Greetings, and welcome to the Cognex third quarter 2023 earnings conference call. At this time, all participants are on a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require 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, Nathan McCurren, Head of Investor Relations. Thank you. Please go ahead. Thank you, Donna. Good morning, and happy Halloween, everyone, and thank you for joining us. With me on today's call are Rob Willett, Cognex's President and CEO, and Paul Todgham, our CFO, formerly known as Sheriff Woody and Hamm from Toy Story at Cognex's annual Halloween celebration last week. Our results were released earlier today. The press release and quarterly report on Form 10-Q are available on the investor relations section of our website. Both the press release and our call today will reference non-GAAP measures. You can see a reconciliation of certain items from GAAP to non-GAAP in Exhibit 2 of the press release. Any forward-looking statements we made in the press release or any that we may make during this call are based upon information that we believe to be true as of today. Our actual results may differ materially from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent Form 10-K and our Form 10-Q filed this morning for Q3. With that, I'll turn the call over to Rob. Thanks, Nathan. Hello, everyone, and thank you for joining us. We delivered third quarter revenue, gross margin, and operating expenses in line with our guidance. Business conditions continue to be difficult. The operating environment remains similar to what we saw last quarter across each of our end markets. As expected, consumer electronics faced the steepest decline in the quarter. This was driven by both project timing and softer demand, particularly in China, where the underlying market remains cautious and customers are managing inventory to lower levels. We expect China to continue to be a challenging market for us and our peers in the near to medium term. Despite these headwinds, we continue to focus on long-term growth and take important steps to execute our strategy. In the third quarter, we grew our served market as we entered two important adjacencies: the vision sensor market and the optical components market. These two markets expand our served market by $1.5 billion, adding to our served market previously sized at $6.5 billion. Let me start with the exciting market for vision sensors that we recently entered. In September, we launched the In-Sight SnAPP vision sensor, redefining standards for ease of use, accuracy, and functionality in an industrial sensor. Powered by pre-trained AI, the In-Sight SnAPP sensor is our easiest to sell and easiest to use product ever launched. The In-Sight SnAPP sensor solves a range of common quality control challenges, including presence/absence inspection, assembly verification, and defect detection. Vision-based sensors are a step up from conventional laser-based sensors, providing superior capabilities to locate features and parts in any position and to improve defect detection. In-Sight SnAPP shares common hardware with our vision systems and is trained using just a few examples. It does not require any programming or vision knowledge by the user. Additionally, the web-based user interface allows customers to plug in and run the sensor from anywhere using a standard web browser, the first Cognex product to not require software for installation. Vision sensors will allow us to reach the new and broader customer base we're targeting with our emerging customer sales force. In-Sight SnAPP will be the gateway for these customers into the In-Sight programming environment and will then offer a pathway to our more powerful vision systems. While this product will be offered at a lower price point than our vision systems, we expect this to be a gross margin accretive product line. We continue to make progress with our emerging customer initiative. We've completed hiring for the year, and many of the initial hires are in the final stages of training. We continue to learn and evolve our model in these early stages. Based on what we're seeing, we remain confident in the growth potential and strong returns of this initiative, and plan to continue to invest in this initiative in 2024. The other market we recently entered is the high-end optical components market, a $500 million served market that we entered with our acquisition of Moritex. Moritex is an industry-leading premium optical components provider based in Japan. Let me spend a moment and expand on why we like this transaction. First, vision technology relies on acquiring an image before analyzing it. The better the image, the better the performance of our machine vision tools. Historically, we've focused the majority of our R&D on algorithm development, and customers often used third-party lenses and lights for image acquisition. Over the past decade, we've invested increasing amounts in optics. This led to our proprietary liquid lenses and more recently, computational lighting from our acquisition of SAC. Sophisticated optics allow us to capture images, such as those of barcodes in a dark recess between two boxes on the logistics line, or those on the reflective surface of an electric vehicle battery. These high-quality images, often acquired at fast speeds, can then be analyzed with our advanced barcoding, barcode reading, and deep learning algorithms. Moritex represents a bigger step into optics for us. Their products capture high-resolution, detailed images for their customers, who are some of the most sophisticated manufacturers of semiconductor, automotive, and electronics capital equipment. Moritex also gives us a more substantial presence in Japan, an important