Greetings and welcome to Cognex Corporation acquisition of RealSense conference call. At this time, all participants are on a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Greer Aviv, Head of Investor Relations. Thank you. Please go ahead.
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 Moschner, 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 Matt.
Thanks, Greer. 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 three 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 four, 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 five, 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 six 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 seven 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 eight. 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 nine. 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.
Both programs are incremental to the purchase price and are designed to retain key employees and align the team with the long-term objectives of the combined business. Following the close, we expect the related expense to be excluded from adjusted EBITDA and other non-GAAP metrics. The transaction is expected to close in the fourth quarter of 2026, subject to customary closing conditions. Considering the additional alignment of financial period and closing schedules, we do not expect this acquisition to meaningfully impact our 2026 results. We will provide more information on the expected financial impacts of the transaction after closing. In summary, we expect the transaction to diversify and meaningfully enhance Cognex's growth profile and, as RealSense continues to scale, deliver profitability and cash generation consistent with our long-term financial framework. Now Matt and I are ready for your questions. Operator, please go ahead.
Thank you. The floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate that your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We do ask that you please limit yourself to one question and one follow-up. Again, that's star one to register a question at this time. Today's first question is coming from Tommy Moll of Stephens Inc. Please go ahead.
Good morning, and thank you for taking my questions.
Hey, Tommy.
Hey, Tommy.
Matt, I wanted to follow up on a couple of comments you had regarding the TAM here. In particular, you called out the fixed arm robot application as one of the key drivers. Can you give us a sense of the end markets underneath that that are really pushing that growth as you go forward? Thank you.
Yeah, absolutely. Thanks, Tommy. Yeah, I think what we said was we estimate the robotic perception market today as roughly $600 million, with a good growth profile that could reach $1.6 billion by 2030. And we believe that TAM is really rooted in more established and visible robotic applications that are being deployed at scale today. You mentioned a few of them, fixed arm. We see that in many of the market verticals that we serve today, automotive, logistics, advanced semiconductor. You would imagine that these robotic fixed arm application would be deployed across really all five of our core verticals today. The other one that is meaningful is mobile robotics, AMRs. And that one does have more of a skew towards warehouse automation. Really, you see this quite frequently in retail distribution, e-commerce, but increasingly, I would say in discrete manufacturing as well, and fleets of AMRs being deployed at scale.
We are really chalking the next wave of advanced robotics, quadrupeds, humanoid types, as really more upside to that growth profile. I would say the TAM, as we are sizing it today, is really rooted in, again, more established, visible robotic applications that we see being deployed today, really across our core verticals with potential upside as more advanced robotic types come to market and we see those get more traction than I would say they have today.
Thank you, Matt. As a follow-up, I wanted to ask, how is Cognex the best owner for this asset? What is the value that you can unlock that potentially others cannot or had not? Specifically, I am thinking about channel synergies and R&D optimization, but there may be other elements you want to call out.
We see just huge potential. Let us start with what our goal is, right? We said it in the script, which is really to be the leading visual intelligence platform of industry. We have been observing for many years now that there is a shift, or at least a new set of attractive opportunities. Today, and maybe for the last 30 years or 40 years, we have been serving more fixed, very highly structured applications, more discrete manufacturing processes. We are seeing a new type of applications where machine vision can serve increasingly mobile, increasingly intelligent, even autonomous robotic systems that are doing value-added work next to those more structured machine types. Again, if our mission is to be the single visual intelligence platform, I think this is a quite natural extension as we see new high-value automation applications arising and applications that benefit from vision.
Then you dig into what are the assets of the two companies. I think there is quite a bit of complementarity on the technology side. We are serving very different applications, but if you unpack the imaging, the embedded processing, the visual reconstruction analysis, all of that is very similar. You can imagine that there is going to be some technology synergy that arises as we take our IP and share it with the RealSense team and vice versa, I would say. Commercial synergy, I would say, for sure very similar logos that we would be serving. Certainly, that would be deploying robotic systems. The RealSense business today I would describe as more of an OEM business, meaning you do a lot of work to drive adoption and you win design to get specced into robotic platforms.
