Q1 2022 Cognex Corp Earnings Call
Greetings and welcome to Cognex first quarter 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during todays conference. Please press star zero on your telephone keypad.
Mind you. This conference is being recorded I would now like to turn this conference over to your host Ms. Susan Conway Senior director of Investor Relations. Thank you Ma'am you may begin.
All right. Thank you good evening, everyone welcome to our first quarter earnings call for 2022.
With us are Rob well at Cognex, as President and CEO and Paul Todd Young our Chief Financial Officer.
I'd like to remind you that our earnings release and quarterly report on Form 10-Q are available on the Investor Relations section of our website at Www Dot Cognex dotcom.
Forward Slash investor both contain detailed information about our financial results.
During the call we may use a non-GAAP financial measure if we believe it is useful to investors or if we think it will help them better understand our results or business trends.
You can see a reconciliation of certain items from GAAP to non-GAAP in exhibit two of the earnings release.
Any forward looking statements made in the earnings release or any that we may make during this call are based upon information that we believe to be true as of today.
However, things can change and actual results may differ materially from those projected or anticipated.
For a detailed list of risk factors, you should refer to our SEC filings, including our most recent Form 10-K, and our Form 10-Q filed Tonight for Q1, now I'll turn the call over to Rob.
Thanks, Sue and Hello, everyone. Thank you for joining us.
We are pleased with our results for the first quarter of 2020 to Cognex reported record first quarter revenue. Following a milestone year in 2021. It was also the second highest quarterly revenue and a 41 year history, and we reported an operating margin greater than 30.
Percent and an after tax margin of 24%.
Revenue for Q1 grew by 18% year on year to $282 million near the top of our expected range.
Companies invested in automation and Cognex is industry, leading machine vision products to support the growth of E. Commerce address widespread labor shortages and meet increasing requirements for product traceability.
Importantly, our product delivery times were mostly back to normal by the end of Q1, thanks to the perseverance of Cognize, our close relationships with suppliers and our aggressive buying actions to secure supply.
So costly the premium prices, we are paying to secure scarce components through brokers is the right thing to do we are prioritizing the needs of our customers and winning market share ahead of shorter term margin and cash flow considerations.
Wow Cognex is supply chain situation has improved its becoming more challenging for many of our customers and partners to support just source basic parts. Since we last spoke with you in February .
As you know cognex products are often part of a broader automation deployment, it's taking customers longer to implement projects and some projects are getting delayed due to longer lead times from suppliers of other equipment. They need like P. L. CS robot and conveyors, that's backing up opportunities.
For Cognex and delaying revenue.
Well this dynamic did not have a material impact on our Q1 results it is causing us to become more cautious about our outlook.
From an end market standpoint, the biggest contributor to year on year revenue growth in Q1 was logistics.
E Commerce, omnichannel and brick and mortar retailers continue to invest in cognex machine vision products to enable higher throughput and cost reductions.
In the broader factory automation market revenue from automotive increased year on year and set a quarterly record in Q1.
Customers in Asia continued to invest in cognex products for production capacity to bring new batteries for electric vehicles to market.
Spending by customers in Europe , and the Americas on traditional vehicles was more muted as they held back orders due to a lack of business confidence and supply and labor shortages.
Consumer electronics revenue grew well in Q1 year on year, we expect this year's spending cycle for consumer electronics will be moderately higher than in 2021 and that played out in Q1 as well.
I'll say more about this year's outlook for consumer electronics in the guidance section of todays call.
In other markets semi continued to perform above overall growth rate.
Turning now to other news.
It's been great to engage closely with called noise in customers again, as the world opens up and becomes more accessible.
In recent weeks I joined Cognos and calls Ru, Hawken, and coke offices to celebrate product launches and innovations.
We also recognized Cognos, reaching Korea milestones as we do at Cognex with Perseverance Awards.
In this difficult labor environment I am pleased to report that Cognex is work hard play hard move fast culture continues to flourish.
Regarding our China team, many called noise of working online and making virtual sales calls the circumstances in China, a difficult now and we're doing all we can to support them.
In the realm of new product development, there's tremendous excitement within cognex about our new product lineup for 2022 and beyond.
