UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 2023 or
☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
.
to
Commission File Number 001-34218
COGNEX CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts
(State or other jurisdiction of
incorporation or organization)
04-2713778
(I.R.S. Employer
Identification No.)
One Vision Drive
Natick, Massachusetts 01760-2059
(508) 650-3000
(Address, including zip code, and telephone number,
including area code, of principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, par value $.002 per share
Trading Symbol(s)
CGNX
Name of Exchange on Which Registered
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes
☒
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes
☐
No
☐
☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes
☒
No
☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Yes
☐
No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting
company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
"emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
☒ Large accelerated filer
☐ Non-accelerated filer
☐ Accelerated filer
☐ Smaller reporting company
☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with
any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its
internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting
firm that prepared or issued its audit report.
Yes
☒
No
☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included
in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes
No
☐
☒
Aggregate market value of voting stock held by non-affiliates of the registrant as of July 2, 2023: $9,631,957,405
Common stock, par value $.002 per share, outstanding as of January 28, 2024: 171,633,726 shares
DOCUMENTS INCORPORATED BY REFERENCE:
The registrant intends to file a Definitive Proxy Statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended
December 31, 2023. Portions of such Proxy Statement are incorporated by reference in Part III of this report.
COGNEX CORPORATION
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2023
INDEX
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
CYBERSECURITY
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY
SECURITIES
[RESERVED]
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT
INSPECTIONS
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
PRINCIPAL ACCOUNTING FEES AND SERVICES
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
FORM 10-K SUMMARY
PART I
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 1C.
ITEM 2.
ITEM 3.
ITEM 4.
PART II
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 9C.
PART III
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
PART IV
ITEM 15.
ITEM 16.
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PART I
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities
laws. Readers can identify these forward-looking statements by our use of the words “expects,” “anticipates,”
“estimates,” “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,” “could,” “should,” and similar words and
other statements of a similar sense. Our future results may differ materially from current results and from those
projected in the forward-looking statements as a result of known and unknown risks and uncertainties. Readers
should pay particular attention to considerations described in the section captioned “Risk Factors,” appearing in
Part I - Item 1A of this Annual Report on Form 10-K. We caution readers not to place undue reliance upon any such
forward-looking statements, which speak only as of the date made. We disclaim any obligation to subsequently
revise forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances
after the date such statements are made.
Unless the context otherwise requires, the words “Cognex®,” the “Company,” “we,” “our,” “us,” and “our company”
refer to Cognex Corporation and its consolidated subsidiaries.
ITEM 1: BUSINESS
Our Company
Cognex Corporation (“the Company” or “Cognex”) invents and commercializes technologies that address some of
the most critical manufacturing and distribution challenges. We are a leading global provider of machine vision
products and solutions that improve efficiency and quality in a wide range of businesses across attractive industrial
end markets. Our solutions blend physical products and software to capture and analyze visual information, allowing
for the automation of manufacturing and distribution tasks for customers worldwide. Machine vision products are
used to automate the manufacturing or distribution and tracking of discrete items, such as mobile phones, electric
vehicle batteries, and e-commerce packages, by locating, identifying, inspecting, and measuring them. Machine
vision is particularly valuable for applications in which human vision is inadequate to meet requirements for size,
accuracy, or speed, or in instances where substantial cost savings are obtained through the reduction of labor or
improved product quality.
Cognex operates in one segment. We offer a variety of machine vision products that have similar economic
characteristics and are distributed by the same sales channels to the same types of customers. Cognex sells to
customers in nearly all industries in which discrete items are manufactured on an assembly line or moved through a
distribution center. Our largest industries by revenue are the automotive, logistics, and consumer electronics
industries, which combined represented approximately 65% of our total revenue in 2023. Cognex was incorporated
in Massachusetts in 1981.
Our Industry
Machine vision is used in a variety of industries where technology is widely recognized as an important component
of automated production, distribution, and quality assurance. Virtually every manufacturer or logistics provider can
achieve better quality and efficiency by using machine vision. This results in a broad base of customers across a
variety of industries, including automotive, logistics, consumer electronics, medical-related, semiconductor,
consumer products, and food and beverage.
Cognex is one of the leading machine vision companies in the world. Our competitors include other vendors of
machine vision systems, controllers, and components; manufacturers of image processing systems, sensors, and
components; and system integrators. We also compete with internal engineering departments of current or
prospective customers, as well as open-source tools available for free from various companies.
Cognex’s ability to compete depends on our ability to design new products and functionality that meet evolving
customer requirements, and then to manufacture and sell those high-quality products in a timely manner. The
primary competitive factors affecting the choice of a machine vision system include product functionality and
performance, ease of use, vendor reputation, price, and post-sales support. The importance of each of these factors
varies depending on the specific needs of the customer.
Our Business Strategies
Expansion of market position
Our goal is to expand our position as a leading worldwide machine vision provider by growing in our core markets,
as well as expanding into new markets and with new customers.
We continue to invest in our core markets, such as automotive, logistics, and consumer electronics where we are a
leading provider of vision and ID products for factory and warehouse automation. Within these markets, we are
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making significant investments to focus on what we believe to be the fastest-growing applications and use cases. In
the logistics market, we are moving beyond barcode reading into more complex applications in distribution centers
and parcel and post warehouses. In the automotive market, we are developing new solutions for fast-growing
electric vehicle and battery manufacturers and suppliers.
We reach a broad base of customers through our worldwide direct sales force that sells primarily to large, strategic
customers, as well as through our network of distributors and integrators that sell primarily to smaller customers
who may be more geographically remote or may require supplemental technical support or integration assistance.
Our “Emerging Customer” sales initiative is expanding our sales force to reach customers new to factory automation
or new to Cognex, who have yet to fully benefit from all that machine vision can offer. We believe these potential
customers are increasingly looking for automation solutions that are easy to implement, easy to use, and provide
the best technology. We expect our Emerging Customer strategy to broaden our reach, increase penetration, and
further diversify our customer base.
Growth through innovation
We invest heavily in research and development to maintain our position as a technology leader in machine vision.
We invest in technology that addresses the most challenging vision applications, such as our deep learning vision
software that solves complex applications with unpredictable defects and deviations. We also invest in technology
that makes vision easier to use and more affordable, and therefore, available to a broader base of customers, such
as our vision sensor products that enable customers with less technical capabilities to use machine vision while
minimizing installation and applications support.
Inorganic growth
We plan to drive inorganic growth through expansion in adjacent markets. We are focusing specifically on markets
in which we expect our products and solutions, application expertise, and customer and industry relationships to
enable us to provide significant value to end-users.
We seek out selective opportunities in new applications and markets through the acquisition of businesses and
technologies that are synergistic with our core markets. We are selective in choosing businesses and technologies
that we believe will enhance long-term growth and profitability. In the fourth quarter of 2023, we acquired Moritex
Corporation, a global provider of premium optical components based in Japan. With an enterprise value of
approximately $270 million, this was Cognex's largest acquisition to-date. We plan to continue to seek acquisition
opportunities to expand our product lines, customer base, distribution network, and technical talent.
Sustainable profitability
We prioritize choosing growth opportunities that we believe will maintain our gross margin percentages, which have
averaged in the low to mid-70 percent range in the past several years and reflect the value that we believe our
customers place on our innovative products. Our relatively high gross margins have the potential to provide us with
strong incremental profit margins, leading to high operating leverage in our financial model.
Culture
Our strong and unique corporate culture reinforces our values of customer first and innovation, and enables us to
attract and retain smart, enthusiastic, and creative talent who are motivated to solve the most challenging vision
tasks for customers.
Our End Markets
Automotive
The automotive market has been one of our largest markets for the past twenty years. Machine vision is used in
almost every step of vehicle manufacturing, from measuring inbound parts, to guiding robot assembly, to inspecting
the stitching on leather seats. We currently expect the proliferation of electronics in automobiles to be a significant
growth driver in both electric vehicles and internal combustion engine vehicles. For example, innovations in safety,
driver assist, and entertainment features increase the number of items to be placed, tracked, measured, and
inspected by machine vision.
We also anticipate a multi-year wave of investment in Electric Vehicle (“EV”) manufacturing equipment, particularly
related to battery manufacturing and inspection. Cognex works closely with the major EV battery manufacturers who
we believe produce the majority of the world’s automotive batteries. We believe that these manufacturers are
positioned to grow within Asia, and to expand both independently and through partnerships in the Americas and
Europe. We expect our existing relationships and proven offerings to position us to capture a significant share of this
growth. These anticipated trends may offset expected reductions in traditional powertrain investments on internal
combustion engine vehicles, leading to growth in the automotive market.
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Consumer Electronics
We anticipate major investments in new generations of consumer electronics. A significant amount of visual
inspection in consumer electronics is still done manually by humans. As labor becomes more costly and
increasingly scarcer, these customers are looking for productivity initiatives to automate these processes. We also
expect leading companies in this space to continue to grow based on new technologies that we expect to succeed
and build on the smartphone. We believe new devices will be difficult to manufacture on a large scale, and therefore
will require more innovative vision products in that process. Cognex has close relationships with the largest and
most sophisticated companies in the consumer electronics market, and we expect to be a partner of choice as they
bring new technologies to market.
Logistics
We believe our e-commerce logistics business is differentiated by the high performance of our bar-code reading and
that potential growth will be driven by retailers investing in online fulfillment. From an automation perspective, the
logistics industry is still in its early stages with a large reliance on human labor and a low rate of robotic automation.
Beyond barcode reading, we expect vision applications in logistics to grow quickly and become a more substantial
business for us. Vision applications include tasks such as inspecting packages for damage, object and symbol
recognition, and dimensioning. Geographically, our current logistics business is primarily within the United States,
but, over the long term, we expect to realize the highest rates of growth in Europe and Asia, where we believe
customers are beginning to catch up with the United States in logistics automation technology and are moving away
from local incumbent suppliers. Leading e-commerce players have taken a post-pandemic “time out” to absorb
excess capacity since early 2022, but we currently continue to expect logistics to be our highest-growth end market
over the mid to long-term.
Medical-Related
Cognex has an established customer base of life science equipment suppliers. Our products are specified in over
100 different machine designs, many of which are in the process of obtaining regulatory approval. As they launch,
we believe they will provide the opportunity to deliver many years of recurring revenue. Applications in this market
include lab automation and medical device inspection applications. During the COVID pandemic, we saw demand
for machine vision grow from manufacturers of diagnostic tests, vaccines, and protective equipment.
Other
The number of end markets that can benefit from machine vision applications is expanding. Other end market uses
of Cognex machine vision include semiconductor manufacturers identifying defects, regulated manufacturers
reducing counterfeiting, food producers improving food safety, and manufacturers using 3D measurement for robotic
guidance.
Products and Technology
Cognex offers a full range of machine vision systems and sensors, vision software, and industrial image-based
barcode readers designed to meet customer needs at different performance and price points. Our products range
from deep learning solutions that solve complex applications with unpredictable defects and deviations, to lower-
cost vision sensors that conduct simple presence/absence inspections. Our products have a variety of physical
forms, depending on the user's needs. For example, customers can purchase vision software to use with their own
camera and processor, or they can purchase a standalone unit that combines camera, processor, and software into
a single package.
Vision Systems and Sensors
Vision systems combine smart cameras and software to perform a wide range of tasks including part location,
identification, measurement, assembly verification, and robotic guidance. Vision sensors can deliver an easy-to-use,
low-cost, reliable solution for simple pass/fail inspections, such as checking the presence and size of parts. In-
Sight® vision systems and sensors include our 2D and 3D vision systems, as well as our In-Sight SnAPP™ sensor.
These products leverage various forms of artificial intelligence, including rule-based coding, as well as deep
learning and edge learning technology leveraging pre-trained models powered by neural networks. Our product
portfolio meets the varying price and performance requirements of our broad base of industrial customers. Our deep
learning-based systems automate and solve complex inline inspections that typically require human judgment for
defect detection, optical character recognition (OCR), assembly verification, or classification. Similar to our deep
learning-based systems, our edge learning-based systems use pre-trained models, but on simpler applications that
prioritize ease of use and have a broader appeal with easier and faster implementation and training.
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Vision Software
Vision software offers customers the flexibility of the Cognex® vision tools library to use with the cameras, frame
grabbers, and peripheral equipment of their choice. Cognex VisionPro® software offers an extensive suite of
patented vision tools, including both traditional rule-based tools and deep learning-enabled tools, for advanced
programming. Its QuickBuild™ prototyping environment allows customers to build complete vision applications with
the simplicity of a graphical flowchart-based programming interface.
Industrial Image-Based Barcode Readers
Cognex industrial image-based barcode readers quickly and reliably read 1D, 2D, label-based, and direct part mark
(DPM) codes found in nearly every industry including automotive, logistics, consumer products, and medical-
related. The DataMan® product line, which includes fixed-mount and handheld models, as well as barcode verifiers,
help organizations optimize performance, increase throughput, and control traceability.
Vision Accessories
Cognex vision accessories are designed for easy integration with Cognex products and applications. Cameras are
available in both area scan and line scan formats to address a wide variety of applications. Lenses and lighting are
also available in both embedded and component formats to provide high-quality image acquisition, including a
portfolio of premium optical components that were added to the Company's vision accessory portfolio with the
acquisition of Moritex Corporation in the fourth quarter of 2023. From value solutions to high-performance hardware,
Cognex offers industrial cameras, lenses, lighting, vision controllers, frame grabbers, and I/O cards to meet any
requirement.
Research, Development, and Engineering
Cognex engages in research, development, and engineering (RD&E) to enhance our existing products and to
develop new products and functionality to address market opportunities. We believe that a continued commitment to
RD&E activities is essential to maintain or achieve product leadership with our existing products and to provide
innovative new product offerings, as well as to provide engineering support for large customers. In addition, we
consider our ability to accelerate time to market for new products to be critical to our revenue growth. We incurred
RD&E costs of approximately $139 million (17% of revenue), $141 million (14% of revenue), and $135 million (13%
of revenue) for the years ended December 31, 2023, 2022 and 2021, respectively. We expect to continue our
commitment to RD&E, even during periods of lower revenue levels, to introduce new platforms, products, and
solutions throughout economic cycles.
Intellectual Property
We rely on the technical expertise, creativity, and knowledge of our personnel, and therefore, we utilize patent,
trademark, copyright, and trade secret protection to maintain our competitive position and protect our proprietary
rights in our products and technology. While our intellectual property rights are important to our success, we believe
that our business as a whole is not materially dependent on any particular patent, trademark, copyright, or other
intellectual property right.
Operations
Most of Cognex’s hardware products are manufactured utilizing third-party contractors, whereby the majority of
component procurement, system assembly, and initial testing are performed by electronics manufacturing services
suppliers. With the acquisition of Moritex Corporation in the fourth quarter of 2023, Cognex began in-house
manufacturing of optical components, such as lenses and lighting. Cognex’s primary contract manufacturer is
located in Indonesia. Our contract manufacturers use specified components sourced from vendor lists approved by
Cognex and assembly/test processes created and controlled by Cognex. After the completion of initial testing,
assembled products from our contract manufacturers are routed to our distribution centers where trained Cognex
personnel load Cognex software onto the products, provide additional assembly and image alignment as needed,
and perform quality control procedures. Cognex ships finished products for customers located in the Americas from
our Southborough, Massachusetts distribution center, for customers located in Europe from our Cork, Ireland
distribution center, and for customers located in Asia from our Singapore distribution center that became operational
during the fourth quarter of 2023.
Sales Channels and Support Services
Cognex sells its products through a worldwide direct sales force that primarily focuses on the development of
strategic accounts which generate or are expected to generate significant sales volume, as well as through a global
network of distribution and integration partners. Our distribution partners provide sales and local support to help
Cognex reach the many prospects for our products in factories around the world, and our integration partners are
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experts in vision and complementary technologies that can provide turnkey solutions for complex automation
projects using vision. Through each of these channels, sales engineers call directly on targeted accounts, with the
assistance of application engineers, and manage the activities of our distribution and integration partners within their
territories in order to provide an advantageous sales model for our products. In 2023, we began ramping up an
Emerging Customer sales force that primarily focuses on selling into accounts which are new to machine vision or
Cognex.
Sales to customers based outside of the United States represented approximately 66% of our total revenue in 2023,
with approximately 26% from customers based in Europe, approximately 20% from customers based in Greater
China, and approximately 20% from customers based in other regions outside the United States. Sales to
customers based in Europe are denominated in Euros and U.S. Dollars, sales to customers based in Greater China
are denominated in Renminbi for sales within Mainland China and U.S. Dollars in other territories, and sales to
customers based in other regions are denominated in U.S. Dollars, Korean Won, Japanese Yen, Mexican Pesos,
and Indian Rupee.
Cognex’s service offerings represent less than 10% of our total revenue and include maintenance and support,
consulting, and training services. Maintenance and support programs include hardware support programs that
entitle customers to have products repaired, as well as software support programs that provide customers with
application support and software updates to the latest software releases. Application support is provided by
technical support personnel located at Cognex regional offices, as well as by field service engineers that provide
support at the customer’s production site. We provide consulting services that range from a specific area of
functionality to a completely integrated installed application. Training services include a variety of product courses
that are available at our offices worldwide, at customer facilities, and online.
Human Capital
Our employees are our most valuable asset and are critical to our success. We create and maintain an environment
where “Cognoids,” a unique name for our employees, can engage with each other, perform their best work, develop
their careers, and be creative. As of December 31, 2023, Cognex employed 2,992 Cognoids globally, including
1,590 in sales, marketing, and service activities; 690 in research, development, and engineering; 445 in
manufacturing and quality assurance; and 267 in information technology, finance, and administration. Of our 2,992
Cognoids, 1,996 are based outside of the United States.
Culture and Values
We pride ourselves on having a unique culture that exemplifies our motto of Work Hard, Play Hard, Move Fast. Our
culture guides the actions and behaviors of our Cognoids and is defined by our ten values - Customer First,
Excellence, Perseverance, Enthusiasm, Creativity, Pride, Integrity, Recognition, Sharing, and Fun. We are
committed to finding the very best talent to be part of our growing technology company. We believe our culture
enables us to attract and retain smart, energetic, and creative talent, and is central to our ability to execute our
operating plans and strategic initiatives. To preserve and enhance our corporate culture, while recognizing
differences across and within regions, we have a global team of Cognoids who serve as Ministers of Culture, led by
our Chief Culture Officer.
We believe in investing in tools and resources that support employees’ learning and development and setting a
compensation structure that reflects the Company’s commitment to a pay-for-performance philosophy. We believe
these efforts align with our stockholders’ long-term interests and better position Cognex to continue to operate as a
leader in the machine vision industry.
Diversity, Equity, Inclusion, and Belonging
While we are incredibly proud of our culture, we continue to listen, learn, and grow. We are excited about the
opportunities to continue to build an organization that reflects the best of the world around us. As a multi-national
company where over half our Cognoids live outside the United States, diversity means different things to different
groups. We are building strategies and plans to continue to enhance our diversity, equity, inclusion, and belonging
(DEIB) initiatives. One specific place where this evolution is visible is through the launch of our DEIB Council. The
Council is led by our Chief Culture Officer and is comprised of over thirty volunteer Cognoids representing a broad
cross-section of functions, geographies, and backgrounds.
Regulatory Compliance
Cognex’s capital expenditures, earnings, and competitive position are not materially affected by compliance with
federal, state, and local environmental provisions which have been enacted or adopted to regulate the distribution of
materials into the environment.
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Available Information
Cognex maintains a website at www.cognex.com. We make available, free of charge, on our website in the
“Company” section under the caption “Investor Information” followed by “Financial Reports” and then “SEC FiIings,”
our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, including
exhibits, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after such reports are
electronically filed with, or furnished to, the SEC. Cognex’s reports filed with, or furnished to, the SEC are also
available at the SEC’s website at www.sec.gov. Cognex has used, and intends to continue to use, its investor
relations website as means of disclosing material non-public information and for complying with our disclosure
obligations under Regulation FD. Information contained on our website is not a part of, or incorporated by reference
into, this Annual Report on Form 10-K or in any other document or report that Cognex files with the SEC, and any
references to Cognex's website are intended to be inactive textual references only.
ITEM 1A: RISK FACTORS
The risks and uncertainties described below are not the only ones that we face. Additional risks and uncertainties
that we are unaware of, or that we currently deem immaterial, also may become important factors that affect our
company in the future. If any of these risks were to occur, our business, financial condition, or results of operations
could be materially and adversely affected. This section includes or refers to certain forward-looking statements. We
refer you to the explanation of the qualifications and limitations of such forward-looking statements, appearing under
the heading "Forward-Looking Statements" in Part II - Item 7 of this Annual Report on Form 10-K.
Risks Related to Execution of our Business Strategy
Our failure to introduce new products in a successful and timely manner could result in the loss of our
market share and a decrease in our revenues and profits.
The market for our products is characterized by rapidly changing technology and increasingly capable competitors.
Accordingly, we believe that our future success will depend on our ability to accelerate time-to-market for new
products with improved functionality, ease-of-use, performance, and price. This includes continuing to introduce
products embedded with artificial intelligence technology that augments rule-based machine vision with image-
based analysis. There can be no assurance that we will be able to introduce new products in accordance with
scheduled release dates or that new products will achieve market acceptance. Our inability to keep pace with the
rapid rate of technological change and customer demands in the high-technology marketplace could have a material
adverse effect on our operating results.
Product development is often a complex, time-consuming, and costly process involving significant investment in
research and development with no assurance of return on investment. Our strong balance sheet allows us to
continue to make significant investments in research, development, and marketing for new products and
technologies. Research is by its nature speculative, and the ultimate commercial success of a product depends on
various factors, many of which are not under our control. We may not achieve significant revenue from new product
investments for several years, if at all. Moreover, new products, if introduced, may not generate the gross margins
that we have experienced historically.
Increased competition may result in decreased demand or prices for our products and services and may
harm our operating results.
The machine vision market continues to be fragmented and competitive. Our competitors include primarily other
vendors of machine vision systems, controllers, and components; manufacturers of image processing systems,
sensors, and components; and system integrators. We also compete with internal engineering departments of
current or prospective customers, as well as open-source tools available for free from various companies, including
tools using artificial intelligence. In recent years, we have encountered increased competition from low-cost vision
providers in China, as well as from large technology companies that may offer free open-source solutions. Any of
these competitors may have greater financial or other resources than we do or may develop more compelling
technologies. We may not be able to compete successfully in the future and our investments in research and
development, sales and marketing, and support activities may be insufficient to enable us to maintain our
competitive advantage. In addition, competitive pressures could lead to price erosion that could have a material
adverse effect on our gross margins and operating results.
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Further, in recent years, we have seen some examples of industry consolidation in our markets. This trend may
continue as companies attempt to strengthen or hold their market positions in an evolving industry and as
companies are acquired or are unable to continue operations. We believe that industry consolidation may result in
stronger competition and may be accompanied by pressure from customers for lower prices. This could lead to
more variability in our operating results and could have a material adverse effect on our business, operating results,
and financial condition.
If we fail to attract and retain key talent and maintain our unique corporate culture, our business and
operating results could suffer.
To support our growth and execute our operating plans and strategic initiatives, we must effectively attract, train,
develop, motivate, and retain skilled employees, while maintaining our unique corporate culture. Technical
personnel with experience in machine vision, and more recently artificial intelligence and transformer-based models,
are in high demand and competition for their talents is intense. We rely on attracting and retaining talent with these
skills to execute our product development plans. We use time-based and performance-based equity awards,
including stock options and restricted stock units ("RSUs") as a key component of compensation for our more senior
employees to align employee interests with the interests of our shareholders, provide competitive compensation
packages, and encourage employee retention. Our stock price volatility may cause periods of time during which
option exercise prices might be less than the sale price of our common stock or the value of RSUs might be less
competitive, which may lessen the retentive attributes of these awards. We are limited as to the number of stock
options and RSUs that we may grant under our stock plans, and we are unsure how effective different stock-based
awards with different vesting schedules will be to retain key talent. Accordingly, we may find it difficult to attract and
retain employees, and any such difficulty could materially adversely affect our business.
Our failure to properly manage the distribution of our products and services could result in the loss of
revenues and profits.
We utilize a direct sales force, as well as a network of distribution and integration partners, to sell our products and
services. We are continually reviewing our go-to-market strategy to help ensure that we are reaching the most
customers that we can and with the highest level of service. At times, this may require strategic changes to our
sales organization or enlisting or dropping various partners in certain regions, which could result in additional costs
or operational challenges. In connection with our “Emerging Customer” sales initiative, we are expanding our sales
force to reach customers who may be newer to factory automation and have yet to fully benefit from all that machine
vision can offer, which has resulted, and is expected to continue to result, in increased sales and marketing
expenses. In addition, successfully managing the interaction of our direct and indirect sales channels, including the
newly-added Emerging Customer sales force, to reach various potential customers for our products and services is
a complex process.
Many of our indirect selling arrangements are non-exclusive, and our distributors are not obligated to buy our
products. Thus, they may be unwilling or unable to dedicate the resources necessary to promote our products or
remain sufficiently trained to provide integration support. In addition, failure of our distributors to adhere to our
policies designed to promote compliance with global anti-corruption laws, export controls, and local laws, could
subject us to criminal or civil penalties and stockholder litigation. In addition, when we use indirect selling methods,
it may reduce visibility to demand and pricing.
To support the expansion of our business internationally, we may decide to make changes to our operating structure
in other countries when we believe these changes will make us more competitive by reaching additional customers,
offering faster delivery, importation services, and/or local currency sales. These new operating models may require
changes in legal structures, business systems, and business processes that may result in significant business
disruption and negatively impact our customers’ experience, resulting in loss of sales. Furthermore, as we assume
more responsibility for the importation of our products into other countries, we face higher compliance risk to adhere
to local regulatory and trade requirements. Finally, the local stocking of finished products in countries outside of our
primary distribution centers may result in higher costs and increased risk of excess or obsolete inventory associated
with maintaining the appropriate level and mix of products in multiple inventory locations, resulting in lower gross
margins.