That is a selling style that we know very well, and that I think we can amplify with our global reach and commercial scale. Then it comes to deployment, deploying and maintaining these systems. There again, I think Cognex has a lot to offer the RealSense team when it comes to our global applications engineering, our global services and support. So, yeah, we see a great strategic fit in terms of where we are trying to take the company, a great technology fit, great commercial fit, and couldn't be more excited to dig into it with the RealSense team in the coming months and years.
Thank you. I will turn it back.
Thank you. Our next question is coming from Joe Giordano of TD Cowen. Please go ahead.
Hey, good morning, guys.
Hey, Joe.
Morning, Joe.
Can you talk a little bit about the competitive landscape here? The numbers, the revenue versus the TAM suggests like 15% share at a number one position. Can you just talk about who the major players are, how that fragmentation has kind of played out?
Yeah. Thanks, Joe. Yeah. As we've said, I think in this style of robotic perception applications, we believe RealSense is the market leader. They've been at this for over a decade, and built just a tremendous technology stack spanning both hardware, software. It's not just about technology, I'd say. Equally impressive is the community of developers that they've cultivated. In our estimation, it's the most interacted with robotic perception platform in the world, which speaks to not just its power, but also its ease of use and sort of the breadth of what it can do. That's really important for us is jumping into an adjacent market with a partner that already has commercial scale and already has a mature technology platform. Your question though is about competition, right? This is a large growing space, and so there are competitors.
There's more traditional competitors that might look and feel more like Cognex, that are offering traditional vision 3D measurement that are spanning also robotic perception applications. Then there are competitors that I would say look and feel much more like RealSense today, more purpose-built devices geared more specifically to this style of robotic perception applications. Still, you can imagine through our investigation of the market and through our engagement with RealSense, we really were able to build strong conviction that they are the market leader today and have a defensible position that can last many, many years.
Dennis, just on the margin profile break even today, looks like you think it could get into like a Cognex normalized target zone. What's required to do that? How hard do you push that? When you think about the spend needed, how do you balance those two things?
Yeah, no, absolutely. First and foremost, I think we really think about profitable growth, and as we outlined in the prepared remarks, we really think that RealSense brings an accretive growth profile to us. In that regard, we're really clearly focused on saying like, "Here we are entering into an adjacent market," which adds additional growth to our general top line, but then also is accretive to our financial framework of the 10%-11% of organic growth. In that regard, clearly we will make the required investments to make sure that we are achieving this growth number first and foremost. Second of all, it's also clearly that to achieve our adjusted EBITDA margin framework, it's all about creating scale and creating leverage.
The business today is basically from a gross margin profile somewhere in the low 50s, where we see a path towards mid, potentially over the longer term towards the high 50s. As Matt outlined, it's really a business focused on an OEM customer set. That means it has a much higher sales efficiency in that regard, much less broader kind of focus, less focused, sorry, less broad-based focus in terms of the go-to market. That means you get very nice OPEX efficiency into this business. With that one, as the business scales, you get also nice fall through to the bottom line. In that regard, at the end, really our focus is to grow this business over the years to come. With that, it will achieve that accretive growth profile, but at the same time, it will also need to achieve our adjusted EBITDA margin framework.
Thanks, guys.
Thank you. The next question is coming from Jake Levinson of Melius Research. Please go ahead.
Hi, good morning, everyone.
Hey, Jake.
Hi, Jake.
Matt, you mentioned that there's some overlap in the technology here, but I'm just trying to get a sense of, in some of these applications, like for robotics or AMRs, the advantages of using your traditional Cognex type of product versus perception guidance. I'm trying to get a sense of how that's
Yeah, happy to. Thank you.
Where the pros and cons are.
Yeah. Think of it as it is similar technology, but optimized to solve different problems. Traditionally, Cognex 3D, that you would find on, and 2D to some extent, that you would find mounted on robots, is really about precise guidance and precise measurement. Okay? We would be taking higher resolution, fewer frames to do that, because you are optimizing for fundamentally a different problem. The RealSense technology is a bit different. It is about higher frame rate, relatively lower resolutions, more streaming type depth sensing, because the output is really informing real-time motion of a robot. It is often less about engaging with an object or a scene, but avoiding, determining real-time positioning, called localization, avoiding obstacles, avoiding collisions. Think about the technology itself is similar, but what it is being optimized to do is different.