Our excitement with shared by customers last month at mode X a major supply chain trade show held in Atlanta, The Cognex Booth was busy and well attended.
Customers at mode X or a breakthrough inside 2800 series vision system that we launched in April .
The insight 2800 integrates cognex is new edge learning technology, making powerful deep learning vision tools much simpler to use and train.
Manufacturers can quickly automate inspection tasks to vary in complexity with this fee was five images.
A few years ago. This work would have required a Phd very large image library and a massive fan called G. P. You to perform.
Bringing a deep learning technology into an easy to use small smart camera, we're training them processing takes place directly on the device was not an easy feat.
It's representative of an overall dynamic in our high tech business like Cognex.
Products continually get smarter smaller faster less expensive and easier to use.
This has led to increased demand over time and this allowed us to introduce new customers to the potential of machine vision.
And the products, we launch are almost always gross margin accretive to those they replace.
Customer feedback on the inside 2800 is very good.
Experienced automation engineers are enthused about how quickly they consult existing and new applications that would have previously required hours or weeks.
New uses of machine vision find the insight 2800 extremely simple to use and deploy without needing to have any machine vision experience.
In other product news, we recently introduced a day demand to a T series of fixed Mount barcode readers. The day demand to a tee features a high resolution sensor, which when combined with our latest D code algorithms and dynamic image formation system dramatically improves code reading performance in.
<unk> coverage.
This technology, along with the latest connectivity options for today's industry pool point out manufacturing needs allows users to read complex bar codes across the broadest set of applications.
It performed exceptionally well on high speed production lines throughout factory automation and logistics supply chain from reading one D and two D label based codes on boxes to small direct part Marc codes edged on critical medical devices.
And now I'll turn it over to Paul Paul.
Thank you, Rob and Hello, everyone.
I apologize in advance if we're the only thing standing between you and a margarita on Cinco de Mayo.
We were pleased to deliver revenue at the high end of our expected range for Q1, and a difficult supply and macro environment.
Revenue was $282 million, which represents an increase of 18% over a strong quarter, a year ago, and a new first quarter record.
It's worth noting that our two year growth rate was 69%.
Also we were pleased to begin catching up on orders and backlog because of our hard work to source supply.
Looking at the change in revenue for Q1 from a geographic perspective.
Revenue from Asia increased by 25% year on year.
Growth in consumer electronics, EV manufacturing logistics semi in the broader market was offset by a two percentage point reduction from currency exchange rates.
Within Asia, Greater China grew by 27%.
Quite a few million dollars of revenue being delayed to Q2 due to lockdowns at quarter end that impacted our flow of goods and customer delivery acceptance.
Revenue from the Americas increased by 17% year on year and delivered a substantial contribution in absolute dollars due to growth in logistics among other industries.
In Europe revenue also increased by 17%, excluding a seven percentage point reduction from currency exchange rates.
Growth came from logistics automotive medical related and other industries in Europe's broad factory automation market.
Gross margin in Q1 was 72% as expected.
This level is five percentage points below the gross margin reported in last year's first quarter due almost entirely to the significant premiums we are paying to procure electronic components through brokers.
I want to remind you that our gross margin target remains in the mid 70% range.
We expect to be back at that level once the global supply challenges have passed.
It appears that would be in 2023 at this point.
Operating expenses were down slightly on a sequential basis and in line with our guidance.
Comparing year on year operating expenses in Q1 increased by 10% due to incremental investments we made in sales and engineering headcount during 2021.
Operating margin was 31% in Q1 of 2022 compared with 33% in Q1 of 2021 and 23% in the prior quarter.
While above our long term target the decline year on year is due primarily to the supply situation, which is driving elevated product costs near term.
Regarding the tax provision the variance in the effective tax rates presented this quarter bear more discussion than it is typically warranted.
First.
Discrete tax items combined for a net expense of $6 $3 million in Q1 of 2022 compared to a net benefit of $5 $2 million in Q1 of 2021 and a net expense of $25000 in Q4 2021.
Second the effective tax rate, excluding discrete tax items was 16%, 18% and 8% respectively.
The notable increase on a sequential basis was due to a true up in Q4 that lowered the 2021 annual tax rate to 16% from our previously estimated 18%.
