Cognex at KeyBanc Forum: AI and Logistics Drive Strategy

On Monday, 11 August 2025, Cognex Corporation (NASDAQ:CGNX) presented at the KeyBanc Capital Markets Technology Leadership Forum, providing a strategic overview that highlighted both opportunities and challenges. With a focus on AI advancements and logistics growth, the company emphasized its commitment to profitability and market expansion under new leadership.

Key Takeaways

• Cognex is focused on AI and machine vision to drive growth, particularly in logistics and e-commerce.
• The company reported a 20% stock increase on earnings day, with EBITDA exceeding 20% for the first time since Q2 2023.
• Strategic initiatives include cost optimization and expanding the customer base through an emerging customer initiative.
• Cognex aims to maintain leadership in AI technology and enhance customer experience.
• M&A is a minor growth component, targeting businesses with 20% to 30% adjusted EBITDA.

Financial Results

• Positive Trends: Notable improvements in factory automation and e-commerce logistics.
• EBITDA: Exceeded 20% adjusted EBITDA, a significant achievement since Q2 2023.
• EPS Growth: Four consecutive quarters of year-over-year EPS increases.
• Cost Optimization: Operating expenses decreased by 3% year-over-year due to structural cost efforts.
• Growth Algorithm:

- Underlying market growth at 4%

- Market penetration between 6% to 7%

- M&A contribution at 3%

Operational Updates

• End Markets:

- Logistics/Warehouse Automation: Represents 24% of the business with strong momentum.

- Automotive: Currently underperforming.

- Packaging (FMCG/Healthcare): Showing progress with a dedicated sales focus.

- Consumer Electronics: Positive early signs and reshoring opportunities.

• Visibility: Nine months in logistics, three months in other factory automation markets.
• OneVision: A cloud-based platform enhancing machine vision inspection tasks.
• Sales Initiatives: Targeting packaging, healthcare, and fast-moving consumer goods.
• Emerging Customer Initiative: Hiring salespeople to broaden customer reach.

Future Outlook

• Growth Drivers: Include cost reduction, quality optimization, reshoring, and regionalization.
• Strategic Priorities:

- Leadership in AI and machine vision technology.

- Enhancing customer experience.

- Doubling the customer base.

• M&A Strategy: Focus on synergistic businesses with 20% to 30% adjusted EBITDA.
• Market Penetration: Expanding applications enabled by AI to serve more customers.
• AI Adoption: Expected to increase demand for machine vision solutions.

Q&A Highlights

• Competition: Confidence in high accuracy and on-device performance to counter startups and large language models.
• OneVision Adoption: Gaining traction with both sophisticated and complex tech needs customers.
• Focus Execution: Emphasis on achieving targets set at Investor Day.

For a detailed understanding, readers are encouraged to refer to the full transcript below.

Full transcript - KeyBanc Capital Markets Technology Leadership Forum:

Ethan Chuang, Associate, Under Ken Newman: One, thank you for coming out. My name is Ethan Chuang. I’m an associate under Ken Newman covering the industrial supply chain. With me today is Dennis Fear, the CFO of Cognex. Dennis, thank you for coming out today.

To kick things off, why don’t you give a little bit of background about yourself and then an overview of who Cognex is?

Dennis Fear, CFO, Cognex: Yeah. Sure. Happy to, and good afternoon, everyone. Thanks for taking the time and your interest in in Cognex. A few words about myself, chief financial officer of Cognex, about a year in the role.

It’s my my third CFO job. I had been at both private and public companies prior to that as a CFO. Who’s Cognex? For those who who don’t know us, so we are the cognition experts. That’s what the name stands for.

I like to say we we bring the real world into the machine world. So we take the photons in the real world. We convert them into images, and then we put our software and vision tools on top of it and really look at what’s in this picture. And that means in factory automation, we for inspection, for example, or for guiding of robotic arms can be identification of products, very good old barcode reading, if you if you want to say, and and and gauging as well. So that’s kind of what we what we do.