That is why we are calling this out as really a separate market and separate application set, even if the core technology is similar. I would say that what is really exciting, in the past, those data were being streamed off the device with the latest generation of RealSense systems that were recently announced. We just mentioned the D585, a very impressive embedded system, gives us the ability to also be running vision analysis software on the device. We think that is kind of a huge leap for that segment of the market. Hopefully that is helpful, Jake, to give you a sense. Similar core technology optimized for different things in the end.
It is. That is super helpful. Maybe just relatedly, how does this technology kind of integrate into your stack, software stack, hardware stack? I am thinking there has got to be a lot of data that can go into OneVision, and you have spent a lot of time developing a more common hardware platform. Is there a longer-term
Yeah
Integration opportunity?
Yeah. I think you're headed in the right direction. Our first priority, Dennis alluded to it, is really to support just the tremendous growth path that the RealSense team is on, right? As we think about the integration, we're going to be very thoughtful about not distracting or diverting from the path that they're on, which is a very exciting one. But yeah, in the medium term, absolutely. There's a ton of opportunities and ideas of how we can start to bring the technology assets of both companies together. The ability to run OneVision-trained AI models potentially on the device, the ability to extract some of the core 3D depth sensing technology back to some of our traditional machine vision applications is huge.
What I would say, though, is their software platform is quite mature, so I would expect that we continue to invest in that, really oriented towards the robotics developer community, which is a different kind of space than what we would traditionally serve. We're going to be smart about it, Jake, but rest assured, there are plenty of ideas of how we can bring the technology assets of both companies together in a way that's really additive and exciting.
Great. Thank you, Matt. I appreciate it. I'll pass it on.
Sure.
Thank you. The next question is coming from Jamie Cook of Truist Securities. Please go ahead.
Hi, good morning, and congrats on the acquisition. I guess just my first question, can you just sort of walk us through how the acquisition came together, whether there were other bidders, and why the timing was right for you guys today? I guess the other question I just have, I think you said in your prepared remarks and in the slides that what gave you confidence in this acquisition is RealSense's defensible position. I am just trying to get more color around that, given still it is just relatively a sort of a new or immature market that their position would be defensible. Thank you.
Sure. Hey, Jamie. Yeah, no, we have been long admirers of the RealSense team and business for many years. You walk the floor of really any serious automation trade show, you will see RealSense devices all over the booths of robotic companies. We have gotten to know the team over the last many years and gotten to know the technology. I will not comment on the specific kind of practicalities of how the deal came together. Again, it was built over years of kind of mutual respect and relationship building, and as these things typically go, I think that led us to a really great place in terms of finding a win-win for both companies. Defensibility, right? Again, this is a business that really has been built over the last 12 years. Founded within Intel in 2014.
I would say it is a technology stack, both hardware and software, built over a long time. A lot of money spent in imaging, proprietary imaging, proprietary embedded processing, algorithms that convert pixel data into accurate depth data very quickly. Then a software development kit that leading robotics companies kind of can take advantage of and interact with the technology very quickly and easily that has great compatibility across all the major software platforms out there. So think about it as mature at scale, meaning proven, being shipped over 1 million units, being adopted in robotic systems that are, again, being deployed at scale with good quality and reliability. That is really what we mean by defensibility.
It is proven novel technology delivered full stack, full stack meaning hardware and software kind of purpose-built together, and then proven to be deployed and used in the market at scale over many years. I think of it as almost hardened in that sense. Very difficult to do. We look at that and say, gosh, a great starting point, and one we can build off of when combined with the assets of Cognex.
Thank you.
Just maybe adding to that.
Oh, sorry. Go ahead.
In terms of the timing of the acquisition, I think if we look back over the last 18 months or so, the company has been able to return to strong growth. We have shown a significant margin expansion. We have made good progress on our transformation of the operating model. We have built a strong balance sheet, which probably Cognex always had, but clearly, I think overall we felt that we have put the Cognex business really in a much better, and into a very strong position. In that regard, we also felt like that now is also good timing in terms of conducting and pursuing this M&A transaction.
Thank you. Congrats.
Thanks, Jamie Cook.
Thanks.
Thank you. Once again, ladies and gentlemen, that's star one if you would like to register a question at this time. Our next question is coming from Piyush Avasthy of Citi. Please go ahead.
Good morning, guys. Congrats on the announcement, and thanks for taking my questions.
Happy to.