machine vision market where we have lower share. Historically, we've considered embedded optics, such as our liquid lens technology, to be included in the served markets of the product with which they are integrated. Now, owning a portfolio of external optical components exposes us to an additional served market. We size the high-end lens and lighting market at approximately $500 million. Moritex is an existing market leader, and we aim to gain share in this attractive market. Now, let me go into more detail on the financial profile of Moritex. We expect Moritex to account for 6%-8% of our overall revenue. While the company's revenue has been growing, recently, Moritex has been most focused on improving profitability through operational improvements and by focusing on higher-end, sophisticated segment of the optical components market. Moritex's heavy exposure to electronics and semi has also negatively impacted its recent growth. But we expect to see growth in those segments rebound as capital investment in equipment to support demand for chips grows over the remainder of this decade. We believe we can grow this newly acquired business in line with our total company target growth of 15% in the long term by participating in strong market growth and gaining share. To gain share, we will leverage our sales network to broaden and accelerate distribution of Moritex products, and we will leverage our combined R&D capabilities to accelerate innovation. In fact, our engineers are already collaborating on more integrated and advantaged optics and software for our combined businesses. From a margin perspective, Moritex has gross margins of approximately 50%, distinguishing Moritex's premium offering from other less sophisticated optics companies. We expect about two percentage points of dilution to our total company gross margin as we integrate the business. Moritex's operating margin is in line with Cognex's 30% target operating margin, so we expect this transaction to be neutral or accretive on an operating margin basis going forward. Before I go into further commentary on the outlook for Q4, I'd like to turn the call over to Paul to walk through more of the results. Thank you, Rob, and hello, everyone. Third quarter revenue was $197 million, a 6% year-on-year decline or a 5% decline in constant currency. I will remind you of a couple items that impact the prior period comparisons. First, in 2022, we had $20 million of revenue shift from the third quarter into the fourth quarter due to the fire at our primary contract manufacturer in June of 2022. This impact was broad, reaching across our geographies and end markets. An exception was consumer electronics, which was largely unaffected because of the timing of shipments into that market. We also discussed last quarter that approximately $15 million of consumer electronics revenue shifted into Q2 from Q3. From an end market standpoint, our biggest year-on-year declines were in consumer electronics and semi. Revenue from many other end markets, including logistics, automotive, and consumer products, increased year-on-year in Q3. However, each of these markets benefited from relatively easy comparisons due to the disruption caused last year by the fire. The underlying business conditions we are seeing in each of these end markets remain consistent with what we reported last quarter. Looking at revenue on a geographic basis, the most dramatic change was in China, which declined by approximately 40% year-on-year in constant currency. The Americas and other Asia regions grew by over 20% and by nearly 10%, respectively, due to increases in logistics, automotive, and other factory automation markets. Europe was roughly flat in constant currency. Gross margin in Q3 was in line with expectations at 72%. Compared to last year, favorability from the decline in broker buys was offset by unfavorable product and industry mix. On a sequential basis, the step down in gross margin was due to unfavorable mix and volume deleverage. Let's turn now to operating expenses. Operating expenses decreased slightly year-over-year on a GAAP basis. Investment in our emerging customer initiatives and transaction costs related to the acquisition of Moritex were offset by headcount management, tight management of discretionary spending, and lower incentive compensation. On a non-GAAP basis, operating expenses increased by 4% year-over-year and declined 3% sequentially, excluding fire-related items and Moritex transaction costs. Non-GAAP operating margin was 15% in Q3, below Q3 of 2022, due primarily to our investment in emerging customers. Reported earnings were $0.11 per share in Q3 and $0.16 per share on a non-GAAP basis. We had a couple significant one-time items negatively impacting our GAAP EPS. First, we reported a foreign currency loss. Given the large movement in exchange rates between the U.S. dollar and the Japanese yen, we locked in a rate at signing of the Moritex transaction to have certainty around the dollar amount we would pay for the business. The yen weakened after we entered into the agreement, and as a result, we reported a pre-tax loss of $8.5 million for the forward contract. Another headwind to GAAP EPS was $4 million of unfavorable discrete tax expense. Moving on, the non-GAAP effective tax rate was 18% in Q3 of 2023, and 15% in Q3 of 2022. Turning to the balance sheet, Cognex reported a strong cash position at the end of Q3, with $846 million in cash and investments and no debt. We closed the Moritex transaction after quarter end, so this balance includes the nearly $300 million we subsequently used in that transaction. After acquiring Moritex, we have sufficient capital to continue to support our organic growth objectives