Greetings. Welcome to the Cognex Third Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. It is now my pleasure to introduce your host, Nathan McCurren. You may begin.

Thank you, operator. Good morning, everyone, and thank you for joining us. Our press release was published yesterday after market close and our quarterly report on Form 10-Q for Q3 2024 was filed this morning. The press release, earnings presentation and 10-Q are available on the Investor Relations section of our website. Both our published materials and the call today will reference non-GAAP measures. You can find a reconciliation of certain items from GAAP to non-GAAP in our press release and earnings presentation. Any forward-looking statements we made in the press release, the accompanying presentation posted to our website 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 from our projections due to the risks and uncertainties that are described in our SEC filings, including our most recent Form 10-K and Form 10-Q. On today's call, Rob Willett, Cognex's President and CEO, will discuss end market trends and provide an update on our strategic initiatives. Dennis Fehr, Cognex's CFO, will discuss our second quarter financial results, and we'll conclude with our outlook. With that, I'll turn the call over to Rob.

Thanks, Nathan. Hello, everyone, and thank you for joining us on Halloween, Cognex's favorite holiday. In the third quarter, we delivered revenue and adjusted EBITDA margin in line with our guidance. Revenue grew 19% year-on-year or 7% excluding the contribution of our Moritex acquisition, led by continued momentum in logistics and semiconductor and comparing against a low base in Q3 of 2023. Conditions across our broader factory automation business remain challenging. While most of our factory automation business has been stable for several quarters, we've seen a further step down in automotive. We continued to manage costs tightly in the third quarter and reduced operating expenses sequentially despite increased costs from the emerging customer initiative and an extra month of Moritex financials. I now want to provide you with an update on our strategic initiatives. We continue to make excellent progress in bringing world-class AI to our machine vision products. In the third quarter, we launched AI assisted labeling to reduce the time required to train deep learning vision models. We've incorporated a new AI model into our VisionPro deep learning products that can cut out any object in any image with a single click. This makes the labeling process much faster. Training AI vision models can sometimes require labeling of over 1,000 images. And this latest model cuts the labeling time by approximately 90%, allowing more customers to adopt our most powerful deep learning product. Another example of how we're making our products more accessible to a broader audience can be seen in our AI-driven optical character recognition tool that we launched in Q3. Our prior OCR offering required significant training which limited its use to more sophisticated customers. Now, with virtually no setup required, customers can leverage this out-of-the-box technology to obtain industry leading weed rates and performance.…

Thank you, Rob. Turning to the financial highlights, which you can see on page 8 of our earnings presentation posted to the website. Third quarter results include four months of Moritex financials as we aligned accounting close schedules in the quarter. Third quarter revenue of $235 million came in slightly above the midpoint of our guidance range and increased 19% year-on-year. Excluding Moritex, revenue grew by 7%. As a reminder, in 2023, we had approximately $15 million of consumer electronics revenue shift into the second quarter from Q3, providing us with an easier comparison. Adjusting for this timing effect, revenue excluding Moritex was roughly flat year-on-year. From a geographic viewpoint, excluding Moritex, revenue grew year-on-year in all four of our major regions for the first time in over two-and-a-half years. Europe grew nearly double digits in the quarter, while Americas and other Asia were both up slightly. Strong logistics results pushed these three regions into year-on-year growth. China was up significantly in the quarter, snapping a streak of seven consecutive declines. However, entirely due to the timing of consumer electronics revenue in the comparable period. Turning to margins, adjusted gross margin was 68.7% in Q3, down 4 points from 72.7% a year ago. Gross margin included a 3 percentage point dilution effect for Moritex, which is higher than the typical 2 percentage point impact due to the additional month of Moritex financial. Sequentially, adjusted gross margin declined 1.6 percentage point, driven mostly by extra Moritex revenue and mix effect. Furthermore, gross margin in Q3 was impacted by competitive pricing pressure. Many manufacturers are being more discerning on cost in the current market environment, and considering the current scarcity of projects, we have prioritized maintaining share. This has been most pronounced within China. Adjusted operating expenses increased 10% year-on-year and were…

[Operator Instructions]. Our first question comes from the line of Jamie Cook with Truist.

