Cognex Corp M&A announcement

Thank you, operator. Good morning, everyone, and thank you for joining us. Earlier today, we announced that we entered into a definitive agreement to acquire RealSense, the current market leader in depth sensing cameras and vision technology for robotic perception and Physical AI. With me on today's call are Matt Moeschler, our CEO, and Dennis Fehr, our CFO. Matt will begin by discussing the strategic rationale for the acquisition, the RealSense technology platform, and the growth opportunity we see in robotic perception. Dennis will then review RealSense's financial profile and the key terms of the transaction. A presentation accompanying today's call is available on the investor relations section of our website. Before we begin, I would like to remind you that certain statements made during this call and in the accompanying presentation are forward-looking statements.

Our actual results may differ from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent Form 10-K. With that, I'll turn the call over to Grier.

Thanks, Grier. Good morning, everyone, and thank you for joining us. Today marks an exciting step forward for Cognex as we announce a definitive agreement to acquire RealSense, the market leader in depth sensing and vision technology for robotic perception. RealSense brings a mature 3D perception platform already at commercial scale and is underpinned by leading proprietary technology and a vibrant developer community. By combining these capabilities with our machine vision expertise and global customer relationships, this acquisition positions Cognex to offer a full stack visual intelligence platform. Through our leading positions in industrial barcode reading, 2D inspection, 3D measurement, and now 3D depth perception for robotic navigation, we expect to support customers in an even broader set of high-value industrial vision applications. This acquisition also helps us further diversify the Cognex growth engine by expanding into an attractive new market that is closely aligned with our core capabilities.

We are excited about the opportunity to bring these two companies together and believe the combination will make both businesses stronger. Turning to page 3 of the presentation, I'll begin with the six investment highlights that underpin our conviction in this transaction. First, RealSense brings technology leadership in 3D robotic perception. The company has built a differentiated and defensible position through a full stack proprietary technology platform spanning imaging technology, custom silicon, advanced algorithms, embedded software, and developer tools. Second, RealSense is the current market leader with the number one position in the high-growth robotic perception market. Third, it brings proven scale with more than 1 million units shipped and a large active developer ecosystem. This is an established technology platform with meaningful commercial adoption and what we see as a strong foundation for continued growth. Fourth, our technologies and expertise are highly complementary.

We enable machines to identify, inspect, measure, and guide, while RealSense enables them to perceive and navigate their surroundings. Fifth, the acquisition expands our served market through an immediate entry into robotic perception. This is an attractive adjacency to our existing industrial machine vision markets and adds exposure to applications such as vision-guided fixed-arm robots, autonomous mobile robots, quadrupeds, and humanoids. Finally, we expect RealSense to accelerate our growth profile. The business is growing rapidly today, and over the long term, we expect it to achieve revenue growth of more than 25%. Together, these attributes strengthen our technology portfolio, expand our market opportunity, and add an important new growth engine. On the next several slides, I'll provide more detail on these highlights, beginning with how RealSense fits within our broader strategy.

Turning to page 4, as we discussed on our most recent earnings call, we are focused on driving growth through diversification across a broader set of customers, channels, and markets, and adjacencies. Over time, we expect this strategy to reduce our exposure to the investment cycles of any one customer or industry and create a more balanced set of growth drivers. While these initiatives will take time, we believe they're important to building a more resilient, scalable business with more consistent performance through cycles. RealSense advances this strategy by extending our core machine vision capabilities into robotic perception. We see this high-growth adjacency as creating opportunities to leverage our technology, industry expertise, and global reach. Moving to page 5, RealSense expands our served market into robotic perception, including fixed-arm robots, autonomous mobile robots, quadrupeds, and humanoids. This is a natural extension of what we already do.

Today, Cognex vision systems enable manufacturers to identify and inspect products, take precise measurements, and guide fixed-arm robots in highly controlled industrial applications. In robotics, our technology helps a robot locate an object, determine its position, and perform a specific task with precision. RealSense extends these capabilities into more dynamic and autonomous applications. Its depth perception technology helps robots understand the three-dimensional world, allowing them to recognize their surroundings, judge distance, avoid obstacles, and navigate through changing environments. Together, our capabilities span the progression from identification, inspection, and precision guidance to 3D perception and autonomous navigation. This creates a broader visual intelligence platform and should position us well to serve customers as automation evolves from fixed, highly structured applications towards increasingly mobile and intelligent robotic systems. The robotic perception market is expected to grow at more than 25% annually and reach approximately $1.6 billion by 2030.

That outlook is based largely on growth in vision-guided fixed-arm robots and autonomous mobile robots, where adoption is more established and visible. We view humanoids and quadrupeds as longer-term opportunities that are not necessary to support the core growth thesis but could create additional upside as adoption develops. Page 6 highlights RealSense's technology leadership, built on a proprietary stack spanning imaging, custom ASICs, 3D vision algorithms, embedded software, and a deeply integrated software development kit, or SDK. At the core of the platform are differentiated depth sensing technologies and custom ASICs that enable accurate, real-time 3D perception with low latency and efficient on-device processing. These capabilities come together in the recently launched D585, an AI-native vision system that combines depth sensing, onboard AI, and edge computing to calculate depth directly on the device up to 30 times per second. Equally important is the software ecosystem surrounding the hardware.

RealSense's SDK supports four major platforms and has generated more than 1.2 million downloads, with approximately 20,000 active developers. These developers help drive design and spec and wins across OEM robotic platforms, creating opportunities for long-term unit growth. Together, the technology platform and developer ecosystem underpin RealSense's leadership in robotic perception and provide a strong foundation for future innovation and growth. Page 7 provides a closer look at RealSense today. Founded within Intel in 2014 and spun out in 2025, RealSense has grown into the number one player in robotic perception, with more than 1 million units shipped. The company expects to generate revenue of $80 million-$90 million in 2026. RealSense also brings approximately 160 employees and a portfolio of more than 70 patents and patent applications.

We are excited to welcome the RealSense team to Cognex and combine what they have built with our machine vision expertise and global reach. With that, I'll turn the call over to Dennis to discuss the financial profile and transaction terms.

Dennis? Thanks, Matt, and good morning, everyone.

Turning to page 8. RealSense meets the core criteria of our disciplined M&A strategy: strong strategic fit, defensible technology, attractive growth, and a credible path to our long-term financial framework. RealSense is expected to grow more than 50% in 2026. Over the long term, we expect growth of more than 25%, meaningfully enhancing our through-cycle growth target of 10%-11%. As the business continues to scale, we see a path toward our adjusted EBITDA margin framework of 25%-31% and free cash flow conversion of more than 100%, supported by revenue growth, operating leverage, greater scale, and our global commercial infrastructure. Our near-term priorities are retaining key talent, supporting innovation, maintaining commercial momentum, and executing a thoughtful integration.

Overall, we expect the transaction to meaningfully enhance our top-line growth profile and, over time, deliver profitability and cash generation consistent with our long-term financial framework. Turning to page 9. We will fund the $500 million purchase price entirely with cash on hand, which included $755 million in cash and investments at the end of Q2. We believe we have the balance sheet strength to complete the acquisition while maintaining the flexibility to invest in organic growth and other disciplined capital allocation opportunities, including share buybacks. In addition, we expect to provide RealSense employees with a three-year cash retention program with a target value of approximately $57 million, subject to performance modifiers. We also expect to grant restricted stock units valued at approximately $50 million, vesting over three years.