and M&A plans, and for continuing to return capital to shareholders through stock buybacks and dividends. I want to provide some additional information about Moritex to help you better understand its impact on our business. We are excited about the returns that this investment can deliver. We have a high bar for the financial profile of acquisition targets, and we're pleased that Moritex clears this hurdle to contribute top-line growth and operating margins consistent with our overall company targets. This, along with substantial opportunity for early revenue synergies, leads to an expected return on invested capital well in excess of our cost of capital by years four to five. We expect the deal to be accretive to EPS on a GAAP basis starting in 2025. First, Moritex is facing similar operating conditions as we are, but with more exposure to electronics and semi, so the immediate contribution is less than what we anticipate in the mid to long term. More importantly, immediate EPS dilution on a GAAP basis is primarily driven by foregone investment income, intangible asset amortization, and acquisition costs. Excluding acquisition costs and intangible amortization, we expect the deal to be immediately accretive to EPS in 2024. In the fourth quarter, we expect one-time charges of approximately $15 million, driven mostly by items relating to the Moritex acquisition. This includes acquisition expenses, as well as an increase in cost of revenue to increase Moritex inventory to fair market value, consistent with purchase accounting requirements. These changes are roughly evenly split between cost of sales and OpEx, with a small portion hitting below the line in other income and expense. Additionally, we expect intangible asset amortization related to Moritex of approximately $1 million. Our fourth quarter results will include about six weeks of operating results from Moritex, as we will be reporting the results of Moritex on a one-month lag, given the differences in time required to close the books each quarter. We closed the transaction on October eighteenth, so our Q4 results will include Moritex operations from then through the end of November. As our financial results begin to be more materially impacted by these non-recurring or purchase accounting charges, we will be making changes to our non-GAAP measures going forward. Having closed the Moritex transaction in the fourth quarter, we will begin to report non-GAAP metrics that exclude the impact of acquisition costs and intangible asset amortization next quarter. We will provide more color as we roll out this change with Q4 reporting. As we announced this morning, our board of directors has increased the quarterly cash dividend by 7% to $0.075. This demonstrates the continued confidence in Cognex's financial strength and long-term growth prospects. Now, I'll turn the call back over to Rob. Thanks, Paul. Turning now to our fourth quarter outlook. We expect revenue to be between $175 million and $195 million, including $5 million-$7 million of revenue from Moritex. This is relatively in line with the third quarter as we continue to manage through a challenging operating environment. We expect gross margin to be approximately 70% on a non-GAAP basis, primarily due to continued operating deleverage and unfavorable mix. As we look forward beyond Q4, we expect it to be challenging to achieve our mid-70% target until we return to stronger growth and fully integrate Moritex. Considering near-term pressures, we will remain diligent about cost management. Sequentially, we expect OpEx to increase slightly on a non-GAAP basis, primarily due to the timing of incentive compensation. We remain confident in our ability to manage through a challenging operating environment and are excited about the strategic investments we have made, which will help us return to our long-term growth model. Now, we will open the call for 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 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. Again, that's star one to register a question at this time. Today's first question is coming from Jacob Levinson of Melius Research. Please go ahead. Hi. Good morning, everyone. Good morning. Maybe just, you know, looking around the world at your major end markets. I know the comps are a little wonky, but can you give us a sense of what you're hearing from the field and what your customers are telling you and, you know, in consumer electronics and logistics, and just kind of what the demand is looking like over the next couple of quarters, because certainly it's not that messy discerning season, so just curious what you're hearing. Yes. Let me start with, you know, consumer electronics. So I think, you know, the down year we expected in consumer electronics in 2023, you know, played out in Q3. Much as we expected, the year was skewed towards Q2. And I think we're, you know, waiting to see, you know, kind of how next year is going to play out in that market overall. Certainly, you know, softer consumer demand in both, you know, the premium smartphone segment, you know, is a challenge. And I'd say customers are being more conservative on plans to invest capital to automate. And I'd also say some of the transition we're expecting in supply chains has been a little slower to materialize than we expected. I think we normally don't have a really good sense of how next year is going to shape out until we get into the spring of next year, and that's normally when we give you an overall look. But, you know, generally, I'd say that market looks very challenging at the moment. But long term, the potential clearly is still there and strong in consumer electronics. You know, customers do have ambitious plans