I guess first on the emerging customer initiative, how do we think about the 3,000 new customers that you're targeting, that you talked about this quarter relative to your targets in the beginning of the year and how that compares to the $50 million of incremental revenue you once talked about? And given the combined sales force that you're doing, does that represent a cost savings opportunity potentially in 2025? And then my second question, just on the gross margins for the fourth quarter, can you just elaborate how much mix and pricing is a headwind to margins sequentially and just sort of what's going on in the pricing environment? That sort of seems like a new nuance. Just wondering, again, how much of a headwind this could be as we look further out.

I'll talk to the first question and I'll give it to Dennis who will give you a little color on gross margin. So I think some context overall, I think as we all understand, Cognex has very strong share among the most sophisticated manufacturers and we're looking to make our new technology more available to many more customers. We think there are hundreds of thousands of customers like that. We expect to sign up 3,000 new customers through the current program in its very first year. It might sound like a small number, but it's a big step, I think, that this first cohort is making. They're ramping, they're getting better every day, the rate of signing up new customers is increasing, and as we move into next year, we would expect more from them. Then we have the second cohort coming online, who we'd expect the same or better from as we get better and better at this initiative. So you can see, we think of it as turning a flywheel, and it's starting to get momentum, and it's broadening our customer base over time. And then context, we've sort of said in the past, we have about 30,000 customers. So, that 3,000 and hopefully more from that cohort next year, the second cohort coming on and adding as we turn the flywheel faster and faster. You can see over a long period, we're pretty optimistic about how that can broaden our customer base overall. Second part of your question, you asked a little bit about the cost of serving customers. For sure, we're bringing in a different profile of Salesnoids and much more activity. They make many more sales calls as they're selling – easier to sell products and they are less expensive to employ. As our sales force grows and develops and turns over over time, we're seeing the potential for higher productivity per sales person, both from a sales amount and from a cost point of view. That's how we certainly think about that. And we have a lot of metrics that we use to track that. In terms of our expectations on entering the year, we were learning as we went along. I would say we're pretty happy with where this is getting in terms of the expectations we had originally.

Let me take that second question. So when we look at the gross margin, gross margin stepped down about 160 basis points sequentially. About 1 full percentage point of that is driven by Moritex, right, so the addition of an extra month of Moritex financials. So in the quarter, that dilutive impact was 3 points instead of the normal 2 points. And then the remainder of that is driven by mix and pricing. That means we talk about the mix side, then we have less of consumer electronics and more of logistics. And then on the pricing specifically, we have been talking about, specifically about China.

Our next question comes from the line of Tommy Moll with Stephens, Inc.

Rob, I wanted to start on logistics. The progression there, we're seeing again in the third quarter, presumably also in the fourth. And if we look around that end market, there are some fairly positive anecdotes just in terms of the pacing of warehouse leasing activity, others in the market talking about some of the end users having absorbed a lot of the overcapacity that was built in years past. And so, I'm just curious, given that a lot of these large projects can have a lead time for you where you have, I don't know how early you take orders or how early the conversations start, but are you seeing any signs that there could be another inflection higher in the coming quarters.

We're certainly very positive about what we're seeing in logistics currently. Revenue grew materially on a year-on-year basis for the third straight quarter in the third quarter. And we expect to finish this year in strong double-digit range. And it's pretty broad across our business, both in terms of the end markets that we're serving and in terms of geographies. And I think we'll know we're coming off two years of significantly lower investment. So I think we're starting from a much lower position basically where there was over capacity built during the pandemic that had to be worked through. And it is worked through now. And we're getting back onto the nice growth path we had envisioned and I think it's coming together very nicely. In your question you asked about visibility. Yeah, for sure, longer lead times, bigger projects. So we do have, I think, good visibility for business that we see in our pipeline and we see it booking. When it comes in, how quickly or not can vary. There are projects that one thinks are coming in this quarter that come next and vice versa. But overall, yeah, I think we have a pretty good sense of what's going on in that market. Some other things that we're seeing and that we expect to go on seeing, new customer activity is strong with many new customers signing up, seeing the industry embrace our edge intelligence platform, which really is adding a lot more capability to our customers in terms of understanding what's going on within the tunnels and read points they have in a warehouse. And those could be thousands of read points, so it's a very data-rich resource we're giving to customers. We're seeing more penetration of vision products, which is exciting to us beyond our traditional ID where we excel, but we want to go further. Nice momentum building in the parcel and post sector for our business, although CapEx and investment in that market isn't necessarily great. Our business is really – we're starting to penetrate that sector and we're exciting. And then emerging markets, especially in India, have a lot of potential for us overall. So that's a little color on what we see overall.