Third the effective tax rate of 16% in Q1 of 2022, excluding discrete tax items is below our guidance because we now expect more of our profits. This year will be earned in tax and lower tax jurisdictions.
Reported earnings were <unk> 38 per share in Q1, compared with 39 in Q1 of 2021 and 30 in Q4 of 2021.
Discrete tax items reduced EPS by <unk> <unk> in the quarter, while they added <unk> <unk> per share in Q1 of 2021.
On a non-GAAP basis earnings were 42 cents per share in Q1, compared with 36 cents in Q1 of 2021 and 30 in Q4 of 2021, excluding discrete tax items.
I want to point out that we are no longer excluding excess and obsolete inventory charges from non-GAAP earnings per share.
We had adjusted for it starting in Q2 of 2020 because of the unusually large charge, we recorded that quarter as part of our restructuring activities. We.
We no longer believe it is necessary now that 2020 is out of our prior year comparison.
Turning to the balance sheet Cognex continues to have a strong cash position with $794 million in cash and investments and no debt.
Cash outflows in Q1 included our stock buyback activity.
We spent $130 million to repurchase cognex stock, which is the highest amount we have deployed to buy back stock in a single quarter.
Our board authorized a new $500 million repurchase program in Q1, after we completed our previous $200 million program.
Our accounts receivable balance increased by 19% from the end of 2021 and remains very healthy.
Large orders shipped late in Q1 contributed to the increase.
Regarding our inventory balanced we are continuing to bring in components and other supply to support customers at a higher level of business.
And we are doing so at elevated cost to win market share and underwrite our resilience in a time of global supply chain constraints.
Now I'll turn the call back to Rob.
Thank you Paul let's move next to guidance.
Cosmetics reported a solid start to 2022 and we expect to report good results for Q2.
We believe revenues for the second quarter will be between 265 million and $285 million.
Asking for us to be ready for product shipments for a number of lodged appointments and onsite support and Q2.
Guidance reflects that timing as well as the assumption that the COVID-19 situation in China does not get worse.
We expect gross margin in Q2 will be in the low 70 per cent range. We believe the premium prices were paying to <unk> components will persist for the remainder of this year.
We expect operating expenses will be roughly flat on a sequential basis.
Lastly, we expect the effective tax rate will be 16%, excluding discrete tax items.
Now we will open the call for questions. Operator. Please go ahead.
At this time will be conducting a question and answer session. If you would like to ask a question. Please pass star one on your telephone keypad a confirmation.
Get your line isn't the question queue, you might press start to if you would like to hear him of your question from the queue corporate.
Using speaker equipment and may be necessary for you to pick up your handset before pressing this darkies.
Limit yourself to one question and one follow up one moment, while I pull for questions. Our first question comes from the line of Jacob Levenson with Melius Research you May proceed with your question.
Good evening everyone.
Good evening Jacob.
Alright, I think they're.
Seems to be quite a lot of angst out there for lack of a better word around a potential recession.
The question is how do you think your customers respond and that type of scenario I mean do they.
Cancel July projects or or do you think that they're just gonna keep spending an automated phone because of the flavor challenges or or inflation or whatever the case my <unk>.
Yes, it's an interesting question Jacob I think.
But in this industry for a number of recessions and.
Sometimes in a shorter cycle spend can take quite a strong downton initially and then we've seen it you know come back pretty strongly I I would say a major customers. So in areas like logistics consumer electronics E V a longer term thinkers and we believe they.
Would continue executing on plans that transcend you know short term changes in the business environment. So it could be you know a mixed picture and that way. We believe you know cognex is well positioned to where the difficult conditions, given a strong balance sheet dot large backlog physician willingness by custom.
M as to improve productivity through automation and machine vision in environments that those the sort of traditional things that we've seen in the past that may be more pronounced now then perhaps in coming into previous recessions based on a size and strength of our customer relationships.
So you know those some of the things I would point out.
Okay. That's helpful.
And.
Somewhat related to that I saw a comment that you folks <unk> 10 to one on swelling factor auto medicine. The best one I I assume that that's four letter primarily until the product <unk>. Just curious if there are particular nuances around certain that markets or or if that was more just a general comment.
