Thank you, and good evening, everyone. Earlier tonight, we issued a press release announcing Cognex's earnings for the first quarter of 2012, and we have also filed our quarterly report on Form 10-Q.

For those of you who have not yet seen these materials, both are available on our website at www.cognex.com. They contain highly detailed information about our financial results.

During tonight's call, we may use a non-GAAP financial measure if we believe it is useful to investors or if we believe it will help investors better understand our results or business trends. For your reference, you can see the company's income statement as reported under GAAP in Exhibit 1 of the earnings press release and a reconciliation of certain items in the income statement from GAAP to non-GAAP in Exhibit 2.

I'd like to emphasize that 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. Things often change and actual results may differ materially from those projected or anticipated.

You should refer to the company's SEC filings, including our most recent Form 10-K, for a detailed list of these risk factors.

Now I'll turn the call over to Cognex's Chairman, Dr. Bob Shillman.

Thanks, Dick, and hello, everyone. I'd like to welcome each of you to our first quarter conference call for 2012.

I happen to be in San Diego today with our advanced R&D team, and I can tell you that they're working on some very exciting projects that we will be announcing later this year.

As you can see in the press release issued earlier today, we reported very good results for the first quarter of 2012, results that even exceeded our expectations. And here to give you the details on these results is my partner, Rob Willett, Chief Executive Officer of Cognex.

And for those who are interested, I'll be available at the end of the call to answer any questions that you may have for me.

Rob, the microphone is yours.

Thank you, Dr. Bob.

Good evening, everyone. I'm pleased with the results we reported tonight for the first quarter of 2012.

They were slightly ahead of our expectations.

Revenue grew 4% over the first quarter of 2011, despite significantly lower revenue from the semiconductor and electronics capital equipment market, resulting from that market's downturn. The broad range of industries that we serve in the factory automation and surface inspection markets drove growth in the first quarter.

From a product standpoint, ID products continue to be our leading performer, increasing 29% year-on-year. Gross margins remained very strong at 75%, reflecting the value of the Cognex customers recognize in our technology.

Operating margins of 23% tracked with our long-term target despite the investments we made in new product development and sales force expansion to drive future growth. And we reported earnings of $0.33 per share, an increase over the $0.32 reported for the prior year's strong first quarter.

Now let's turn to the details of the quarter. Revenue from the factory automation market was $59 million and accounted for 76% of total revenue.

This level represents growth of 14% year-on-year. As expected, factory automation revenue declined by 5% on a sequential basis due to seasonality we typically see at the start of a new year.

From a geographic perspective, Asia was our best performer during the first quarter in terms of percentage growth. Factory automation revenue from Asia increased 31% year-on-year and 12% from the prior quarter.

Although a slowdown in the consumer electronics industry has cooled our growth rate, especially in Greater China, Asia is still growing faster than the rest of our business. On a sequential basis, growth was led by strong sales in Korea.

Sales to the Japanese factory automation market increased 21% over the first quarter of 2011. While spending on automation equipment is sluggish in Japan and the consumer electronic slowdown has dampened growth, our business continues to grow well through the Mitsubishi channel following the setback of last year's earthquake and tsunami.

In Europe, our factory automation business held up well, considering the region's economic news, increasing 12% year-on-year. On a constant currency basis, the growth was 16%.

Strong performance in automotive, consumer products and food and beverage offset significantly lower revenue from solar customers.

And factory automation revenue from the Americas increased 8% over the first quarter of 2011. We saw good forward momentum in the broad factory automation market, with particularly strong performance in automotive.

Revenue from the semiconductor and electronics capital equipment market was $6.7 million in the first quarter. This represents a decrease of 47% year-on-year, or a reduction of $6 million.

SEMI revenue increased by 28% on a sequential basis, which was a positive development. It appears the downturn has bottomed out and the market is beginning to recover.

In the surface inspection market, first quarter revenue was $11.6 million. This represents an increase of 20% year-on-year and a decrease of 28% from the record level reported for the prior quarter.

Surface inspection revenue can be lumpy due to the timing of deliveries and installations and the impact of revenue deferrals. Demand for our surface inspection systems remains solid in both metals and paper, our main vertical industries.