For a follow-up, I wanted to ask about something you mentioned on the emerging customer initiative. I think I heard you say the first cohort hit the million dollar a week run rate in the third quarter. And if I heard that correctly, I'm just curious, what does that number need to be to hit the targeted 30% operating margin for this initiative?

I said almost a million dollars per week, and that's correct, they did that. And then they're also referring significant business over to our account sales engineers who are closing vision business, et cetera. As we look at our models, it's some quarters before they breakeven and then start to add – to reach that 30%. It's gross margin accretive to our target. So the gross margin is great. The fall through is great. As we see that, we've given you a sense in general and what we've invested in the program overall. There's a bit of attrition obviously as one would expect overall. So I think we can we can all do the math together on kind of how that plays out. Dennis, I don't know if you'd like to…?

Maybe first, I think we wanted to give you this number, right, that you have a bit of a sense where it is, right? We also mentioned it's not a number which we want to provide on an ongoing basis. So I think in a big picture what we have typically said is that, again, the first year's investment year, we hired them last year, we trained them this year as the year for a breakeven, and next year is basically the year where we really want to see it to be accretive to our number. So that's perhaps how you can think about the progression.

Our next question comes from the line of Andrew Buscaglia with BNP Paribas.

For the guidance for Q4 for gross margins, are you able to say if that's similar to Q3 and ex Moritex would be above 70%? Or is there any other color you can provide to help us out with that?

I wouldn't give you a number on excluding Moritex, but I can talk you through a bit on the puts and takes here. So if you take our Q3 2024 as a starting point, and we have benefits on the one side, we have one month less of Moritex. That's the percentage point on the positive side. But then on the other side, it's clearly we also talked about where the growth coming from, it's coming from logistics. And then, certainly, Q4 is typically the weakest quarter on consumer electronics. So that means we have a headwind on mix and then we have been talking also about the headwind on pricing, particularly in China. So these are kind of the puts and takes from Q3 moving into Q4.

With the emerging customer initiative, are you assuming contribution in Q4? And then should we expect a number or another target for 2025 as a million a week would imply pretty material number? So just wondering what your thoughts are in terms of [Multiple Speakers] guiding that.

Two things on that. The first, we have been saying that 50 million run rate, not all of that is incremental, but we have been seeing continuous increase of bookings. So in that regard, yes, absolutely, there's a contribution baked into our Q4 guidance in terms of increased bookings coming out of the emerging customer initiative. Second, when we talk about 2025, I think we think it's too early to talk yet about 2025, right? So we can talk about broader the market trends that we are seeing there, but in general, a bit early to call 2025 at this moment.

Our next question comes from the line of Damian Karas with UBS.

I was wondering if you might be able to just speak to us about the specific trends you're seeing at the regional level. I know you said kind of all regions were up in the quarter, but maybe you could just take us a walk around the globe and where you're seeing things looking potentially any better or any worse than previously.

I have circled the globe since we last spoke. So I think I have some perspective on this. I think the Americas market is – still, overall, markets are tough, right? You look at the PMIs that we see overall, generally, they're pretty weak on a global basis. And I think that's a good metric of what we see in markets and current feelings across really all the markets that we're serving. And it doesn't so much apply other sort of growth areas like logistics and semiconductor that are really helping us, but everywhere else, it's weak, very weak, I would say, overall. Americas, that certainly applies. You can see that particularly negative sentiment in automotive, I would say, overall, other markets are sort of low, but stable, I would characterize. In Europe, similar story, even more concern I think around automotive. We put up some pretty good results in Europe in the last quarter, and I think we probably gained some share there, but helped a lot by our logistics, the performance of our logistics business. But the factory automation situation continues to be pretty weak there. In China, we can go into that in a lot more detail if we're interested, if others – if you want to talk about it. But I think, yeah, the market there has been weak for a long time. We've seen seven consecutive quarters of decline in our business, but we actually grew there last quarter. Mostly as a result of the timing of electronics, but our automotive business in China did grow last quarter. I think we'll hear and see, and my experience having visited China this month is the automotive industry in China is strong, strengthening, and they have overcapacity, which means their vision investments aren't perhaps strong, but the overall market sentiment there in automotive is perhaps a little better than anywhere else. Japan might be a slightly better market overall, I think helped by semi, helped by a weak yen. Certainly, we see some more positive sentiment there. And then probably the rest of Asia definitely is more of a growing market, but still a lot of tentativeness around what's going on in the world about the geopolitical situation. So I think that would be a little bit of a color on how I would call the markets over all around the world.