Our go-to-market strategy has distinct risks and costs, and therefore, our failure to implement the most
advantageous balance in the sales and operating model for our products and services could have a material
adverse effect on our revenue and profitability.
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Economic, political, and other risks associated with international sales and operations could adversely
affect our business and operating results.
In 2023, approximately 66% of our revenue was derived from customers located outside of the United States. We
anticipate that international sales will represent a more significant portion of our revenue in 2024 due to the
acquisition of Japan-based Moritex Corporation in the fourth quarter of 2023. In addition, we source components
from suppliers located outside of the United States, including China, utilize third-party contract manufacturers,
primarily located in Indonesia and Malaysia, to assemble certain of our products, and beginning in the fourth quarter
of 2023 with the acquisition of Moritex Corporation, manufacture optical components at production plans located in
Vietnam and China. We intend to continue to expand our sales and operations outside of the United States and
expand our presence in international emerging markets. As a result, our business is subject to the risks inherent in
international sales and operations, including, among other things:
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various regulatory and statutory requirements,
difficulties in injecting and repatriating cash,
export and import restrictions,
trade tariffs,
transportation delays,
product certification requirements,
employment regulations and local labor conditions,
difficulties in staffing and managing foreign operations, particularly as we expand our presence globally
corruption,
instability in economic or political conditions,
political or trade sanctions,
difficulties protecting intellectual property,
uncertainties surrounding the interpretation and application of regulatory and statutory requirements,
varying data protection and privacy laws,
business systems connectivity issues, and
potentially adverse tax consequences.
Any of these factors could have a material adverse effect on our business, operating results or financial condition.
We face several risks related to conducting business in China. In recent years, trade tariffs imposed by the United
States on certain components imported from Chinese suppliers resulted in higher costs for our products, which, to
date, have not been material to our total cost of goods. In addition to trade tariffs, U.S. export controls that place
restrictions on the exportation of our products or a subset of our products, including applicable regulations
promulgated by the U.S. Commerce Department’s Bureau of Industry and Security, have had a negative impact on
our revenue from customers based in China. Trade tariffs and export controls also have had an indirect impact on
the economic climate in China, which in turn, has had a negative impact on the Company's revenue from customers
based in China who see risk in doing business with a U.S. company. The imposition of additional tariffs or other
trade barriers could increase our costs in certain markets and may cause our customers to find alternative providers
of machine vision products and services. To date, the impact of these restrictions has been immaterial to our total
revenue and costs; however, if disputes and conflicts continue or further escalate, actions by governments in
response could be significantly more severe and restrictive and could materially adversely affect our operating
results.
An escalation of the China-Taiwan conflict could lead to challenges procuring integrated circuit chips from Taiwan-
based vendors that are fundamental to the design of our products. Although we are taking steps to mitigate this risk,
including purchasing chips in advance of demand, there can be no assurance that these steps will be successful in
securing an adequate supply of chips at our current cost structure. Geopolitical tensions, trade disputes, and
concerns about supply chain resilience have prompted some multinational companies to reassess their operations
in China. Rising labor costs, intellectual property concerns, and uncertainties around regulatory environments have
contributed to a trend where certain industries, particularly in manufacturing, are exploring diversification of their
production bases to other countries or reshoring to their home country. These trends may adversely affect our
revenue in China and operating results.
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To date, the Russia-Ukraine war that has been ongoing since the first quarter of 2022 and the Israel-Hamas war that
began in the fourth quarter of 2023 have not had a material adverse effect on our business. Economic sanctions
and export controls imposed by the United States and other countries targeting specific industries, entities, and
individuals in Russia, as well as the impact on the supply of energy resources in Europe, have not materially
adversely affected our business to date. Further escalation of these geopolitical tensions, however, could have a
broader impact which could adversely affect our business and/or our supply chain, distribution and integration
partners, or customers in the broader region, including the European Union. Furthermore, instability may lead to
increased market volatility, negatively impacting customer confidence and spending.
We also are subject to applicable anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K.
Bribery Act, and similar anti-corruption and anti-kickback laws in the jurisdictions in which we operate. These laws
generally prohibit offering, promising, giving, or authorizing others to provide anything of value, either directly or
indirectly, to a government official or private party in order to influence official action or otherwise gain an unfair
business advantage, such as to obtain or retain business. Particularly as a result of our global operations, including
in developing countries, and our growing international sales force, our relationships with our customers and
resellers could expose us to liability under these laws. Violations of anti-corruption laws may result in severe civil
and criminal penalties for noncompliance. Even an unsuccessful challenge or investigation into our practices is
costly to defend, and could cause adverse publicity, and thus could have a material adverse effect on our business,
financial condition, or operating results.
Implementation of our acquisition strategy may not be successful, which could affect our ability to increase
our revenue or profitability and may otherwise adversely affect our business.
We have acquired, and may continue to acquire, new businesses and technologies. During the fourth quarter of
2023, we completed our largest acquisition to date by acquiring Moritex Corporation, a global provider of premium
optical components based in Japan, for an enterprise value of approximately $270 million. The Moritex acquisition,
and acquisitions in general, may involve significant risks and uncertainties, which could include, among others:
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the diversion of management's attention from other operational matters,
the inability to realize expected synergies or other benefits resulting from the acquisition, including the
failure to achieve projected sales of acquired products,
difficulties or delays integrating personnel, operations, technologies, products, processes, and systems of
the acquired business, particularly in locations far from the Company's headquarters,
the failure to retain key talent and difficulties integrating corporate cultures,
entry into markets in which we may have limited prior experience and where competitors have stronger
market positions,
the inability to protect and secure acquired intellectual property or confidential information,
difficulties or delays completing the development of acquired in-process technology,
the failure to retain key customers,
the impairment of acquired intangible assets resulting from lower-than-expected cash flows from the
acquired assets,
acquisition-related charges, which could adversely impact operating results and cash flows in any given
period and could be substantially different from period to period,
difficulties with implementing internal controls and accounting systems necessary to be compliant with
requirements applicable to public companies subject to SEC reporting, and
difficulties with closing a transaction due to regulatory approvals, employment matters, required consents,
litigation, or other challenges, which could increase costs and prevent the acquisition from being completed
within the expected timeframe, or from being completed at all.
Acquisitions are inherently risky and the inability to effectively manage these risks could have a material adverse
effect on our operating results.
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Risks Related to Information Technology and Intellectual Property
Information security breaches may adversely affect our business.
We rely on our information technology systems, including third-party services, to effectively run our business. We
may be subject to information security failures or breaches caused by hacking, malicious software, acts of
vandalism or terrorism, or other events. The risk of a cyberattack continues to increase given rapid advancements in
technologies, as well as the proliferation of diplomatic and armed conflict throughout the world. Our security
measures or those of our third-party service providers may not detect or prevent such breaches. Any such
compromise to our information security could result in the distraction of management and diversion of information
technology resources, theft of our intellectual property, including software source code, a misappropriation of our
cash or other assets, an interruption in our operations, the unauthorized publication of our confidential business or
proprietary information, the unauthorized release of customer, vendor, or employee data, and the exposure to
litigation or regulatory penalties, any of which could harm our business and operating results. We have experienced
cybersecurity incidents in the past, however, to date, these incidents have not had a material impact on our
operations or financial results. Future cybersecurity incidents could have a material adverse effect on our business,
reputation, financial condition, or operating results.
Changes in laws or regulations relating to data privacy or data protection, or any actual or perceived failure
by us to comply with such laws and regulations, could harm our business.
We are subject to a variety of United States and international laws, rules, policies and other obligations regarding
data protection and security breaches. Privacy and data security have become significant issues in the United
States, Europe, and in many other jurisdictions where we conduct or may in the future conduct our operations. For
instance, the European Union's General Data Protection Regulation ("GDPR"), many state and federal privacy laws
within the United States, and other similar global laws in locations in which we do business govern our global data
privacy practices. The regulatory framework for the collection, use, safeguarding, sharing, and transfer of
information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. For example,
the California Privacy Rights Act (CPRA), which took effect on January 1, 2023 (with certain provisions of the CPRA
having retroactive effect to January 1, 2022), as well as obligations from new privacy laws in Colorado, Connecticut,
Delaware, Florida, Indiana, Iowa, Montana, New Jersey, Oregon, Tennessee, Texas, Utah and Virginia that have
taken or will take effect between 2023 and 2026, may require us to further modify certain of our information
practices and could subject us to additional compliance costs and expenses. These laws continue to develop and
may be inconsistent from jurisdiction to jurisdiction. Complying with emerging and changing requirements may be
costly and require us to change certain business practices. Noncompliance could result in significant fines,
penalties, claims, or legal liability. Any inability to adequately address privacy and data security concerns or comply
with applicable privacy or data security laws, regulations, and policies could result in additional cost and liability to
us, damage our reputation, inhibit sales, and harm our business.
If we fail to successfully protect our intellectual property, our competitive position and operating results
could suffer.
We rely on our proprietary software technology and hardware designs, as well as the technical expertise, creativity,
and knowledge of our personnel to maintain our position as a leading provider of machine vision products. Software
piracy and reverse engineering may result in counterfeit products that are misrepresented in the market as Cognex
products or pirated products that contain stolen technology, such as software. Although we use a variety of methods
to protect our intellectual property, we rely most heavily on patent, trademark, copyright, and trade secret protection,
as well as non-disclosure agreements with customers, suppliers, employees, and consultants. We also attempt to
protect our intellectual property by restricting access to our proprietary information by a combination of technical and
internal security measures. These measures, however, may not be adequate to:
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protect our patents from challenge, invalidation, or circumvention, or
ensure that our intellectual property will provide us with competitive advantages.
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Our pending and future patent applications may not issue as patents or, if issued, may not issue in a form that will
provide us with any meaningful protection or any competitive advantage. Even if issued, existing or future patents
may be challenged, narrowed, invalidated, or circumvented, which could limit our ability to stop competitors from
developing and marketing similar products, increase costs, or limit the length of patent protection we may have for
our products. Furthermore, other companies may design around technologies we have patented, licensed, or
developed. Moreover, changes in patent laws or their interpretation in the United States and other countries could
also diminish the value of our intellectual property or narrow the scope of our patent protection. In addition, the legal
systems of certain countries do not favor the aggressive enforcement of patents, and the laws of foreign countries
may not protect our rights to the same extent as the laws of the United States. As a result, our patent portfolio may
not provide us with sufficient rights to exclude others from commercializing products similar to ours. Any of these
adverse circumstances could have a material adverse effect on our operating results.
Risks Related to our Supply Chain
The failure to manufacture and deliver products in a timely manner could negatively affect customer
satisfaction and our operating results.
A significant portion of our products is presently manufactured by a third-party contractor located in Indonesia. Since
2022, we have been scaling up an additional contract manufacturer located in Malaysia, which is expected to further
mitigate risk, diversify supply chain, and expand production capacity. With the acquisition of Moritex Corporation in
the fourth quarter of 2023, we began in-house manufacturing of optical components, such as lenses and lighting, in
production plants located in Vietnam and China. In-house manufacturing exposes us to various risks that could
adversely impact our business operations and financial condition, including, but not limited to, (i) the health and
safety of our employees engaged in manufacturing; (ii) the storage, use, and transportation of hazardous materials
utilized in the manufacturing process; and (iii) legal risks related to environmental protection and health and safety
laws in all applicable jurisdictions. Although our third-party and in-house manufacturers have the ability to shift
production to plants in other regions when operations in their primary plant are disrupted, production and test
equipment located at the plant that is unique to the manufacture of Cognex products creates practical challenges to
doing so in a timely manner. Furthermore, the loss of a key supplier, or failure of a key supplier to access necessary
credit to operate its business or otherwise remain in business, could have a material adverse impact on our
operating results. Changes and additions to our supply chain require considerable time and resources and involve
significant risks and uncertainties, and we can provide no assurance of return on, or success of, such investments.
We also rely on our third-party and in-house manufacturers to meet delivery schedules. We have experienced, and
may continue to experience, delays in the delivery of our products from our suppliers due to the impact of global
supply chain challenges or other factors. For example, on June 7, 2022, our primary contract manufacturer
experienced a fire at its plant in Indonesia which destroyed a significant amount of Cognex-owned consigned
inventories, as well as component inventories owned by the contract manufacturer that were designated for Cognex
products. The fire resulted in delayed shipments, loss of sales, and higher-than-normal purchase costs to replenish
component inventories which adversely impacted our business, financial condition, and results of operations
primarily during the second half of 2022, with the gross margin impact of higher purchase costs continuing into the
first half of 2023. Challenges in obtaining components and maintaining production have resulted in delays, and may
continue to result in delays, in meeting our delivery schedules that, as a result, delay deliveries to our customers
past their requested delivery date. Delays in customer orders also can result in delayed revenue recognition or loss
of business which can impact our operating results in a particular reporting period.
Our inability to obtain components for our products could adversely affect our operating results.
Certain key electronic and mechanical components, such as integrated circuit chips, are fundamental to the design
of Cognex products. Due to the impact of global supply chain challenges and other factors, we have experienced,
and may continue to experience, disruptions to the supply of components for our products that have resulted, and
may continue to result, in higher purchase costs, higher delivery costs, and manufacturing delays. An escalation of
the China-Taiwan conflict could result in challenges procuring integrated circuit chips from Taiwan-based vendors.
Although we are taking steps to mitigate this risk, including purchasing chips in advance of demand, there can be no
assurance that these steps will be successful in securing an adequate supply of chips at our current cost structure.
We source components from preferred vendors that are selected based on price and performance considerations.
In the event of a supply disruption from a preferred vendor, these components typically may be purchased from
alternative vendors, which may result in higher purchase costs and manufacturing delays based on the time
required to identify and obtain sufficient quantities from an alternative source. Certain Cognex products utilize
components that are available from only one source. If we are unable to secure adequate supply from these
sources, we may have to redesign our products, which may lead to higher costs, delays in manufacturing, and
possible loss of sales.
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Although we are taking certain actions to mitigate supply risk and have entered into agreements, including in broker
markets, for the supply of many components, there can be no assurance that Cognex will be able to extend or
renew these agreements on similar terms, such as purchase prices, or at all. Component suppliers may suffer from
poor financial conditions, which can lead to business failure for the supplier, further limiting our ability to obtain
sufficient quantities of components on reasonable terms, or at all. Therefore, Cognex remains subject to risks of
supply shortages and price increases that can adversely affect our business and operating results.
Our failure to effectively manage product transitions or accurately forecast customer demand could result
in excess or obsolete inventory and resulting charges.
Because the market for our products is characterized by rapid technological changes, we frequently introduce new
products with improved functionality, ease-of-use, and performance, or lower cost that may replace existing
products. Among the risks associated with the introduction of new products are difficulty predicting customer
demand and effectively managing inventory levels to ensure adequate supply of the new product and avoid excess
supply of the legacy product. Our failure to effectively manage product transitions or accurately forecast customer
demand, in terms of both volume and configuration, may lead to an increased risk of excess or obsolete inventory
and resulting charges.
We strategically may enter into non-cancelable and/or non-refundable commitments with vendors to purchase
inventory in advance of demand to address concerns about the availability of future supplies, build safety stock to
help ensure customer shipments are not delayed should we experience higher than anticipated demand for
inventory with long lead times, or take advantage of favorable pricing. Supply chain disruptions and unanticipated
changes in demand have resulted, and may continue to result, in the Company purchasing a significant amount of
inventory in advance of demand. These measures to purchase inventory may expose us to an increased risk of
excess or obsolete inventory and resulting charges if actual demand is lower than anticipated.
If components purchased by our primary contract manufacturer have not been consumed in the production of our
finished goods within a certain period of time, we have been required, and may continue to be required, to purchase
these components from our primary contract manufacturer and later sell them back when they are needed to meet
our demand. While we typically expect these components to be consumed in the production of our finished goods,
this arrangement may expose us to an increased risk of excess or obsolete inventory and resulting charges.
Disruptions to one of our distribution centers could adversely affect our operating results.
We ship finished products for customers located in the Americas from our Southborough, Massachusetts distribution
center, for customers located in Europe from our Cork, Ireland distribution center, and for customers located in Asia
from our Singapore distribution center that became operational during the fourth quarter of 2023. Following the
COVID pandemic, we experienced, and may experience again, labor shortages or working restrictions due to
factors such as health and safety concerns or governmental regulations. Although we have the ability to shift
operations from one distribution center to another, there are practical challenges to doing so in a timely, cost-
effective manner, and we may experience delays in shipping customer orders. These delays could negatively impact
customer satisfaction and, in turn, cause loss of sales, which could adversely affect our operating results.
Our products may contain design or manufacturing defects, which could result in reduced demand,
significant delays, substantial costs, or customer dissatisfaction and/or loss of sales.
If flaws in either the design or manufacture of our products were to occur, we could experience a rate of failure in
our products that could result in significant delays in shipment and material repair or replacement costs. Due, in
part, to our focus on releasing new products as quickly as possible to satisfy customer demands, our release-to-
market process may not be robust enough to detect significant design flaws or software bugs. While we engage in
product quality programs and processes, including actively monitoring and evaluating the quality of our component
suppliers and contract manufacturers, these actions may not be sufficient to avoid a product failure rate that results
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substantial delays in shipment,
significant repair or replacement costs,
product liability claims or lawsuits, particularly in connection with life sciences customers, electric vehicle
battery manufacturers, or other high-risk end-user industries,
customer dissatisfaction and/or loss of sales, or
potential damage to our reputation.
Any of these results could have a material adverse effect on our operating results.
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Risks Related to Revenue Concentrations
The loss of, or significant curtailment of purchases by, large customers could have an adverse effect on our
business.
In 2023, no single customer represented more than 10% of our total revenue. However, we have had customers of
this size in the past, particularly in the logistics and consumer electronics industries. Large customers may divert
management’s attention from other operational matters and pull resources from other areas of the business,
resulting in potential loss of sales from other customers. In addition, large customers may receive preferred pricing
and a higher level of support, which may lower our gross margin percentage. Furthermore, in certain instances, due
to long supplier lead times, we may purchase inventory in advance of receipt of a large customer purchase order,
which exposes us to an increased risk of excess or obsolete inventory and resulting charges. The loss of, or
curtailment of purchases by, any one or more of our large customers, has had, and could in the future have a
material adverse effect on our operating results.
Risks Related to Financial Matters
We are at risk for impairment charges with respect to our investments or acquired intangible assets, which
could have a material adverse effect on our operating results.
As of December 31, 2023, we had approximately $374 million of debt securities in our investment portfolio. These
debt securities are reported at fair value, with unrealized gains and losses, net of tax, included in shareholders’
equity as other comprehensive income (loss) since these securities are designated as available-for-sale securities.
As of December 31, 2023, our portfolio of debt securities had a net unrealized loss of $9,967,000. Included in this
net loss, were gross unrealized losses totaling $10,555,000, of which $1,561,000 were in a loss position for less
than twelve months and $8,994,000 were in a loss position for greater than twelve months. Management monitors
its debt securities that are in an unrealized loss position to determine whether a loss exists related to the credit
quality of the issuer that would be reported in current operations. While management currently intends to hold these
securities to full value recovery at maturity, we may determine to sell these securities prior to maturity to fund our
operations, make acquisitions, or for other purposes, which may result in a loss. It is our policy to invest in
investment-grade debt securities that minimize our exposure to credit losses; however, no assurances can be made
that we will not incur credit losses with respect to our securities portfolio. No credit losses were recorded in 2023.
As of December 31, 2023, we had approximately $113 million in acquired intangible assets, consisting primarily of
acquired technologies and customer relationships. The majority of these intangible assets were recorded in the
fourth quarter of 2023 when Cognex acquired Moritex Corporation. These assets are susceptible to changes in fair
value due to a decrease in the historical or projected cash flows from the use of these assets, which may be
negatively impacted by economic trends. We evaluate long-lived assets for impairment annually each fourth quarter
and whenever events or changes in circumstances, referred to as "triggering events," indicate the carrying value
may not be recoverable. If we determine that any of these investments or intangible assets are impaired, we will be
required to take a related charge to earnings that could have a material adverse effect on our operating results.
We may have additional tax liabilities and our effective tax rate may increase or fluctuate, which could
adversely affect our operating results and financial condition.
As a multinational corporation, we are subject to income taxes, as well as non-income based taxes, in the United
States and numerous foreign jurisdictions. Our effective income tax rate is dependent on the geographic distribution
of our worldwide earnings or losses and the tax laws and regulations in each geographic region in which we
operate. Significant judgment is required in determining our worldwide provision for income and other taxes. The
application of tax laws and regulations is subject to legal and factual interpretation, judgment, and uncertainty, and
tax laws themselves are subject to change. For example, many countries have recently adopted, or are considering
the adoption of, revisions to their respective tax laws based on the Organization for Economic Co-operation and
Development’s (“OECD”) Inclusive Framework, which could impact our tax liability due to our organizational
structure and significant operations outside of the United States. Furthermore, we are subject to regular review and
audit by both domestic and foreign tax authorities and may be assessed additional taxes, penalties, fees, or interest,
which could have a material adverse effect on our financial position, liquidity, or results of operations.
Although we believe our tax positions are reasonable, the final determination of tax audits or any related litigation
could be different from what is reflected in our financial statements and could have a material adverse effect on our
income tax provision, net income, or cash flows in the period in which the determination is made.
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Fluctuations in foreign currency exchange rates and the use of derivative instruments to hedge these
exposures could adversely affect our reported results, liquidity, and competitive position.
We face exposure to foreign currency exchange rate fluctuations, as a significant portion of our revenues,
expenses, assets, and liabilities are denominated in currencies other than the functional currencies of our
subsidiaries or the reporting currency of our company, which is the U.S. Dollar. In certain instances, we utilize
forward contracts to hedge against foreign currency fluctuations. These contracts are used to minimize foreign
currency gains or losses, as the gains or losses on the derivative are intended to offset the losses or gains on the
underlying exposure. We do not engage in foreign currency speculation. If the counterparty to any of our hedging
arrangements experiences financial difficulties, or is otherwise unable to honor the terms of the contract, we may
experience material losses.
The success of our foreign currency risk management program depends on forecasts of transaction activity
denominated in various currencies. To the extent that these forecasts are overstated or understated during periods
of currency volatility, we could experience unanticipated foreign currency gains or losses that could have a material
impact on our results of operations. In addition, our failure to identify new exposures and hedge them in an effective
manner may result in material foreign currency gains or losses.
In addition to the U.S. Dollar, a significant portion of our revenues and expenses are denominated in the Euro and
Chinese Renminbi, and to a lesser extent the Korean Won, Japanese Yen, Mexican Peso, and Indian Rupee. We
estimate that approximately 52% of our sales in 2023 were invoiced in currencies other than the U.S. Dollar, and we
expect sales denominated in foreign currencies to represent a more significant portion of our total revenue in 2024
due to the acquisition of Japan-based Moritex Corporation in the fourth quarter of 2023. While we also have
expenses denominated in these same foreign currencies, the impact on revenues has historically been, and is
expected to continue to be, greater than the offsetting impact on expenses. Therefore, in times when the U.S. Dollar
strengthens in relation to these foreign currencies, we would expect to report a net decrease in operating income.
Conversely, in times when the U.S. Dollar weakens in relation to these foreign currencies, we would expect to report
a net increase in operating income. Thus, changes in the relative strength of the U.S. Dollar may have a material
impact on our operating results.
General Risk Factors
Unfavorable global economic conditions may negatively impact our operating results.
Our revenue levels are impacted by global economic conditions, as we have a significant business presence in
many countries throughout the world. Unfavorable economic conditions, such as inflation, slower growth or
recession, higher interest rates, tighter credit, and labor shortages, may cause companies to delay or reduce
spending for automation projects, including those with machine vision, amid weaker general manufacturing
confidence and heightened uncertainty around global trade. Furthermore, customer confidence and capital
investment can be materially adversely impacted as a result of financial market volatility, negative financial news,
declines in income or asset values, energy shortages and cost increases, labor and healthcare costs, and other
global economic conditions. When global economic conditions are unfavorable, our revenue and our ability to
generate operating profits could be materially adversely affected.
As a result of global economic conditions, our business is subject to the following risks, among others:
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our customers may not have sufficient cash flow or access to financing to purchase our products and
services,
our customers may not pay us within agreed upon terms or may default on their payments altogether,
our suppliers may be unable to fulfill their delivery obligations to us in a timely manner,
lower demand for our products may result in charges for excess and obsolete inventory if we are unable to
sell inventory that is either already on hand or that we are committed to purchase,
lower cash flows may result in impairment charges for acquired intangible assets or goodwill,
a decline in our stock price may make stock-based awards a less attractive form of compensation and a
less effective incentive for retention for our employees, and
the trading price of our common stock may be volatile.
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As of December 31, 2023, we had approximately $576 million in cash and investments. In addition, we have no
long-term debt. We believe that our strong cash position puts us in a relatively good position to weather economic
downturns. Nevertheless, our operating results have been materially adversely affected in the past, and could be
materially adversely affected in the future, as a result of unfavorable economic conditions and reduced capital
spending by manufacturers and logistics companies worldwide.
Natural disasters, fires, energy shortages, widespread public health issues, or man-made disasters could
result in business disruptions that may adversely affect our business and operating results.
Our business, and the businesses of our customers, suppliers, and third-party service providers, could be disrupted
by natural disasters, fires, energy shortages, public health crises, such as pandemics and epidemics, man-made
disasters, such as cyberattacks, terrorism or industrial accidents, or other events outside of our control. Certain of
our business operations, such as our third-party primary contractor manufacturers in Indonesia and Malaysia, are in
locations that may be more prone to earthquakes and other natural disasters, and global climate change may result
in certain types of natural disasters occurring more frequently or with more intense effects. Following a business
disruption, the Company could be subject to production downtimes, operational delays, substantial recovery time,
customer claims, significant expenditures to resume operations, the diversion of management’s attention and
resources, or loss of business, any of which could have a material adverse effect on our competitive position,
operating results, or financial condition. Because we rely on single or limited sources for the supply of certain
components and manufacture of our products, a business disruption affecting such sources would worsen any
adverse consequences to our business.
While we maintain insurance coverage for certain types of losses, such insurance coverage may be insufficient to
cover all losses that may arise. The impact of any such business disruption is difficult to predict.