We are pleased that the investments we have made in new product development are helping Cognex grow revenue despite challenging conditions in certain industries and geographic regions. The new Cognex products hitting in the market today are more powerful and easier to use than ever before.

One example is the DataMan 300, the latest addition to our lineup of industrial ID readers. Incorporating our groundbreaking new Hotbars technology, the DataMan 300 is a self-configuring barcode reader that can read the most difficult 1D and 2D codes as they are presented at any angle on high-speed lines.

This reliable and versatile ID reader is opening new opportunities for Cognex in both manufacturing and logistics.

In the first quarter, we also introduced OCRMax, an exceptional optical character-reading software product for our In-Sight and VisionPro platforms. OCRMax is a very powerful, accurate, fast and easy-to-use tool for reading and verifying character strings, such as vehicle identification numbers on automobile parts and date and lot codes on aspirin bottles, soup cans and cosmetic packages as they move on factory conveyors.

OCRMax can handle character variations, text skews, proportional fonts and variable string lengths easily and at the highest read rate. Customers are using OCRMax in applications that until now were extremely difficult for machine vision to perform.

OCRMax and Hotbars are 2 examples of the software innovation for which Cognex is recognized. They are highly advanced technologies, but difficult applications, that enable us to maintain high margins and win new customers in automotive, food and beverage, pharmaceuticals, consumer products, logistics and other target industries.

Our sales force expansion is also contributing to top line growth. One reason for our momentum is the additional sales engineers we have added over the past 24 months and the quality of the people we have hired.

We are building our numbers of sharp, highly motivated sales engineers who are committed to Cognex.

Further additions to engineering and sales are planned for 2012, although at a slower pace than in 2011. The consistent investment we make in our business reflects the confidence we have in our plans for growth.

For the second quarter, we expect that revenue will be in the range of $82 million to $85 million. This range represents an increase of 6% to 9% over the revenue reported tonight for the first quarter.

We expect little increase over the second quarter of 2011 because growth in factory automation and surface inspection is expected to be offset by lower revenue from the semiconductor, electronics and solar industries. Operating expenses are expected to increase by up to 3% on a sequential basis.

And the effective tax rate is expected to remain at 21%.

Now let's open up the conference call for your questions. Operator, we are ready to take questions.

First off, I wondered, Dick, if you could talk about stock comp in the quarter. It was a little bit higher than it has been historically.

Is that a level that we should think about or expect going forward? Or is it something that should moderate back down closer to historic levels?

Well, it will moderate down. What we have is we issued some options in the fourth quarter of 2011, so we've got a full quarter's worth occurring here in Q1 versus what we had in Q4.

So that will explain some of the increase. What we will have in Q2 is because, typically, a lot of our annual grants have been made in Q2, in Q2, we see the true-up from forfeitures or whatever that have occurred over the course of the year.

So I would expect that the Q2, we will see a lower level of option expense than you did in Q1.

Then I also wondered if you could talk a little bit about, kind of, geographically, what you're seeing? I mean, is Asia, as we kind of get into the 2Q so far, is Asia remaining robust?

Europe was a little more -- a little stronger than what I had initially potentially anticipated. And does that growth continued or is it softening given all the other economic woes?

Sure. So you started asking about Asia.

Yes, I would say we saw a strong growth out of many markets in Asia in the quarter, particularly Korea, as I mentioned. But also more broadly, Greater China had been slower through the back end of last year.

Although it's a major growth driver for Cognex, that growth rate has slowed down through that back part of last year. But we're now beginning to see that accelerate in terms of what we're seeing in that market.

So I think we're optimistic about China growth as we move through the year here. You asked about Europe.

Yes, we did report some pretty strong results in Europe, and we're seeing continued strength in that market despite what we're reading in the press.

Okay. And then just one final question, if I may.

I wondered, as you're getting more traction in the logistics market, is RFID or other types of competing technologies, anything like that, creeping up to be more of a competitive threat? Or could you talk to that at all?

Yes, generally, we don't find we're competing with RFID technologies in 99% of applications that we're seeing. I mean, obviously, the cost of RFID is very high in comparison to reliable reading of barcodes, which is what we do.