Rob, you talked about some of the AI tools that you're building into your solution set. I'm curious if that's changing your pricing dynamics at all, or maybe the best way to think about that is just as a means to get new customers on board, or your existing customers to refresh. And also, I'm just kind of curious to what extent AI might be driving an investment cycle for your customers. If I just think about consumer electronics, I presume a lot of those customer products are going to be evolving to become AI enabled. So getting beyond the near term CE pressures, how are you thinking about that?

What's going on in the world of AI, as we all hear about it, it's moving at a great pace. It's very exciting, the capabilities. I alluded to some in my opening remarks, that really are taking very complicated problems that really weren't solvable by machine vision before, or not economically solvable, and making them much easier to deploy. This is very sophisticated technology overall, but what it is, is allowing us to serve more customers who can now apply our technology in a more robust way. And it's the beginning. There's a lot of very powerful technology coming to market. We're investing in it. We think we're ahead in that space based on the acquisitions and the investments that we've made and the caliber of our engineers. And it's something we have very clearly in our sights. I've met with some of the most sophisticated manufacturers in consumer electronics and other spaces over the last few months. And I think they're very excited, as we are, about what we see the potential of this technology is. It does have the potential for us to broaden what we do and serve many, many more applications and to do so more cost-effectively with less engineering time spent by us or by our customers overall. As we've alluded to and continues to be true, this technology – it gets applied in a very powerful complex way. And I think of Nvidia chips banging out huge data, masses of data to accomplish tasks. We're very good at taking that technology and deploying it in a much more energy and processor intensive way into embedded systems. And that's what we see more in lower price point products, selling what we call Edge Learning technology that can be trained on just a very few samples and doesn't have the power, but has, in some cases, quite close to the power of the products that we sell at the high end. So that's something that we then will allow – is allowing us to broaden our customer base. And that links very closely to our aspirations with the emerging customer segment, where we can take powerful technology that then over time we learn how to make easy to deploy, to put on low cost hardware and sell very broadly and broaden those customers away beyond the 30,000, towards the hundreds of thousands we aspire to. So that's kind of the journey that we're on and we're excited, but we also know the whole industry is moving fast in that direction. So we need to make sure we're innovating and staying ahead.

Our next question comes from the line of Joe Giordano with Cowen and Company.

This is Michael on for Joe. Earlier you mentioned about $1 million per week sale cadence from that first cohort for the emerging customer initiative. And then, like a certain degree of referral business. So all this was hit despite, clearly, factory automation being weak and that's like the primary end market for those type of customers. So can you just give us a sense of what the revenue uplift would be in a more normalized market environment.

I wouldn't say it's a $1 million cadence. I'd say it's growing all the time, right? So we've hired a team. We're getting them out and they're growing. And in the third quarter, they were selling almost a million per week. Our aspirations are for them to sell more and more as we move forward. And they are referring business. You're quite right. In terms of where that ends up, in terms of where we can get to. and the potential of that, that's something that we're going to discover. But right now, as we're looking up that hill and we're seeing our progress, we're pretty happy with what it is, but I can't give you more detail on that at this point.

Maybe to add here, what we also said is that, in this quarter, we made changes that nowadays emerging customer Salesnoids also selling to existing customers and therefore not all of this revenue coming out of that is incremental, right? So in that regard, keep that in mind when you think about that $1 million.

Actually, to that point, I think it might be interesting if I gave you a concrete example of why we're doing that. We definitely have seen within our existing customers that we're just not making enough calls within them at deeper levels and broadly enough within those existing customers. So I was at one of the world's largest automotive companies in recent weeks. And I think it's kind of instructive as to who Cognex is. I was in there with the head of automation engineering in a three-hour meeting, discussing the application of advanced machine vision to robot guidance, right? And just imagine those kind of videos you see on YouTube, right? Okay. And great meeting. Walk out of the meeting. And I noticed there's a cubicle outside with one of our competitors demoing vision sensors and ID products. And that's the place generally we haven't been at Cognex and there's a lot of business in that space. And with the emerging customers calling out existing accounts, that's where we see – we can get a big bang from the buck in addition to signing up these thousands of new customers we're targeted. So I hope you see that and perhaps you can also see why it's a little difficult for us then to pass and quantify what's incremental versus just pure sales of dollars.

Our next question comes from the line of Jim Ricchiuti with Needham & Company.

