Despite revenue for 2015 being lower than we planned (the strong U.S. dollar alone reduced our revenue by about $23 million, or 5 percentage points of growth, year-on-year), it did increase 6% over 2014, and we showed strong momentum and a record-setting pace for the first half of the year. As we moved through the second half, two external factors slowed our growth: the weaker-than-expected global industrial market, and delays of large orders from some customers as they juggled resources and re-prioritized their projects. While less profitable than 2014, we invested heavily in technology, manufacturing capacity and our salesforce, so we’re primed for stronger growth in the future.
What the Future Holds: Cognex 2015
I bet you’re wondering which industries we see as our three most important in 2015.
Our big drivers, so to speak, are consumer electronics, automotive and logistics.
What do I mean by consumer electronics? Here’s an example: in the future, we call our phones "smartphones." They are wireless and fit in our pockets, and each one has more computing power than all of NASA when it put two astronauts on the moon in 1969!
Cognex is becoming instrumental in manufacturing these phones and other electronic devices. Our products are used in everything from assembling touchscreens to improving robot accuracy.
Consumer electronics was our largest industry in 2015, with revenue growing in the mid-teens following a tremendous year in 2014. And the opportunity for Cognex in this industry, particularly as manufacturers push toward more sophisticated automation of work cells, is far-out!
We see much of this potential in China, where most of the world’s electronics products are currently manufactured, often by hand! It’s a great space for Cognex: rising wages, a need for improved quality and productivity, and products that are becoming too small
to manufacture by hand are driving manufacturers to automate. They want fast production ramp-up and quick product changeovers, and our technology makes that possible!
Let’s talk automotive. This may come as a surprise to you, but in 2015, flying cars are not the norm. In fact, our cars look pretty similar to the ones you’re used to, but the technology in them has advanced dramatically.
Though the DeLorean Motor Company no longer makes cars, all of the top worldwide automotive companies are Cognex customers. In fact, we sold them and their suppliers more than $100 million of Cognex vision and ID in 2015!
We help automotive companies improve their manufacturing quality and performance. With sophisticated product roadmaps including cool stuff like hybrid technology, advanced battery-powered and even hydrogen-powered cars, and quality challenges like airbag malfunctions (Doc, we really ought to get ’em in the DeLorean!), they’re going to need vision more than ever in the coming years.
In case the term "logistics" hasn't hit yet in 1981, here’s what we do in this space. Distribution centers and warehouses need to increase productivity and reduce labor costs; our fast and accurate barcode readers help facilitate the sorting of packages and products, and we’re quickly replacing laser scanners. (Did you ever think a laser could be outdated? The future is an amazing place, Doc!) Our customers and prospects include well-known retailers, package delivery companies and postal accounts, and we even had our first major win in airport baggage handling. In 2015, we gained a lot of traction in the European logistics market, and we made great progress in the U.S., winning systems integrators who are key to serving this market!
Products You Couldn’t Have Imagined in 1981
Doc, you’ll be amazed at the vision and ID products we introduced in 2015; they are faster, smaller and easier-to-use than ever!
Back in 1997, we introduced PatMax®, the most powerful machine vision algorithm ever. In 2015, we debuted our new object location software, PatMax Redline™, which works 4-7x faster and solves challenging customer applications that even PatMax couldn’t!
The new In-Sight 2000™ expands the use of our vision products to the simplest applications, opening up the market to more price-sensitive manufacturers, and it is so easy to use. It’s a far cry from our first vision system for sure!
Our 5-megapixel In-Sight® models—the 5705, 5705C and 8405—are the world’s fastest stand-alone 5MP vision system, the only stand-alone 5MP color vision system, and the smallest stand-alone 5MP vision system, respectively. They perform at rates you probably can’t even imagine in 1981!
We also launched three next-generation fixed-mount ID readers—the DataMan® 150, 260 and 360—that deliver unprecedented performance, flexibility and ease-of-use, and even read damaged barcodes.
Cognex of the Future
I haven’t taken the DeLorean beyond this present day, so I can’t tell you what the future holds, but I can say that we are excited about new markets for machine vision.
One important milestone in 2015 was our penetration of the life sciences market, as our first high-volume customer deployed its new product that features Cognex vision! While revenue was less than $10 million in 2015, we believe it will continue to grow as clinical diagnostics equipment manufacturers design machines that incorporate Cognex products.
3D vision is a fast-growing and exciting market for us. Our customers use our 3D displacement sensors to measure the heights of critical features of precision parts during their manufacture. 2015 was both a learning year and an exciting product development year for us in 3D! Despite growing significantly, we are still a small player in a $200 million market. We know this space is a big opportunity for us, and our current and future customers really benefit from the extensive technical expertise we provide. In a nutshell, Doc, the most advanced products of the future are made with machine vision from Cognex!
The More Things Change…
The More They Stay the Same!
A lot has changed in the past three decades, but your vision for Cognex as a special place to work is exactly the same: we hire awesome people, we celebrate our unique culture, and we have the most application experience and engineering knowledge in the industry!
It may be hard to envision as you’re just starting this company, but in 2015 we actually sold our surface inspection division. By selling this slower-growing and less-profitable business, we are sharpening our focus on Cognex’s core, where we see the most current success and potential growth. As a result of the sale, we reported an after-tax gain of $78 million in 2015 (a nice chunk of change!).
On a related note, we bought a great small company called Manatee Works, Inc., which makes barcode decoding solutions for smartphones!
Doc, to sum it up for you, Cognex meets the expectations that you set for us back in 1981...we have the best and the brightest people, the most advanced vision-based products, happy customers around the world…. and we still maintain your Work Hard, Play Hard and Move Fast culture. With all of that, the future looks great…not only for you back in 1981, but for all of us here too!
That’s all I can tell you, Doc! You’ll have to find out the rest of our story through the natural course of time…
Robert J. “Robbie McFly” Willett
President and Chief Executive Officer