And the only place we do see RFID might be in very high value or much counterfeited pharmaceutical-type products. But it's really not something we consider or see as a growing competitor to what we do.

The ID business, looked like you had another very strong quarter. What did it represent as a percent of revenue?

Because I think you mentioned it was up 29% year-over-year.

Yes, that was the growth percentage. Let me see here.

Dick, maybe while you're looking for that, Rob, are there any wins in the logistics market that you can point to with DataMan or perhaps the broader ID business that gives us a little bit better sense of the growth that you're seeing in that particular segment of the ID market?

Yes. I think we're still at the early stage of kind of the logistics market adopting the technology that we have.

But we're seeing -- and we're seeing quite a large range of small-scale purchases among companies that we're targeting. So I'm not really at liberty to disclose names, but they are major players in the field.

And we're expecting to see that business continue to ramp up as they see the benefits of our technology and adopt it.

Jim, to get back to your earlier question, ID products accounted for about 21.5% of total revenues in the quarter, which is up from 17.3% in the first quarter of last year.

Great. And I'm curious that you -- one of the areas of strength that you called out was Korea.

What was that -- what do you attribute the strength you're seeing in the Korean market? Any particular vertical?

Well, Korea I think as an economy, particularly in electronics, is doing extremely well. I think it's absorbed quite a lot of electronics manufacturing market from Japan over the last few years.

And then, obviously, it's a major market for smartphone manufacture. So certainly that's one industry where we're seeing a lot of growth.

Okay. So much of that coming from the electronics market.

And it sounds like that portion of the business, if you include SEMI, it does sound like it's bottomed and potentially you'd see that improving as you go through the year?

Yes, we're cautiously optimistic about that, yes.

Okay. Any target in mind, just switching gears, looking at the Mitsubishi channel?

Any target as you look at that business this year? It sounds -- you sound somewhat encouraged by what you're seeing in that market, at least from the factory automation side.

How do you see that business in 2012?

Yes. So in terms of market, it serves the very broad base of factory automation markets in Japan.

So there are more than 1,000 Mitsubishi distributor salespeople with In-Sight and our other products in their bag. We exited last year about a $10 million run rate on that business, and we would expect it to grow faster than our business overall this year.

I wanted to ask you a little bit about your initial thoughts on the In-Sight 7000, whether it's meeting your expectations? And do you see the product more as kind of a classic upgrade to the core machine vision system?

Or are you seeing evidence of it perhaps expanding your opportunities into new markets?

Yes. So the In-Sight 7000, which we began rolling out at the start of this year, it's very compact, very powerful addition to our In-Sight line.

Initially, we're targeting that particularly at some of the lower-priced points in the vision systems market where, traditionally, we have not been as strong a player as in other areas in the market. So -- and that, obviously, particularly applies to emerging markets, where there's a demand for lower price point, easier-to-use powerful vision.

So that's where we're starting out. But we do expect that product to broaden its served market over time.

Okay. And then also, Rob, just a question in terms of competition.

Are you seeing any new developments from Keyence and SICK in the North American market? Meaning, from your perspective, have they upped their presence in the market or is it sort of business as usual?

We continue to see them present in this market and we continue to see them investing. But in terms of any quantum change in what they're doing, no, there's nothing to report there.

Two questions. So first on -- how should we think about your web and surface inspection on a year-over-year growth for 2012?

And as a follow up, I just wanted to understand how -- what are the margins now? Have they improved from last year?

Can you give us some idea on that.

Just to clarify your question, you're asking about the SISD surface inspection business both in terms of growth and margin?

Yes.

Yes. Great, okay, yes.

So we're very pleased with how our surface inspection business has been performing over the last year or so. We saw it increase 20% year-on-year in the first quarter.

And we've also seen our margins in that business, operating margins, improve significantly from high single digits to right around 20% today. So we've seen a lot of improvement and a lot of stronger management and focus and operational improvement in that business.

Generally, we don't give targets for the full year, but we do expect to see that business continue to growth -- to grow and continue to report strong margins in 2012.

And the other thing is that given that your Vision Systems has higher margins, how would you kind of look at that gross margin trajectory as you progress through the year?

Yes. So we've reported gross margins of 75% in the first quarter.

I think that was very similar to what we reported in the fourth quarter of last year.