for smartphones and wearable devices and new technologies coming to market. And automation is still, you know, very much front and center in terms of their plans, in terms of improving cost and quality. And then, you know, finally, the opportunity of machine vision to improve cosmetic appearance in that market, and eliminate defects, is, you know, is very substantial. So I'd say, short term looks challenging, long term, still very much intact. If I then turn to, logistics, you know, logistics, you know, did grow in Q3, both year-over-year and sequentially at Cognex. But I think our feeling is, you know, we're, we're still bumping along the bottom in terms of that business. It's been a difficult market for the past six quarters, and a few larger e-commerce players are still, you know, working through excess capacity due to the pandemic, and the rest of logistics is slower than we like. But, we do expect logistics will be strongly accretive to growth for many years after we get through the current situation. We see lots of opportunity, and our products increasingly, you know, addressing that opportunity as smaller customers, with the potential to contribute more, particularly in developing markets. Definitely, vision technology is really exciting in terms of what it can provide. We're penetrating the parcel and post sector of logistics, which is quite a large sector we haven't been able to address with our products in the past and are now able to, and we recorded a pretty substantial win with a very major player in that sector. So there's, I think, lots of promise there. And the potential we see for e-commerce in India, for logistics, is very strong. But I think, getting to your question, I think we're still waiting to see when the inflection point is going to come, and we're confident it will. We expect it to come at some point next year, but there's still lacking clarity on where we are in terms of that recovery and logistics. Okay, that's helpful. Just on a different topic, you know, you guys have higher gross margins than certainly anything I cover, much more like a software company, and I'd imagine a lot of your acquisition targets are probably going to have a gross margin profile that's maybe more similar to Moritex. So I guess the question is, philosophically, how important are gross margins to you in terms of maintaining your, you know, let's just call it 70%+ type level? Or do you think over time you're just going to find acquisitions out there that are going to be more in that 50% type range? Obviously, nothing to snap at, but just curious. Yeah. So we care very strongly about gross margins, and we believe very strongly that we'll get our gross margins back to the mid-70% range. And that's view hasn't changed for us, certainly. We don't – if you look at our history, we generally haven't acquired companies with revenue, right? So this is kind of a different play for us. But we think the opportunity to create highly advantaged optics products and increase the gross margin of those products and integrate them together with software, really should give us, in the long term, a nice route back for that business we've acquired to be, you know, similar to our overall gross margins. And then, you know, we see lots of things that we're doing which will improve gross margins over time. But in the shorter term, what will improve them is if we have more volume, as we start to see the emerging customer segment kick back in with higher gross margin-accretive, and in the long run, operating margin-accretive business as that starts to grow and really gain scale. So certainly, and, you know, and as we see recovery in consumer electronics, you know, which has been very software-driven in terms of gross margin, you know, we're confident that we're on a path to get back to mid-70% gross margin. And I would view the gross margin of Moritex as kind of an outlier of any business that we would look to acquire, not as anything typical or indicative of future acquisitions gross margins. Okay, great. Thank you. I'll pass it on. Thank you. The next question is coming from Piyush Avasthy of Citi. Please go ahead. Hey, good morning, guys. Thanks for taking my questions. Hello. Can we drill down into your 4Q sales guidance a bit? It is sequentially down. I'm sure there is a seasonal component to it, but then cost of capital is also higher. Can you comment if there are any end markets that you expect to, that you expect could get weaker from 3Q to 4Q? We heard, like, EV projects slipping, there were strikes. And then on the flip side, any end markets where you are seeing more resilience or green shoots modes? Sure. Yes. I think it's probably playing out much as we might have expected, with consumer electronics this year skewed much more to the second quarter and you know, stepping down in Q3 and as normal, really, in Q4. So we normally see consumer electronics business pretty profitable for us, being lower in Q4, and I think that's, that will be similar this year. I think you know, another reason you know, our our Q4 is challenged is what we see going on in China, right? You know, that's a region that is showing very significant decline. So we operate on short, in short cycles with an average order to ship time of approximately 60 days. So our business inflects quickly and not as backlog driven as many of our industrial peers. So I think you're seeing that play through in our results. The final thing I would point to is, historically, quite often one sees a budget flush at the end of the year, and we're not anticipating any budget flush this year, while we see a lot of our customers under pressure. So I think it's a similar picture as we would have expected. Consumer