I wanted to focus on the other category that you guys sometimes talk about. It's in your deck. The strength in the semi, I wonder if you could talk to where you're seeing the strongest demand, particularly in light of concerns some people have about maybe a more modest recovery in the WFE market in the early part of 2025. And then also, I noticed you highlighted strength in the medical market, Rob. Maybe you could talk to what you're seeing there.

It is hard to call a long-term trajectory of semiconductor CapEx having been in that a long time, as have you. We know how that market is. I think there's debate about are we at the start of a super cycle or are we really in more of a cyclical position. We talk to machine builders. I'm not sure I have great visibility on that either to tell you the truth. But we are seeing a strong investment, definitely, a lot around high bandwidth memory, relating to a lot of chips for data centers overall. I think just the quality of Cognex's technology in that space for precise alignment and inspection, for traceability, for wafer probing, for those types of applications is very well recognized and good. So we see that. And then our business with Moritex really, and Moritex was – a significant part of its revenue was in semis. It's giving us nice additional exposure to that market and cross selling opportunities to sell optics or software where we were previously only selling one in respectively Cognex or Moritex. So we like what we see. We're confident about what we're seeing at the moment in the near term. But yeah, next year, perhaps more difficult to call, as you note. The second part of your question asked about medical related industries, which are about 10% of our revenue. They grew nicely in the third quarter, and although year-to-date has been down. I think what we're seeing is pretty consistent with what other players supplying into this industry are seeing was, there was just an over investment by big machine builders around COVID, around kind of the supply chain disruption that we've seen. It was kind of massive, I would say. And I think we've now seen that unwind.…

Just a quick follow up. Rob, sounds like you were in China with customers. I'm just curious, I know it's early, but are you seeing – are the customers that you talk to at all hopeful of a stronger business just given some of the government initiatives to try to stimulate growth?

It's not obvious to me, Jim, that stimulus impacts manufacturing per se. I think it's probably more about the real estate market. But if it feeds back into consumer demand, then that obviously drives domestic consumption of manufacturing. And I don't think it's there yet overall. But as I mentioned, if you look at our overall business in China, it's been declining sequentially for seven quarters. But we did buck that trend in this quarter. Too early to say whether that is a turning point or really just – year-over-year. I'm not talking about sequentially, year-over-year. So I think too soon to say is the answer to that question, but the market itself is very weak compared to where it was. There's a lot of excess manufacturing capacity, which is meaning not a lot of desire to invest in new automation or applications at the moment. And then in our own space, there are more local and Chinese competitors who are getting stronger. They're gaining share, I would say, particularly versus European companies and some of the smaller Japanese players in that space. And as we think about opposition in that market, we believe very strongly it's important that we maintain share. So particularly at the lower end of the market, simpler applications like simpler barcode reading, we're pricing just more aggressively in that market to make sure that we're maintaining share while we get our new products ready, which will be higher gross margin. And then we can be there with very, very competitive technology as the market recovers. And then we tend to sell older generations of products at those lower price points to make sure that we're still maintaining share, but that is a little dilutive to our gross margin and you'll see a little of that in the Q3 results if you look closely.

Our next question comes from the line of Jacob Levinson with Melius Research.

Rob, just on the logistics business, I think we've heard some mixed signals from some of the players in that space. And it feels a little bombed out at this point after the post-COVID overhang. I know a few years ago, you had a pretty large concentration with an e-commerce customer that we all know well. You mentioned that you're making progress in post and parcel, and mentioned a Korean e-commerce company. So can you just give us a sense of how that business has changed over the last couple of years and maybe just the breadth of the customers that you have today versus a few years ago?

I'm not sure I heard you correctly. If you said bottomed out, I would agree with that. I think that that's kind of where we are. And we're now seeing a nice growth trajectory. And probably we have now for a few quarters. And that's building. That is really happening across all of our logistics business, though, I would say, or maybe for different reasons. I think the big e-commerce players are coming back and spending strongly and rolling out new generations of automation. And you can see that in what they're saying publicly. And we're right there with them. And it's very exciting. And you see that even in the customers I mentioned out in Korea or in others overall. But then, yeah, our more second tier of customers, smaller players, what we sometimes call our base logistics business, that definitely is signing up many new customers and we're seeing a lot of nice business there. I think of a large e-commerce company, not huge in terms of revenue but playing in a niche, actually, a few companies like that, whether it's your pet food or food delivery type businesses, certainly we're seeing a pick-up in the number of customers we have in those spaces and the growth in investment that we're seeing. I think it's still quite early, I think, in the recovery, but what we're seeing in terms of activity, what we're seeing in terms of their response to our new products, which we've really spent a lot of time and investment in and are really now hitting their strides nicely, is something we're encouraged by. And likewise, yeah, parcel and post, a segment where we've been underrepresented. Well, I don't think the segment itself is exactly investing heavily. I think if you look at their CapEx numbers from the big parcel players, they're kind of down, is what they're saying. But we ourselves, because our share was low and we have great technology now, are seeing growth in that business for us too. So that's an overall picture for you.