Matt, maybe can you talk about the alternate technologies that RealSense competes with? What's the current competitive moat, and how Cognex can maybe add to what these guys are offering?
Yeah. As you'd imagine, it's a vibrant technology space. There are companies trying to "solve it with software." Really throwing very large, sophisticated AI-based models at 2D images. Using stereo 2D, that's a path some are pursuing, and it has its pros and its cons. There's other technologies based on LiDAR, for example, most often seen on autonomous driving vehicles and other sort of large machinery. Pros and cons there. But again, I would come back, Piyush, to this is really the only platform, the RealSense platform, that we see as being deployed at scale, in volume, on leading fixed arm, autonomous mobile, and quadruped humanoid platforms. While there are competing approaches, we believe strongly that this is really the most elegant, if you will. For those that have seen a RealSense device, it's extremely compact, very easy to integrate. Again, hardware, software really integrated very nicely together.
That's how we think about it. We evaluated really the full spectrum of solutions and landed here and have real conviction that this is a winning technology stack that really combines performance, simplicity, is cost-effective in the ways that it needs to be, best total cost of ownership, and we're going to be leaning in there. Yeah, as I mentioned earlier, I think there's many opportunities where we can amplify that advantage. Bringing really our vision tools expertise and the platforms that underpin that, such as OneVision, where now that the latest generation of RealSense depth cameras can run vision tools on device, potentially running Cognex vision tools to do a variety of things on device at the edge in real time. We think that's a very differentiated story for customers that they'll find very compelling.
Great. I feel like some strategic partnerships, maybe just help us understand, do you stay with those partnerships? Not sure if there's any restriction or if that helps you. Any color there, that would be appreciated.
Yeah, Piyush, none that I can think of. No. As part of any M&A, of course, we'd consider conflicts of interest that they could present. We don't see any material issues of that nature in this situation.
Perfect. Thanks and congrats again.
Thanks.
Thank you. Our next question is coming from Robert Jamieson of Needham & Company. Please go ahead.
Hey, good morning. Thanks for taking my questions, and congrats. Just how quickly do you think you can expect to leverage your existing logistics, consumer electronics, customer base to pull through some of RealSense's 3D perception platform? Can you maybe talk a little bit about any customer concentration or overlap, and then maybe any regions that you think you can help the company expand into?
Yeah, sure. I think your question is really about revenue synergies. I would say, again, the business is really on quite a growth path today. I will say it again, our primary goal is to support that, really with the customers in the industries and applications that they serve largely today. That is priority number one. We think, in doing that, we fully satisfy the deal rationale that we have written to underpin the valuation, which is to say we are not really relying on huge amounts of revenue synergy to justify that valuation, yet we see them as existing. You are right to say there is good overlap at some of our largest customers and some of their largest customers in terms of applications that we are serving with machine vision, where we could better penetrate together a variety of robotic perception applications.
Definitely that exists, and we will be taking advantage of that. I think you are also right in saying that probably has more of a bent to warehouse automation and e-commerce specifically, but not exclusively. I think geographic is a big one. Today the RealSense business, just by the nature of advanced robotics, is more concentrated in the Americas and China. Cognex serves many other providers of automation around the world, and so we will be bringing our full commercial kind of force and presence to bear where it makes sense. Then you think about our five market verticals that we serve. We would be finding every opportunity to drive penetration, whether it is logistics or consumer electronics, semiconductor packaging.
We see opportunities over time to be introducing RealSense technology to many of those customers as they adapt some of these more advanced robotic types and rely increasingly on more autonomous robotic manufacturing methods in the future. While, again, I will just reiterate, so much of the deal valuation was not necessarily built on the back of sort of huge revenue synergies. We have many ideas of how we can go after those, and so in that sense, I view it in some ways as upside to the thesis overall.
Great. Thank you, Matt. Just on the Facial Authentication business that they are spinning out, is that just because that is non-core?
You got it. It is no more complicated than that. It is a nascent business that they have been incubating using similar technology. We made the decision to let them spin that out beforehand because of its non-core nature.
Got you. That makes sense. Thank you.
Thanks, Robert.
Thank you. At this time, I'd like to turn the floor back over to Mr. Moschner for closing comments.
Thank you, everybody, for your time today and for your continued interest and support of Cognex. We look forward to speaking with you when we report our Q3 earnings in November.
Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.