Well you know I'd say, there's a lot going on out there [laughter] Jacob I'm, you know I'm reminded of you know Tom Peters is quotation if you're not confused you're not paying attention. It's like there's so there's so many variables I think currently for anyone running a business. So so suddenly.
The supply chain challenges are are notable and as I said I think often what we're seeing now is our deployments and sales are being held up by other suppliers in the automation infrastructure, whether it's integrators sales of P. L sees you know we're seeing print some major supplier.
<unk> lead times on P. L fees and other you know uhm motion control equipment I'm going out six months at this point and certainly that is deployed and that's flowing slowing down some deployment, but you know what else. I think is is is you know obviously, the China Covid situation, we discussed Oh.
So I think spending by companies in Europe , and America, becoming more tentative, particularly in automotive and packaging and I think obviously concerns macroeconomic concerns the geopolitical situation with with the war in Ukraine, etc. Uhm. So you know and and I think we've also seen we've read this.
And the press you have that some some new distribution centers and logistics of being delayed more focus is being placed now on productivity and process improvements to reduce cost and improve our worker safety. So these are all factors that you know are are playing into our thinking as we look out about.
Into the year, some are playing very positively uhm, particularly around you know.
Companies interests to reduce costs and improve worker safety others delaying you know greenfield sites would would have a longer term implemented an implication. The final thing I would say is I think a lot of what we're seeing more is delaying of projects you know, it's like giving us some some concern rather than you know we're not seeing like.
<unk> think of really any cancellation of projects that we're seeing now would we expect to in the near term.
Great. Thank you good luck.
Our next question comes from the line.
Call you May proceed with your question.
Hi. Thank you question I have is just with respect to some of the the project and the logistics area are the students tend.
Tend to be larger projects and I.
I guess, where I'm going with this is normally if <unk>. If some of these deployments are not done by Q3.
My impression is the customers like to have that replaced by <unk>.
Strongest calendar quarter Q4 is there a risk that these slipped perhaps into 2023.
But I'd say, Jim we you know, we're still kind of continuing to learn about the seasonality and logistics you know it. It appears that Q1 and Q3 will be the stronger revenue generating quotas. This year for our logistics and then we would probably you know expect as we have in previous here is lower lower <unk>.
You certainly in queue for for the reasons you suggested I don't necessarily see the dynamic we're playing you're referring to really having a marked effect on a business. This your overall, but those the overall quarterly phasing with a stronger Q1 and Q3 Uhm is is probably what where where we're expecting.
At this point not so much related to any change in a business environment just more to the timing of deployment yeah. Jim. This is Paul I'm sure. This before but you know the last three years have had quite different seasonality and logistics 2020.
Logistics group every corner from Q1 to queue for so Q4 was actually the highest quarter and logistics and 2020th so kind of bucking that theory of holiday readiness. It that you said last year I grew from Q1 to Q3 steadily and then Q4 was down and then as Bob mentioned this year as a different patterns. So yeah. We we are trying to give color on the overall flavor.
The year, but I don't think we have true insight into.
A pattern or at least we haven't seen it over the past three years.
Understood. Thank you and you saw on with respect to the color you gave on appreciate it on the on the consumer electronics and logistics Margaret what are you thinking in terms of automotive did you see the same trans more investment over the balance of the year any Z a little bit more uncertainty in the traditional market.
Well suddenly we're you know we're seeing automotive revenues growing foster in Asia, you know and and that's where you know global parts suppliers and Evie battery manufacturers are concentrated in you know, we see a lot of investment and very strong growth in that part of the business and then we're seeing.
<unk> you know slower growth was declining growth rates in Europe and America by there are more traditionally you know a combustion engine in tier two traditional automotive parts suppliers. So I would expect those dynamics to continue you know there are you know obviously E V battery projects inquiry.
Recently in Europe , and America, but I think those are probably longer time place for you know cognex is gross plans.
Thank you.
Our next question comes from the line of.
Goldman Sachs. You May proceed with your question.
Hi, good afternoon <unk>.
Hi, Joe.
Hey, I.