And I would say as a as a company, we are regarded as typically as the tech leader in the space, both kind of in the pre AI area and the pre AI era. And now also, I would say, since 2022 when we launched our first AI product, also in that now new AI area that we have really embraced AI as kind of the next level of machine vision and to drive basically additional use cases and penetration. Overall, we are, I would say, in an attractive market, which has the potential for attractive growth rates driven by continuous cost out and quality optimization desire by our customers, reshoring and maybe regionalization of global manufacturing as well as labor shortages in some instances. And then at the same time, we while we operate as a kind of software on device model, so that means we sell the software on hardware and go on to instead. We command kind of software like margins, at least traditionally, have been like a historic average of 28% adjusted EBITDA margin that has compressed a little bit over the last couple of years, and that’s what we are right now addressing heads on as a maybe as a new leadership team, if you want to say so.

So Matt Moschina, our CEO, came into the role just six weeks ago. And as I mentioned before, I’m about a year in the role. So we are driving back to where we think we belong in terms of bottom line profitability. And so in that regard, looking optimistic into the future.

Ethan Chuang, Associate, Under Ken Newman: That’s great. And so maybe just to kick things off on my end. You guys just reported earnings a few weeks ago and commentary around positive improving trends within factory automation and e commerce logistics looks pretty good. Investors clearly seem to like it with the stock up 20% on the day. But can you talk a little bit more about what you’re seeing in your end markets and what’s driving visibility into the third quarter and second half of this year?

Dennis Fear, CFO, Cognex: Sure, absolutely. Maybe before I go into particular end market, maybe first big picture, right? So on the one side, we have cyclical nature as very often industrial automation CapEx based businesses are. So we saw the peak of the last cycle in 2021 and then saw a more pronounced, I would say, down cycle, ’twenty two, flat ’twenty three, strongly down and then starting only to flatten out in 2024. And during this time, the company also did some investments into future growth, which on the one side, we, as a new leadership team, a strategic angle, we like.

But at the same time, it really compressed bottom line a lot. So I would say I think what the market reacted a bit to, at least what I hope the market did in the last earnings call, was to say like this refocus on bottom line profitability and at the same time showing also really first progress there. But maybe to the questions on the end markets, more specifically, what we see there. So first, which markets are we serving? Our largest end market is logistics and, call it, warehouse automation.

That’s about 24% of our business. And then the second is automotive. Third is, we call it packaging, that’s fast moving consumer goods and health care. It’s just like the application is very similar on this one. That’s why I put that into one.

Consumer electronics, the fourth and semiconductor is the fifth. And I think over the last twelve months or probably now eighteen months, we have seen logistics growing very nicely and that we see strong momentum there as that’s a market which is not very deeply penetrated or is actually the lowest penetrated market with machine vision. And therefore, we see really a long term growth potential there. It’s also the market where we typically have the most visibility. So that means for us nine months, right?

So in all the other end markets, which we sometimes combine to call it factory automation, we just have like three months visibility, so much shorter. And then I would say maybe other highlights. We saw in the quarter, we highlighted positively packaging, that we’ve made good progress there, especially with the dedicated sales focus. And we’ve for the first time in many years, we highlighted consumer electronics as kind of an early sign of positivity. So we have seen consumer electronics 2021 a great year.

But since then, it was almost like kind of a refresh cycle year after year. And it was the first time that we said like, hey, in this market, we are now seeing the opportunities from the reshoring, seeing the first moving of supply chains from China into other Asian countries and then in general, a more positive sentiment in that industry. So that’s maybe a few words upfront on the vertical markets. Yeah.

Ethan Chuang, Associate, Under Ken Newman: That’s great. And then you touched on it a little bit, but maybe on the margin side of things. It was pretty good to see you guys have EBITDA start trending towards that 20% you guys had outlined earlier. Can you help me understand what sort of initiatives are in place right now? And what how much of it is more structural as opposed to just flexing what the company’s needs at the moment?

Dennis Fear, CFO, Cognex: Yes. No. Thanks. Thanks on that. Yes.

On the one side, great progress, right? So four quarters, this year over year EPS increase. First quarter since Q2 twenty twenty three above 20% adjusted EBITDA. So nice progress. And it’s really, if you think about it, we’re looking at the entire P and L, right?

So in our mind, Madsen mind, we’re thinking about like, let’s drive what we can influence and what we can control. So what can we control? On the one side, we can control on the top line. We can control a bit like where do we focus our sales efforts, like less automotive, which is not a good market right now, and more on like packaging, health care, fast moving consumer goods. And that gives us at least a few percentage points of growth, even so if we would leave market out for the moment.