electronics, China, no budget flush, that's why our guidance is where it is. Yeah, I mean, I think if there's any positive, obviously, the addition of Moritex, and then we are anticipating a slight increase in logistics, but again, I don't think we would—we're not quite ready to call that the green shoots that suggest we're coming out of the, you know, bumping along the bottom that we've been in so far. And then, you know, finally, EV battery is a growth driver for us. You know, it continues to grow. You know, we saw good, good progress in Q3, good progress every quarter this year. So certainly, we're we have expectations for continued growth and green shoots for a long time, and that is helping our Q4, and we expect it to help us next year. Got it. Helpful. And one on margins, like, operating deleverage continues to be a concern. So is there, is there a game plan, let's say, end markets remain choppy, are there any levers that you can pull to support profitability as you get into 2024? Yeah, I mean, I think the timing of our emerging customers' investment is sort of one. So, you know, this year was a pure invest year in, in emerging customers. You know, hiring, you know, a full class of, of, of trainees, setting up the infrastructure to support them, and so on. You know, we believe that class next year will be driving, you know, top line and bottom line benefit to Cognex. Now, we're continuing to invest again in a second class, so, overall, you know, the, the, the, the picture is still, is still investment in emerging customers. But I think, you know, that's an area that we just see so much opportunity and, and we see opportunities. You know, we've seen it throughout this year, despite, you know, a, a choppy economic environment. So we think that can be, you know, one contributing factor. You know, well, obviously, yeah, once we get back to growth, we see significant leverage in our business, whether that's, you know, through COGS to some extent, with volume leverage on our fixed assets, and particularly through, you know, through our R&D and sales force. So yes. And I think I would add, as you look at our results in 2023, the slowdown in investment from a handful of our largest customers in logistics and consumer electronics and semi really represents the majority of our decline, right? So we're confident that those markets and industries will pivot back into growth, and we want to be sure that we're ready to take advantage of that when it comes. So I think that's how we're certainly positioning ourselves, as we look to the future. Got it. A quick follow-up on that. Like, I think, like, one of your competitor is seeing some tailwind from lower raw materials and component costs. Are you seeing similar dynamics or no? Well, you know, as you kind of mapped the last couple of years, we saw large increases in component costs from semiconductor shortages. We're certainly through that, and so now we're, you know, and we are seeing, you know, some price reductions coming through. Those won't flow through into our PNL for some quarters, you know, as the inventory turns. But generally, the story there is good. You know, it is. We are certainly seeing improvements in our raw materials. Yep, and improvements in lead times as well, helps us be more responsive. Got it. I appreciate all the color, guys. Good luck. Thank you. Thank you. The next question is coming from Jim Ricchiuti of Needham and Company. Please go ahead. Hi, good morning. Wanted to go back to the announcement on the SnAPP sensor. Is this product going to be going through distribution, indirect channels as well? Hi, Jim. It's interesting. I thought of you this morning when I was talking about SnAPP Sensors and how long you've covered Cognex. When I came to Cognex, you know, 15 years ago, we had a product called Checker that we were targeting at a similar market, and the technology and the channel wasn't really ready for us at that time as it is today, as it is now. So we expect, you know, we will sell the SnAPP Sensor through all of our channels. You know, it's definitely will be good for distribution and OEMs, but certainly our main thrust is gonna be direct sales and that emerging customer segment that we're adding, which is gonna call on more entry-level and less penetrated customers for us, who need simpler vision. It's gonna be a really nice entry point for them into the vision platform of In-Sight that they can just trade up on without changing programming environments. It's kind of a nice seamless move up. The answer to your question is really primarily direct, but certainly all channels firing with this product. Got it. And Rob, I mean, this sounds like a product that has some real attraction in terms of ease of use, the ability to deploy quickly. Is there any sense as to how you might anticipate this out of the gate in early 2024? Look, it's always hard to forecast new products, but you have a sales force now that's been trained on this, presumably, and you should get some benefit fairly quickly? Yeah. So we have this, you know, large emerging customer sales force that's, you know, reaching the end of its training and are, you know, entering the field in various markets around the world, and they, it will be certainly a major product for them to sell. I actually sat through a series of demos by them recently, you know, where they demoed the new product to me. It's very impressive in terms of how easy it is to sell and how well it demos. So yes, we do expect that. And then, you know, if they're starting to go into the field around the end of the year and the beginning of next year, I think we'll see it sequentially, you know, increase as we move through next year, and, you know, we'll see some