Expectations relating to environmental, social, and governance considerations expose the Company to
potential liabilities, increased costs, reputational harm, and other adverse effects on our business.
Many governments, regulators, investors, employees, customers, and other stakeholders are increasingly focused
on environmental, social, and governance considerations relating to businesses, including climate change and
greenhouse gas emissions, human and civil rights, and diversity, equity, and inclusion. In addition, we make
statements about our environmental, social, and governance goals and initiatives through our Sustainability
Reports, information provided on our website, and other communications. In addition, future environmental laws and
regulations have the potential to affect our operations, increase our costs, decrease our revenue, or change the way
we design or manufacture our products. Responding to these environmental, social, and governance considerations
and implementation of these goals and initiatives involves risks and uncertainties, requires investments, and
depends in part on third-party performance or data that is outside of our control. We cannot guarantee that we will
achieve our environmental, social, and governance goals and initiatives. In addition, some stakeholders may
disagree with our goals and initiatives. Any failure, or perceived failure, to achieve our goals, further our initiatives,
adhere to our public statements, comply with federal, state, or international environmental, social, and governance
laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and
regulatory proceedings against the Company and adversely affect our business, reputation, results of operations,
financial condition, and stock price.
The price of the Company’s stock is subject to volatility.
We have experienced substantial stock price volatility in the past and may continue to do so in the future. The price
of our stock may be affected by factors such as our financial performance, announcements of technological
innovations or new products by us or our competitors, market conditions, and other factors. Additionally, the
Company, the technology industry, and the overall stock market have, from time to time, experienced extreme stock
price and volume fluctuations that have affected stock prices in ways that may have been unrelated to these
companies’ operating performance. Price volatility may cause the average price at which we repurchase our stock in
a given period to exceed the stock’s price at a given point in time. We believe the price of our stock should reflect
expectations of future growth and profitability. If we fail to meet expectations related to future growth, profitability,
dividends, share repurchases, or other market expectations, the price of our stock may decline significantly, which
could have a material adverse impact on investor confidence and employee retention.
15
Our Company may be subject to time-consuming and costly litigation or activist shareholder activities.
From time to time, we may be subject to various claims, demands, and lawsuits by competitors, shareholders,
customers, distributors, patent trolls, former employees, or other parties arising in the ordinary course of business,
including lawsuits charging patent infringement, or claims and lawsuits instituted by us to protect our intellectual
property and confidential information, or for other reasons. These matters can be time consuming, divert
management’s attention and resources, and cause us to incur significant expenses. Furthermore, the results of any
of these actions may have a material adverse effect on our operating results.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None
ITEM 1C: CYBERSECURITY
Cybersecurity Risk Management
As part of our overall “Enterprise Risk Management” program, the Company has implemented a cybersecurity risk
management program that is informed by recognized industry standards and frameworks. The cybersecurity risk
management program includes a number of components, including information security program assessments,
penetration testing, and threat simulation exercises that are conducted periodically by both internal and external
resources, as well as continuous monitoring of critical risks from cybersecurity threats using automated tools. During
onboarding and periodically thereafter, we conduct trainings for the Company’s employees, contractors, and
temporary workers about cybersecurity risks, including sending test phishing emails for training purposes to all
users of the Company’s email system.
As part of our cybersecurity risk management program, we maintain processes to assess and review the
cybersecurity practices of third-party vendors and service providers, including utilization of software to evaluate,
assess, and monitor cybersecurity risks posed by third parties that provide critical services or handle confidential
information. Additionally, prior to engaging a critical third-party vendor or service provider, and periodically
thereafter, we conduct security audits of such third parties, and, as appropriate, include security requirements in
contracts.
We, like other companies in our industry, face a number of cybersecurity risks in connection with our business.
Although such risks have not materially affected us, including our business strategy, results of operations, or
financial condition, to date, we have, from time to time, experienced threats to and security incidents related to our
data and systems, including denial of service and phishing attacks. For more information about the cybersecurity
risks we face, see the risk factor entitled “Information security breaches may adversely affect our business” in Item
1A- Risk Factors.
Governance
Our cybersecurity risk management program and related operations and processes are managed by our Information
Security team (the “IS Team”), which is led by the Senior Director of Information Security. The Senior Director of
Information Security role is currently held by an individual who has approximately fifteen years of experience
managing information security programs. The IS Team is responsible for assessing risks from cybersecurity threats,
including their potential business impact and likelihood of occurrence, as well as implementing risk remediations
and mitigations.
The IS Team provides reports on cybersecurity risk management processes to the Chief Financial Officer and other
leaders of the Company on a quarterly basis, or as potentially critical risks from cybersecurity threats or incidents
arise.
The IS Team provides reports on an annual basis to the Audit Committee, which oversees cybersecurity risks
pursuant to the Audit Committee Charter. The Audit Committee periodically reports on cybersecurity risk
management to the full Board of Directors. The Board of Directors, as a whole and through its committees, has
responsibility for the oversight of risk management.
ITEM 2: PROPERTIES
In 1994, Cognex purchased and renovated a 100,000 square-foot building located in Natick, Massachusetts that
serves as our corporate headquarters and is occupied by employees primarily in research, development, and
engineering, manufacturing and quality assurance, and administration functions. In 1997, Cognex completed
construction of a 50,000 square-foot addition to this building.
16
In 1995, Cognex purchased an 83,000 square-foot office building adjacent to our corporate headquarters that is
occupied by employees primarily in marketing, service, information technology, and finance functions.
In 1997, Cognex purchased a three and one-half acre parcel of land adjacent to our corporate headquarters. This
land is being held for future expansion and is currently used as an Ultimate Frisbee Field for our Cognoids.
In 2007, Cognex purchased a 19,000 square-foot building adjacent to our corporate headquarters that is currently
used as a training center as part of our Emerging Customer sales initiative.
In 2014, Cognex purchased a 50,000 square-foot building in Cork, Ireland that serves as the distribution center for
customers located in Europe.
In 2021, Cognex entered into a lease for a 65,000 square-foot building in Southborough, Massachusetts for a term
of 10 years that serves as the distribution center for customers located in the Americas.
In June 2023, Cognex entered into a lease for a 115,000 square-foot building in Singapore for a term of 10 years
and 6 months to serve as a new distribution center for customers located in Asia that became operational during the
fourth quarter of 2023.
In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023, the Company acquired a
162,000 square-foot building in Shenzhen, China and assumed a lease agreement for a 22,000 square-foot building
in Bac Ninh, Vietnam, both of which serve as production plants for optical components.
Cognex conducts certain of its operations in other leased facilities, predominantly research, development, and
engineering, sales, and administration functions. These lease agreements expire at various dates through 2033.
Certain of these leases contain renewal options, leasehold improvement incentives, retirement obligations,
escalation clauses, rent holidays, and variable payments tied to a consumer price index.
ITEM 3: LEGAL PROCEEDINGS
Various claims and legal proceedings generally incidental to the normal course of business are pending or
threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe
that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results
of operations.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
17
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND
ISSUER PURCHASES OF EQUITY SECURITIES
The Company’s common stock is traded on The NASDAQ Stock Market LLC, under the symbol CGNX. As of
January 28, 2024, there were approximately 625 shareholders of record of the Company’s common stock. The
Company believes the number of beneficial owners of the Company’s common stock on that date was substantially
greater.
In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's
common stock. Under this October 2018 program, in addition to repurchases made in prior years, the Company
repurchased 957,000 shares at a cost of $78,652,000 in 2021, which completed purchases under the October 2018
program.
In March 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the
Company's common stock. Under this March 2020 program, the Company repurchased 1,060,000 shares, including
5,000 shares that were repurchased in 2021 and settled in 2022, at a cost of $83,000,000 in 2021, and 1,677,000
shares at a cost of $117,000,000 in 2022, which completed purchases under the March 2020 program.
In March 2022, the Company's Board of Directors authorized the repurchase of an additional $500,000,000 of the
Company's common stock. Under this March 2022 program, the Company repurchased 1,682,000 shares at a cost
of $87,314,000 in 2022 and 1,723,000 shares at a cost of $79,794,000 in 2023, including $446,000 of buyback
Excise Tax in accordance with the Inflation Reduction Act of 2022, leaving a remaining balance of $332,892,000.
The Company may repurchase shares under this program in future periods depending on a variety of factors,
including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and
cash requirements. The Company is authorized to make repurchases of its common stock through open market
purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.
The following table sets forth information with respect to purchases by the Company of shares of its common stock
during each fiscal month of the fourth quarter of 2023:
Total Number of
Shares Purchased
Average
Price Paid
per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Approximate Dollar
Value of Shares that
May Yet Be
Purchased Under the
Plans or Programs
October 2 - October 29, 2023
October 30 - November 26, 2023
November 27 - December 31, 2023
Total
74,000 $
492,000
—
566,000 $
34.98
35.66 (1)
—
35.57
74,000 $
492,000
—
566,000 $
350,436,000
332,892,000 (1)
332,892,000
332,892,000
(1) Includes $446,000 of buyback Excise Tax in accordance with the Inflation Reduction Act of 2022.
The information required by Item 5 of Form 10-K regarding equity compensation plans is incorporated herein by
reference to Item 12 of Part III of this Annual Report.
The Company’s Board of Directors declared and paid cash dividends of $0.060 per share in the first, second, and
third quarters of 2021, $0.065 per share in the fourth quarter of 2021 and in the first, second, and third quarters of
2022, and $0.070 per share in the fourth quarter of 2022 and in the first, second, and third quarters of 2023. The
dividend was increased to $0.075 per share in the fourth quarter of 2023.
Total dividends paid were $49,079,000 in 2023, $45,921,000 in 2022, and $43,263,000 in 2021. Future dividends
will be declared at the discretion of the Company's Board of Directors and will depend on such factors as the Board
deems relevant, including, among other things, the Company's ability to generate positive cash flow from
operations.
18
Set forth below is a line graph comparing the annual percentage change in the cumulative total shareholder return
on the Company’s common stock, based on the market price of the Company’s common stock, with the total return
on companies within the Nasdaq Composite Index and the Research Data Group, Inc. Nasdaq Lab Apparatus &
Analytical, Optical, Measuring & Controlling Instrument (SIC 3820-3829 US Companies) Index (the “Nasdaq Lab
Apparatus Index”). The performance graph assumes an investment of $100 in each of the Company and the two
indices, and the reinvestment of any dividends. The historical information set forth below is not necessarily
indicative of future performance. Data for the Nasdaq Composite Index and the Nasdaq Lab Apparatus Index was
provided to the Company by Research Data Group, Inc.
*$100 invested on 12/31/2018 in stock or index, including reinvestment of dividends. Fiscal year ended December 31.
Cognex Corporation
NASDAQ Composite
NASDAQ Stocks
12/18
12/19
12/20
12/21
12/22
12/23
100.00
145.56
220.61
214.32
130.52
116.38
100.00
100.00
136.69
140.44
198.10
190.18
242.03
225.09
163.28
144.46
236.17
172.72
(SIC 3820-3829 U.S. Companies) Lab Apparatus & Analyt,Opt, Measuring, and Controlling Instrument)
19
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Cognex CorporationNASDAQ CompositeNASDAQ Stocks (SIC 3820-3829 U.S. Companies) Lab Apparatus & Analyt,Opt, Measuring, and Controlling Instr12/1812/1912/2012/2112/2212/23$0$100$200$300 ITEM 6: [RESERVED]
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements made in this report, as well as oral statements made by the Company from time to time,
constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Exchange Act. Readers can identify these forward-looking statements by our use of the
words “expects,” “anticipates,” “estimates,” "potential," “believes,” “projects,” “intends,” “plans,” “will,” “may,” “shall,”
“could,” “should,” "opportunity," "goal" and similar words and other statements of a similar sense. These statements
are based on our current estimates and expectations as to prospective events and circumstances, which may or
may not be in our control and as to which there can be no firm assurances given. These forward-looking
statements, which include statements regarding business and market growth opportunities and trends, future
financial performance and financial targets, customer demand and order rates and timing of related revenue,
managing supply shortages, delivery lead times, future product mix, research and development activities, sales and
marketing activities (including our Emerging Customer Program), new product offerings and product development
activities, customer acceptance of our products, the potential effects of emerging technologies, capital expenditures,
cost management activities, investments, liquidity, dividends and stock repurchases, strategic and growth plans, our
ability to maintain and grow key relationships, acquisitions, the expected impact of the fire at our primary contract
manufacturer's plant on our assets, business and results of operations and related insurance recoveries, and
estimated tax benefits and expenses and other tax matters, involve known and unknown risks and uncertainties that
could cause actual results to differ materially from those projected. Such risks and uncertainties include: (1) the
technological obsolescence of current products and the inability to develop new products; (2) the impact of
competitive pressures; (3) the inability to attract and retain skilled employees and maintain our unique corporate
culture; (4) the failure to properly manage the distribution of products and services; (5) economic, political, and other
risks associated with international sales and operations, including the impact of trade disputes on the economic
climate in China and the wars in Ukraine and Israel; (6) the challenges in integrating and achieving expected results
from acquired businesses; (7) information security breaches; (8) the failure to comply with laws or regulations
relating to data privacy or data protection; (9) the inability to protect our proprietary technology and intellectual
property; (10) the failure to manufacture and deliver products in a timely manner; (11) the inability to obtain, or the
delay in obtaining, components for our products at reasonable prices; (12) the failure to effectively manage product
transitions or accurately forecast customer demand; (13) the inability to manage disruptions to our distribution
centers or to our key suppliers; (14) the inability to design and manufacture high-quality products; (15) the loss of, or
curtailment of purchases by, large customers in the logistics, consumer electronics, or automotive industries; (16)
potential impairment charges with respect to our investments or acquired intangible assets; (17) exposure to
additional tax liabilities, increases and fluctuations in our effective tax rate, and other tax matters; (18) fluctuations in
foreign currency exchange rates and the use of derivative instruments; (19) unfavorable global economic conditions,
including increases in interest rates and high inflation rates; (20) business disruptions from natural or man-made
disasters, such as fire, or public health issues; (21) exposure to potential liabilities, increased costs, reputational
harm, and other adverse effects associated with expectations relating to environmental, social, and governance
considerations; (22) stock price volatility; and (23) our involvement in time-consuming and costly litigation or activist
shareholder activities. The foregoing list should not be construed as exhaustive and we encourage readers to refer
to the detailed discussion of risk factors included in Part I - Item 1A of this Annual Report on Form 10-K. The
Company cautions readers not to place undue reliance upon any such forward-looking statements, which speak
only as of the date made. The Company disclaims any obligation to subsequently revise forward-looking statements
to reflect the occurrence of anticipated or unanticipated events or circumstances after the date such statements are
made.
EXECUTIVE OVERVIEW
Cognex Corporation (“the Company”) invents and commercializes technologies that address some of the most
critical manufacturing and distribution challenges. We are a leading global provider of machine vision products and
solutions that seek to improve efficiency and quality in a wide range of businesses across attractive industrial end
markets. In addition to product revenue derived from the sale of machine vision products, the Company also
generates revenue by providing maintenance and support, consulting, and training services to its customers;
however, service revenue accounted for less than 10% of total revenue for all periods presented.
20
Machine vision is used in a variety of industries where technology is widely recognized as an important component
of automated production, distribution, and quality assurance. Virtually every manufacturer or distributor can achieve
better quality and efficiency by using machine vision. This results in a broad base of potential customers across a
variety of industries, including automotive, logistics, consumer electronics, medical-related, semiconductor,
consumer products, and food and beverage.
Revenue for the year ended December 31, 2023 totaled $837,547,000, representing a decrease of 17% from the
prior year due primarily to lower spending trends across our factory automation business, most notably in the
consumer electronics and semiconductor industries, and the continued pause in investments by a few large e-
commerce logistics customers.
Gross margin as a percentage of revenue remained consistent with the prior year at 72%, as the deleveraging
impact of lower sales volume, less favorable revenue mix, and charges related to the acquisition of Moritex
Corporation in the fourth quarter of 2023 were offset by lower inventory costs due to a reduction in premiums paid to
brokers for the purchase of components.
Operating expenses were relatively flat with the prior year, as the favorable year-over-year impact of losses from the
fire at our contract manufacturer in 2022 compared to recoveries from the fire in 2023, lower incentive
compensation, and cost management activities were offset by investments in our “Emerging Customer” sales
initiative and costs related to the acquisition of Moritex Corporation in the fourth quarter of 2023.
Operating income decreased to 16% of revenue in 2023 compared to 24% of revenue in 2022 driven by the
operating deleveraging resulting from the lower revenue levels. This lower level of operating income resulted in net
income of 14% of revenue in 2023 compared to 21% of revenue in 2022, and net income per diluted share of $0.65
in 2023 compared to $1.23 in 2022.
The following table sets forth certain consolidated financial data as a percentage of revenue:
Revenue
Cost of revenue
Gross margin
Research, development, and engineering expenses
Selling, general, and administrative expenses
Loss (recovery) from fire
Operating income
Non-operating income
Income before income tax expense
Income tax expense
Net income
(1) Amounts may not total properly due to rounding.
RESULTS OF OPERATIONS
Year Ended December 31,
2023 (1)
2022 (1)
2021
100 %
28
72
17
40
(1)
16
1
16
3
14 %
100 %
28
72
14
31
2
24
—
25
3
21 %
100 %
27
73
13
30
—
30
1
31
4
27 %
As foreign currency exchange rates are a factor in understanding period-to-period comparisons, we believe the
presentation of results on a constant-currency basis in addition to reported results helps improve investors’ ability to
understand our operating results and evaluate our performance in comparison to prior periods. We also use results
on a constant-currency basis as one measure to evaluate our performance. Constant-currency information
compares results between periods as if exchange rates had remained constant period-over-period. We generally
refer to such amounts calculated on a constant-currency basis as excluding the impact of foreign currency
exchange rate changes. Results on a constant-currency basis are not in accordance with accounting principles
generally accepted in the United States of America (U.S. GAAP) and should be considered in addition to, and not as
a substitute for, results prepared in accordance with U.S. GAAP.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Revenue
Revenue for the year ended December 31, 2023 was $837,547,000 compared to $1,006,090,000 for the prior year,
representing a decrease of 17%. Changes in foreign exchange rates resulted in a lower level of reported revenue in
2023 as compared to 2022. Excluding the impact of foreign currency exchange rate changes, revenue decreased
21
by 16% compared to 2022. On October 18, 2023, Cognex acquired Moritex Corporation, a global provider of
premium optical components based in Japan. During the integration period, Cognex is consolidating Moritex results
one month in arrears, and therefore, revenue for the fourth quarter of 2023 included six weeks of Moritex revenue
totaling approximately $7,000,000. The majority of this revenue was from customers based in Asia in similar
industries as Cognex’s historical revenue.
The decrease in revenue was due primarily to lower spending trends across our factory automation business, most
notably in the consumer electronics and semiconductor industries, and the continued pause in investments by a few
large e-commerce logistics customers. Revenue from the automotive industry, our largest market in both 2023 and
2022, decreased approximately 6% from the prior year. Although automotive revenue related to investment in
electric vehicle battery applications grew year-over-year, this increase was more than offset by lower automotive
revenue outside of electric vehicle battery applications. Revenue from the logistics industry decreased
approximately 21% from the prior year. Excluding the decreases in revenue from a few large e-commerce
customers, revenue from the remainder of the logistics industry grew, as the broader base of logistics customers
continued to invest in automation. Revenue from the consumer electronics industry decreased approximately 31%
from the prior year, with a large portion of the decrease coming from lower large-customer demand.
The following table sets forth our disaggregated revenue information by geographic area based on the customers'
country of domicile (in thousands) for the years ended December 31, 2023 and 2022.
Americas
Percentage of total revenue
Europe
Percentage of total revenue
Greater China
Percentage of total revenue
Other Asia
Percentage of total revenue
Total revenue
Twelve-months Ended
December 31, 2023 December 31, 2022
$ Change
% Change
$
$
$
$
$
330,415
$
390,573
$
(60,158)
(15) %
39 %
39 %
220,665
$
234,643
$
(13,978)
(6) %
26 %
23 %
164,115
$
227,447
$
(63,332)
(28) %
20 %
23 %
122,352
$
153,427
$
(31,075)
(20) %
15 %
15 %
837,547
$
1,006,090
$
(168,543)
(17) %
Changes in revenue from a geographic perspective were as follows:
•
•
•
•
Revenue from customers based in the Americas decreased by 15% from the prior year driven by lower
revenue in the logistics industry due to the continued pause in investments by a few large e-commerce
customers. Revenue from industries outside of logistics also declined from the prior year, most notably in
medical-related industries that had benefited from COVID-related applications in prior years.
Revenue from customers based in Europe decreased by 6% from the prior year. Changes in foreign
currency exchange rates resulted in a higher level of reported revenue in 2023, as the U.S. Dollar
weakened versus the Euro and sales denominated in Euros were translated into U.S. Dollars at a higher
rate. Excluding the impact of foreign currency exchange rate changes, revenue from customers based in
Europe decreased by 8% from the prior year. The decrease came from customers in a variety of industries,
most notably the logistics and consumer electronics industries.
Revenue from customers based in Greater China decreased by 28% from the prior year. Changes in foreign
currency exchange rates resulted in a lower level of reported revenue in 2023, due to the impact of sales
denominated in Chinese Renminbi. Excluding the impact of foreign currency exchange rate changes,
revenue from customers based in Greater China decreased by 23% from the prior year. The decrease was
driven by lower revenue in the consumer electronics industry, particularly due to lower large-customer
demand. Challenging business conditions in China also resulted in broad-based declines in revenue from
customers in a variety of industries, most notably the automotive and semiconductor industries.
Revenue from other countries in Asia decreased by 20% from the prior year. Changes in foreign currency
exchange rates resulted in a lower level of reported revenue in 2023, primarily from sales denominated in
Japanese Yen and Korean Won. Excluding the impact of foreign currency exchange rate changes, revenue
from other countries in Asia decreased by 17% from the prior year. The decrease was driven by lower
22
revenue in the semiconductor and consumer electronics industries, and, to a lesser extent, the automotive
industry. Revenue from Moritex customers based in Japan in the fourth quarter of 2023 was not material to
the overall trend in the other countries in Asia region that includes Japan.
Gross Margin
The following table sets forth our gross margin (in thousands) for the years ended December 31, 2023 and 2022.
Gross margin
Percentage of total revenue
Twelve-months Ended
December 31, 2023 December 31, 2022
$ Change % Change
$
601,241
$
721,905
$
(120,664)
(17) %
72 %
72 %
Gross margin as a percentage of revenue remained consistent at 72% in both 2023 and 2022. The deleveraging
impact of lower sales volume, as well as less favorable revenue mix and charges related to the acquisition of
Moritex Corporation in the fourth quarter of 2023, had an unfavorable impact on the gross margin percentage as
compared to the prior year.
In accordance with the accounting principles applied in business combinations, the Company recorded Moritex
inventories at fair market value, resulting in a $4,000,000 increase to acquired inventories above cost. Of this
$4,000,000 increase to inventories, approximately $2,800,000 was recorded as cost of revenue in the fourth quarter
as the majority of the acquired inventories were sold, with the remaining $1,200,000 expected to be recorded as
cost of revenue in the first quarter of 2024. Moritex charges for the fourth quarter of 2023 also included
approximately $600,000 of amortization related to acquired technologies.
These decreases were offset by lower inventory costs driven by a reduction in premiums paid to brokers for the
purchase of components in response to global supply chain constraints and the expedited replenishment of
inventories lost in the fire at our primary contract manufacturer in the second quarter of 2022.
Operating Expenses
The following table sets forth our operating expenses (in thousands) for the years ended December 31, 2023 and
2022.
Research, development, and engineering expenses
Percentage of total revenue
Selling, general, and administrative expenses
Percentage of total revenue
Restructuring charges
Percentage of total revenue
Loss (recovery) from fire
Percentage of total revenue
Total operating expenses
Percentage of total revenue
Twelve-months Ended
December 31, 2023 December 31, 2022
$ Change
% Change
$
$
$
$
$
139,400
$
141,133
$
(1,733)
(1) %
17 %
14 %
339,139
$
312,107
$
27,032
9 %
40 %
—
$
— %
31 %
1,657
$
(1,657)
(100) %
— %
(8,000)
$
20,779
$
(28,779)
(139) %
(1) %
2 %
470,539
$
475,676
$
(5,137)
(1) %
56 %
47 %
Research, Development, and Engineering Expenses
Research, development, and engineering (RD&E) expenses in 2023 decreased by $1,733,000, or 1%, from the
prior year. The decrease in RD&E expenses was due primarily to lower incentive compensation expenses resulting
from weaker business performance, as well as cost management activities that included the realignment of
headcount to the lower business levels. These decreases were partially offset by the additional costs associated
with a new team of optical engineers that joined Cognex with the acquisition of Moritex Corporation on October 18,
2023.
RD&E expenses as a percentage of revenue was 17% in 2023 compared to 14% in 2022. We believe that a
continued commitment to RD&E activities is essential to maintain or achieve product leadership with our existing
products and to provide innovative new product offerings, as well as to provide engineering support for large
23
customers. In addition, we consider our ability to accelerate the time to market for new products to be critical to our
revenue growth and competitive position. This annual percentage is impacted by revenue levels and investing
cycles.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses in 2023 increased by $27,032,000, or 9%, from the prior year.
The increase in SG&A expenses was due primarily to increased costs related to our “Emerging Customer” sales
initiative, including additional headcount, travel expenses, sales demonstration equipment, and marketing costs. We
launched this initiative in 2023 to broaden the reach of our sales force to customers who are relatively new to
factory automation and have not fully realized the advantages of machine vision.
Costs related to the acquisition of Moritex Corporation on October 18, 2023 also contributed to the higher SG&A
expenses. These costs included additional sales and support personnel, sales demonstration equipment distributed
to the Cognex sales force, transaction costs totaling approximately $5,800,000, and approximately $800,000 of
amortization related to acquired customer relationships and trademarks.
These increases were partially offset by lower incentive compensation expenses, which included sales commissions
and incentive bonuses, resulting from weaker business performance. Cost management also helped to offset the
increases, including the realignment of headcount to support the Emerging Customer sales initiative.