And then we can control our cost base. And at our recent Investor Day, we talked about that we believe our biggest opportunity in driving bottom line profitability is through OpEx efficiency. And that’s what we have seen now in this quarterly results that we saw kind of year over year in a constant currency basis, coming down 3%. So in that regard, we think we’re really driving structural cost optimization and it’s therefore there to last. So it’s not something driven by anything external.

It’s really something we control and we are focused on.

Ethan Chuang, Associate, Under Ken Newman: Yes. That’s great. And then you said you just had your company’s first Analyst Day, which is very exciting. You and Matt talked a little more constructively about M and A as a pillar of the long term growth strategy. I guess maybe can you touch a little bit more about what sort of targets you guys are looking at?

Maybe say higher margin software as opposed to hardware like Vortex or what that may look like? And then just overall, what’s the shift behind the strategy?

Dennis Fear, CFO, Cognex: Yes. No, thanks for that. Yes. So we talked about Investor Day about our kind of new growth algorithm. And in general, so first of all, we brought it down a bit to where it was before.

And then we kind of sliced it in almost like, you can say, three components. So first, we said like, what’s the growth? I think my mic dropped. Sorry for that, guys. Three So components.

So the first one is, is it still on? Is it good? Great. Okay. And then underlying market growth.

So what it means like how much is the market of our customers growing? And we said like through cycle, that’s 4%. And then we said like and that’s really the biggest block of growth. It’s like 6% to 7% penetration. That means we see the opportunity to penetrate our customers from two directions more.

One thing is more applications enabled by the adoption of AI. And then the second one is about going to more customers, which we have traditionally not served. So that’s kind of the two vectors there. And then the third one is M and A. And that’s really the smallest in the three growth components was 3%.

And so we brought that in as we believe Cognex has a very strong balance sheet, no So could we add additional shareholder value creation through synergistic M and A plan planning or execution? And that’s kind of what we wanted to convey with that. And what are we looking for? We look for highly synergistic businesses with the conviction that they can meet our financial framework criteria, especially being in that 20% to 30% adjusted EBITDA, either being within or with a clear path to within. And in the past, for Cognex, synergistic M and A really meant focusing on TAC and said like, is that a TAC which we like, which is maybe a niche, which we need?

And that still exists for us today. But as we have built out a really strong direct sales force, there’s also a great opportunity for us to add and create synergies by driving more products through our sales force. And that could be through additional tech, of course. It can be through consolidation in the market or it can be by entering adjacencies. So that’s kind of what is driving us there.

But again, I really want to clarify that we don’t think like M and A is the key piece to the growth algorithm. It’s actually the smallest.

Ethan Chuang, Associate, Under Ken Newman: Got it. That’s helpful. And then maybe on the first two pillars that you kinda mentioned on the organic side of things. You guys recently announced OneVision, which is a very exciting product. For people who don’t know, could you explain what that is?

And then maybe who you’re kinda seeing the most traction with in terms of what types of customers are maybe adopting OneVision.

Dennis Fear, CFO, Cognex: Yeah. I think OneVision is one of these great examples to say, like, let’s drive market penetration. And maybe let’s talk about what it is, but probably don’t know the knowledge here in the room. There might be different levels of information. Let’s maybe take a step back first, what do we do mostly, right?

We sell, and I mentioned it before, we sell software on device, right? So that means think about like you put a machine vision system on a production line and it really executes and does all the computational task on the device in the line. And that’s what customers like because for two reasons: latency, that kind of speed going into a cloud just doesn’t work And then second, cybersecurity. So they the customers, they really like to have devices on the line, and they don’t like very much to be in the cloud. And that means for you as a machine vision provider and a machine vision user, you can only use as much compute power as you have on the device.

You can’t use easily what the compute power is available on the cloud. And that means, as Cognex, I would almost argue one of our most secret sauce is to create machine vision models which are just optimized for the available compute power and make it work and cover as much as you can, Vincent. And that’s probably where we are better than everyone else in the industry. But still, there can be use cases, especially very complex inspection tasks, where that compute power just is not enough. So you would want to tap into the cloud in some way.

But the way how we found to do it is one vision. And think about like one vision maybe as a training room in the cloud. So that means a customer has a device, maybe has already used it for inspection task, and now he wants to drive it to the next level of inspection. So let’s extract all the data from this our Cognex device, bring it to the one vision cloud, and then run a a deep learning training model in the cloud using the compute power of the cloud and basically improving the model, not improving, let’s say, the one inspection. It’s improving the model in the training room.