benefit in Q1. Got it. And you alluded to an investment in a second class in terms of bringing on folks in this, this area. And I'm wondering if you could perhaps size the additional investment. I think, you know, in the past, you, you talked about $25-$30 million annual investment, and I think you alluded, and possibly the last call, about a $10 million additional investment. I'm just trying to get a sense as to what the additional investment is gonna be as you expand this initiative. Yeah, sure, Jim. So this year we sized the investment at about $25-$30 million in operating expenses, and knowing that it would be a ramp-up, given you know, hiring timing largely associated with you know, the college recruitment cycle and which varies across different geographies, but you know, broadly speaking, is not so different from what we have in the U.S. And it was about a $10 million run rate exiting Q3, so that gives you some perspective on where we are right now. We will see a sequential increase next year, you know, partly as folks enter the field and start achieving you know, commissions and then really coming in with an additional class, kind of, over the course of Q2 and Q3. You know, we're not prepared to fully size that at this point, but you know, it will be a step up in operating expense. Though, you know, unlike this year, it'll be associated with also, you know, revenue being delivered by that first class who's now, you know, quota-carrying and out in the field. Got it. If I could slip one more in, I'll go jump back in the queue. That win that you alluded to in Parcel Post, was that. You guys have been excited, I think, on the new product front with the modular vision tunnel. I'm not sure if that has any relation to that win or if you could just elaborate on the significance of that Parcel Post win you talked about. Yeah. So we've come to market in this year, really starting with the 580 at the beginning of the year, and now the 380 we launched recently with some products that have wide field of view, are very easy to integrate, very high performance, that really set them up nicely for parcel and post, where there's a high degree of variability and many, many different boxes moving down, you know, a mass flow type line. So these products now are really suitable for big parcel companies. So part of that success relates to this product, but part of it is also that that really becomes a wedge for us to sell other products also to this company. So they certainly see the benefit of just simple presentation scanning of boxes as it moves through their centers. So, yes, machine vision tunnel nicely, but also other products pulled through as a part of that win. Got it. Thanks very much. Thank you. The next question is coming from Andrew Buscaglia of BNP Paribas. Please go ahead. Morning, this is Yedohn for Andrew. Thanks for taking my question. In light of recent commentary regarding Moritex helping beef up stature in Asia, can we gain a little bit more color into the outlook for capturing share in that region and how that fits into Cognex's overall growth strategy? Thanks. Sure. Yeah. Moritex is a storied and highly regarded company in Japan, right? It's really the majority of its business and its relationships in that market, you know, are in Japan. And they're very, very strong and very long-standing relationships with some very major semi and electronics and automotive companies in Japan. So that's wonderful, and those are OEM relationships that, you know, tend to be, you know, sticky and enduring. So certainly that's something we very much like about the business, and it's one where we can sell additional products to those customers, for sure. I think in other areas, Moritex has great product-... products that are very suitable for Cognex's customer base across all regions, and certainly Asia being one, which you will lead to there. So we have a, you know, large sales force and lots and lots of customers, where we're looking forward to taking the Moritex products throughout Asia. So we certainly see that as good potential. They also have some significant manufacturing and assembly facilities across Asia, you know, in China and in Vietnam. So those also allow us to address customers and supply them quickly, which is certainly what some of our larger customers need for their optics products in China. So all of those we see as nice beachheads for us into Asia, but particularly, of course, into Japan. That's helpful. And then as a follow-up, you know, following this, this biggest deal in the company's history, what is the allocation strategy here? And is there an increasing appetite for potential buybacks, given the share price com, having come in a bit? Thanks. Sure. So, you know, our capital allocation priorities really haven't changed. You know, obviously, funding organic growth is our kind of goes without saying, and we still generate, you know, very healthy excess cash beyond that. And, you know, our top three priorities have been M&A, followed by stock buybacks, followed by the dividend. And I would say, you know, if we looked over our history prior to this acquisition over the last five years or so, our actual allocation of capital relative to our priorities were not as well matched. So, you know, we did a very significant dividend in 2020 after passing $1 billion in cash. We did quite a healthy amount of stock buyback activity in 2021 and 2022, and very little M&A activity, excluding, you know, SUALAB in 2019. So, you know, we view kind of the acquisition of Moritex and other future deals as more trying to get back aligned with, you know, when we see great technology we like, where we see tremendous sales synergies, whether that's technology synergies