Loss (Recovery) from Fire
On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia. The fire
destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned
by the contract manufacturer that were designated for Cognex products. There was no significant damage to the
Company's production equipment. Since the date of the fire, the Company has worked with the contract
manufacturer to resume production, maintain standards of product quality, and replenish inventories destroyed by
the fire. Since 2022, the Company has also been scaling up an additional contract manufacturer to further mitigate
risk, diversify supply chain, and expand production capacity.
In 2022, the Company recorded a net loss related to the fire of $20,779,000, consisting primarily of losses of
inventories and other assets of $48,339,000, partially offset by insurance proceeds received from the Company's
insurance carrier of $27,560,000. In 2023, the Company recorded recoveries related to the fire of $8,000,000,
consisting of $2,500,000 for proceeds received from the Company's insurance carrier in relation to a business
interruption claim and $5,500,000 for proceeds received as part of a financial settlement for lost inventory and other
losses incurred as a result of the fire. Management does not anticipate additional recoveries.
Restructuring Charges
On December 7, 2022, the Company acquired SAC Sirius Advanced Cybernetics GmbH ("SAC"), a leader in
computational lighting technology based in Germany. In December 2022, following its acquisition of SAC, the
Company performed restructuring activities to align the cost and operating structure of the acquired business with
the Company's business strategy. The restructuring activities resulted in charges of $1,657,000 in 2022. No
additional charges are expected to be incurred in future periods in relation to this restructuring plan.
Non-operating Income (Expense)
The following table sets forth our non-operating income (expense) (in thousands) for the years ended December 31,
2023 and 2022.
Foreign currency gain (loss)
Investment income
Other income (expense)
Total non-operating income (expense)
Twelve-months Ended
December 31, 2023 December 31, 2022
$ Change
% Change
$
$
$
$
(10,039) $
14,093 $
592 $
4,646 $
(1,837) $
(8,202)
6,715 $
(412) $
4,466 $
7,378
1,004
180
446 %
110 %
(244) %
4 %
The Company recorded foreign currency losses of $10,039,000 in 2023 and $1,837,000 in 2022. In the third quarter
of 2023, the Company recorded a foreign currency loss of $8,456,000 on the settlement of a foreign currency
forward contract entered into to hedge the Japanese Yen purchase price of the acquisition of Moritex Corporation.
Remaining foreign currency gains and losses in each year resulted primarily from the revaluation and settlement of
assets and liabilities that are denominated in currencies other than the functional currency of the Company, which is
the U.S. Dollar, or its subsidiaries.
24
Investment income increased by $7,378,000, or 110%, from the prior year. The increase was due primarily to higher
yields on the Company's portfolio of debt securities, partially offset by lower average investment balances and
changes in realized gains and losses. During the fourth quarter of 2023, net cash payments related to the
acquisition of Moritex Corporation reduced cash available to invest by approximately $257 million, which resulted in
lower investment income for the fourth quarter of 2023.
The Company recorded other income of $592,000 in 2023 and other expense of $412,000 in 2022.
Income Tax Expense
The following table sets forth income tax information (in thousands) for the twelve-month periods ended December
31, 2023 and December 31, 2022.
Income before income tax expense
Income tax expense
Effective income tax rate
Twelve-months Ended
December 31, 2023 December 31, 2022
$ Change
% Change
$
$
135,348
22,114
$
$
250,695
35,170
$
$
(115,347)
(13,056)
(46) %
(37) %
16 %
14 %
The Company’s effective tax rate was 16% in 2023 and 14% in 2022.
The increase in the effective tax rate from 14% to 16% primarily resulted from the impact of discrete tax items, most
notably an increase in tax reserves and an increase in tax expense due to a tax rate revaluation on state tax assets.
These impacts were partially offset by discrete tax benefits related to the release of a valuation allowance.
Excluding the impact of all discrete tax items, the Company's effective tax rate was 15% in 2023 and 16% in 2022
due to an increase in tax credits available in the year, partially offset by an increase in disallowed executive
compensation.
Year Ended December 31, 2022 Compared to Year Ended December 31, 2021
Revenue
Revenue for the year ended December 31, 2022 was $1,006,090,000 compared to $1,037,098,000 for the prior
year, representing a decrease of 3%. Changes in foreign exchange rates resulted in a lower level of reported
revenue in 2022 as compared to 2021. Excluding the impact of foreign currency exchange rate changes, revenue
increased by 1% compared to 2021.
The fire on June 7, 2022 at our primary contract manufacturer’s plant in Indonesia, which destroyed a large amount
of component inventory, limited our ability to fulfill certain orders in the year ended December 31, 2022, which
resulted in lower revenue. Revenue from the logistics industry, our largest market in 2021, decreased by
approximately 25% as a result of the slowing of large e-commerce customer projects as such customers absorbed
excess capacity built up during the pandemic. Excluding these decreases in revenue from a few large logistics
customers, revenue from the remainder of the logistics industry grew, as the broader base of logistics customers
continued to invest in automation. The decline in overall revenue from the logistics industry was partially offset by
growth in the broader factory automation market, most notably in the consumer electronics, automotive, and
semiconductor industries. Consumer electronics revenue increased by approximately 8%, and 14% on a constant-
currency basis, primarily as a result of increased large-customer demand. Revenue from our largest industry in
2022, automotive, increased by 7%, and 13% on a constant-currency basis, primarily as a result of continued
investment in electric vehicles.
Changes in revenue from a geographic perspective were as follows:
•
•
Revenue from customers based in the Americas decreased by 10% from the prior year driven primarily by a
decrease in revenue from customers in the logistics industry. This decrease was partially offset by an
increase in revenue from other industries, led by growth in the automotive and consumer electronics
industries.
Revenue from customers based in Europe decreased by 5% from the prior year. Changes in foreign
currency exchange rates resulted in a lower level of reported revenue in 2022, as sales denominated in
Euros were translated into U.S. Dollars at a lower rate. Excluding the impact of foreign currency exchange
rate changes, revenue from customers based in Europe increased by 5% from the prior year. The increase
came from customers in a variety of industries, most notably the automotive and consumer electronics
industries, partially offset by a decrease in revenue from customers in the logistics industry.
25
•
•
Revenue from customers based in Greater China increased by 14% from the prior year. Changes in foreign
currency exchange rates resulted in a lower level of reported revenue in 2022, primarily from sales
denominated in Chinese Renminbi. Excluding the impact of foreign currency exchange rate changes,
revenue from customers based in Greater China increased by 17% from the prior year. The increase was
driven primarily by higher revenue in the consumer electronics industry, particularly due to increased large-
customer demand, and to a lesser extent, growth in the semiconductor and automotive industries.
Revenue from other countries in Asia remained flat with the prior year. Changes in foreign currency
exchange rates resulted in a lower level of reported revenue in 2022, primarily from sales denominated in
Japanese Yen and Korean Won. Excluding the impact of foreign currency exchange rate changes, revenue
from these customers in other countries in Asia increased by 8% from the prior year, led by higher revenue
in semiconductor and automotive industries, and, to a lesser extent, the logistics industry. These increases
were partially offset by a decrease in revenue from the consumer electronic industry.
Gross Margin
Gross margin as a percentage of revenue decreased to 72% in 2022 compared to 73% in 2021. The decrease
resulted primarily from higher inventory costs, due largely to global supply chain constraints and the expedited
replenishment of inventories lost in the fire at our primary contract manufacturer's plant on June 7, 2022. These
circumstances have resulted in broker-buy purchases for components at higher-than-normal costs. The decrease in
gross margin was also due to an unfavorable impact of foreign currency exchange rate changes.
A more favorable revenue mix partially offset this decrease in gross margin. A lesser percentage of revenue came
from the logistics industry, which has relatively lower gross margins, and a greater percentage of revenue came
from the consumer electronics industry, which has relatively higher gross margins. Further, the Company has
increased prices, which has offset the impact of component cost inflation (not including broker-buy purchases) on
our gross margin.
Operating Expenses
Research, Development, and Engineering Expenses
Research, development, and engineering (RD&E) expenses in 2022 increased by $5,761,000, or 4%, from the prior
year as detailed in the table below (in thousands).
RD&E expenses in 2021
Personnel-related costs
Stock-based compensation
Foreign currency exchange rate changes
Incentive compensation
Other
RD&E expenses in 2022
$
$
135,372
8,060
4,761
(6,348)
(4,453)
3,741
141,133
RD&E expenses increased primarily due to higher personnel-related costs resulting from headcount additions to
support new product initiatives and salary increases provided to employees as part of our merit and promotion
process. Stock-based compensation expense also increased from the prior year due to a higher level of stock-
based grants at a higher average economic value, as well as the impact of a forfeiture rate true-up that resulted in
higher expense.
These increases were partially offset by lower incentive compensation expense compared to the prior year due to
weaker business performance. Relevant performance goals for incentive compensation plans are set at the
beginning of each year, with the ability to earn upside if the goals are exceeded. In contrast to 2022, performance
goals set for 2021 incentive bonuses were exceeded, resulting in a higher level of bonus expense recorded in 2021.
The impact of foreign currency exchange rate changes further offset the increase to RD&E expenses, as costs
denominated in foreign currencies were translated into U.S. Dollars at a lower rate.
RD&E expenses as a percentage of revenue was 14% in 2022 compared to 13% in 2021.
Selling, General, and Administrative Expenses
Selling, general, and administrative (SG&A) expenses increased in 2022 by $2,753,000, or 1%, from the prior year
as detailed in the table below (in thousands).
26
SG&A expenses in 2021
Personnel-related costs
Stock-based compensation
Travel expenses
Incentive compensation
Foreign currency exchange rate changes
Other
SG&A expenses in 2022
$
$
309,354
24,112
6,436
5,666
(24,476)
(14,613)
5,628
312,107
SG&A expenses increased primarily due to higher personnel-related costs resulting from headcount additions,
primarily for sales personnel to support the Company's anticipated revenue growth, and salary increases provided
to employees as part of our merit and promotion process. In addition to salaries and fringe benefits, these
personnel-related costs included sales commissions and travel expenses related to the additional headcount. Stock-
based compensation expense also increased from the prior year due to a higher level of stock-based grants at a
higher average economic value, as well as the impact of a forfeiture rate true-up that resulted in higher expense.
While travel expenses increased due to the number of sales personnel added, expenses also increased due to a
higher level of travel activity as restrictions related to COVID-19 continued to ease.
These increases were partially offset by lower incentive compensation expenses than the prior year, which included
sales commissions and incentive bonuses, primarily due to weaker business performance. Relevant performance
goals for these plans are set at the beginning of each year, with the ability to earn upside if the goals are exceeded.
In contrast to 2022, performance goals set for 2021 sales commissions and incentive bonuses were exceeded,
resulting in a higher level of incentive compensation expenses recorded in 2021. The impact of foreign currency
exchange rate changes further offset the increase to SG&A expenses, as costs denominated in foreign currencies
were translated into U.S. Dollars at a lower rate.
Loss from Fire
On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia. The fire
destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned
by the contract manufacturer that were designated for Cognex products. There was no significant damage to the
Company's production equipment. Since the date of the fire, the Company has worked with the contract
manufacturer to assess the damage, resume production, maintain standards of product quality, and replenish
inventories destroyed by the fire. The Company has also been scaling up an additional contract manufacturer to
further mitigate risk, diversify supply chain, and expand production capacity.
As a result of the fire, the Company recorded $48,339,000 in gross losses in 2022, related to $37,663,000 of
Cognex-owned inventories, $8,709,000 of primarily prepayments related to Cognex-designated components that
were owned by the contract manufacturer and other assets, and $1,967,000 related to deleveraging of costs related
to our distribution centers.
Gross losses have been reduced by insurance proceeds received from the Company’s insurance carrier of
$27,560,000 in the fourth quarter of 2022. Gross losses net of insurance recovery of $20,779,000 are presented in
the caption “Loss from fire” on the Consolidated Statements of Operations.
Restructuring Charges
On December 7, 2022, the Company acquired all of the outstanding shares of SAC Sirius Advanced Cybernetics
GmbH ("SAC"), a leader in computational lighting technology based in Germany. The acquisition of SAC and its
technology is expected to expand the Company’s capabilities in defect detection, and accelerate our growth
trajectory with electric vehicle battery manufacturers. In December 2022, following its acquisition of SAC, the
Company performed restructuring activities to align the cost and operating structure of the acquired business with
the Company's business strategy. The restructuring activities resulted in charges of $1,657,000 in 2022.
Non-operating Income (Expense)
The Company recorded foreign currency losses of $1,837,000 in 2022 and $2,270,000 in 2021. Foreign currency
gains and losses result primarily from the revaluation and settlement of assets and liabilities that are denominated in
currencies other than the functional currencies of our subsidiaries or the reporting currency of our company, which is
the U.S. Dollar.
27
Investment income increased by $55,000, or 1%, from the prior year. The slight increase was due primarily to higher
yields on investments, partially offset by lower average investment balances and changes in realized gains and
losses.
The Company recorded other expense of $412,000 in 2022 and $591,000 in 2021.
Income Tax Expense
The Company’s effective tax rate was 14% of pre-tax income in 2022, compared to 12% in 2021.
The increase in effective tax rate in 2022 primarily resulted from the impact of discrete tax items, including a
decrease in tax benefits related to stock-based compensation, an increase in certain international tax reserves, and
a net expense related to return-to-provision adjustments. These impacts were partially offset by discrete tax benefits
related to audit settlements, a release in the valuation allowance, Global Intangible Low-Taxed Income ("GILTI")
adjustments, and a rate revaluation on deferred state tax assets.
Excluding the impact of all discrete tax items, the Company’s effective tax rate was 16% of pre-tax income for both
2022 and 2021.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically been able to generate positive cash flow from operations, which has funded its
operating activities and other cash requirements and resulted in an accumulated cash and investment balance of
$576,277,000 as of December 31, 2023. The Company has established guidelines relative to credit ratings,
diversification, and maturities of its investments to maintain liquidity and safety of the investment portfolio.
Operating Activities
Net cash provided by operating activities totaled $112,916,000 in 2023. Significant uses of cash consisted of
aggregate payments of $24,040,000 related to the 2019 acquisition of Sualab Co, Ltd. that were contingent upon
the continued employment of key talent, payments made to build up inventory levels, and incentive compensation
payments made in the first quarter of 2023 that were earned and accrued in 2022.
Investing Activities
Net cash provided by investing activities totaled $32,273,000 in 2023. Investing activities included the acquisition of
Moritex Corporation in the fourth quarter of 2023 that resulted in a payment, net of cash acquired, of $257,056,000
that was largely funded from the maturities and sales of investments. Investing activities also included capital
expenditures, which totaled $23,077,000 in 2023 and consisted primarily of continued investments in business
systems related to the Company's sales process, manufacturing test equipment related to new product
introductions, and leasehold improvements.
Financing Activities
Net cash used in financing activities totaled $125,605,000 in 2023.
In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's
common stock. Under this October 2018 program, in addition to repurchases made in prior years, the Company
repurchased 957,000 shares at a cost of $78,652,000 in 2021, which completed purchases under the October 2018
program.
In March 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the
Company's common stock. Under this March 2020 program, the Company repurchased 1,060,000 shares, including
5,000 shares that were repurchased in 2021 and settled in 2022, at a cost of $83,000,000 in 2021, and 1,677,000
shares at a cost of $117,000,000 in 2022, which completed purchases under the March 2020 program.
In March 2022, the Company's Board of Directors authorized the repurchase of an additional $500,000,000 of the
Company's common stock. Under this March 2022 program, the Company repurchased 1,682,000 shares at a cost
of $87,314,000 in 2022 and 1,723,000 shares at a cost of $79,794,000 in 2023, including $446,000 of buyback
Excise Tax in accordance with the Inflation Reduction Act of 2022, leaving a remaining balance of $332,892,000.
The Company may repurchase shares under this program in future periods depending on a variety of factors,
including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and
cash requirements.
The Company’s Board of Directors declared and paid cash dividends of $0.060 per share in the first, second, and
third quarters of 2021, $0.065 per share in the fourth quarter of 2021 and in the first, second, and third quarters of
2022, and $0.070 per share in the fourth quarter of 2022 and in the first, second, and third quarters of 2023. The
dividend was increased to $0.075 per share in the fourth quarter of 2023.
28
Total dividends paid were $49,079,000 in 2023, $45,921,000 in 2022, and $43,263,000 in 2021. Future dividends
will be declared at the discretion of the Company's Board of Directors and will depend on such factors as the Board
deems relevant, including, among other things, the Company's ability to generate positive cash flow from
operations.
Future Cash Requirements
The Company's material cash requirements include contractual obligations related to inventory purchase
commitments and leases. As of December 31, 2023, the Company had inventory purchase commitments of
$61,459,000, with the majority payable within twelve months, and lease payment obligations of $105,697,000, with
$13,612,000 payable within twelve months.
Other significant and/or expected cash outlays for 2024 include:
• We expect to continue to make significant cash outlays related to our Emerging Customer sales initiative as
we continue to grow our sales force in order to reach customers who are new to machine vision or Cognex.
•
The Tax Cuts and Jobs Act of 2017 subjected unrepatriated foreign earnings to a one-time transition tax. As
of December 31, 2023, the Company had a remaining balance payable of $33,006,000 through 2025.
We believe that the Company's existing cash and investment balances, together with cash flow from operations, will
be sufficient to meet its operating, investing, and financing activities for the next twelve months. In addition, the
Company has no long-term debt. We believe that our strong cash position has put us in a relatively good position
with respect to anticipated longer-term liquidity needs.
CRITICAL ACCOUNTING ESTIMATES
Our discussion and analysis of the Company’s financial condition and results of operations are based on the
consolidated financial statements included in this Annual Report on Form 10-K, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial
statements requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We base our estimates
on historical experience and various other assumptions believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Changes in accounting estimates are reasonably likely to occur from period to
period. Accordingly, actual results could differ from these estimates under different assumptions or circumstances
resulting in charges that could be material in future reporting periods. We believe the following critical accounting
policies require the use of significant estimates and judgments in the preparation of our consolidated financial
statements.
Revenue Recognition
The Company recognizes revenue in a manner that depicts the transfer of promised goods or services to customers
in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those
goods or services.
Management uses significant judgment when determining the amount of revenue to be recognized each period for
application-specific customer solutions. Accounting for application-specific customer solutions requires management
to monitor and evaluate customer contracts to determine the point in time at which the solution is validated. The
Company’s application-specific customer solutions are comprised of a combination of products and services which
are accounted for as one performance obligation to deliver a total solution to the customer.
Revenue for application-specific customer solutions is recognized at the point in time when the solution is validated,
which is the point in time when the Company can objectively determine that the agreed-upon specifications in the
contract have been met and the customer should reasonably accept the performance obligations in the
arrangement. Although the customer may have taken legal title and physical possession of the goods when they
arrived at the customer’s designated site, the significant risks and rewards of ownership transfer to the customer
only upon validation.
In certain instances, an arrangement may include customer-specified acceptance provisions or performance
guarantees that allow the customer to accept or reject delivered products that do not meet the customer’s
requirements. If the Company can objectively determine that control of a good or service has been transferred to the
customer in accordance with the agreed-upon requirements in the contract, then customer acceptance is a
formality. If acceptance provisions are presumed to be substantive, then revenue is deferred until customer
acceptance.
29
Income Taxes
Significant judgment is required in determining worldwide income tax expense based on tax laws in the various
jurisdictions in which the Company operates. The Company has established reserves for income taxes by applying
the “more likely than not” criteria, under which the recognition threshold is met when an entity concludes that a tax
position, based solely on its technical merits, is more likely than not to be sustained upon examination by the
relevant tax authority. All tax positions are analyzed periodically and adjustments are made as events occur that
warrant modification, such as the completion of audits or the expiration of statutes of limitations, which may result in
future charges or credits to income tax expense.
As part of the process of preparing consolidated financial statements, management is required to estimate income
taxes in each of the jurisdictions in which the Company operates. These estimates occur in the calculation of
income tax credits, benefits, and deductions, and in the calculation of certain tax assets and liabilities, which arise
from differences in the timing of the recognition of certain expenses for tax and financial statement purposes. We
assess the likelihood of the realization of deferred tax assets and record a corresponding valuation allowance as
necessary if we determine those deferred tax assets may not be realized due to the uncertainty of the timing and
amount to be realized of certain federal, state, and international tax credit carryovers.
The Company has made an election to account for the impact of the Global Intangible Low-Taxed Income (GILTI)
minimum tax in deferred taxes. Management has determined that this change is considered preferable, based on
the conclusion that it appropriately matches the Company’s current and deferred income tax implications to its tax
structure.
Business Combinations
Allocating the purchase price for a business combination requires the Company to identify and estimate the fair
values of various assets acquired and liabilities assumed. Management is responsible for determining the
appropriate valuation model and estimated fair values, and in doing so, considers a number of factors, including
information provided by an outside valuation advisor. Management bases the fair value of assets, including
identifiable intangible assets acquired and liabilities assumed, on detailed valuations that use information and
assumptions provided by management, which consider management’s best estimates of inputs and assumptions
that a market participant would use.
NEW PRONOUNCEMENTS
Refer to Part II, Item 8 - Note 2 within this Form 10-K, for a full description of recently issued accounting
pronouncements including the expected dates of adoption and expected impact on the financial position and results
of operations of the Company.
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to certain risks relating to its ongoing business operations, including foreign currency
exchange rate risk and interest rate risk. The Company currently mitigates certain foreign currency exchange rate
risks with derivative instruments. The Company does not currently manage its interest rate risk with derivative
instruments.
Foreign Currency Risk
The Company faces exposure to foreign currency exchange rate fluctuations, as a significant portion of its
revenues, expenses, assets, and liabilities are denominated in currencies other than the functional currencies of the
Company’s subsidiaries or the reporting currency of the Company, which is the U.S. Dollar. In certain instances, we
utilize forward contracts to hedge against foreign currency fluctuations. These contracts are used to minimize
foreign currency gains or losses, as the gains or losses on the derivative are intended to offset the losses or gains
on the underlying exposure. We do not engage in foreign currency speculation.
The Company enters into economic hedges utilizing foreign currency forward contracts with maturities of up to three
months to manage the exposure to fluctuations in foreign currency exchange rates arising primarily from foreign-
denominated receivables and payables.
30
The Company had the following outstanding forward contracts as of December 31, 2023 and 2022 (in thousands):
Currency
Notional
Value
December 31, 2023
High
Rate
USD
Equivalent
December 31, 2022
Low
Rate
Notional
Value
USD
Equivalent
High
Rate
Low
Rate
Derivatives Not Designated as Hedging Instruments:
Euro
40,000 $
44,302
0.9029
0.9029
60,000 $
64,174 0.9350 0.9350
Singapore Dollar
Mexican Peso
Chinese Renminbi
39,700
145,000
50,000
30,136
1.32
1.32
8,505
7,025
17.05
17.05
7.12
7.12
—
185,000
55,000
—
—
—
9,480
19.51
19.51
7,619
7.22
7.22
Hungarian Forint
2,240,000
6,466
346.45
346.45
1,590,000
4,238 375.19 375.19
British Pound
Japanese Yen
Canadian Dollar
Swiss Franc
3,345
600,000
1,470
—
4,258
0.7855
0.7855
3,445
4,161 0.8279 0.8279
4,255
141.02
141.02
700,000
5,281 132.56 132.56
1,112
1.32
1.32
—
0
0
1,730
1,120
1,278
1,218
1.35
0.92
1.35
0.92
A change in foreign currency exchange rates could materially impact the fair value of these contracts; however, if
this occurred, the fair value of the underlying exposures hedged by the contracts would change by a similar amount.
Accordingly, management does not believe that a material change in foreign currency exchange rates used in the
fair value of our derivative instruments would materially impact operations or cash flows.
The success of our foreign currency risk management program depends on forecasts of transaction activity
denominated in various currencies. To the extent that these forecasts are overstated or understated during periods
of currency volatility, we could experience unanticipated foreign currency gains or losses that could have a material
impact on our results of operations. Furthermore, our failure to identify new exposures and hedge them in an
effective manner may result in material foreign currency gains or losses.
The Company’s functional currency/reporting currency exchange rate exposures result from revenues and
expenses that are denominated in currencies other than the U.S. Dollar. In addition to the U.S. Dollar, a significant
portion of our revenues and expenses are denominated in the Euro and Chinese Renminbi, and to a lesser extent
the Korean Won, Japanese Yen, Mexican Peso, and Indian Rupee. We estimate that approximately 52% of our
sales in 2023 were invoiced in currencies other than the U.S. Dollar, and we expect sales denominated in foreign
currencies to continue to represent a significant portion of our total revenue. While we also have expenses
denominated in these same foreign currencies, the impact on revenues has historically been, and is expected to
continue to be, greater than the offsetting impact on expenses. Therefore, in times when the U.S. Dollar strengthens
in relation to these foreign currencies, we would expect to report a net decrease in operating income. Conversely, in
times when the U.S. Dollar weakens in relation to these foreign currencies, we would expect to report a net increase
in operating income. Thus, changes in the relative strength of the U.S. Dollar may have a material impact on our
operating results.
Interest Rate Risk
The Company’s investment portfolio of debt securities includes corporate bonds, treasury notes, asset-backed
securities, and sovereign bonds. Debt securities with original maturities greater than three months are designated
as available-for-sale and are reported at fair value. As of December 31, 2023, the fair value of the Company’s
portfolio of debt securities amounted to $373,622,000, with amortized cost amounts totaling $383,589,000,
maturities that do not exceed seven years, and a yield to maturity of 2.3%. Differences between the fair value and
principal amounts of the Company’s portfolio of debt securities are primarily attributable to discounts and premiums
arising at the acquisition date, as well as unrealized gains and losses as of the balance sheet date. Management
currently intends to hold these securities to full value recovery at maturity.