And then you bring it back from the training room back into the device. And at this moment, you close the door to the training room, you cut your connection to the cloud, you’re back in the line, you have the speed, and you have the cybersecurity aspect. And that’s basically what One Vision does. And why is that important? It’s important from two aspects.

It’s a, it makes it easier for, let’s say, kind of the middle segment of the market to use deep learning type of applications, which in the past you would need to use complex PC based kind of cloud connected vision systems, very complex to set up, very complex to operate and to maintain. And then so it adds basically or gives access to a new customer group to that ability. And then for the more sophisticated customer like the top of the market, they maybe have been using this more complex system, but it was still a hassle for them. So now it becomes much easier for them. So for them, it drives efficiency.

And therefore, we believe it’s really a strong kind of differentiator and another addition to our Cognex ecosystem, which makes our customers being attracted to buy and stay

Ethan Chuang, Associate, Under Ken Newman: with Cognex. Got it. And so maybe help me understand, is it at the moment, are you seeing more traction with those customers that maybe have it easier to scale? Or is it the customers that have more complex tech needs?

Dennis Fear, CFO, Cognex: I mean, traditionally, Cognex as a company has always served kind of the most sophisticated customers with the most sophisticated problems. And we are pretty good at that, and we serve some of the most kind of iconic companies around the world or globally with that. So in that regard, that’s really where our stronghold is, and that’s a good business. And especially like in logistics, where I think it’s well known Amazon is our largest customer, goes very well. But then at the same time, right, we drove this sales initiative to go broader into the market.

And we like what we see at the moment in the packaging vertical, where we really see kind of yielding results and that kind of led to some of the more positive commentary in the last earnings call where we said like, okay, instead of seeing that more flattish this year, we see some growth happening for that. So in that regard, I would say there’s traction in both, but very clearly, our original stronghold is the more sophisticated side, very clearly.

Ethan Chuang, Associate, Under Ken Newman: Got it. And then maybe on the longer term view of things, when we think about AI becoming more democratized and processing becoming more available, obviously, you guys have positioned yourself well within the machine vision space. Are you are you guys concerned that any smaller players may be adopting technology at a faster rate and just the accessibility to computing power, maybe that becomes a threat at some point?

Dennis Fear, CFO, Cognex: Yes, it’s a great question. And I think there are two sides how you think about it. There’s a smaller player potential startups entering the space. And then you could sometimes you’re getting asked like, do you think NVIDIA and Meta will be your future competitors with the large models which they train? I would say maybe the first part is very easy to answer because history already proved us that it’s not a risk to start ups, right?

So a lot of start ups like four years ago are collecting a lot of money, trying to get into the space, and they have all not been really successful in that regard. So I think we can really say history has proven otherwise. Now on the other side, with the hyperscaler, the large language model provider, obviously, vote is still out in that sense, but we believe that there are very good reasons why it would not. So first of all, I think one thing is you need to have very high accuracy, right? So you can’t have like 99%.

You need to more go towards five sigma, six sigma, that type of very industrial machine version specific task. And we actually ran a comparison of some of the large language models against our machine version specific model. And we can see that we beat them on accuracy on industrial machine vision tasks. So that’s one, accuracy. But then I think even more important is that what I said before, it just can’t only run-in the cloud.

It needs to run on the device. So that means you really need to optimize it for efficiency, right? You can’t use this big language model, which use clusters and clusters of GPUs, but you don’t have that on your device. So in that regard, that is a And I mentioned before, I think that’s where we’re really the secret sauce of Cognexus.

And then the other topic, scalability. How easy is it to transfer that model from this specific task to another one? Now if you run another product on this line, can you let a model still address it? If you want to add now add another production line, how easy is it to transfer? And that’s where we really consistently see our advantage and really also kind of our right to win, so to say.

That’s why we’re not entirely concerned about kind of these large language models. But at the same time, we we feel like there’s a lot of opportunity bringing AI into machine vision. And why? Because with AI, we are able to solve so much more applications, which we couldn’t do in the past, that it’s really a demand generator.

Ethan Chuang, Associate, Under Ken Newman: Got it. And as you guys look to maybe fulfill this demand, you guys recently announced a new leadership team to help increase sales and growth and innovation. So you’re a part of that. So I guess maybe from your perspective, what’s kind of the most exciting thing that you want to see in the next few months from this group?