or salesforce synergies, geographic, you know, we wanna lean in. You know, on the buyback front, our stated goal is to offset dilution from our employee equity programs, and we've been well ahead of that goal for quite some time right now, since we pronounced it in the 2012, 2013 time frame. We tend to have two aspects to our buyback, kind of a ratable, you know, buying regularly, and an opportunistic. And of course, you know, the opportunistic can change, you know, dramatically with, you know, current market conditions and, you know, current cash flow positions and, you know, the advice and recommendation of our board. So it's something we certainly always evaluate, but we don't feel pressure right now to buy back shares, but we certainly see opportunity, obviously, given where the share price is. Hopeful. Thank you. I'll hop back in the queue. Thank you. The next question is coming from Ken Newman of KeyBanc Capital Markets. Please go ahead. Hi, good morning, guys. Thanks for taking the question. First question for me, you know, we have heard a little bit of color about weaker discrete automation activity within the distribution channel this quarter, but I was just curious if you had any color on whether you've seen a material difference in demand momentum between your distribution channel versus the direct sales force? I would say generally not, no. I don't think. But something to understand about Cognex is, you know, our larger customers tend to be more direct, right? So our large customers in consumer electronics and some of our large customers in logistics, we would tend to deal with direct. So that can make our, the percentage of our business, you know, skew more to distribution as those large customers are lower and then back to direct, so larger. But aside from that, I wouldn't say there's an overall tenor of change, direct versus distribution. And then, you know, as we move into next year, as we see our emerging customers, our emerging customer sales force, you know, enter the field, those will all be direct sales. So perhaps we would expect to see more skewing towards direct. And probably we'll see that as we have over the, you know, the last 10 years at Cognex, a larger portion of our business go direct, as we've invested more in our direct sales force. And generally speaking, those direct sales tend to be at higher gross margin as well. Yeah, and one note, maybe, you know, us relative to some, you know, industrial automation competitors, you know, we don't have a significant channel that carries a lot of inventory for us. So the phenomenon of kind of stocking or destocking as, you know, drivers of quarter-to-quarter or year-over-year fluctuations, it's not entirely absent. There are, you know, there are a few customers, probably more end customers, who, you know, during the supply chain crisis, maybe bought aggressively on chips and maybe have a few more vision systems than they need. But overall, I think that phenomenon is quite muted for us. So, you know, our results tend to be more a function of the demand we're seeing right now, as opposed to, you know, a lag, which may have sort of buffered some of our competitors' results for a period of time, and they're now facing, you know, the destocking phenomenon. Yeah, it's good to understand about Cognex. We discourage our distributors from holding inventory. We want them to use their working capital, grow their business, not buy inventory from us. So, as a result, there isn't that kind of buffer. And I think that's why when you see our business pick up, and it will, it's probably more of a leading indicator for our peers in terms of what they will see in terms of market pickup. Yep, that's very helpful. Appreciate that. For my follow-up, you know, I think you guys had mentioned that the EV demand still remains pretty stable and strong here. Obviously, there's lots of moving pieces, especially in the headlines around the strike. But I'm curious, was there an impact from this UAW strike? And then if this is now done, is that gonna be a material impact on the guide for Q4, or not so much? We don't think it was a material impact, no. Maybe $1 million or $2 million of business might have, you know, been delayed or pushed out as a result of this, the strike. And as those look to being resolved, you know, I think that's no longer really a concern of any magnitude for us. Very helpful. Thanks. Once again, that is star one, if you would like to register a question at this time. The next question is coming from Jairam Nathan of Daiwa Securities. Please go ahead. Hi. Thanks for taking my question. So, you know, we have seen some of the EV customers, some of your EV OEMs kind of pushing out capital investments in batteries. For instance, Ford talked about it last week, and are you seeing, do you see any, should we expect any kind of pushouts in battery investment benefits? I think what we're seeing is probably pretty consistent with what I think we've been, you know, explaining and communicating over the balance of the year, which is there's a huge demand coming for EV battery manufacturing. But there's a little bit of short-term headwind as some investment plans have had to change from Asia to Europe and even more to the United States, right? So that's meant that some plants that were planned to be built in other geographies are being built, particularly in America, but also in Europe. So I think that's one phenomenon that's playing out, much as we expected, and as I think most of us understand, when new plants go up, whether it's semiconductor or EV, you know, it's quite a long time to build out the facility, and then automation, and particularly vision and robotics, is something that goes in pretty