CEO Scours the World
for Cognex Collection

Dear Shareholders,
In this Ripley's Believe It Or Not! Odditorium, you've seen creatures and sights that challenge your very perception of reality. Some Odditorium visitors might be skeptical, might wonder if a company like Cognex is real, or if they can believe what they see. Well, it's time to suspend your disbelief! But before we embark on this journey, remember: when you experience a company like Cognex, every other company in the world may start to seem ordinary…

Cognex had a truly astonishing year in 2014 with record financial results and tremendous profitability. Here are some highlights:

• Record revenue of $486 million, a 37% increase over 2013's record revenue of $354 million;
• Operating margin was 30%, an increase of 600 basis points over 2013;
• Record net income of $121 million, a 65% increase over the previous record of $74 million set in 2013;
• Net margin was 25% compared to 21% in 2013; and
• Record earnings per share of $1.36, up from $0.83 in 2013.

How did we accomplish these fantastic feats, you may ask? With astounding growth from factory automation, our largest and fastest growing market! Strong demand from a broad range of customers in Europe, the Americas and Greater China grew 2014 factory automation revenue 41% to a record $400 million. Another factor contributing to this significant growth was the largest value of orders ever from one customer in a single year in Cognex history! We'll say more about this large customer later.

From an industry perspective, our most significant contributor to factory automation revenue growth in 2014 was the consumer electronics industry. Also important were automotive, logistics and consumer products. Customers in these industries are increasingly applying Cognex vision and barcode readers in a wide range of manufacturing operations.

Beyond factory automation, the two smaller markets served by Cognex—surface inspection and semiconductor and electronics capital equipment (SEMI)—also contributed to our success. Surface inspection was boosted by growth from both the metals and paper industries, growing 29% to $60 million, up from $46 million in 2013. SEMI revenue totalled $26 million, up from $23 million in 2013 thanks to a modest rebound in this cyclical market.

Be Amazed! Cognex Growth Initiatives Harness Future Potential
A unique company like Cognex does not focus solely on the present. Part of what makes Cognex so incredible—and the perfect exhibit for a Ripley's Odditorium—is our focus on growth initiatives.

Stunning ID Products
ID products had another stellar year in 2014. Revenue from ID products increased well in excess of our 30% long-term target. A major contributor to this growth was our continued success in the logistics market, where leading names in the postal, parcel and retail sectors are adopting our highly advantaged DataMan® barcode readers. Following our initial success in the U.S. market, 2014 saw strong growth for our logistics products in Europe, helping us grow from 0% market share just three years ago to 10% in 2014. Based on this, and the strength of our overall ID products business, we expect to see continued strong growth in the future!

Products With Vision
2014 was also a record year for Cognex vision products, which grew more than 30% over 2013. This astounding performance was helped by $70 million of revenue from a single customer in 2014. Based on the strength of Cognex's technology and the quality of our global support operation, this company selected Cognex for major high-precision manufacturing projects. We expect our work together to continue and view this as a long-term relationship.

Greater China—One of the Cognex Wonders of the World
We believe our stellar results suggest that machine vision is being more widely adopted globally, particularly in Greater China. The Chinese market continues to increase its reliance on machine vision thanks to a number of factors, including a shrinking workforce, which is becoming too costly for traditional manufacturing tasks, and a generation of new electronics products that are becoming too small and complex to assemble by the human hand. Against this backdrop, machine vision is becoming a ubiquitous and essential component of manufacturing in this high-potential region.

And while this trend is readily apparent in the consumer electronics segment, we also see great potential for our technology in Greater China from local manufacturers in industries such as automotive, medical devices, consumer products and pharmaceuticals.

One-of-a-Kind 3-D Displacement Sensors
Building on our recent entry into the highly profitable market for 3-D vision products, we expanded our series of displacement sensors during 2014 with three new models, more robust vision tools, and an easy-to-use application development environment to more broadly serve customers in the automotive, food and electronics industries. Addressing the most challenging tasks, Cognex's superior software algorithms and our technically sophisticated sales force provide significant differentiation from our competitors. And we believe 3-D vision will be an area of high growth and high value for Cognex in the future.

The Stunning Life of Life Sciences
Life Sciences, another new market for Cognex, continues to show great promise. Equipment manufacturers are selecting Cognex Advantage® vision engines for the increasing vision and ID demands of their next-generation machines.

Important design wins in 2014 include what we believe will be the first large-scale deployment of our technology in a life science product. This machine builder, and others like it, offer Cognex the potential for significant recurring revenue for many years to come.

New Machine Vision Products Stretch the Boundaries of What's Possible
Building upon our technology leadership, we introduced some truly awe-inspiring products during the year that will help propel our continued success:

• DataMan® 8600 high-performance handheld readers address the most challenging Direct Part Mark (DPM) barcodes on the widest range of materials and surfaces.
• DataMan® 8050 series are our fastest and most economical handheld readers to date.
• PowerGrid™ technology is a patent-pending texture-based algorithm powerful enough to read significantly damaged 2-D barcodes.
• Cognex Explorer™ Real Time Monitoring systems improve utilization rates for logistics customers by automatically evaluating packages that can't be processed.
• In-Sight® Micro 1500 can perform up to 400 inspections per second, ideal for the fastest production lines.
• The Cognex VC5 is a factory-ready vision controller for building and deploying 3-D and multi-camera applications.

World's Most Cultured Company
Some Odditorium visitors might wonder how a company this successful has any time to focus on culture. At Cognex, however, we understand how important both our outstanding workforce and our unique culture are to our success, and how investments in these areas enable our continued growth!

In 2014, we invested substantially in recruiting and developing Cognoids. We actively seek the brightest minds in machine vision and added more than 240 new Cognoids. To support our large and growing team, we increased our footprint with new and expanded offices around the world. This included doubling our operations in Cork, Ireland and purchasing our facility there.

And it is because of our unique culture and our Work Hard, Play Hard, Move Fast mentality that so many Cognoids not only join our company, but choose to stay with us. In fact, in 2014, more than 300 Cognoids—about one quarter of our total organization—had 10 or more years' tenure at Cognex. The perseverance and deep knowledge of our team is an important asset, enabling Cognex to address the technical demands of our customers and helping us lead the world in the development of high-potential new products for machine vision.

Cognex 2014: Iconic and Incomparable…Until Next Year's Results!
Visitors, we have reached the end of our Cognex Odditorium tour. We've explored stupefying success, gasp-inducing growth and a level of accomplishment never before experienced. And although what you've seen here today might have astounded you, I assure you, there is much more to come!

Believe It or Not!

Robert J. Willett
President and Chief Executive Officer