In July 2023, the Company’s investment policy was modified to reduce effective maturities of newly purchased
securities to up to five years. As of December 31, 2023, the Company held investments with maturities in excess of
the five-year limit that were approved as pre-existing exceptions to the new policy. As of December 31, 2023, 68%
of the investment portfolio had effective maturity dates of less than three years. Given the relatively short maturities
and investment-grade quality of the Company’s portfolio of debt securities as of December 31, 2023, we do not
expect a sharp rise in interest rates to have a material adverse effect on the fair value of these instruments. As a
result, the Company does not currently hedge these interest rate exposures.
31
The following table presents the hypothetical change in the fair value of the Company’s portfolio of debt securities
arising from selected potential changes in interest rates (in thousands). This modeling technique measures the
change in fair value that would result from a parallel shift in the yield curve plus or minus 50 and 100 basis points
(BP) over a twelve-month time horizon.
Type of security
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Valuation of securities given
an interest rate decrease
No change in
interest rates
Valuation of securities given
an interest rate increase
$
$
(100 BP)
(50 BP)
50 BP
314,317 $
311,567 $
308,816 $
306,066 $
44,298
19,658
2,003
43,911
19,486
1,986
43,523
19,314
1,969
43,135
19,142
1,951
380,276 $
376,950 $
373,622 $
370,294 $
100 BP
303,316
42,748
18,970
1,933
366,967
32
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 248)
Consolidated Statements of Operations for the Years Ended December 31, 2023, 2022, and 2021
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2023,
2022, and 2021
Consolidated Balance Sheets as of December 31, 2023 and 2022
Consolidated Statements of Cash Flows for the Years Ended December 31, 2023, 2022, and 2021
Consolidated Statements of Shareholders’ Equity for the Years Ended December 31, 2023,
2022, and 2021
Notes to the Consolidated Financial Statements
Financial Statement Schedule:
Schedule II – Valuation and Qualifying Accounts for the Years Ended December 31, 2023, 2022,
and 2021
34
36
37
38
39
40
41
71
33
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Cognex Corporation
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Cognex Corporation (a Massachusetts
corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated
statements of operations, comprehensive income, shareholders’ equity, and cash flows for each of the three years
in the period ended December 31, 2023, and the related notes and financial statement schedule included under
Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present
fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in
conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on
criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (“COSO”), and our report dated February 15, 2024 expressed an
unqualified opinion.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis for our opinion.
Critical audit matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial
statements that was communicated or required to be communicated to the audit committee and that: (1) relate to
accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Revenue Recognition – Application-Specific Customer Solutions
As described further in Notes 1 and 14 to the consolidated financial statements, the Company recognizes revenue
from application-specific customer solutions. For these transactions, revenue is recognized at the point in time when
the solution is validated, which is when the Company can objectively determine that the agreed-upon specifications
in the contract have been met and the customer will accept the performance obligation in the contract. We identified
revenue recognition related to application-specific customer solutions as a critical audit matter.
The principal considerations for our determination that revenue recognition related to application-specific customer
solutions is a critical audit matter are that evaluating the performance obligations and determining the timing of
validation and that the agreed-upon specifications in the contract have been met relies on the use of management
judgments and requires a higher degree of auditor judgment in designing, executing and evaluating the results of
audit procedures. Accounting for application-specific customer solutions requires the Company to monitor and
evaluate customer contracts on an ongoing basis to determine the point in time at which the solution is validated,
the agreed-upon specifications in the contract have been met and revenue can be recognized.
34
Our audit procedures related to the revenue recognition of application-specific customer solutions included the
following, among others.
• We tested the design and operating effectiveness of internal controls related to the monitoring of
application-specific customer solutions contracts, determination of validation and the timing of revenue
recognition.
• We evaluated management’s significant accounting policies related to these customer contracts, including
the determination of the performance obligation, for appropriate revenue recognition based on key terms
and provisions.
•
For a sample of contracts, we inspected source documents, including the customer contract or purchase
order, third-party shipping information, invoice, and evidence of validation or acceptance to evaluate the
identification of performance obligations and timing of revenue recognition.
/s/ GRANT THORNTON LLP
We have served as the Company’s auditor since 2007.
Boston, Massachusetts
February 15, 2024
35
COGNEX CORPORATION – CONSOLIDATED STATEMENTS OF OPERATIONS
Revenue
Cost of revenue
Gross margin
Research, development, and engineering expenses
Selling, general, and administrative expenses
Loss (recovery) from fire (Note 22)
Restructuring charges (Note 23)
Operating income
Foreign currency gain (loss)
Investment income
Other income (expense)
Income before income tax expense
Income tax expense
Net income
Year Ended December 31,
2023
2022
2021
(In thousands, except per share amounts)
$
837,547 $ 1,006,090 $
236,306
601,241
139,400
339,139
(8,000)
—
130,702
(10,039)
14,093
592
284,185
721,905
141,133
312,107
20,779
1,657
246,229
(1,837)
6,715
(412)
135,348
22,114
250,695
35,170
$
113,234 $
215,525 $
1,037,098
277,271
759,827
135,372
309,354
—
—
315,101
(2,270)
6,660
(591)
318,900
39,019
279,881
Net Income per weighted-average common and common-
equivalent share:
Basic
Diluted
Weighted-average common and common-equivalent shares
outstanding:
Basic
Diluted
$
$
0.66 $
0.65 $
1.24 $
1.23 $
1.59
1.56
172,249
173,399
173,407
174,869
176,463
179,916
Cash dividends per common share
$
0.286 $
0.265 $
0.245
The accompanying notes are an integral part of these consolidated financial statements.
36
COGNEX CORPORATION – CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
Other comprehensive income (loss), net of tax:
Available-for-sale investments:
Net unrealized gain (loss), net of tax of $4,389, $(5,943), and
$(2,206) in 2023, 2022, and 2021, respectively
Reclassification of net realized (gain) loss into current operations
Net change related to available-for-sale investments
Foreign currency translation adjustments:
Foreign currency translation gain (loss)
Net change related to foreign currency translation adjustments
Year Ended December 31,
2023
2022
2021
(In thousands)
$
113,234 $
215,525 $
279,881
10,507
1,954
12,461
(17,152)
182
(16,970)
(7,152)
(236)
(7,388)
11,500
11,500
(4,385)
(4,385)
(6,753)
(6,753)
Other comprehensive income (loss), net of tax
Total comprehensive income
23,961
(21,355)
(14,141)
$
137,195 $
194,170 $
265,740
The accompanying notes are an integral part of these consolidated financial statements.
37
COGNEX CORPORATION – CONSOLIDATED BALANCE SHEETS
ASSETS
Current assets:
Cash and cash equivalents
Current investments, amortized cost of $132,799 and $223,545 in 2023 and 2022,
respectively, allowance for credit losses of $0 in 2023 and 2022
Accounts receivable, allowance for credit losses of $583 and $730 in 2023 and 2022,
respectively
Unbilled revenue
Inventories
Prepaid expenses and other current assets
Total current assets
Non-current investments, amortized cost of $250,790 and $476,148 in 2023 and 2022,
respectively, allowance for credit losses of $0 in 2023 and 2022
Property, plant, and equipment, net
Operating lease assets
Goodwill
Intangible assets, net
Deferred income taxes
Other assets
Total assets
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable
Accrued expenses
Accrued income taxes
Deferred revenue and customer deposits
Operating lease liabilities
Total current liabilities
Non-current operating lease liabilities
Deferred income taxes
Reserve for income taxes
Non-current accrued income taxes
Other liabilities
Total liabilities
Commitments and contingencies (Note 11)
Shareholders’ equity:
December 31,
2023
2022
(In thousands)
$
202,655 $
181,374
129,392
218,759
114,164
2,402
162,285
68,099
678,997
244,230
105,849
75,115
393,181
112,952
400,400
7,088
2,017,812 $
125,417
2,179
122,480
67,490
717,699
454,117
79,714
37,682
242,630
12,414
407,241
6,643
1,958,140
21,454 $
72,374
16,907
31,525
9,624
151,884
68,977
246,877
26,685
18,338
299
513,060
27,103
93,235
18,129
40,787
8,454
187,708
31,298
249,961
15,866
33,008
1,905
519,746
$
$
Preferred stock, $0.01 par value - Authorized: 400 shares in 2023 and 2022,
respectively, no shares issued and outstanding
Common stock, $0.002 par value – Authorized: 300,000 shares in 2023 and 2022,
respectively, issued and outstanding: 171,599 and 172,631 shares in 2023 and 2022,
respectively
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss, net of tax
Total shareholders’ equity
Total liabilities and shareholders' equity
—
—
343
1,037,202
512,543
(45,336)
1,504,752
2,017,812 $
345
979,167
528,179
(69,297)
1,438,394
1,958,140
$
The accompanying notes are an integral part of these consolidated financial statements.
38
COGNEX CORPORATION – CONSOLIDATED STATEMENTS OF CASH FLOWS
2023
Year Ended December 31,
2022
(In thousands)
2021
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
$ 113,234 $ 215,525 $ 279,881
Stock-based compensation expense
Depreciation of property, plant, and equipment
Loss (gain) on disposal of property, plant, and equipment
Amortization of intangible assets
Non-cash impact of charges related to fire (Note 22)
Excess and obsolete inventory charges
Fair value adjustment on acquired inventories (Note 21)
Amortization of discounts or premiums on investments
Realized (gain) loss on sale of investments
Change in deferred income taxes
Changes in operating assets and liabilities:
Accounts receivable
Unbilled revenue
Inventories
Prepaid expenses and other current assets
Accounts payable
Accrued expenses
Accrued income taxes
Deferred revenue and customer deposits
Other
Net cash provided by operating activities
Cash flows from investing activities:
Purchases of investments
Maturities and sales of investments
Purchases of property, plant, and equipment
Net payments related to business acquisitions
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net payments from issuance of common stock under stock plans
Repurchase of common stock
Payment of dividends
Net cash used in financing activities
Effect of foreign exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
54,768
17,270
229
4,610
—
3,775
2,829
1,745
1,954
54,505
16,347
19
3,274
46,372
3,084
—
4,968
182
(19,779)
(27,338)
43,774
16,616
33
3,667
—
2,573
—
4,887
(236)
(3,118)
23,346
(255)
3,454
1,806
(4,503)
1,637
(22,591)
(48,934)
(54,920)
2,469
(6,998)
(32,342)
(13,744)
(17,277)
(35,309)
(16,745)
(9,122)
2,056
(444)
4,886
4,232
(12,081)
27,828
16,861
(6,401)
14,417
3,411
112,916
243,406
314,065
(184,056)
(233,720)
(668,053)
496,462
253,983
430,969
(23,077)
(19,667)
(15,455)
(257,056)
(5,050)
—
32,273
(4,454)
(252,539)
3,268
9,861
63,292
(79,794)
(204,314)
(161,652)
(49,079)
(45,921)
(43,263)
(125,605)
(240,374)
(141,623)
1,697
21,281
(3,365)
(4,787)
(2,815)
(82,912)
181,374
186,161
269,073
$ 202,655 $ 181,374 $ 186,161
The accompanying notes are an integral part of these consolidated financial statements.
39
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T
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Summary of Significant Accounting Policies
The accompanying consolidated financial statements reflect the application of the significant accounting policies
described below.
Nature of Operations
Cognex Corporation ("the Company" or "Cognex") is a leading global provider of machine vision products and
solutions that improve efficiency and quality and address some of the most critical manufacturing and distribution
challenges.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United
States of America (U.S. GAAP) requires management to make estimates and judgments that affect the reported
amounts of assets and liabilities and the disclosure of contingent liabilities as of the balance sheet date, and the
reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.
Significant estimates and judgments include those related to revenue recognition, income taxes, and business
combinations.
Basis of Consolidation
The consolidated financial statements include the accounts of Cognex Corporation and its subsidiaries, all of which
are wholly owned. All intercompany accounts and transactions have been eliminated.
Foreign Currency Translation
The financial statements of the Company’s foreign subsidiaries, where the local currency is the functional currency,
are translated using exchange rates in effect at the end of the year for assets and liabilities and average exchange
rates during the year for results of operations. The resulting foreign currency translation adjustment, net of tax, is
included in shareholders’ equity as accumulated other comprehensive loss.
Fair Value Measurements
The Company applies a three-level valuation hierarchy for fair value measurements. The categorization of assets
and liabilities within the valuation hierarchy is based on the lowest level of input that is significant to the
measurement of fair value. Level 1 inputs to the valuation methodology utilize unadjusted quoted market prices in
active markets for identical assets and liabilities. Level 2 inputs to the valuation methodology are other observable
inputs, including quoted market prices for similar assets and liabilities, quoted prices for identical and similar assets
and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by
observable market data. Level 3 inputs to the valuation methodology are unobservable inputs based on
management’s best estimate of the inputs that market participants would use in pricing the asset or liability at the
measurement date, including assumptions about risk. A change to the level of an asset or liability within the fair
value hierarchy is determined at the end of a reporting period.
Cash, Cash Equivalents, and Investments
Money market instruments, as well as debt securities with original maturities of three months or less, are classified
as cash equivalents and are stated at amortized cost. Debt securities with original maturities greater than three
months and remaining maturities of one year or less are classified as current investments. Debt securities with
remaining maturities greater than one year are classified as non-current investments. In July 2023, the Company’s
investment policy was modified to reduce effective maturities of newly purchased securities to up to five years. As of
December 31, 2023, the Company held investments with maturities in excess of the five-year limit that were
approved as pre-existing exceptions to the new policy.
Debt securities with original maturities greater than three months are designated as available-for-sale and are
reported at fair value, with unrealized gains and losses, net of tax, included in shareholders’ equity as accumulated
other comprehensive loss. Realized gains and losses are calculated using the specific identification method.
Realized gains and losses, interest income, and the amortization of the discount or premium on debt securities
arising at acquisition, are included in "Investment income" on the Consolidated Statements of Operations.
Management monitors its debt securities to determine whether a loss exists related to the credit quality of the issuer.
If the present value of the cash flows expected to be collected from the security is less than the amortized cost basis
of the security, then a credit loss exists and an allowance against the security for credit losses is recorded. The
41
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
allowance is limited to the amount by which fair value is below amortized cost, recognizing that the investment could
be sold at fair value. Credit losses continue to be remeasured in subsequent reporting periods. Credit losses and
recoveries related to debt securities are included in “Other income (expense)” on the Consolidated Statements of
Operations. When developing an estimate of expected credit losses, management considers all relevant information
including historical experience, current conditions, and reasonable forecasts of expected future cash flows.
Accounts Receivable
The Company extends credit with various payment terms to customers based on an evaluation of their financial
condition. Accounts that are outstanding longer than the payment terms are considered to be past due. The
Company establishes an allowance against accounts receivable for credit losses when it determines receivables are
at risk for collection based on the length of time the receivable has been outstanding, the customer’s current ability
to pay its obligations to the Company, and general economic and industry conditions, as well as various other
factors. Receivables are written off against this allowance in the period they are determined to be uncollectible and
payments subsequently received on previously written-off receivables are recorded as a recovery of the credit loss.
Credit losses and recoveries related to accounts receivable are included in "Selling, general, and administrative
expenses" on the Consolidated Statements of Operations.
Inventories
Inventories are stated at the lower of cost and net realizable value. Cost is determined using standard costs, which
approximates actual costs under the first-in, first-out (FIFO) method. Net realizable value is the estimated selling
price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and
transportation.
Purchase price variances are incurred when actual costs are different than standard costs due to favorable or
unfavorable market prices. Management applies judgment to recognize purchase price variances in the same
period that the associated standard costs of the finished goods that consume these components are sold.
The Company’s inventory is subject to technological change or obsolescence. The Company reviews inventory
quantities on hand and estimates excess and obsolescence exposures based on assumptions about future
demand, product transitions, general economic and industry conditions, and other circumstances, and records
reserves to reduce the carrying value of inventories to their net realizable value. If actual future demand is less than
estimated, additional inventory write-downs would be required.
The Company generally disposes of obsolete inventory upon determination of obsolescence. The Company does
not dispose of excess inventory immediately, due to the possibility that some of this inventory could be sold to
customers as a result of differences between actual and forecasted demand. When inventory has been written
down below cost, such reduced amount is considered the new cost basis for subsequent accounting purposes. As a
result, the Company could recognize a higher-than-normal gross margin if the reserved inventory were
subsequently sold.
In accordance with the accounting principles applied in business combinations, acquired inventories are recorded at
fair value on the acquisition date. This valuation policy typically results in the write-up of inventories above the
acquired company’s pre-acquisition carrying value, which results in a lower-than-normal gross margin when these
acquired inventories are sold.
Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and depreciated using the straight-line method over the assets’
estimated useful lives. Buildings’ original useful lives are 39 years, building improvements’ useful lives are ten years,
and the useful lives of computer hardware and software, manufacturing test equipment, and furniture and fixtures
range from two to ten years. Land that is leased or granted, as well as leasehold improvements, are depreciated
over the shorter of the estimated useful lives or the remaining terms of the leases. Maintenance and repairs are
expensed when incurred; additions and improvements are capitalized. Upon retirement or disposition, the cost and
related accumulated depreciation of the disposed assets are removed from the accounts, with any resulting gain or
loss included in current operations.
In accordance with the accounting principles applied in business combinations, acquired property, plant, and
equipment are recorded at fair value on the acquisition date. This valuation policy typically results in the write-up of
property, plant, and equipment above the acquired company’s pre-acquisition carrying value, which results in a
higher depreciation expense over the estimated lives of the assets.
42
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Internal-use Software
Internal-use software is software acquired, internally developed, or modified solely to meet the Company's internal
needs, and during the software's development, no substantive plan exists to sell the software. The accounting
treatment for computer software developed for internal use depends on the nature of activities performed at each
stage of development. The preliminary project stage includes conceptual formulation of design alternatives,
determination of system requirements, vendor demonstrations, and final selection of vendors, and during this stage
costs are expensed as incurred. The application development stage includes software configuration, coding,
hardware installation, and testing. During this stage, certain costs are capitalized, including external direct costs of
materials and services, as well as payroll and payroll-related costs for employees who are directly associated with
the project, while certain costs are expensed as incurred, including training and data conversion costs. The post-
implementation stage includes support and maintenance, and during this stage costs are expensed as incurred.
Capitalization begins when both the preliminary project stage is completed and management commits to funding the
project. Capitalization ceases at the point the project is substantially complete and ready for its intended use, that is,
after all substantial testing is completed. Costs of specified upgrades and enhancements to internal-use software
are capitalized if it is probable that those expenditures result in additional functionality. Capitalized costs are
amortized on a straight-line basis over the estimated useful life.
Leases
At inception of a contract, the Company determines whether that contract is or contains a lease by assessing
whether there is an identified asset and whether the contract conveys the right to control the use of the identified
asset for a period of time in exchange for consideration. The Company has control of the asset if it has the right to
direct the use of the asset and obtains substantially all of the economic benefits from the use of the asset
throughout the period of use.
As a practical expedient, the Company does not recognize a lease asset or lease liability for leases with a lease
term of twelve months or less. In the determination of the lease term, the Company considers the existence of
extension or termination options and the probability of those options being exercised.
Lease contracts may include fixed lease components and non-lease components, such as common area
maintenance and utilities for property leases. As a practical expedient, the Company accounts for the non-lease
components together with the lease components as a single lease component for all of its leases.
The Company classifies a lease as a finance lease when it meets any of the following criteria at the lease
commencement date: (1) the lease transfers ownership of the underlying asset to the Company by the end of the
lease term; (2) the lease grants the Company an option to purchase the underlying asset that the Company is
reasonably certain to exercise; (3) the lease term is for the major part of the remaining economic life of the
underlying asset (the Company considers a major part to be 75% or more of the remaining economic life of the
underlying asset); (4) the present value of the sum of the lease payments and any residual value guaranteed by the
Company equals or exceeds substantially all of the fair value of the underlying asset (the Company considers
substantially all the fair value to be 90% or more of the fair value of the underlying asset amount); or (5) the
underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end
of the lease term. When none of the criteria above are met, the Company classifies the lease as an operating lease.
On the lease commencement date, the Company records a lease asset and lease liability on the balance sheet. The
lease asset consists of: (1) the amount of the initial lease liability; (2) any lease payments made to the lessor at or
before the lease commencement date, minus any lease incentives received; and (3) any initial direct cost incurred
by the Company. Initial direct costs are incremental costs of a lease that would not have been incurred if the lease
had not been obtained and are capitalized as part of the lease asset. The lease liability equals the present value of
the future cash payments discounted using the Company's incremental borrowing rate. The Company’s incremental
borrowing rate is the rate of interest that the Company would have to pay to borrow an amount equal to the lease
payments over a similar term, which, through year ended December 31, 2023, was estimated using the Secured
Overnight Financing Rate (SOFR) plus a 2% credit risk spread.
Operating lease expense equals the total cash payments recognized on a straight-line basis over the lease term.
The amortization of the lease asset is calculated as the straight-line lease expense less the accretion of the interest
on the lease liability each period. The lease liability is reduced by the cash payment less the interest each period.
Goodwill
Goodwill is stated at cost. The Company evaluates the potential impairment of goodwill annually each fourth quarter
43
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and whenever events or circumstances indicate the carrying value of the goodwill may not be recoverable. The
Company performs a qualitative assessment of goodwill to determine whether further impairment testing is
necessary. Factors that management considers in this assessment include general economic and industry
conditions, overall financial performance (both current and projected), changes in strategy, changes in the
composition or carrying amount of net assets, and market capitalization. If this qualitative assessment indicates that
it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company would
proceed to perform a quantitative impairment test. Under this quantitative analysis, the fair value of the reporting
unit is compared with its carrying value, including goodwill. If the carrying value exceeds the fair value of the
reporting unit, the Company recognizes an impairment charge. The Company estimates the fair value of its
reporting unit using the income approach based on a discounted cash flow model. In addition, the Company uses
the market approach, which compares the reporting unit to publicly traded companies and transactions involving
similar businesses, to support the conclusions based on the income approach.
Intangible Assets
Intangible assets are stated at cost and amortized over the assets’ estimated useful lives. Intangible assets are
either amortized in relation to the relative cash flows anticipated from the intangible asset or using the straight-line
method, depending on facts and circumstances. The useful lives of customer relationships range from five to fifteen
years, completed technologies from five to nine years, non-compete agreements from three to seven years, and
trademarks for three years. In-process technology is an indefinite-lived intangible asset until the technology is
completed, at which point it is amortized over its estimated useful life.
The Company evaluates the potential impairment of intangible assets whenever events or circumstances indicate
the carrying value of the assets may not be recoverable. For finite-lived intangible assets that are subject to
amortization, the Company follows a two-step process for impairment testing. In step one, known as the
recoverability test, the carrying value of the asset is compared to the sum of the undiscounted cash flows expected
to result from the use and eventual disposition of the asset. If the sum of the undiscounted future cash flows is less
than the carrying value, the asset is not recoverable and step two is performed. In step two, the impairment charge
is measured as the amount by which the carrying value of the asset exceeds its fair value.
Warranty Obligations
The Company warrants its products to be free from defects in material and workmanship for periods primarily
ranging from one to three years from the time of sale based on the product being purchased and the terms of the
customer arrangement. Warranty obligations are evaluated and recorded at the time of sale since it is probable that
customers will make claims under warranties related to products that have been sold and the amount of these
claims can be reasonably estimated based on historical costs to fulfill claims. Obligations may also be recorded
subsequent to the time of sale whenever specific events or circumstances impacting product quality become known
that would not have been taken into account using historical data.
Contingencies
Loss contingencies are accrued if the loss is probable and the amount of the loss can be reasonably estimated.
Legal costs associated with potential loss contingencies are expensed as incurred.
Derivative Instruments
Derivative instruments are recorded on the Consolidated Balance Sheets at fair value. Changes in the fair value of
the Company’s economic hedges utilizing foreign currency forward contracts are included in "Foreign currency gain
(loss)" on the Consolidated Statements of Operations. When the Company is engaged in more than one
outstanding derivative contract with the same counterparty and also has a legally enforceable master netting
agreement with that counterparty, the “net” mark-to-market exposure represents the netting of the positive and
negative exposures with that counterparty. The cash flows from derivative instruments are presented in the same
category on the Consolidated Statements of Cash Flows as the category for the cash flows from the hedged item.
Generally, this accounting policy election results in cash flows related to derivative instruments being classified as
an operating activity on the Consolidated Statements of Cash Flows.
Revenue Recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, “Revenue
from Contracts with Customers.” The core principle of ASC 606 is to recognize revenue in a manner that depicts the
transfer of promised goods or services to customers in an amount that reflects the consideration to which the
44
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company expects to be entitled in exchange for those goods or services. The framework in support of this core
principle includes: (1) identifying the contract with the customer; (2) identifying the performance obligations in the
contract; (3) determining the transaction price; (4) allocating the transaction price to the performance obligations;
and (5) recognizing revenue when (or as) the performance obligations are satisfied.
Identifying the Contract with the Customer
The Company identifies contracts with customers as agreements that create enforceable rights and obligations,
which typically take the form of customer contracts or purchase orders. The Company accounts for a contract when
it has approval and commitment from both parties, the rights of the parties are identified, payment terms are
identified, the contract has commercial substance, and collectability of consideration is probable.
Identifying the Performance Obligations in the Contract
The Company identifies performance obligations as promises in contracts to transfer distinct goods or services.
Standard products and services that the Company regularly sells separately, which customers can benefit from
either on their own or with other readily available resources and are distinct within the context of the customer
contract, are accounted for as distinct performance obligations. Application-specific customer solutions that are
comprised of a combination of products and services are accounted for as one performance obligation to deliver a
total solution to the customer. On-site support services that are provided to the customer after the solution is
deployed are accounted for as a separate performance obligation.
Shipping and handling activities for which the Company is responsible under the terms and conditions of the sale
are not accounted for as performance obligations but as fulfillment costs. These activities are required to fulfill the
Company’s promise to transfer the goods and are expensed when revenue is recognized.
The Company does not assess whether promised goods or services are performance obligations if they are
immaterial in the context of the contract. If revenue is recognized before immaterial promises have been completed,
then the costs related to such immaterial promises are accrued at the time of sale.
Determining the Transaction Price
The Company determines the transaction price as the amount of consideration it expects to receive in exchange for
transferring promised goods or services to the customer. Amounts collected from customers for sales taxes are
excluded from the transaction price.