late in the process. So we're expecting that to come, but some of those projects are being delayed by the CHIPS Ac t for chips and the IRA Act for EV. That's a phenomenon. The other factor is some of these projects are delayed because of labor shortages and the shortage of qualified people to get productions up and running. So I think, I think that's going on. It's as we expected, and, you know, we're very optimistic about the long-term prospect. On, on a sort of longer-term note, I spent quite a lot of the last quarter traveling and visiting, I'd say, most of the largest EV battery companies in the world, and I met with senior management. And their plans are, are, are really very impressive in terms of the capacity they expect to add, between now and the end of the decade. You know, I heard numbers of five to seven times in production capacity that they're looking to add, right? And, you know, Cognex machine vision is an, a very important part of their roadmap for im- for improving quality and throughput. And, you know, I think, I think those of us who understand EV batteries know that they're difficult to manufacture and dangerous, so quality is something that's top of mind. And then, you know, there are also longer-term investment plans, which you may have been reading about, you know, such as solid-state EV batteries and new forms of batteries coming. So this is a very exciting area. It's been paused a little bit while focus has changed, and, you know, the demand is coming. If there's one other factor I think I would point to is, in China, there is an overcapacity of battery capacity. So, so as a result, I think some of the investments in that area may have slowed down, but I think we saw that coming, too, and I don't think that's a real surprise to us overall. So I think a lot of the capacity is gonna be added by non-Chinese players and outside of Asia. Okay, thanks. And just on Moritex, since you're kind of backward integrating, would you expect some loss in revenue as some of your competitors stop buying from them? And could you also talk about CapEx, any change to your CapEx since they have a manufacturing facility? Right. So we expect Moritex's growth to be in line with our total company growth of about 15% target over the long term. And as we start to sell their products through our sales force, we're expecting, you know, good growth prospects, and then longer-term joint R&D. Your question was around dis-synergies, and, you know, we expect a small amount of dis-synergies. A few of our competitors are currently customers of Moritex. We, you know, we hope to go on supplying them, but it's possible that they may choose not to buy from our company anymore. But we don't we. Those are really not very significant in terms of what we expect. So, we're expecting a lot of growth as we take their products and move them through our sales force and as we bring you know our products to some of the Moritex customers in Japan. So very small dis-synergies, very large synergies. That you know, potential dis-synergies or lost revenue is taken into account in our 6%-8% estimate of total company revenue that we think Moritex will comprise now that we own them. And CapEx. On the CapEx side, yes, they do, you know, they do run two manufacturing facilities, so, you know, relative to us as a sort of CapEx, as a percent of revenue or what metric you might use, they're, they're slightly higher. But in the grand scheme of our overall, we'll remain a very CapEx-light, you know, not particularly asset-intensive business. So, you know, there might be a modest step-up, but not something that I think would have any material impact on our results, Jairam. Okay, and my final last question is on logistics. You know, Honeywell talked about seeing a significant jump in orders in the third quarter sequentially. Typically, what's the lead lag behind? How do you lag, does Cognex lag behind them? And should we, is that a sustainable green shoot? So we, you know, we also saw, you know, an increase in orders sequentially, not a large increase. I think, as we said, we sort of think we're bumping up along the bottom. You know, I think that there we think of Intelligrated as one of the large integrators in the industry. So, you know, with that, if you look at the overall group, you know, I think they're similar to kind of some of the things that we would see overall. But I would say in general, you know, integrators get orders and contracts before we do. So, I'm not sure that I would view what Honeywell said as a leading indicator for us overall, but generally, as integrators get more business, that flows through to us on a lag. Okay, great. Okay. Thank you. Thank you. Once again, that is star one for any additional questions. We'll pause a moment for any additional questions. We're showing no additional questions in queue at this time. I'd like to turn the floor back over to Mr. Willett for closing comments. Well, thank you. Before we wrap, I want to take a moment to thank Sue Conway, our Senior Director of Investor Relations. Over 34 years with Cognex across accounting and investor relations, she, after 34 years, Sue will be leaving Cognex at the end of this year. Sue has been here since the beginning of Cognex's journey as a public company, and this quarter was the 135th quarterly close or earnings for Cognex that Sue has helped oversee. Sue, we will wish you the best in your next chapter, and thank you for all you have done for Cognex. With that, we will wrap the call. Thank you for joining us this morning. We look forward to speaking with you again on next quarter's call. Ladies and gentlemen, thank you for your participation. 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.