Just kind of a broader question around the longer term growth framework for instead of logistics business. Obviously, it's been an incredibly great story for you guys and and talking about at 50 per cent <unk> credit over time, but there's news out yeah last week, but Amazon.
You know bill too many warehouses has an excess of fulfillment capacity.
I'm just curious I mean, we have to talk about that specific customer but that just.
Just more broadly how you're thinking about the growth rate over the longterm can whether there is potential like excess capacity right now and that's at Gridspace for good for the next 12 to 24 months.
Yes, I think you know we we expect you know just sticks to be accretive to our overall growth this year, but unlikely to grow anywhere close to 50% stretched skull. After you know a remarkable year last year and and a remarkable three years really I think that we've we've seen uhm.
So uhm the you know the there's a lot of demand for machine vision and and logistics. However, you know I think you correctly referenced plans for new distribution centers are being delayed more focus is being placed on productivity process improvement to reduce costs and prove work cause safety. So yeah. There are.
A lot of lot of repetitive motion that goes on in in logistics fulfillment and you know I think suddenly with more concerns about labor and safety and potential unionization in those plans I think there's more focus going on in pivoting towards those applications is actually plays very well, so cognex, where.
We sell fix Mount and more sophisticated vision, rather than 70 handhelds right into that into that marketplace Uhm and uhm. So we're you know and as as I've mentioned that the the deployment is slowing due to supply chain and also you know labor meeting engineering and and integration.
<unk> shortages, so so that that's kind of the dynamics, but this year I.
I think we we we we do expect to kind of revisit some of our longterm growth targets surround logistics, we're not quite ready to to share those with you, but I think you can expect later this year will come with a with a what is a very exciting vision for the future of Cognex logistics, particularly as it relates to moving beyond <unk>.
Codes and more into vision, where we see some very exciting growth opportunities I think your you know your right to us for that and give us a little time to come back to you in the community later in the year about.
How we should think about what's being a 50 per cent stretch go and what that might look like going forward still I would expect very exciting.
Got it that that's super helpful and I appreciate that all that color I, maybe I won't follow up question. It again, just kind of keeping this a little bit of a little bit longer term and I'm I'm curious, whether there's been like any change the competitive dynamic you know yourselves in in in your your competitor in Asia and enjoys like some pretty good bear.
<unk> I thought I thought it was interesting that.
Zebra by <unk> imaging announced this this past month I'm just curious like weather does that is a dynamic changing it all competitively any any comments that you can make around that would be would be helpful as well.
Yeah, Yeah sure I'll make a few general comments, so I you know I I.
<unk> <unk> <unk> <unk> <unk> main competitor in this marketplace and we I think have gained quite a load of share over the last few years I think technology, our balance sheet, our investments R&D spend our sales improvements pay dividends through this period. So.
Saved those dynamics I think O'brien born out if you look over the last say 18 month period of results in terms of you know new competitors were always very focused on what's going on in terms of new entrants in new competitors. You know certainly you know zebra is accompany we see investing a lot.
In the space and of course, we did.
I'm very I'm interested in not surprised by zebras acquisition of May trucks.
Wouldn't say it changes our overall strategy or thoughts uhm. Some thoughts I have about certainly that would be you know both companies sell primarily through partners not direct sales as we can switch the the majority uhm have with the majority of our business and you know make trucks as you know a very strong <unk>.
Co company they've been in the industry is a little bit longer than we have they're very strong in rule space Division and have strong you know semi conductor of relationships with large Oems. So you know those are those are all you know it's interesting things for us to observe you know as soon as we think about that that transaction.
We're also you know there is more you know more activity I would say is in local Chinese competitors and recently watched those very carefully there have been some ipos locally by you know by some Simpson Chinese machine vision companies and those those so obviously, a large state owned enterprise and hike.
<unk> that also is growing in China, so quite quite dynamic I would say probably the companies I've mentioned, a gaming gaming chair and growing and and they're probably doing so at the expense of many of the other players in the industry, who have been there for a long time, and perhaps haven't kept up with R&D and innovation and investment in sales channel.
So those are some of the broad dynamics I would see Joe.
I appreciate the time enjoy the Margrietus letter.
[noise] Cinco de Maya.