Dennis Fear, CFO, Cognex: Right. So first, I would say I would applaud Matt how fast he has moved on that, right? He’s less than six weeks in the job and put together his leadership team, and that’s definitely part that he has been seven years already in Cognex before. But then I think if you look a little bit into what was changed, there’s a very clear alignment of that team towards the strategic objectives, which Matt outlined. So first, being number one in AI, technology and machine vision.

So you now have people in that from that leadership team who have not reported to a CEO in the past and are reporting to the CEO. So that means they get more weight in the overall discussion, right, first. Second strategic priority, drive customer experience, be one in customer experience in the industry. Now our Head of Customer Success, who runs our gross functional customer experience push, hasn’t reported to the CEO in the past, now reports to the CEO. So again, very clear tie to the strategic objectives.

And then last, to double the number of customers. So here, we have a new Head of Sales, who’s Karl Gerst. He’s not new to the company. He’s twenty seven years in the company, but he never worked on sales. He worked on the product side.

And what he brings is process. Process focus, very clearly driving a playbook, a very consistent sales playbook. And I would say that’s really a bit of a shift for Cognex as well. So again, here, very strong alignment to the strategic objectives. But maybe you ask what excites me the most about this team.

I think for me, it’s really focused execution. I think that’s really what we want to bring across to everyone on the street is that we put our targets at Investor Day, and I think we are very focused and very clear about we will drive these targets. And we think we can control at least a good portion of the destiny, right? We can’t control generally the market, but we can control some part of that growth by our sales resource allocation, and we can drive our bottom line performance by being disciplined on cost. And therefore, I think I’m excited about that.

Ethan Chuang, Associate, Under Ken Newman: That’s very exciting. And it’s great to hear you guys are all focused from the top of the management all the way down. Maybe touch on the emerging customer initiative. I know that’s kind of a big point for you guys and I know that the second cohort is probably ramping about now. So, maybe just how they’re progressing and what makes you success or makes you confident the success for the Cognoids?

Dennis Fear, CFO, Cognex: Right. So maybe, again, maybe a different information level here in the room. What is it? What are we trying to do? But if you go back to the last peak of the last cycle, 2021, Cognex, fantastic growth in the years before, but very high customer concentration with two very large customers, right?

And then at the same time, you see some of our competitors, namely Kians, being very successful in the broader market. So in that regard, you would think like, hey, is there a great opportunity for Cognex to grow outside of the established customer base going to more customers with attractive margins actually. So that’s kind of the strategic rationale behind it. And I would say, right, the initiative launched in ’twenty three was hiring the first class. Then the first class of maybe I should say, what are we trying to do, bringing in a different type of salespeople, which are more transactional focused and going broader into the market.

So we decided we are hiring a bunch of between college grads and kind of one to two years’ experience and bring them in, train them and then deploy them into the market. So we hired in ’twenty three, released the first class in ’twenty four and then just released the second class beginning of this year. I think we went through a couple of learnings. I think we talked about that in prior earnings calls, about like what products are they selling, what are really the right products, so we adjusted a bit on that. We certainly also learned in terms of management.

So they’re a bit different in terms of management. So in the beginning, we kept sales management separated for that reason. But at the same time, we also saw it drove a lot of inefficiencies in terms of the coordination of the sales force. So we combined the sales forces. And then we also realized, like when we say about going to more customers, that does not mean necessarily to new logos.

It sometimes can also mean that within one logo, you have different buyers, and we haven’t visited all these buyers. So we also let them go to existing logos but trying to find new buyers who have maybe small buckets of budget, which we haven’t tapped into, into the past. So we went through this learning curve, I would say. And I think we made some positive comments about what we saw on the packaging market in the last earnings call. So in that regard, I think we feel like we are moving into the right direction.

But at the same time, I would say it’s clearly, it’s a strategic shift for Cognex, right? It’s really kind of almost repositioning Cognex from only focusing on top of the market into a broader play. And that won’t happen overnight. So in that regard, I would say we’re on the right track. But there’s still maybe, I would call it, opportunity because we expect that the of each of these salespeople will gradually increase over three years’ time.

So that means we’ll still have a lot to get from this organization.

Ethan Chuang, Associate, Under Ken Newman: Got it. Yeah. It’s all been very helpful. And I know we’re kind of up on time here. So Dennis, I appreciate the time today.

It’s it’s been

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