If a contract includes a variable amount, such as a rebate, then the Company estimates the transaction price using
either the expected value or the most likely amount of consideration to be received, depending on the specific facts
and circumstances. The Company includes estimated variable consideration in the transaction price only to the
extent it is probable that a significant reversal of revenue will not occur when the uncertainty is resolved. The
Company updates its estimate of variable consideration at the end of each reporting period to reflect changes in
facts and circumstances.
The Company typically does not grant customers the explicit right to return product. However, from time to time, the
Company may allow a customer to return a product. As a practical expedient, the Company estimates the
transaction price using the expected value based on its history of return experience using a portfolio approach in
which the Company’s total revenue is reduced by an estimate of total customer returns. Management reasonably
expects that the effect of applying a portfolio approach to a group of contracts would not differ materially from
considering each contract separately.
Allocating the Transaction Price to the Performance Obligations
The Company allocates the transaction price to each performance obligation at contract inception based on a
relative stand-alone selling price basis, or the price at which the Company would sell the good or service separately
to similar customers in similar circumstances.
Recognizing Revenue When (or As) the Performance Obligations are Satisfied
The Company recognizes revenue when it transfers the promised goods or services to the customer. Revenue for
standard products is recognized at the point in time when the customer obtains control of the goods, which is
typically upon shipment or delivery when the customer has legal title, physical possession, the risks and rewards of
ownership, and an enforceable obligation to pay for the products. Revenue for services, which are not material, is
typically recognized over the time the service is provided.
Revenue for application-specific customer solutions is recognized at the point in time when the solution is validated,
which is the point in time when the Company can objectively determine that the agreed-upon specifications in the
45
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
contract have been met and the customer should reasonably accept the performance obligations in the
arrangement. Although the customer may have taken legal title and physical possession of the goods when they
arrived at the customer’s designated site, the significant risks and rewards of ownership transfer to the customer
only upon validation. Revenue for on-site support services related to these solutions is recognized over the time the
service is provided.
In certain instances, an arrangement may include customer-specified acceptance provisions or performance
guarantees that allow the customer to accept or reject delivered products that do not meet the customer’s
requirements. If the Company can objectively determine that control of a good or service has been transferred to the
customer in accordance with the agreed-upon requirements in the contract, then customer acceptance is a
formality. If acceptance provisions are presumed to be substantive, then revenue is deferred until customer
acceptance.
For the Company’s standard products and services, revenue recognition and billing typically occur at the same time.
For application-specific customer solutions, however, the agreement with the customer may provide for billing terms
which differ from revenue recognition criteria, resulting in either deferred revenue or unbilled revenue. Credit
assessments are performed to determine payment terms, which vary by region, industry, and customer. Prepayment
terms result in contract liabilities for customer deposits. When credit is granted to customers, payment is typically
due 30 to 90 days from billing. The Company's contracts have an original expected duration of less than one year,
and therefore as a practical expedient, the Company has elected to ignore the impact of the time value of money on
a contract and to expense sales commissions. The Company recognizes an asset for costs to fulfill a contract if the
costs relate directly to the contract and to future performance, and the costs are expected to be recovered.
Management exercises judgment when determining the amount of revenue to be recognized each period. Such
judgments include, but are not limited to, assessing the customer’s ability and intention to pay substantially all of the
contract consideration when due, determining when two or more contracts should be combined and accounted for
as a single contract, determining whether a contract modification has occurred, assessing whether promises are
immaterial in the context of the contract, determining whether material promises in a contract represent distinct
performance obligations, estimating the transaction price for a contract that contains variable consideration,
determining the stand-alone selling price of each performance obligation, determining whether control is transferred
over time or at a point in time for performance obligations, and assessing whether formal customer acceptance
provisions are substantive.
Research and Development
Research and development costs primarily include costs related to personnel, prototyping materials and equipment,
and outside services. Research and development costs are expensed when incurred until technological feasibility
has been established for the product. Thereafter, all software costs may be capitalized until the product is available
for general release to customers. The Company determines technological feasibility at the time the product reaches
beta in its stage of development. Historically, the time incurred between beta and general release to customers has
been short, and therefore, the costs have been insignificant.
Advertising Costs
Advertising costs are expensed as incurred and totaled $1,190,000 in 2023, $1,257,000 in 2022, and $1,965,000 in
2021.
Stock-Based Compensation
The Company’s stock-based awards that result in compensation expense consist of stock options and restricted
stock units ("RSUs"), including performance restricted stock units ("PRSUs"). The Company has reserved a specific
number of shares of its authorized but unissued shares for issuance upon the exercise of stock options or the
settlement of RSUs. When a stock option is exercised or an RSU is settled, the Company issues new shares from
this pool. Management is responsible for determining the appropriate valuation model and estimating the fair value
of stock-based awards, and in doing so, considers a number of factors, including information provided by an outside
valuation advisor and the observable market price of the Company's common stock on the grant date. The fair value
of RSUs is determined based on the observable market price of the Company's common stock on the grant date
less the present value of expected future dividends. The fair value of PRSUs where the performance goal includes
service and market conditions is calculated using a Monte Carlo simulation model to estimate the probability of
satisfying the service and market conditions stipulated in the award grant. When determining the grant-date fair
value of stock-based awards, management further considers whether an adjustment is required to the observable
46
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
market price or volatility of the Company's common stock that is used in the valuation as a result of material non-
public information, if that information is expected to result in a material increase in share price.
The Company recognizes compensation expense related to stock-based awards using the graded attribution
method, in which expense is recognized on a straight-line basis over the service period for each separately vesting
portion of the stock option or RSU as if the award was, in substance, multiple awards. The amount of compensation
expense recognized at the end of the vesting period is based on the number of awards for which the requisite
service has been completed. No compensation expense is recognized for awards that are forfeited for which the
employee does not render the requisite service. The term “forfeitures” is distinct from “expirations” and represents
only the unvested portion of the surrendered award. The Company applies estimated forfeiture rates to its unvested
awards to arrive at the amount of compensation expense that is expected to be recognized over the requisite
service period. At the end of each separately vesting portion of an award, the expense that was recognized by
applying the estimated forfeiture rate is compared to the expense that should be recognized based on the
employee’s service, and an increase or decrease to compensation expense is recorded to true up the final expense.
Taxes
The Company recognizes a tax position in its financial statements when that tax position, based solely upon its
technical merits, is more likely than not to be sustained upon examination by the relevant taxing authority. Those tax
positions failing to qualify for initial recognition are recognized in the first interim period in which they meet the more
likely than not standard, or are resolved through negotiation or litigation with the taxing authority, or upon expiration
of the statutes of limitations. Derecognition of a tax position that was previously recognized occurs when an entity
subsequently determines that a tax position no longer meets the more likely than not threshold of being sustained.
Only the portion of the liability that is expected to be paid within one year is classified as a current liability. As a
result, liabilities expected to be resolved without the payment of cash (e.g., resolution due to the expiration of the
statutes of limitations) or are not expected to be paid within one year are not classified as current. It is the
Company’s policy to record estimated interest and penalties as income tax expense and tax credits as a reduction
in income tax expense.
Deferred tax assets and liabilities are determined based on the differences between the financial statement and tax
bases of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences
reverse. Valuation allowances are provided if, based on the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized. The Company accounts for the impact of the Global
Intangible Low-Taxed Income (GILTI) tax in deferred taxes.
Sales tax in the United States and similar taxes in other jurisdictions that are collected from customers and remitted
to government authorities are presented on a gross basis (i.e., a receivable from the customer with a corresponding
payable to the government). Amounts collected from customers and retained by the Company during tax holidays
are recognized as non-operating income when earned.
Net Income Per Share
Basic net income per share is computed by dividing net income available to common shareholders by the weighted-
average number of common shares outstanding for the period. Diluted net income per share is computed by
dividing net income available to common shareholders by the weighted-average number of common shares
outstanding for the period plus potential dilutive common shares. Dilutive common equivalent shares consist of
stock options and restricted stock units and are calculated using the treasury stock method. Common equivalent
shares do not qualify as participating securities. In periods where the Company records a net loss, potential
common stock equivalents are not included in the calculation of diluted net loss per share as their effect would be
anti-dilutive.
Comprehensive Income
Comprehensive income is defined as the change in equity of a company during a period from transactions and other
events and circumstances, excluding transactions resulting from investments by owners and distributions to owners.
Accumulated other comprehensive loss, net of tax, consists of foreign currency translation adjustment losses of
$36,550,000 and $48,050,000, as of December 31, 2023 and December 31, 2022, respectively; net unrealized
losses on available-for-sale investments of $7,515,000 and $19,976,000 as of December 31, 2023 and December
31, 2022, respectively; and losses on currency swaps, net of gains on long-term intercompany loans of $1,271,000
at each year end.
47
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Concentrations of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash,
cash equivalents, investments, and accounts receivable. The Company has certain domestic and foreign cash
balances that exceed the insured limits set by the Federal Deposit Insurance Corporation (FDIC) in the United
States and equivalent regulatory agencies in foreign countries. The Company primarily invests in investment-grade
debt securities and has established guidelines relative to credit ratings, diversification, and maturities of its debt
securities that maintain liquidity and safety. The Company has historically not experienced any significant realized
losses on its debt securities. The Company performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses. The Company has historically not experienced any significant losses related
to the collection of its accounts receivable.
A significant portion of the Company's products is presently manufactured by a third-party contractor located in
Indonesia. This contract manufacturer has agreed to provide the Company with termination notification periods and
last-time-buy rights, if and when that may be applicable.
Certain key electronic and mechanical components, such as integrated circuit chips, are fundamental to the design
of Cognex products. Due to the impact of global supply chain challenges or other factors, we have experienced, and
may continue to experience, disruptions to the supply of components for our products that have resulted, and may
continue to result, in higher purchase costs, delivery costs, and manufacturing delays.
The Company sources components from preferred vendors that are selected based on price and performance
considerations. In the event of a supply disruption from a preferred vendor, these components may typically be
purchased from alternative vendors, which may result in higher purchase costs and manufacturing delays based on
the time required to identify and obtain sufficient quantities from an alternative source. Certain of the Company’s
products utilize components that are available from only one source. If we are unable to secure adequate supply
from these sources, we may have to redesign our products, which may lead to higher costs, delays in
manufacturing, and possible loss of sales.
Business Combinations
The Company determines whether a transaction qualifies as a business combination by applying the definition of a
business, which requires the assets acquired and liabilities assumed to be inputs and processes that have the
ability to contribute to the creation of outputs. The Company accounts for business combinations under the
acquisition method of accounting, which requires the following steps: (1) identifying the acquirer, (2) determining the
acquisition date, (3) recognizing and measuring the identifiable assets acquired and the liabilities assumed, and (4)
recognizing and measuring goodwill. The Company measures the identifiable assets acquired and liabilities
assumed at their estimated fair values as of the acquisition date. Management is responsible for determining the
appropriate valuation model and estimated fair values, and in doing so, considers a number of factors, including
information provided by an outside valuation advisor. Management bases the fair value of assets, including
identifiable intangible assets acquired and liabilities assumed, on detailed valuations that use information and
assumptions provided by management, which consider management’s best estimates of inputs and assumptions
that a market participant would use. Goodwill is recognized as of the acquisition date as the excess of the
consideration transferred over the net amount of assets acquired and liabilities assumed. Transaction costs are
expensed as incurred.
Restructuring Charges
One-time employee termination benefits associated with restructuring activities exist at the date the plan of
termination has been communicated to employees (the “communication date”) and all of the following criteria are
met: (1) management, having the authority to approve the action, has committed to the plan of termination, (2) the
plan identifies the number of employees to be terminated, their job classifications or functions and their locations,
and the expected completion date, (3) the plan establishes the terms of the benefit arrangement in sufficient detail,
and (4) actions required to complete the plan indicate it is unlikely that significant changes to the plan will be made.
If employees are not required to render service until they are terminated in order to receive the termination benefits
or will not be retained to render service beyond a minimum retention period, a liability for the termination benefits is
recognized and measured at fair value at the communication date. Otherwise, a liability is measured initially at the
communication date based on the fair value of the liability as of the termination date and recognized ratably over the
future service period. Changes to the fair value of the liability are recorded as restructuring adjustments.
Closures of leased offices as part of a restructuring activity prior to the end of the contractual lease term are treated
as abandoned right-to-use assets when the Company ceases to use the property for economic benefit and lacks
48
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
either the intent or ability to sublease. The lease asset is written down to zero as of the abandonment date.
Estimates of contract termination costs assume the Company will be obligated to pay the remaining rent over the
contract period, and the lease liability continues to be recorded on the balance sheet. Subsequent negotiations that
result in early contract terminations are recorded as favorable restructuring adjustments.
Other associated costs as part of a restructuring activity include costs to consolidate facilities, costs to relocate
employees, and legal fees incurred to research local statutory requirements and prepare termination agreements.
These costs are recognized in the period in which the liability is incurred, which generally corresponds to the period
in which the services are rendered.
NOTE 2: New Pronouncements
Accounting Standards Update (ASU) 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax
Disclosures
The amendments in this ASU apply to all entities that are subject to Topic 740, Income Taxes. The amendments
require public business entities to disclose specific categories in their rate reconciliation and provide additional
information for reconciling items that meet a quantitative threshold. They also require all entities to disclose income
taxes paid, net of refund received, disaggregated by federal, state, and foreign taxes and by individual jurisdictions
in which income taxes paid, net of refunds received, is equal to or greater than five percent of total income taxes
paid. For public business entities, the amendments in this ASU are effective for annual periods beginning after
December 15, 2024. The amendments in this ASU should be applied on a prospective basis. Management does not
expect ASU 2023-09 to have a material impact on the Company's financial statements and disclosures.
Accounting Standards Update (ASU) 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable
Segment Disclosures
The amendments in this ASU apply to all public entities, including public entities with a single reportable segment,
that are required to report segment information in accordance with Topic 280, Segment Reporting. The amendments
require public business entities to provide in interim and annual periods one or more measures of segment profit or
loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the
amendments require disclosure of significant segment expenses and other segment items, as well as incremental
qualitative disclosures. The amendments in this ASU are effective for fiscal years beginning after December 15,
2023. The amendments in the ASU should be applied on a retrospective basis. We did not early adopt ASU
2023-07. Management does not expect ASU 2023-07 to have a material impact on the Company's financial
statements and disclosures.
Accounting Standards Update (ASU) 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of
Reference Rate Reform on Financial Reporting", (ASU) 2021-01, "Reference Rate Reform (Topic 848): Scope", and
Accounting Standards Update (ASU) 2022-06, "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of
Topic 848"
The amendments in these ASUs apply to all entities that have contracts, hedging relationships, and other
transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate
reform. Together, the ASUs provide optional expedients and exceptions for applying generally accepted accounting
principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if
certain criteria are met. The expedients and exceptions provided by the amendments do not apply to contract
modifications made and hedging relationships entered into or evaluated after December 31, 2024, except for
hedging relationships existing as of December 31, 2024 that an entity has elected certain optional expedients for
and that are retained through the end of the hedging relationship. The amendments in these ASUs are effective for
all entities as of March 12, 2020 through December 31, 2024. Management adopted Topic 848 on January 1, 2023,
and now uses the Secured Overnight Financing Rate (SOFR). The adoption did not have a material impact on the
Company's financial statements and disclosures.
49
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3: Fair Value Measurements
Financial Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The following table summarizes the financial assets and liabilities measured at fair value on a recurring basis as of
December 31, 2023 (in thousands):
Assets:
Money market instruments
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Economic hedge forward contracts
Liabilities:
Economic hedge forward contracts
Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
Significant Other
Observable
Inputs (Level 2)
Unobservable
Inputs
(Level 3)
$
19,413 $
—
—
—
—
—
— $
308,816
43,523
19,314
1,969
151
—
106
—
—
—
—
—
—
—
The Company’s money market instruments are reported at fair value based on the daily market price for identical
assets in active markets, and are therefore classified as Level 1.
The Company’s debt securities and forward contracts are reported at fair value based on model-driven valuations in
which all significant inputs are observable or can be derived from or corroborated by observable market data for
substantially the full term of the asset or liability, and are therefore classified as Level 2. Management is responsible
for estimating the fair value of these financial assets and liabilities, and in doing so, considers valuations provided
by a large, third-party pricing service. For debt securities, this service maintains regular contact with market makers,
brokers, dealers, and analysts to gather information on market movement, direction, trends, and other specific data.
They use this information to structure yield curves for various types of debt securities and arrive at the daily
valuations. The Company's forward contracts are typically traded or executed in over-the-counter markets with a
high degree of pricing transparency. The market participants are generally large commercial banks.
Non-financial Assets that are Measured at Fair Value on a Non-recurring Basis
Non-financial assets, such as property, plant and equipment, operating lease assets, goodwill, and intangible
assets, are required to be measured at fair value only when an impairment loss is recognized. The Company
evaluates these long-lived assets for impairment whenever events or changes in circumstances, referred to as
"triggering events," indicate the carrying value may not be recoverable. The Company did not record impairment
charges related to non-financial assets in 2023, 2022, or 2021.
50
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4: Cash, Cash Equivalents, and Investments
Cash, cash equivalents, and investments consisted of the following (in thousands):
Cash
Money market instruments
Cash and cash equivalents
Corporate bonds
Asset-backed securities
Sovereign bonds
Agency bonds
Treasury notes
Municipal bonds
Current investments
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Non-current investments
December 31,
2023
2022
$
$
183,242 $
19,413
202,655
124,851
3,551
990
—
—
—
129,392
183,965
43,523
15,763
979
244,230
576,277 $
180,959
415
181,374
164,055
26,890
—
15,858
11,332
624
218,759
374,440
44,214
33,539
1,924
454,117
854,250
The Company’s cash balance included foreign bank balances totaling $173,614,000 and $160,611,000 as of
December 31, 2023 and 2022, respectively.
Corporate bonds consist of debt securities issued by both domestic and foreign companies; asset-backed securities
consist of debt securities collateralized by pools of receivables or loans with credit enhancement; sovereign bonds
consist of direct debt issued by foreign governments; agency bonds consist of domestic or foreign obligations of
government agencies and government-sponsored enterprises that have government backing; treasury notes consist
of debt securities issued by the U.S. government; and municipal bonds consist of debt securities issued by state
and local government entities. All of the Company's securities as of December 31, 2023 and 2022 were
denominated in U.S. Dollars.
Accrued interest receivable is included in "Prepaid expenses and other current assets" on the Consolidated Balance
Sheets and amounted to $3,169,000 and $3,620,000 as of December 31, 2023 and 2022, respectively.
The following table summarizes the Company’s available-for-sale investments as of December 31, 2023 (in
thousands):
Current:
Corporate bonds
Asset-backed securities
Sovereign bonds
Non-current:
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$
$
128,150 $
3,637
1,012
189,326
43,654
16,773
1,037
383,589 $
— $
—
—
506
82
—
—
588 $
(3,299) $
(86)
(22)
(5,867)
(213)
(1,010)
(58)
(10,555) $
124,851
3,551
990
183,965
43,523
15,763
979
373,622
51
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company’s available-for-sale investments as of December 31, 2022 (in
thousands):
Current:
Corporate bonds
Asset-backed securities
Agency bonds
Treasury notes
Municipal bonds
Non-current:
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
$
167,558 $
27,607
16,143
11,602
635
394,576
44,333
35,144
2,095
699,693 $
$
— $
—
—
—
—
561
79
103
—
743 $
(3,503) $
(717)
(285)
(270)
(11)
(20,697)
(198)
(1,708)
(171)
(27,560) $
164,055
26,890
15,858
11,332
624
374,440
44,214
33,539
1,924
672,876
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale
investments in an unrealized loss position as of December 31, 2023 (in thousands):
Unrealized Loss
Position For Less than
12 Months
Unrealized Loss
Position For Greater than
12 Months
Total
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
$ 30,770 $
20,725
17,062
—
(359) $ 226,643 $
(153)
(1,049)
—
2,441
2,252
1,968
$ 68,557 $
(1,561) $ 233,304 $
(8,807) $ 257,413 $
(9,166)
(213)
23,166
(1,096)
19,314
(80)
1,968
(8,994) $ 301,861 $ (10,555)
(60)
(47)
(80)
The following table summarizes the Company’s gross unrealized losses and fair values for available-for-sale
investments in an unrealized loss position as of December 31, 2022 (in thousands):
Unrealized Loss
Position For Less than
12 Months
Unrealized Loss
Position For Greater than
12 Months
Total
Corporate bonds
Asset-backed securities
Treasury notes
Agency bonds
Sovereign bonds
Municipal bonds
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
Unrealized
Losses
Fair Value
$ 285,087 $
47,582
32,614
15,858
967
624
(9,591) $ 187,153 $ (14,609) $ 472,240 $ (24,200)
(2,425)
(126)
(2,299)
(468)
(3)
(465)
(285)
—
(285)
(171)
(104)
(67)
(11)
—
(11)
$ 382,732 $ (12,718) $ 190,707 $ (14,842) $ 573,439 $ (27,560)
50,077
32,716
15,858
1,924
624
2,495
102
—
957
—
Management monitors debt securities that are in an unrealized loss position to determine whether a loss exists
related to the credit quality of the issuer. When developing an estimate of expected credit losses, management
considers all relevant information including historical experience, current conditions, and reasonable forecasts of
expected future cash flows. Based on this evaluation, no allowance for credit losses on debt securities was
recorded as of December 31, 2023, 2022, or 2021. Management currently intends to hold these securities to full
value recovery at maturity.
52
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes the Company's gross realized gains and losses on the sale of debt securities (in
thousands):
Gross realized gains
Gross realized losses
Net realized gains (losses)
Year Ended December 31,
2022
2021
2023
$
$
111 $
(2,065)
(1,954) $
133 $
(315)
(182) $
246
(10)
236
Realized gains and losses are included in "Investment income" on the Consolidated Statements of Operations. Prior
to the sale of these securities, unrealized gains and losses for these debt securities, net of tax, were recorded in
shareholders’ equity as accumulated other comprehensive loss.
The following table summarizes the effective maturity dates of the Company’s available-for-sale investments as of
December 31, 2023 (in thousands):
Corporate bonds
Treasury notes
Asset-backed securities
Sovereign bonds
<1 Year
3-4 Years
1-2 Years
2-3 Years
$ 124,851 $ 62,596 $ 44,906 $ 44,896 $ 31,567 $
— $ 308,816
43,523
—
19,314
6,443
1,969
$ 129,392 $ 71,888 $ 54,469 $ 67,166 $ 44,264 $ 6,443 $ 373,622
22,270
—
—
12,697
—
—
—
3,551
990
2,441
5,872
979
6,115
3,448
—
5-7 Years
4-5 Years
Total
NOTE 5: Inventories
Inventories consisted of the following (in thousands):
Raw materials
Work-in-process
Finished goods
December 31,
2023
2022
$
93,201 $
5,747
63,337
$
162,285 $
71,720
906
49,854
122,480
In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the
Company recorded inventories with a fair value of $22,788,000 on the acquisition date.
The Company recorded provisions for excess and obsolete inventories of $3,775,000 and $3,084,000 in 2023 and
2022, respectively, which reduced the carrying value of the inventories to their net realizable value.
NOTE 6: Property, Plant, and Equipment
Property, plant, and equipment consisted of the following (in thousands):
Land
Buildings
Building improvements
Leasehold improvements
Computer hardware and software
Manufacturing test equipment
Furniture and fixtures
Less: accumulated depreciation
53
December 31,
2023
2022
$
8,805 $
34,117
44,992
19,611
55,154
36,182
7,361
206,222
(100,373)
105,849 $
$
3,951
24,533
45,003
14,491
53,663
27,176
6,378
175,195
(95,481)
79,714
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the
Company recorded property, plant and equipment with a fair value of $19,876,000 on the acquisition date.
The Company disposed of property, plant, and equipment with a cost basis of $12,421,000 and accumulated
depreciation of $12,184,000 in 2023, net of proceeds of $8,000, resulting in a loss of $229,000. The Company
disposed of property, plant, and equipment with a cost basis of $17,358,000 and accumulated depreciation of
$16,604,000 in 2022, resulting in a loss of $754,000. Of this loss, $735,000 related to production equipment
destroyed as a result of the fire at the Company's primary contract manufacturer's plant in Indonesia on June 7,
2022 and is included in "Non-cash impact of charges related to fire (Note 22)" on the Consolidated Statements of
Cash Flows.
NOTE 7: Leases
The Company's leases are primarily leased properties across different worldwide locations where the Company
conducts its operations. All of these leases are classified as operating leases. Certain leases may contain options to
extend or terminate the lease at the Company's sole discretion. As of December 31, 2023, there were no options to
terminate and twenty-eight options to extend that were accounted for in the determination of the lease term for the
Company's outstanding leases. Certain leases contain leasehold improvement incentives, retirement obligations,
escalating clauses, rent holidays, and variable payments tied to a consumer price index. Lease costs associated
with variable payments were $1,175,000 in 2023, $1,009,000 in 2022, and $1,253,000 in 2021. There were no
restrictions or covenants for the outstanding leases as of December 31, 2023. The Company did not have any
leases that had not yet commenced but that created significant rights and/or obligations as of December 31, 2023.
The total operating lease expense was $11,598,000 in 2023, $8,939,000 in 2022, and $8,180,000 in 2021. The total
operating lease cash payments were $10,148,000 in 2023, $8,548,000 in 2022, and $8,225,000 in 2021. The total
lease expense for leases with a term of twelve months or less for which the Company elected not to recognize a
lease asset or lease liability was $427,000 in 2023, $144,000 in 2022, and $154,000 in 2021.
Future operating lease cash payments are as follows (in thousands):
Year Ended December 31,
2024
2025
2026
2027
2028
Thereafter
Amount
13,612
11,836
9,746
8,851
8,395
53,257
105,697
$
$
The discounted present value of the future lease cash payments resulted in a lease liability of $78,601,000 and
$39,752,000 as of December 31, 2023 and 2022, respectively.