Our next question comes from the line of Andrea Andrew Buscaglia with Bang Berg You May proceed with your question.
Hey, guys.
Unlike comment on consumer electronics growing I was not expecting to hear that especially this early in the air Bud what's what exactly it driving that what's giving you the visibility to.
To make that comment.
Well.
We are very close working relationships with them with a number of very large you know consumer electronics.
Providers, but also their supply chains in their customers. So we you know we have pretty good insights by this time of year about their plans to roll out you know new technology, and new models and invest in new lines and and and that's been the case for us for many years now. So it's really that's that's kind of a reed and that's really.
<unk>, we're sharing I I would say you know there's certainly.
They're always dynamics of new features and new technology coming in to the electronic space and you know there are used glad that really pops for us and you've seen that you know years like 2017.
And and and their their ears that are more muted or have declined and I think we're calling this year was one of moderate gross.
Okay, and you know the comment on automotive you were talking about faster growth in Asia.
But maybe some decline in growth rates in North America from traditional Oh. He's do you do you guys do work or intend to do work with some of the newer.
Non traditional E V makers that are based out of the U S.
Well as as we often say you know where the bleeding uhm provider of advanced machine vision technology for industrial nation in the World and you know we work with the most sophisticated customers in general and those you know those in general very sophisticated use this and they have excellent engineering teams. So they are exactly the kind of <unk>.
Companies that we work with.
Okay.
Well actually maybe it's just a question if those guys are still the best thing how come you know you wouldn't see that automotive growth. This year. So it's kind of like new or D. V makers are still.
You know moving forward with her plan.
I think we have some good food automotive growth in in the first quarter, and you know where and so I don't think we've given more guidance for the year overall, so, but but I think the comment I would make is B C. You know strong growth in E V and Evie battery and much more muted growth in traditional automotive uhm. So that you know that.
Additionally, Dodge.
Large market for us so it's more of an MX thing and you can count on you know the the innovators, particularly the E. B battery in the electing the electric vehicle company suddenly who experiencing great growth, providing us with strong growth Olson yeah on the scale of D. V. In Asia remains you know is is the highest concentration of art you know of.
Mix. So yeah. It could be you know growing it girl, he's growing everywhere, but a different level of different base levels in a different timing durations of.
Rollout of Capex, and the different geography, and it and it might it might help to understand too that you know E. B as it says it's the supply chain ecosystem that includes a lot of you know Oh, Ms and <unk>.
Sub contractors and and machine builders in battery manufacturers right. So much more than it is selling directly to and and use a brand that you might recognize even though those brands are often contracting with with the with the machine builders, Yes, you have to start by Rob So what <unk>.
We recognize the revenue, where we execute the project not necessarily where yeah.
Oh, Yeah, I might be located headquarters.
Yeah, and and you know suddenly the large E. B battery manufacturing companies are almost all Asian.
Got it thank you.
Our next question comes from the line of.
Robbed Nathan.
With your question.
Yes, good evening just to follow up on that last question around automotive an E V. <unk> could you framed the growth rate range that were falling into right. Now I mean is it is it a triple digits, you said strong, but just you know perhaps a reference 0.4.
The rate of growth of what you're saying.
What was your question about E V or the automotive in General E V portion of your automotive business.
Right so.
I'm not sure we would necessarily give you specifics, but it's certainly you know growing a lot faster than than our overall growth rate and then maybe I'll leave it at that.
Okay, Okay and also it it clearly your seemingly a little more comfortable around your supply position.
Relative to how the ecosystem.
You're selling into is fearing but I'm just curious you know how that how your handicapping that and and how it's played out for you. If you saw.
You know any incretion decommit that you were able to just manage around or how that I guess, how your accounting for that risk and your outlook as we go forward here still because it is it is still challenging for many.
Yes, I you know I think we've been about a year really into this kind of problem with <unk> and for us it send it to be kind of suppliers of chips, who have D. Committed you know why we have you know we have a.
Ah Ah Ah Ah by schedule agreed with him that goes out years in some cases and you know in a period of extreme gross that we sore going back a year away. We were reporting 40 per cent type growth rate. So obviously, we were consuming large amounts of chips and burning through on.
Strategic reserves have chips. So we we had we had that dynamic and then we had you know some some suppliers of.
