Cognex results for 2011

I try to be one of the first to bring you financial results from machine vision industry leader Cognex, but last week I got scooped. It was technology industry blog Virtual Strategy that altered me to news of record results from our friends in Natick, MA..

Click that link for details, or go to www.cognex.com, but if you’re interested in my summation and interpretation, read on.

First, the headlines. Quarterly comparisons are a little misleading because of a one-off adjustment at the end of 2010, so let’s look at the twelve month numbers: revenues (sales, for my British readers,) up 11% to almost $322m, and income (profit, in British English,) up 14% to $61m. Clearly then, marginal growth in sales volumes translates to lots more profit. I think that means high fixed costs, and a high margin per product sold.

What’s missing however is any discussion of units sold. That’s something I’d like to see because it’s my understanding that Cognex pushed through a pretty steep price increase last year. So when CEO Bob Willet says that revenue for Q1-12 is expected to be flat, doesn’t that mean volumes are actually declining?

Now the business of business is to make profit, so if they can make more money by shifting fewer units, that’s a good thing, isn’t it? Well perhaps it’s more complicated than that.

What I think is happening, and this is pure conjecture, is that the sales mix is shifting towards Dataman code readers and Checker sensors. This lowers the average revenue per unit sold, but it also boosts profit since these are high margin products made in reasonably big volumes. It would also imply that perhaps the VisionPro line is going to diminish in importance, leaving Cognex to go head-to-head with Microscan at the less sophisticated end of the vision market.

And one other observation before you get on with your day: I spotted a few hints in the year-end report about new product introductions. There’s the increase in inventories, the growth in R&D headcount, and the expansion of SGA costs. Is something exciting about to be launched?

It would be good to see something innovative from Cognex, although I’m not holding my breath.