Just pivoting quickly on semiconductor, I feel like that was the original machine vision market, I suppose, way back when, but as I understand it, a lot of those customers brought those capabilities in-house a long time ago. It's not a market that I think we've heard a lot about from you folks in the last couple of years, but what's changed? Have you just had success? You mentioned machine builders. Have there been other portions of that market where you've been able to make inroads over time?

I think, gosh, if we dust off our history books at Cognex, we go back 30 years for sure. Directionally, I think I'm right in saying that in the late 90s, 70% of our business was in Japan and it was almost all semiconductor. So things have changed a lot. And you're right, a lot of those capabilities were bought in house in the late 90s. But the Cognex technology is great and they rely on us to do very difficult tasks that no one else can do and they have spec-ed into their machines in a market that generally doesn't change providers of technology very easily, in a more of a copy exact kind of mentality. So we benefit from that in a lot of areas of inspection and code reading through the – with wafers and other difficult material for high speed pick and place and align type things that just we do better than anybody in the world and work really closely with those big machine builders. So generally our business with them is going to kind of move with their own sales. It's a market driven thing where we are spec'd in. And then we are seeing opportunities to sell newer technology, particularly around the application of deep learning. Some of the factors I talked about when I talked about AI and what it can do, which can in many cases be incremental business into similar applications that can be done more effectively, require less engineering also. So, overall, it's a relatively small number of customers compared to what we see in the rest of our business. Our share is long-term and good with them, and we're seeing just the quality of our technology and the demand for their products really leading to some nice growth.

Our next question comes from the line of Rob Mason with Baird.

Hopping between calls here, so apologies if this has already been addressed. But, Rob, I heard your commentary opening up around automotive. Taking an incremental step lower, it sounded like – I'm just curious where you think that is in terms of the market bottoming. And what potentially could be a catalyst there to see investment flow back? Does it just need to be redirected back towards more traditional, or is it still going to be reliant on EV to drive that?

I think the market looks very weak, and sentiment in the market is very weak. So we're certainly not expecting a recovery in that market anytime soon. It will recover, right, but not that soon, I think. I think as we might segment by region and application. So I think the companies I've spoken to in America and Europe are really feeling quite burned by their investments in EV that they haven't really come through for them. And I think we probably all know that. I think they built infrastructure to supply perhaps hundreds of thousands of EV. I'm thinking of a tier one supplier I met with recently who had made very big investments to supply one of the biggest automotive companies in the world with hundreds of thousands of a particular area and it's really just tens of thousands and they put capital into that and it's painful for them. I think sometimes with different pricing where you want to play in the EV space, you got a price lower because it's the future. I heard quite a lot of that in Europe and America, and so I think rebuilding around that when the EV supply, EV demand isn't there. We all read a lot about that, the lack of charging infrastructure, the lack of range, the reason Western consumers aren't buying EVs. That'll change at some point, but I don't think in the near term because I do think in the long run, the technology will be superior and I think it will be driven and adopted. But it's going to take time. And where will it happen then becomes the next question, right? So I think as I'm in China, and sure, you hear those people who go to China and see, it's a very different…

And just real quickly, I know it's, again, challenging market backdrop, as you noted, but you introduced some newer 3D vision products this year. I'm just curious what the sense of uptake has been there.

We launched an excellent product, the first product ever to bring AI to 3D, an industrial 3D system. We launched it in April. We're happy to see the growth that's going on in that and we think very much – it has very significant opportunity from here. So it's something we're pleased about. It's a good example, I think, about launching new products. High gross margin products, high growth potential. We hope to do a lot of that next year and sell them through what is a larger sales force to many more customers. And I think we're a little low on time. Maybe that's a good note to end on.

Operator, I'm going to wrap up. I'm just going to say to everybody, I really, really appreciate your joining us this morning and your questions, and we look forward to seeing you again on the next quarter's call. Thank you.

This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.