Specialty custom chips for really Uhm D committing and they would be committing out you know six months. So I think we when we last spoke to you we sort of thought I think that we were kind of you know, making really great headway and you know we expect to get see that kind of broke a Y bri headwind really diminished by the end of the year.
<unk> right, but more recently you know we've seen some decommit you know continue and that's problematic for US you know one of our suppliers, particularly as you know came with.
Schedule that you know they've pushed back a good six months and you know I'm hearing a lot in the industry about the pain that that's core. So so suddenly those are challenges, where where then working very hard to design out those chips or replace them with other opportunities and and then we have to go out into the broken market, sometimes and and sauce.
No sauce chips from brokers and that can be in the current environment very expensive, we're saying that we think that kind of process of going out and sort of thing and the broken market is gonna continue for US obviously goes into inventory and then it comes into revenue said, there's a bit of delight timing, where we can see what sitting you know more costly inventory will go into <unk>.
Alex in subsequent quarters. So we kind of we have a view of that I'll turn it over to pull to sort of put to size that for Ya Yeah, Yeah, Hi, Rob for you know for the last three quarters. We've we've given some sizing of I'll start with the revenue side and that'll go to the gross margin. We've we've done some sizing of of how much revenue might've been shifted.
Pushed out a quarter because yeah that would be recognized in a normal supply environment and and was delayed. So you know that those are positive number you know we pushed for some revenue and it kind of grew through the back half of last year because of art. The the investment we've made to secure supply and M M and positioning and we'd Rob mentioned and to prepare.
Remarks were basically back to normal delivery times for the vast majority of our products and we delivered about $20 million of orders in the quarter that had been in the backlog for some period of time, which which primarily benefited Europe and the Americas.
And this was partially offset by a few million dollars of of orders that we otherwise wouldn't have racket, we would've recognized in China were it not for you know.
Uhm Covid related delays in transit and customer acceptance at quarter end.
And then on the gross margin side, Yeah, I think what's what's maybe a little more unique for cognacs relative to others, who are exciting several different factors core component cost inflation fried and broker biases is really the the broker buys are the vast majority of of of the Delta between last year's gross margin of 77 per cent and then.
And certainly the us versus a 72 per cent now versus a 75 per cent or mid seventies target. It was about 400, a little over 400 basis points of a margin headwind driven by the broker buys which was very comparable to what we saw in Q4 and comparable to what we expect to see in Q2.
Yeah, I have some hope it might get better in the back half, but we're not counting on it at this point.
Very good that's helpful. Thank you.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Moment lollipop for questions.
My next question comes from the line of.
With Cowan you May proceed with your question.
Guys how are Ya.
Hi, Joe.
Hey, I just wanted to confirm one thing I I think you said, but.
Are both consumer electronics and logistics expect it to be accretive for the full year to total company growth.
Yes, they are.
Okay I thought that's what you said and you kind of it I think indirectly answered this too but based on three Q logistics expect it to be like a more active quarter and I think you mentioned <unk> expect it to be your highest revenue quarter for C. E is it fair like based on everything we know right now that three Q as Spike Lee sequentially higher <unk>.
Avenue quarter for the phone company that <unk>.
Yeah, Hey, Joe.
Again, we we we we just guide for the for the for the current quarter of course, but you know putting those trends together and thinking about the seasonality of consumer electronics, which which does tend to be a seasonal build and this year. We are expecting Q1, and Q3 to be our largest quarters for logistics I think that's a safe bet.
Okay.
I think what was the question earlier talking about the angst, that's and that's in the market right. Now you know sometimes angst is good for a company with a lot of cash and no debt to be active and opportunistic. So just curious what you think about the M&A markets.
Are there parts of the market better.
Kind of under pressure, where you can kind of step in or does it start looking more attractive now just what's your overall view there.
I think we're you know we're always out you know, we're very selective and we like companies with great technology for sure.
My sense is it's it's a little early right you know I think maybe the you know the the the the.
<unk> kind of what we're looking at maybe hasn't filtered into the M&A environment and particularly in terms of.
No valuation so but it certainly that's something that we're <unk>, we're thinking a lot about.