In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the
Company assumed multiple lease agreements, the most significant of which is for a 22,000 square-foot building in
Vietnam that serves as a production plant for optical components.
In June 2023, the Company entered into a lease for a 115,000 square-foot building in Singapore to serve as a new
distribution center for customers in Asia. The lease contains two components, including an 88,000 square-foot
premises with a term of ten years, six months. The Company has the right and option to extend the term of this
lease component for an additional period of five years, commencing upon the expiration of the original term. This
lease component commenced during the second quarter of 2023, and therefore the Company recorded
approximately $29,639,000, which reflects an estimated extension period of five years, within "Operating lease
assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the commencement date. The
second component of this Singapore lease is for a 27,000 square-foot premises with a term of eight years. The
commencement date for this lease component is in the fourth quarter of 2025, and therefore it was not yet recorded
on the Consolidated Balance Sheets, nor did it create any significant rights and obligations as of December 31,
2023. The Company has the right and option to extend the term of this lease component for an additional period of
five years, commencing upon the expiration of the original term. Future payment obligations associated with this
lease component total $13,231,000, none of which was payable in 2023 and which reflects an estimated extension
54
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
period of five years. Future payment obligations related to this lease component are not included in the future
operating lease cash payments table above.
In December 2021, the Company entered into a lease for a 65,000 square-foot building in Southborough,
Massachusetts for a term of ten years to serve as a new distribution center for customers in the Americas. The
Company has the right and option to extend the term of this lease for an additional period of five years, commencing
upon the expiration of the original ten-year term. This lease commenced during the first quarter of 2022, and
therefore the Company recorded approximately $9,271,000, which does not reflect an estimated extension period,
within "Operating lease assets" and "Operating lease liabilities" on the Consolidated Balance Sheets on the
commencement date.
The weighted-average discount rate was 5.7% and 3.3% for the leases outstanding as of December 31, 2023 and
December 31, 2022, respectively. The weighted-average remaining lease term was 10.5 years and 7.8 years for the
leases outstanding as of December 31, 2023 and 2022, respectively.
NOTE 8: Goodwill
The changes in the carrying value of goodwill were as follows (in thousands):
Balance as of December 31, 2021
Acquisition of SAC Sirius Advanced Cybernetics GmbH (refer to Note 21)
Foreign exchange rate changes
Balance as of December 31, 2022
Acquisition of Moritex Corporation (refer to Note 21)
Foreign exchange rate changes
Balance as of December 31, 2023
Amount
241,713
2,359
(1,442)
242,630
145,047
5,504
393,181
$
$
For its 2023 annual analysis of goodwill, management elected to perform a qualitative assessment. Based on this
assessment, management believes it is more likely than not that the fair value of the reporting unit exceeds its
carrying value. The Company did not record impairment charges related to goodwill in 2023, 2022, or 2021.
NOTE 9: Intangible Assets
Intangible assets consisted of the following (in thousands):
Customer relationships
Completed technologies
Trademarks
Non-compete agreements
Balance as of December 31, 2023
Completed technologies
Customer relationships
Non-compete agreements
Balance as of December 31, 2022
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
75,965 $
62,123
903
340
139,331 $
(5,352) $
(20,745)
(50)
(232)
(26,379) $
70,613
41,378
853
108
112,952
Gross
Carrying
Value
Accumulated
Amortization
Net
Carrying
Value
28,017 $
5,838
340
34,195 $
(17,744) $
(3,860)
(177)
(21,781) $
10,273
1,978
163
12,414
$
$
$
$
In connection with the acquisition of Moritex Corporation in the fourth quarter of 2023 (refer to Note 21), the
Company acquired customer relationships valued at $66,900,000 with an estimated useful life of fifteen years,
completed technologies valued at $32,300,000 with an estimated useful life of nine years, and trademarks valued at
$850,000 with an estimated useful life of three years.
55
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the acquisition of SAC Sirius Advanced Cybernetics GmbH ("SAC") in the fourth quarter of 2022,
(refer to Note 21), the Company acquired completed technologies valued at $3,800,000 with an estimated useful life
of 7 years.
In 2022, the Company retired approximately $43,280,000 of intangible assets primarily related to distribution
networks and customer relationships that were fully amortized and had a net carrying value of zero on the
Consolidated Balance Sheets.
The Company did not record impairment charges related to intangible assets in 2023, 2022 or 2021.
Estimated amortization expense for each of the five succeeding fiscal years and thereafter is as follows (in
thousands):
Year Ended December 31,
2024
2025
2026
2027
2028
Thereafter
NOTE 10: Accrued Expenses
Accrued expenses consisted of the following (in thousands):
Foreign retirement obligations
Incentive compensation
Salaries and payroll taxes
Vacation
Warranty obligations
Deferred payments related to Sualab Co., Ltd. acquisition (1)
Other
Amount
11,389
11,066
10,711
9,737
9,008
61,041
112,952
$
$
December 31,
2023
2022
$
$
12,835 $
10,645
8,774
5,827
4,244
—
30,049
72,374 $
7,191
18,554
8,121
5,847
4,375
19,282
29,865
93,235
(1) The total consideration for the Company's 2019 acquisition of Sualab Co., Ltd. included deferred payments,
contingent upon the continued employment of key talent, of $24,040,000 that was paid fully in October 2023. The
deferred payments were recorded as compensation expense over the four-year period.
The changes in the warranty obligation were as follows (in thousands):
Balance as of December 31, 2020
Provisions for warranties issued during the period
Fulfillment of warranty obligations
Balance as of December 31, 2021
Provisions for warranties issued during the period
Fulfillment of warranty obligations
Balance as of December 31, 2022
Provisions for warranties issued during the period
Fulfillment of warranty obligations
Foreign exchange rate changes
Balance as of December 31, 2023
56
$
$
5,406
3,256
(3,235)
5,427
1,876
(2,928)
4,375
2,940
(3,078)
7
4,244
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11: Commitments and Contingencies
As of December 31, 2023, the Company had outstanding purchase orders totaling $61,459,000 to procure inventory
from various vendors. Certain of these purchase orders may be canceled by the Company, subject to cancellation
penalties. These purchase commitments relate primarily to expected sales in 2024.
A significant portion of the Company's outstanding inventory purchase orders as of December 31, 2023, as well as
additional preauthorized commitments to procure strategic components based on the Company's expected
customer demand, are placed with the Company's primary contract manufacturer for the Company's assembled
products. The Company purchased $10,616,000, $5,269,000, and $547,000 in 2023, 2022, and 2021, respectively,
of inventories as a result of the Company's obligation to purchase any non-cancelable and non-returnable
components that have been purchased by the contract manufacturer with the Company's preauthorization, when
these components have not been consumed within the period defined in the terms of the Company's agreement
with this contract manufacturer. While the Company typically expects such purchased components to be used in
future production of Cognex finished goods, these components are considered in the Company's reserve estimate
for excess and obsolete inventory. Furthermore, the Company accrues for losses on commitments for the future
purchase of non-cancelable and non-returnable components from this contract manufacturer at the time that
circumstances, such as changes in demand, indicate that the value of the components may not be recoverable, the
loss is probable, and management has the ability to reasonably estimate the amount of the loss.
Various claims and legal proceedings generally incidental to the normal course of business are pending or
threatened on behalf of or against the Company. While we cannot predict the outcome of these matters, we believe
that any liability arising from them will not have a material adverse effect on our financial position, liquidity, or results
of operations.
NOTE 12: Indemnification Provisions
Except as limited by Massachusetts law, the by-laws of the Company require it to indemnify certain current or
former directors, officers, and employees of the Company against expenses incurred by them in connection with
each proceeding in which he or she is involved as a result of serving or having served in certain capacities.
Indemnification is not available with respect to a proceeding as to which it has been adjudicated that the person did
not act in good faith in the reasonable belief that the action was in the best interests of the Company. The maximum
potential amount of future payments the Company could be required to make under these provisions is unlimited.
The Company has never incurred significant costs related to these indemnification provisions. As a result, the
Company believes the estimated fair value of these provisions is not material.
In the ordinary course of business, the Company may accept standard limited indemnification provisions in
connection with the sale of its products, whereby it indemnifies its customers for certain direct damages incurred in
connection with third-party patent or other intellectual property infringement claims with respect to the use of the
Company’s products. The maximum potential amount of future payments the Company could be required to make
under these provisions is, in many, but not all instances, subject to fixed monetary limits. The Company has never
incurred significant costs to defend lawsuits or settle claims related to these indemnification provisions. As a result,
the Company believes the estimated fair value of these provisions is not material.
In the ordinary course of business, the Company also accepts limited indemnification provisions from time to time,
whereby it indemnifies customers for certain direct damages incurred in connection with bodily injury and property
damage arising from the use of the Company’s products. Future payments the Company could be required to make
under these provisions is generally recoverable under the Company’s insurance policies. As a result of this
coverage, and the fact that the Company has never incurred significant costs to defend lawsuits or settle claims
related to these indemnification provisions, the Company believes the estimated fair value of these provisions is not
material.
NOTE 13: Derivative Instruments
The Company’s foreign currency risk management strategy is principally designed to mitigate the potential financial
impact of changes in the value of transactions and balances denominated in foreign currencies resulting from
changes in foreign currency exchange rates. The Company enters into economic hedges utilizing foreign currency
forward contracts with maturities that do not exceed approximately three months to manage the exposure to
fluctuations in foreign currency exchange rates arising primarily from foreign-denominated receivables and
payables. The gains and losses on these derivatives are intended to be offset by the changes in the fair value of the
assets and liabilities being hedged. These economic hedges are not designated as hedging instruments for hedge
accounting treatment.
57
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Additionally, during 2023, the Company entered into a foreign currency forward contract to exchange U.S. Dollars
for ¥40,000,000,000 to hedge the Japanese Yen purchase price of the acquisition of Moritex Corporation (refer to
Note 21). Upon the settlement of this contract, the Company recorded a foreign currency loss of $8,456,000, which
was recorded in "Foreign currency gain (loss)" on the Consolidated Statements of Operations.
The Company had the following outstanding forward contracts (in thousands):
Currency
December 31, 2023
Notional
Value
USD
Equivalent
December 31, 2022
Notional
Value
USD
Equivalent
Derivatives Not Designated as Hedging Instruments:
Euro
40,000 $
Singapore Dollar
Mexican Peso
Chinese Renminbi
Hungarian Forint
British Pound
Japanese Yen
Canadian Dollar
Swiss Franc
39,700
145,000
50,000
2,240,000
3,345
600,000
1,470
—
44,302
30,136
8,505
7,025
6,466
4,258
4,255
1,112
—
60,000 $
64,174
—
185,000
55,000
1,590,000
3,445
700,000
1,730
1,120
—
9,480
7,619
4,238
4,161
5,281
1,278
1,218
Information regarding the fair value of the outstanding forward contracts was as follows (in thousands):
Asset Derivatives
Fair Value
Balance
Sheet
Location
Derivatives Not Designated as Hedging Instruments:
December 31,
2023
December 31,
2022
Liability Derivatives
Fair Value
December 31,
2023
December 31,
2022
Balance
Sheet
Location
Economic hedge
forward contracts
Prepaid
expenses and
other current
assets
$
151 $
Accrued
expenses
27
$
106 $
479
The following table summarizes the gross activity for all derivative assets and liabilities which were presented on a
net basis on the Consolidated Balance Sheets due to the right of offset with each counterparty (in thousands):
Asset Derivatives
December 31,
2023
December 31,
2022
Liability Derivatives
December 31,
2023
December 31,
2022
Gross amounts of
recognized assets
Gross amounts
offset
Net amount of
assets presented
$
$
151 $
—
151 $
Gross amounts of
recognized liabilities $
Gross amounts
offset
Net amount of
liabilities presented
$
27
—
27
106 $
—
106 $
479
—
479
58
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information regarding the effect of derivative instruments, net of the underlying exposure, on the consolidated
financial statements was as follows (in thousands):
Location in Financial
Statements
Year Ended December 31,
2022
2021
2023
Derivatives Not Designated as Hedging Instruments:
Gains (losses)
recognized in current
operations
Foreign currency gain
(loss)
NOTE 14: Revenue Recognition
$
(10,023) $
9,823 $
4,262
The following table summarizes disaggregated revenue information by geographic area based on the customer's
country of domicile (in thousands):
Americas
Europe
Greater China
Other Asia
Year Ended December 31,
2023
2022
2021
$ 330,415 $ 390,573 $ 435,220
220,665
164,115
122,352
234,643
227,447
153,427
247,744
200,135
153,999
$ 837,547 $ 1,006,090 $ 1,037,098
The following table summarizes disaggregated revenue information by revenue type (in thousands):
Standard products and services
Application-specific customer solutions
Costs to Fulfill a Contract
Year Ended December 31,
2023
2022
2021
$ 734,140 $ 848,153 $ 889,253
103,407
157,937
147,845
$ 837,547 $ 1,006,090 $ 1,037,098
Costs to fulfill a contract are included in "Prepaid expenses and other current assets" on the Consolidated Balance
Sheets and amounted to $13,265,000 and $14,578,000 as of December 31, 2023 and 2022, respectively.
Accounts Receivable, Contract Assets, and Contract Liabilities
Accounts receivable represent amounts billed and currently due from customers which are reported at their net
estimated realizable value. The Company maintains an allowance against its accounts receivable for credit losses.
Contract assets consist of unbilled revenue which arises when revenue is recognized in advance of billing primarily
for certain application-specific customer solutions contracts. Contract liabilities consist of deferred revenue and
customer deposits which arise when amounts are billed to or collected from customers in advance of revenue
recognition.
59
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes changes in the allowance for credit losses (in thousands):
Balance as of December 31, 2021
Increases to the allowance for credit losses
Write-offs, net of recoveries
Foreign exchange rate changes
Balance as of December 31, 2022
Increases to the allowance for credit losses
Write-offs, net of recoveries
Foreign exchange rate changes
Balance as of December 31, 2023
Amount
776
191
(237)
—
730
500
(645)
(2)
583
$
$
The following table summarizes the deferred revenue and customer deposits activity (in thousands):
Balance as of December 31, 2021
Deferral of revenue billed in the current period, net of recognition
Recognition of revenue deferred in prior period
Foreign exchange rate changes
Balance as of December 31, 2022
Deferral of revenue billed in the current period, net of recognition
Recognition of revenue deferred in prior period
Returned customer deposit
Foreign exchange rate changes
Balance as of December 31, 2023
Amount
35,743
39,076
(31,520)
(2,512)
40,787
21,538
(20,987)
(9,205)
(608)
31,525
$
$
As a practical expedient, the Company has elected not to disclose the aggregate amount of the transaction price
allocated to unsatisfied performance obligations for our contracts that have an original expected duration of less
than one year. The remaining unsatisfied performance obligations for our contracts that have an original expected
duration of more than one year, primarily related to extended warranties, is not material.
NOTE 15: Shareholders’ Equity
Preferred Stock
The Company has 400,000 shares of authorized but unissued $.01 par value preferred stock.
Common Stock
On April 25, 2018, the Company's shareholders approved an amendment to the Company's Articles of Organization
to increase the authorized number of shares of $.002 par value common stock from 200,000,000 to 300,000,000.
Each outstanding share of common stock entitles the record holder to one vote on all matters submitted to a vote of
the Company’s shareholders. Common shareholders are also entitled to dividends when and if declared by the
Company’s Board of Directors.
Stock Repurchases
In October 2018, the Company's Board of Directors authorized the repurchase of $200,000,000 of the Company's
common stock. Under this October 2018 program, in addition to repurchases made in prior years, the Company
repurchased 957,000 shares at a cost of $78,652,000 in 2021, which completed purchases under the October 2018
program.
In March 2020, the Company's Board of Directors authorized the repurchase of an additional $200,000,000 of the
Company's common stock. Under this March 2020 program, the Company repurchased 1,060,000 shares, including
5,000 shares that were repurchased in 2021 and settled in 2022, at a cost of $83,000,000 in 2021, and 1,677,000
shares at a cost of $117,000,000 in 2022, which completed purchases under the March 2020 program.
60
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 2022, the Company's Board of Directors authorized the repurchase of an additional $500,000,000 of the
Company's common stock. Under this March 2022 program, the Company repurchased 1,682,000 shares at a cost
of $87,314,000 in 2022 and 1,723,000 shares at a cost of $79,794,000 in 2023, leaving a remaining balance of
$332,892,000. The 2023 repurchase included $446,000 of buyback Excise Tax in accordance with the Inflation
Reduction Act of 2022.
The Company may repurchase shares under this program in future periods depending on a variety of factors,
including, among other things, the impact of dilution from employee stock awards, stock price, share availability, and
cash requirements. The Company is authorized to make repurchases of its common stock through open market
purchases, pursuant to Rule 10b5-1 trading plans, or in privately negotiated transactions.
Dividends
The Company’s Board of Directors declared and paid cash dividends of $0.060 per share in the first, second, and
third quarters of 2021, $0.065 per share in the fourth quarter of 2021 and in the first, second, and third quarters of
2022, and $0.070 per share in the fourth quarter of 2022 and in the first, second, and third quarters of 2023. The
dividend was increased to $0.075 per share in the fourth quarter of 2023.
Future dividends will be declared at the discretion of the Company's Board of Directors and will depend on such
factors as the Board deems relevant, including, among other things, the Company's ability to generate positive cash
flow from operations.
NOTE 16: Stock-Based Compensation
Stock Plans
The Company’s stock-based awards that result in compensation expense consist of stock options, restricted stock
units ("RSUs"), and performance restricted stock units ("PRSUs"). In May 2023, the shareholders of the Company
approved the Cognex Corporation 2023 Stock Option and Incentive Plan (the “2023 Plan”). The 2023 Plan permits
awards of stock options (both incentive and non-qualified options), stock appreciation rights, RSUs, and PRSUs. Up
to 8,100,000 shares of common stock (subject to adjustment in the event of stock splits and other similar events)
may be issued pursuant to awards granted under the 2023 Plan. In connection with the approval of the 2023 Plan,
no further awards will be made under the Cognex Corporation 2001 General Stock Option Plan, as amended and
restated (the “2001 Plan”), and the Cognex Corporation 2007 Stock Option and Incentive Plan, as amended and
restated (the “2007 Plan”). With the approval of the 2023 Plan, the 10,610,800 shares of common stock subject to
awards granted under the 2001 Plan and the 2007 Plan that were outstanding as of May 3, 2023 may become
eligible for issuance under the 2023 Plan if such awards are forfeited, cancelled, or otherwise terminated (other than
by exercise) (the “Carryover Shares”). As of December 31, 2023, forfeitures, cancellations, and other terminations
from the 2001 Plan and the 2007 Plan have resulted in 343,492 Carryover Shares, raising the authorized total
shares that may be issued under the 2023 Plan to 8,443,492.
As of December 31, 2023, the Company had 7,978,000 shares available for issuance under its stock plans. Stock
options are granted with an exercise price equal to the market value of the Company’s common stock at the grant
date and generally vest over four or five years based on continuous employment and expire ten years from the
grant date. RSUs generally vest upon three or four years of continuous employment or incrementally over such
three or four year periods. PRSUs generally vest upon three years of continuous employment and achievement of
performance criteria established by the Compensation Committee of our Board of Directors on or prior to the grant
date. Participants are not entitled to dividends on stock options, RSUs, or PRSUs.
61
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Stock Options
The following table summarizes the Company’s stock option activity:
Outstanding as of December 31, 2022
Granted
Exercised
Forfeited or expired
Outstanding as of December 31, 2023
Exercisable as of December 31, 2023
Options vested or expected to vest as of
December 31, 2023 (1)
Shares
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in thousands)
8,467 $
1,541
(330)
(670)
9,008 $
5,207 $
51.56
46.33
33.64
57.65
50.87
47.78
5.92 $
17,164
4.42 $
16,212
8,548 $
50.79
5.78 $
16,896
(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some
point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the
unvested options.
The total cash received as a result of stock option exercises was $11,104,000 in 2023, $12,267,000 in 2022, and
$63,860,000 in 2021. In connection with these exercises, the tax benefit (expense) realized by the Company was
$(4,691,000) in 2023, $2,548,000 in 2022, and $46,529,000 in 2021.
The fair values of stock options granted in each period presented were estimated using the following weighted-
average assumptions:
Risk-free rate
Expected dividend yield
Expected volatility
Expected term (in years)
Risk-free rate
Year Ended December 31,
2023
2022
2021
4.0 %
0.61 %
39 %
5.0
2.2 %
0.44 %
37 %
5.5
1.3 %
0.27 %
39 %
6.0
The risk-free rate was based on a treasury instrument whose term was consistent with the contractual term of the
option.
Expected dividend yield
The current dividend yield was calculated by annualizing the cash dividend declared by the Company’s Board of
Directors and dividing that result by the closing stock price on the grant date.
Expected volatility
The expected volatility was based on a combination of historical volatility of the Company’s common stock over the
contractual term of the option and implied volatility for traded options of the Company’s stock.
Expected term
The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over
time.
The weighted-average grant-date fair value of stock options granted was $17.76 in 2023, $21.39 in 2022, and
$33.79 in 2021.
The total intrinsic value of stock options exercised was $6,227,000 in 2023, $8,424,000 in 2022, and $80,369,000 in
2021. The total fair value of stock options vested was $34,751,000 in 2023, $41,497,000 in 2022, and $45,328,000
in 2021.
62
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Restricted Stock Units (RSUs)
The following table summarizes the Company's RSUs activity:
Shares
(in thousands)
Nonvested as of December 31, 2022
Granted
Vested
Forfeited or expired
Nonvested as of December 31, 2023
Weighted-Average
Grant Date Fair Value
61.74
46.14
59.22
59.20
54.22
1,269 $
791
(521)
(110)
1,429 $
The fair value of RSUs was determined based on the observable market price of the Company's stock on the grant
date less the present value of expected future dividends. The weighted-average grant-date fair value of RSUs
granted was $46.14 in 2023, $58.06 in 2022, and $87.03 in 2021. There were 521,000, 192,000, and 16,000 RSUs
that vested in 2023, 2022, and 2021, respectively.
Tax obligations for vested RSUs are settled by withholding a portion of the shares prior to distribution to the
shareholder. The total cash used by the Company to fund the tax payments was $7,836,000 in 2023, $2,406,000 in
2022, and $568,000 in 2021. In connection with these vested RSUs, the tax benefit (expense) realized by the
Company was $(3,229,000) in 2023, $(1,049,000) in 2022, and $126,000 in 2021.
Performance Restricted Stock Units (PRSUs)
The following table summarizes the Company's PRSUs activity:
Nonvested as of December 31, 2022
Granted
Vested
Forfeited or expired
Nonvested as of December 31, 2023
Shares
(in thousands)
Weighted-
Average
Grant Date Fair
Value
33 $
46
—
—
79 $
62.49
44.86
—
—
52.23
The fair value of PRSUs was calculated using a Monte Carlo simulation model to estimate the probability of
satisfying the service and market conditions stipulated in the award grant. The weighted average grant-date fair
value of PRSUs granted was $44.86 in 2023 and $62.49 in 2022. No PRSUs were granted in 2021. No PRSUs
vested in 2023, 2022, and 2021.
Stock-Based Compensation Expense
The Company stratifies its employee population into three groups: one consisting of the CEO, another consisting of
senior management, and another consisting of all other employees. The Company currently applies an estimated
annual forfeiture rate of 0% to all stock-based awards for the CEO, 8% to all stock-based awards for senior
management, and 13% for all other employees. Each year during the first quarter, the Company revises its forfeiture
rate based on updated estimates of employee turnover. This resulted in a decrease to compensation expense of
$234,000 in 2023, an increase to compensation expense of $1,536,000 in 2022, and a decrease to compensation
expense of $255,000 in 2021.
As of December 31, 2023, total unrecognized compensation expense, net of estimated forfeitures, related to non-
vested stock-based awards, including stock options, RSUs, and PRSUs, was $58,489,000, which is expected to be
recognized over a weighted-average period of 1.92 years.
The total stock-based compensation expense and the related income tax benefit recognized was $54,768,000 and
$8,442,000, respectively, in 2023, $54,505,000 and $9,540,000, respectively, in 2022, and $43,774,000 and
$6,764,000, respectively, in 2021. No compensation expense was capitalized in 2023, 2022, or 2021.
63
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table presents the stock-based compensation expense by caption for each period presented on the
Consolidated Statements of Operations (in thousands):
Cost of revenue
Research, development, and engineering
Selling, general, and administrative
NOTE 17: Employee Savings Plan
Year Ended December 31,
2023
2022
2021
$
$
1,979 $
16,480
36,309
54,768 $
2,016 $
17,693
34,796
54,505 $
1,345
13,535
28,894
43,774
Under the Company's Employee Savings Plan, a defined contribution plan, all U.S. employees who have attained
age 21 may contribute up to 100% of their pay on a pre-tax basis under the Company's Employee Savings Plan,
subject to the annual dollar limitations established by the Internal Revenue Service ("IRS"). The Company matches
50% of the first 6% of pay an employee contributes. Company contributions vest 25%, 50%, 75%, and 100% after
one, two, three, and four years of continuous employment with the Company, respectively. Company contributions
totaled $3,392,000 in 2023, $3,284,000 in 2022, and $2,898,000 in 2021. Cognex stock is not an investment
alternative and Company contributions are not made in the form of Cognex stock.
NOTE 18: Income Taxes
Domestic income before taxes was $16,039,000 in 2023, $48,546,000 in 2022, and $121,729,000 in 2021. Foreign
income before taxes was $119,309,000 in 2023, $202,149,000 in 2022, and $197,171,000 in 2021.
Income tax expense consisted of the following (in thousands):
Year Ended December 31,
2023
2022
2021
Current:
Federal
State
Foreign
Deferred:
Federal
State
Foreign
27,870
5,372
8,406
41,648
(19,266)
(769)
17,406
(2,629)
39,019
$
29,084 $
48,355 $
3,544
9,207
41,835
(24,731)
(5,877)
10,887
(19,721)
22,114 $
5,689
10,243
64,287
(40,772)
(8,354)
20,009
(29,117)
35,170 $
$
64
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the U.S. federal statutory corporate tax rate to the Company’s income tax expense, or effective
tax rate, was as follows:
Income tax expense at U.S. federal statutory corporate tax rate
State income taxes, net of federal benefit
Foreign tax rate differential
Tax credits
Taxation on multinational operations
Tax reserves
Limitation on deduction for executive compensation
Discrete tax expense related to employee stock-based compensation
Discrete tax expense related to tax return filings
Discrete tax expense related to rate revaluation on state tax assets
Discrete tax benefit related to GILTI adjustments
Discrete tax benefit for release of valuation allowance
Discrete tax benefit for audit settlements
Other
Income tax expense
Tax Reserves
Year Ended December 31,
2023
2022
2021
21 %
1
(6)
(3)
(3)
3
2
1
2
2
(2)
(4)
—
2
16 %
21 %
2
(7)
(1)
—
1
1
—
2
(2)
(3)
(1)
(1)
2
14 %
21 %
1
(5)
(2)
—
—
—
(3)
(1)
—
—
—
—
1
12 %
The changes in gross amounts of unrecognized tax benefits, excluding interest and penalties, were as follows (in
thousands):
$
Balance of reserve for income taxes as of December 31, 2020
Reductions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in the current period
Reductions as a result of the expiration of the applicable statutes of limitations
Balance of reserve for income taxes as of December 31, 2021
Reductions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in the current period
Reductions relating to settlements with taxing authorities
Reductions as a result of the expiration of the applicable statutes of limitations
Balance of reserve for income taxes as of December 31, 2022
Reductions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in prior periods
Additions as a result of tax positions taken in the current period
Reductions relating to settlements with taxing authorities
Reductions as a result of the expiration of the applicable statutes of limitations
Balance of reserve for income taxes as of December 31, 2023
$
13,952
(280)
100
525
(485)
13,812
(119)
2,850
505
(2,329)
(1,072)
13,647
(242)
12,556
1,877
(1,230)
(894)
25,714
The Company’s reserve for income taxes, including gross interest and penalties, was $29,053,000 as of December
31, 2023, of which $26,685,000 was classified as a non-current liability and $2,368,000 was classified as an offset
to deferred tax assets. The Company's reserve for income taxes, including interest and penalties, was $15,866,000
as of December 31, 2022, which was classified as a non-current liability. The amount of gross interest and penalties
included in these balances was $3,339,000 and $2,219,000 as of December 31, 2023 and 2022, respectively. If the
Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these
reserves would be released and income tax expense would be reduced in a future period. As a result of the
65
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released,
which would decrease income tax expense by approximately $650,000 to $1,000,000 over the next twelve months.
The Company has defined its major tax jurisdictions as the United States, Ireland, China, Japan, and Korea and
within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, 34.6% in Japan,
and 21% in Korea, compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a
favorable impact to the effective tax rate of 6 percentage points for 2023, 7 percentage points for 2022, and 5
percentage points for 2021. Management has determined that earnings from its legal entity in China will be
indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be
indefinitely reinvested. In 2023, the Company qualified for a tax holiday in China, which is renewed every three
years. The tax effect of this benefit, derived from the tax holiday, on basic and diluted earnings per share for 2023
was not material.
Within the United States, the tax years 2019 through 2022 remain open to examination by the Internal Revenue
Service ("IRS") and various state taxing authorities. The tax years 2017 through 2022 remain open to examination
by various taxing authorities in other jurisdictions in which the Company operates. The Company is under audit by
the Commonwealth of Massachusetts for the returns filed for tax years 2020 and 2021. In addition, the Company is
under audit in Ireland for the returns filed for tax years 2019 through 2020. Management believes the Company is
adequately reserved for these audits. The final determination of tax audits could result in favorable or unfavorable
changes in our estimates. Any reserves associated with this audit period will not be released until the issue is
settled or the audit is concluded.
Interest and penalties included in income tax expense were $1,032,000 in 2023, $229,000 in 2022, and $281,000 in
2021.
Cash paid for income taxes totaled $56,618,000 in 2023, $57,016,000 in 2022, and $49,435,000 in 2021.
Deferred Tax Assets and Liabilities
The tax effects of temporary differences and attributes that give rise to deferred income tax assets and liabilities as
of December 31, 2023 and December 31, 2022 were as follows (in thousands):
Deferred tax assets:
Intangible asset in connection with change in tax structure
Stock-based compensation expense
Tax credit carryforwards
Inventory and revenue related
Bonuses, commissions, and other compensation
Depreciation
Foreign net operating losses
Capitalization of R&D expenses
Other
Total deferred tax assets
Valuation allowance
Deferred tax liabilities:
Amortization
GILTI tax basis differences in connection with change in tax structure
Net deferred taxes
December 31,
2023
2022
375,360 $
20,916
7,848
10,897
6,243
1,840
339
28,521
5,514
457,478
(943)
456,535 $
386,221
21,962
8,284
8,117
5,116
4,881
53
16,889
15,102
466,625
(7,661)
458,964
(28,685) $
(274,327)
(303,012) $
(2,762)
(298,922)
(301,684)
153,523 $
157,280
$
$
$
$
$
66
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Change in Tax Structure and Global Intangible Low-Taxed Income Tax
In 2019, the Company made changes to its international tax structure due to legislation by the European Union
regarding low tax structures that resulted in an intercompany sale of intellectual property. As a result, the Company
recorded an associated deferred tax asset of $437,500,000 in Ireland based on the fair value of the intellectual
property that is being realized over fifteen years as future tax deductions. From a United States perspective, the
sale was disregarded, and any future deductions claimed in Ireland are added back to taxable income as part of
Global Intangible Low-Taxed Income ("GILTI") minimum tax. The Company recorded an associated deferred tax
liability of $350,000,000, representing the GILTI minimum tax related to the fair value of the intellectual property.
Other Deferred Tax Assets and Liabilities
As of December 31, 2022, the Company recorded a deferred tax asset resulting from the capitalization of research
and development expenditures. Beginning in 2022, the Tax Cuts and Jobs Act eliminates the option to deduct
research and development expenditures in the period incurred and requires taxpayers to capitalize and amortize
such expenditures over five or fifteen years, as applicable, pursuant to Section 174 of the Internal Revenue Code.
As of December 31, 2023, the Company had foreign net operating loss carryforwards of $1,720,000, state tax credit
carryforwards of $8,740,000 that will begin to expire for the 2031 tax return, and foreign tax credit carryforwards of
$943,000.
As of December 31, 2023, the Company had a valuation allowance for foreign tax credits of $943,000 that was not
considered to be realized. Should these credits be utilized in a future period, the reserve associated with these
credits would be reversed in the period when it is determined that the credits can be utilized to offset future income
tax liabilities.
As of December 31, 2023, the Company released the valuation allowance for state research and development tax
credits of $5,427,000, as these credits are expected to be utilized to offset future state income tax liabilities.
While the deferred tax assets, net of valuation allowance, are not assured of realization, management has
evaluated the realizability of these deferred tax assets and has determined that it is more likely than not that these
assets will be realized. In reaching this conclusion, we have evaluated certain relevant criteria including the
Company’s historical profitability, current projections of future profitability, and the lives of tax credits, net operating
losses, and other carryforwards. Should the Company fail to generate sufficient pre-tax profits in future periods, we
may be required to establish valuation allowances against these deferred tax assets, resulting in a charge to current
operations in the period of determination.
NOTE 19: Weighted Average Shares
Weighted-average shares were calculated as follows (in thousands):
Basic weighted-average common shares outstanding
Effect of dilutive stock awards
Diluted weighted-average common and common-equivalent
shares outstanding
Year Ended December 31,
2023
2022
2021
172,249
1,150
173,407
1,462
176,463
3,453
173,399
174,869
179,916
Stock options to purchase 6,854,092, 4,715,104, and 497,504 shares of common stock, on a weighted-average
basis, were outstanding in 2023, 2022, and 2021, respectively, but were not included in the calculation of dilutive net
income per share because they were anti-dilutive. Restricted stock units totaling 365, 26,079, and 605 that will be
settled in shares of common stock to the extent they vest, on a weighted-average basis, were outstanding in 2023,
2022, and 2021, respectively, but were not included in the calculation of dilutive net income per share because they
were anti-dilutive. No PRSUs were excluded in the calculation of dilutive net income per share in 2023, 2022, and
2021 as PRSUs were not anti-dilutive on a weighted-average basis.
67
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 20: Segment and Geographic Information
The Company operates in one segment, machine vision technology. The Company has a single, company-wide
management team that administers operations as a whole rather than as discrete operating segments. The
Company’s chief operating decision maker is the chief executive officer, who makes decisions to allocate resources
and assesses performance at the corporate level, without regard to geography, product line, or end market. The
Company offers a variety of machine vision products that have similar economic characteristics and are distributed
by the same sales channels to the same types of customers.
The following table summarizes information about geographic areas (in thousands):
United States
Europe
Greater China
Other
Total
Year Ended December 31, 2023
Revenue
Long-lived assets
$
288,324 $
220,665 $
164,115 $
62,946
17,005
17,028
164,443 $
15,958 $
837,547
112,937
Year Ended December 31, 2022
Revenue
Long-lived assets
$
343,835 $
234,643 $
66,928
14,725
227,447 $
1,334
200,165 $ 1,006,090
86,357
3,370 $
Year Ended December 31, 2021
Revenue
Long-lived assets
$
393,690 $
247,744 $
63,141
16,982
200,135 $
960
195,529 $ 1,037,098
84,788
3,705 $
Revenue is presented geographically based on the customer’s country of domicile.
Revenue from a single customer accounted for 11% and 17% of total revenue in 2022 and 2021, respectively.
Revenue from this customer was not greater than 10% of total revenue in 2023. Accounts receivable from this
customer was not greater than 10% of total accounts receivable as of December 31, 2023 or December 31, 2022.
Revenue from a second customer accounted for 11% of total revenue in 2022. Revenue from this customer was not
greater than 10% of total revenue in 2023 or 2021. Accounts receivable from this customer was not greater than
10% of total accounts receivable as of December 31, 2023 or December 31, 2022.
NOTE 21: Business Combinations
Moritex Corporation
On October 18, 2023, the Company acquired all the outstanding shares of Moritex Corporation (Moritex), a global
provider of premium optical components based in Japan, for an enterprise value of ¥40 billion Japanese Yen, or
approximately $270 million U.S. Dollars based on the closing date foreign exchange rate.
The cash-free, debt-free enterprise value was adjusted by cash acquired, debt assumed, and final working capital
balances to arrive at total consideration to be allocated to assets acquired and liabilities assumed of
¥44,376,245,000 ($296,138,000 based on the closing date foreign exchange rate), of which ¥44,227,414,000
($295,144,000) was paid in cash on the closing date and ¥148,831,000 ($994,000) is expected to be paid in the first
quarter of 2024 as a final purchase price adjustment based on the closing balance sheet. The Company acquired
cash balances totaling $38,088,000 as part of this transaction, to arrive at a net cash outflow of $257,056,000 on
the closing date. There was no contingent consideration as part of this transaction.
Established in 1973, Moritex develops, manufactures, and sells high-end optical components, such as lenses and
lighting, for industrial use. The acquisition of Moritex is expected to increase the Company's optical technology
capabilities, which include our proprietary embedded liquid lenses and, more recently, computational lighting from
our 2022 acquisition of SAC Sirius Advanced Cybernetics GmbH (described below). Vision technology relies on
acquiring high-quality images to optimize the performance of machine vision tools. Historically, our customers have
primarily used third-party lenses and lighting for image acquisition. We anticipate the portfolio of Moritex optical
components will allow us to expand our served market to include high-end lenses and lighting and provide our
customers with a more complete product offering by replacing third-party components with Cognex-manufactured
optical components. Moritex also provides the Company with a more substantial presence in Japan, which is an
important machine vision market where we believe we can increase our share through a stronger local presence.
This transaction was accounted for as a business combination. As of the date of this filing, the purchase price
allocation is preliminary and may change during the one-year measurement period ending October 18, 2024 as new
68
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
information becomes available, particularly related to tax positions reflected as of the acquisition date. Identifiable
assets acquired and liabilities assumed were recorded at their estimated fair values, which were valued using level
3 inputs, as of the acquisition date. Pro-forma information, as well as revenue and earnings from the date of the
acquisition, are not presented because they are not material to the Company’s consolidated financial statements.
Transaction costs were approximately $5,800,000 and were expensed as incurred as part of SG&A expenses on the
Consolidated Statement of Operations.
The purchase price was allocated based on provisional amounts as follows (in thousands):
Cash and cash equivalents
Accounts receivable
Inventories
Property, plant and equipment
Goodwill
Customer relationships
Completed technologies
Trademarks
Deferred income tax assets
Other assets
Accounts payable
Accrued expenses
Deferred income tax liabilities
Reserve for income taxes
Other liabilities
Purchase price
$
$
38,088
11,572
22,788
19,876
145,047
66,900
32,300
850
4,516
4,935
(6,700)
(13,521)
(22,055)
(5,864)
(2,594)
296,138
The customer relationships, completed technologies, and trademarks are included in "Intangible assets" on the
Consolidated Balance Sheet. The customer relationships are being amortized to SG&A expenses over fifteen years,
the completed technologies are being amortized to cost of revenue over nine years, and the trademarks are being
amortized to SG&A expenses over three years. None of the acquired goodwill is deductible for tax purposes.
SAC Sirius Advanced Cybernetics GmbH
On December 7, 2022, the Company acquired all of the outstanding shares of SAC Sirius Advanced Cybernetics
GmbH ("SAC"), a leader in computational lighting technology based in Germany. The acquisition of SAC and its
technology is expected to expand the Company’s capabilities in defect detection, and accelerate its growth
trajectory with electric vehicle battery manufacturers. The purchase price of the acquisition was not material to the
Company's consolidated financial statements.
NOTE 22: Loss (Recovery) from Fire
On June 7, 2022, the Company’s primary contract manufacturer experienced a fire at its plant in Indonesia. The fire
destroyed a significant amount of Cognex-owned consigned inventories, as well as component inventories owned
by the contract manufacturer that were designated for Cognex products. There was no significant damage to the
Company's production equipment. Since the date of the fire, the Company has worked with the contract
manufacturer to resume production, maintain standards of product quality, and replenish inventories destroyed by
the fire. The Company has also been working to ramp up an additional contract manufacturer to further mitigate risk,
diversify supply chain, and expand production capacity.
In 2022, the Company recorded a net loss related to the fire of $20,779,000, consisting primarily of losses of
inventories and other assets of $48,339,000, partially offset by insurance proceeds received from the Company's
insurance carrier of $27,560,000. In 2023, the Company recorded recoveries related to the fire of $8,000,000,
consisting of $2,500,000 for proceeds received from the Company's insurance carrier in relation to a business
interruption claim and $5,500,000 for proceeds received as part of a financial settlement for lost inventory and other
losses incurred as a result of the fire. Management does not anticipate additional recoveries. These losses and
recoveries are presented in the caption "Loss (recovery) from fire" on the Consolidated Statements of Operations.
69
COGNEX CORPORATION - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 23: Restructuring Charges
In December 2022, following its acquisition of SAC Sirius Advanced Cybernetics GmbH (refer to Note 21), the
Company completed restructuring activities to align the cost and operating structure of the acquired business with
the Company's business strategy. The restructuring activities included a workforce reduction of 18 employees and
the termination of certain operating lease contracts, and resulted in charges of $1,657,000 in 2022. These charges
are included in “Restructuring charges” on the Consolidated Statements of Operations.
The following table summarizes the restructuring charges for the year ended December 31, 2022 (in thousands):
One-time termination benefits
Contract termination costs
Amount
1,584
73
1,657
$
$
The following table summarizes the activity in the Company’s restructuring reserve, which is included in “Accrued
expenses” on the Consolidated Balance Sheets (in thousands):
Balance as of December 31, 2021
Restructuring charges
Cash payments
Foreign exchange rate changes
Balance as of December 31, 2022
Cash payments
Foreign exchange rate changes
Balance as of December 31, 2023
NOTE 24: Subsequent Events
One-time
Termination
Benefits
Contract
Termination
Costs
Total
$
$
— $
1,584
(646)
26
964
(973)
9
— $
— $
73
—
2
75
(75)
—
— $
—
1,657
(646)
28
1,039
(1,048)
9
—
On February 15, 2024, the Company's Board of Directors declared a cash dividend of $0.075 per share. The
dividend is payable March 14, 2024 to all shareholders of record as of the close of business on February 29, 2024.
70
COGNEX CORPORATION – SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS
Description
Allowance for Credit Losses on
Accounts Receivable:
2023
2022
2021
Reserve for Sales Returns:
2023
2022
2021
Deferred Tax Valuation Allowance:
2023
2022
2021
Additions
Balance at
Beginning
of Period
Charged to
Costs and
Expenses
Charged
to Other
Accounts
Deductions
Other
Balance at
End of
Period
(In thousands)
$
$
$
730 $
776 $
831 $
500 $
191 $
— $
— $
— $
— $
(645) (1) $
(237) (1) $
(55) (1) $
(2) (2) $
(2) $
—
(2) $
—
583
730
776
$ 1,518 $
$ 1,518 $
$ 1,291 $
500 $
— $
— $
— $
— $
227 $
—
—
—
(1) $
(1) $
(1) $
—
—
—
(2) $ 2,018
(2) $ 1,518
(2) $ 1,518
— $
— $
$ 7,661 $
$ 8,188 $ 2,234 $ 3,889 $
— $
$ 8,568 $ 1,420 $
(6,718)
(6,650)
(1,800)
$
$
$
—
—
—
943
$
$ 7,661
$ 8,188
(1)
(2)
Specific write-offs
Foreign currency exchange rate changes
71
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no disagreements with accountants on accounting or financial disclosure during 2023 or 2022.
ITEM 9A: CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As required by Rules 13a-15 and 15d-15 of the Exchange Act, the Company has evaluated, with the participation of
management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure
controls and procedures (as defined in such rules) as of the end of the period covered by this report. Based on such
evaluation, except as described below relating to the acquisition of Moritex Corporation, the Chief Executive Officer
and Chief Financial Officer concluded that such disclosure controls and procedures were effective as of that date.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting.
Management has evaluated the effectiveness of the Company’s internal control over financial reporting based on
the framework in Internal Control – Integrated Framework issued in 2013 by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
Except as described below relating to the acquisition of Moritex Corporation, based on our evaluation, management
has concluded that the Company’s internal control over financial reporting was effective as of December 31, 2023.
The Company closed the acquisition of Moritex Corporation on October 18, 2023. The new acquisition's total assets
and revenues constituted approximately 5% and 1%, respectively, of the Company’s consolidated total assets and
revenues as shown on our consolidated financial statements as of and for the year ended December 31, 2023. As
the acquisition occurred during the fourth quarter of 2023, the Company excluded Moritex Corporation from the
scope of the assessment of the effectiveness of the Company’s internal control over financial reporting and, with
respect to the portion of disclosure controls and procedures that are subsumed by internal control over financial
reporting of Moritex Corporation, the Company's disclosure controls and procedures. This exclusion is in
accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an
assessment of a recently-acquired business may be omitted from the scope in the year of acquisition if specified
conditions are satisfied.
Attestation Report of the Registered Public Accounting Firm on Internal Control over Financial Reporting
The Company’s internal control over financial reporting as of December 31, 2023 has been audited by Grant
Thornton LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Changes in Internal Control over Financial Reporting
Except as described above, there have been no changes in the Company's internal control over financial reporting
that occurred during the fourth quarter of the year ended December 31, 2023 that have materially affected, or are
reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company
continues to review its disclosure controls and procedures, including its internal control over financial reporting, and
may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s
systems evolve with its business.
72
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Cognex Corporation
Opinion on internal control over financial reporting
We have audited the internal control over financial reporting of Cognex Corporation (a Massachusetts corporation)
and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal
Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—
Integrated Framework issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December
31, 2023, and our report dated February 15, 2024 expressed an unqualified opinion on those financial statements.
Basis for opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for
its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control Over Financial Reporting ("Management's Report"). Our responsibility is
to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting
was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal
control over financial reporting of Moritex Corporation, a wholly-owned subsidiary, whose financial statements reflect
total assets and revenues constituting five and one percent, respectively, of the related consolidated financial
statement amounts as of and for the year ended December 31, 2023. As indicated in Management’s Report, Moritex
Corporation was acquired during 2023. Management’s assertion on the effectiveness of the Company’s internal
control over financial reporting excluded internal control over financial reporting of Moritex Corporation.
Definition and limitations of internal control over financial reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or
procedures may deteriorate.
/s/ GRANT THORNTON LLP
Boston, Massachusetts
February 15, 2024
73
ITEM 9B: OTHER INFORMATION
During the quarter ended December 31, 2023, the following Section 16 officer adopted a Rule 10b5-1 trading
arrangement, as defined in Item 408 of Regulation S-K, that is intended to satisfy the affirmative defense conditions
of the Exchange Act Rule 10b5-1(c):
• On December 12, 2023, Joerg Kuechen, the Chief Technology Officer of the Company, adopted a trading
arrangement for the sale of shares of the Company’s common stock (a “Rule 10b5-1 Trading Plan”). Mr.
Kuechen’s Rule 10b5-1 Trading Plan, which has a term ending on December 6, 2024, provides for the
exercise of vested stock options to acquire up to 202,556 shares of common stock and the sale of up to
215,818 shares of common stock pursuant to the terms of the plan.
During the quarter ended December 31, 2023, no 10b5-1 trading arrangements were modified or terminated, and no
director or officer of the Company adopted or terminated a “non-Rule 10b5-1 trading arrangement,” as defined in
Item 408 of Regulation S-K.
ITEM 9C: DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Information with respect to Directors and Executive Officers of the Company and the other matters required by
Item 10 shall be included in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 1, 2024 and is incorporated herein by reference.
charge, on
The Company has adopted a Code of Business Conduct and Ethics covering all employees, which is available, free
of
Information-
Governance Documents". The Company intends to disclose on its website any amendments to or waivers of
the Code of Business Conduct and Ethics on behalf of the Company’s directors and executive officers that would
otherwise be required to be disclosed under the rules of the SEC or The NASDAQ Stock Market LLC.
the Company’s website, www.cognex.com under
"Company-Investor
ITEM 11: EXECUTIVE COMPENSATION
Information with respect to executive compensation and the other matters required by Item 11 shall be included in
the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 1, 2024 and is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
Information with respect to security ownership and the other matters required by Item 12 shall be included in the
Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 1, 2024 and is
incorporated herein by reference.
The following table provides information as of December 31, 2023 regarding shares of common stock that may be
issued under the Company’s existing equity compensation plans:
Plan Category
Equity compensation plans approved by
shareholders (3)
Equity compensation plans not
approved by shareholders (3)
Number of securities to be
issued upon exercise of
outstanding options,
warrants and rights, and
vesting of restricted stock
units
(a)
Weighted-average exercise
price of outstanding options,
restricted stock units,
warrants, and rights
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in column (a))
10,516,000 (1) $
—
10,516,000
$
51.22
—
51.22
7,978,000 (2)
—
7,978,000
(1)
(2)
(3)
Includes shares to be issued upon exercise of outstanding options under the Company’s 2023 Stock Option and Incentive Plan, the
2007 Stock Option and Incentive Plan, and subsequent to shareholder approval, the 2001 General Stock Option Plan, as amended
and restated.
Includes shares remaining available for future issuance under the Company’s 2023 Stock Option and Incentive Plan. This amount is
subject to adjustment from "Carryover Shares" as defined in Note 16: Stock-Based Compensation.
All references made to share or per share amounts have been adjusted to reflect the two-for-one stock split which occurred in the
fourth quarter of 2017.
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The 2001 General Stock Option Plan was originally adopted by the Board of Directors in December 2001 without
shareholder approval. In December 2011, this plan received shareholder approval for an amendment and
restatement of the plan. This plan provided for the granting of nonqualified stock options and incentive stock options
to any employee who was actively employed by the Company and was not an officer or director of the Company.
The maximum number of shares of common stock that were available for grant under this plan was 38,440,000
shares. All option grants had an exercise price per share that was no less than the fair market value per share of the
Company’s common stock on the grant date and had a term that was no longer than ten years from the grant date.
32,544,411 stock options were granted under the 2001 General Stock Option Plan. With shareholder approval of the
2023 Stock Option and Incentive Plan in May 2023, no further shares may be granted from the 2001 General Stock
Option Plan.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions and the other matters required by Item 13
shall be included in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on
May 1, 2024 and is incorporated herein by reference.
ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES
Information with respect to principal accounting fees and services and the other matters required by Item 14 shall be
included in the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on May 1,
2024 and is incorporated herein by reference.
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
PART IV
(1)
(2)
Financial Statements
The financial statements are included in Part II – Item 8 of this Annual Report on Form 10-K.
Financial Statement Schedule
Financial Statement Schedule II is included in Part II – Item 8 of this Annual Report on Form 10-
K.
Other schedules are omitted because of the absence of conditions under which they are
required or because the required information is provided in the consolidated financial
statements or notes thereto.
(3)
Exhibits
The Exhibits filed as part of this Annual Report on Form 10-K are listed in the Exhibit Index,
immediately preceding the signature page hereto.
ITEM 16: FORM 10-K SUMMARY
Not applicable
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 15th day of
February 2024.
SIGNATURES
COGNEX CORPORATION
By:
/s/ Robert J. Willett
Robert J. Willett
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Robert J. Willett
Robert J. Willett
/s/ Paul D. Todgham
Paul D. Todgham
/s/ Sachin Lawande
Sachin Lawande
/s/ John Lee
John Lee
/s/ Angelos Papadimitriou
Angelos Papadimitriou
/s/ Dianne Parrotte
Dianne Parrotte
/s/ Marjorie Sennett
Marjorie Sennett
/s/ Anthony Sun
Anthony Sun
President, Chief Executive Officer, and Director (principal
executive officer)
February 15, 2024
Senior Vice President of Finance and Chief Financial
Officer (principal financial and accounting officer)
February 15, 2024
Director
Director
Director
Director
Director
Director
February 15, 2024
February 15, 2024
February 15, 2024
February 15, 2024
February 15, 2024
February 15, 2024
76