Alright, and if I could sneak one last one just.
The logistics push out.
Is there a visibility around like you know, it's just pushed down to three Q and you kind of have you had that discussion you had the visibility or is is pushing to three Q and then maybe it's cancelled or maybe it's pushed into next year like how solid is that the timing around those pushups.
Yeah, I mean, I think again, there's a reason we give quarterly guidance and not beyond that I didn't get it.
Rob noted.
There there is tremendous volatility right now so even you know thinking you know it's a good bet. That's good bad based on information. We have we have today could it could things delay further and and you know it could get worse, you know of course of course, they could but.
You know there are several moving pieces of <unk> associated with these sort of long-term multiyear plans that the the the the pushes do tend to be kind of historically of this duration not you know.
Mmm not dramatic changes uhm, given all the other parts that are sort of lined up so I'd say it could get worse, but you know we think the the downside of that is bound something to some extent given given the commitments our partners are making.
And I'll also comment that I think you know cause next tends to deal with the most sophisticated uhm businesses. You know I think we certainly saw that initially in the downturn that some of these logistics players who are technically sophisticated I'm really kind of leaned in and invested heavily so you know I I would I think while there what they see going on and.
Their business.
In terms of sales to customers might be changing their automation plans are pretty well established and it's more of the order and and the focus of how they implement them. So we you know we we we we have I'd say quite a high degree of confidence that that businesses coming our way and would not be canceled.
Thanks.
Our next question comes from the line.
While you May proceed with your question.
Hi, Thanks for taking my question I decided pricing <unk> I had a pricing Christians are.
Many of the companies have been raising prices to offset some of the east coast headwinds.
Can you talk about what what <unk> are these numbers length of these price increases.
Yeah, I can I can take it to.
Obviously, the you know the current inflation environment is something we haven't seen in some time.
For you know our philosophy on on on pricing really is yeah. Our strategy is focused more on offsetting what we believe is permanent inflation at the gross margin line. So you know the biggest driver of our lower gross margin right now is broker buys and although we're getting <unk>. So I'm all set.
For some pricing actions, we've taken at an operating income level, we're really focused on trying to you know.
Come through this this this period of supply chain volatility with <unk>.
<unk> the the price increases we've taken and realize essentially matching the the <unk>. The inflation that we think will be with us for some time and based on what we saw in Q1. We believe we are keeping pace with that underlying cost increases that are permanent but of course, we'll continue to monitor and react accordingly.
We try not to be more specific than that knowing you know our largest partner that's very little in for competitive reasons, you know don't don't wish to disclose further.
Okay. Thank you and they're just as a follow up I see that logistics is I have seen.
Site that has a good driver and all of your segments.
One of the regions and I was just wondering if you could kind of give us some more nuance on on how the regional growth has been you know are you seeing more weakness in the U S.
The shots in the U S and less so in international.
<unk> I'll make a general comment and then pull may be more specific but I would say you know that the majority of Ah Ah logistics businesses still U S focused and but we've been investing for a number of years and building up our capabilities.
And so we generally see much higher growth rates in those markets and I think that some you know some some of the exciting part of logistics business and why we were confident about continuing to grow very strongly as a business.
Regardless necessarily of what happens in the U S.
Right you got you got you got the data and that's been that's been playing out with the sort of relatively faster growth you know for some <unk> abroad for for some time now and I think we've also been quite happy with just the diversification of our logistics business you know a number of customers in depth of relationships with those customers, which has been expanding nicely too we're seeing some really.
You know really great e-commerce, techno technical and leaders in Asian markets, particularly adopting cognex vision and you know in a big and exciting way and and similarly in Europe. So we yeah. We have a lot of enthusiasm about that and I know in our discussions here with you it tends to be a little U S focus so I would <unk>.
Recommend you know, we we talk about that more in future.
Okay, great. Thank you. Thanks.
If you would like to ask a question. Please press star one on your telephone keypad.
We have reached the end of the call I would now like to turn this call back over to Mister Rob wallet for closing comments.
Thank you so much and thank you everyone for joining US Tonight, we look forward to speaking with you again on next quarters Cole.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation enjoy the rest of your day.
[music].
Mm.
[music].