Yes, what we had was a couple of things that happened during the quarter. First off, the surface inspection vision business represented the greater percentage of revenues in the first quarter than they did like in the first quarter of last year.

So that would have dampened our gross margin. But we saw improvement in both divisions on the product mix and to a certain degree also absorption, especially at the surface inspection division.

So pretty much as we take a look at our current level of business and expectations, we would pretty much expect to be at around the 70 -- or be able to continue at around the 75% quarter-on-quarter.

Fair enough. And just I had a quick -- just wanted to get this clarification.

What level of penetration do you think you have on the DataMan 302? Do you sell it to the equipment vendors or directly to the wafer or the cell manufacturers?

For the DataMan 302, I just wanted to find out, do you sell it to the equipment vendors or directly to the wafers or cell manufacturers?

So the DataMan 300 family is a broad-based factory automation product, right? So we sell it into all of our major factory automation markets, major ones would include automotive and electronics, and we're also targeting logistics.

But it's a very broadly sold product. It's -- although it can be sold into SEMI and other -- like solar applications, the main target is really factory automation.

Robert, if we just look at the Americas and we look at the 3 primary businesses, the factory automation, SISD and SEMI OEM. I'm curious, factory automation, you said, was up plus 8%.

But what did SISD and SEMI do to aggregate to a 4% growth rate?

Sure. Dick, can you...

Yes, let me take a look here. You're talking about -- we had a decline in -- the 4% was that quarter...

8% over the first quarter of last year.

Okay. Yes, that was in -- it was plus 8%, factory automation; minus 48% in SEMI and plus roughly 26% on surface inspection.

I see, okay. And so if I -- so let me ask another question.

When I just look at factory automation now across Cognex and we have this -- we have the 13% growth in the quarter. And you have in the past been pretty adamant about targeting 20% for that business, for factory automation.

And when I'm looking at the growth rates that you provided, I guess I'm curious maybe where we need -- we're a little bit softer, and I guess it's Americas. And I'm trying to figure out, what end market might be holding us back a little bit in FA Americas?

So I think we've reported a 14% year-on-year growth in factory automation, right, in the first quarter. I think one area where we've seen headwind on growth is in the solar market.

So a year ago we were seeing very strong orders, particularly in Europe and in America, on solar. And we sized that kind of headwind this quarter and probably next quarter at about $3 million.

So if you add that growth back in, then we're getting more into the high teens.

Okay, all right. And then just one last question for Dick.

On -- in the, I think it's in the working capital on the balance sheet, there's a $6 million use of cash. I think it's working capital, it's kind of other.

And the swing factor year-over-year is kind of more like $8 million. I'm just curious, is that -- what is that?

Let's see, 6 well -- $6 million when in the fourth quarter -- or the first quarter compared to year end, 2 big chunks make that up. One of which is the payment of dividends -- not dividends, I'm sorry, the payment of bonuses to the staff.

And secondly, we had to make in the first quarter some fairly significant tax payments due to the profits that we reported in 2011. That was not as significant last year in the first quarter.

While we did pay bonuses last year in the first quarter, we didn't have the significant level of tax payments because we had net operating loss carryforwards from 2008 and 2009 that helped offset some of our profits in 2010, and we didn't need to make big tax payments.

Okay. So between the tax payments and the bonus payments, you did not make those in the first quarter of '11?

In the first quarter of '11, we made bonus payments. We did not make -- we did not have to make tax payments.

And those tax payments were fairly significant. The other comment I want to make relative to your earlier question relative to the 20% factory automation growth target, we have not specifically given out guidance or targets relative to regions.

Our target for factory automation growth is 20% on a consolidated basis. North America happens to be the most -- the more mature markets or whatever.

And we would expect that our future growth in factory automation, percentage-wise, would increase more in some of the less developed regions like Asia, okay?

No, I understand, okay. And then just one last question for Rob.

This OCRMax product that's being introduced, is this targeting the pharma serialization market?

Well, that's certainly one market that can benefit from it, Rick. But certainly there are many markets, particularly consumer packaged goods, high-value consumer packaged goods, beverage, document printing.

As we look out into the second half of the year, do these -- the headwinds from the solar market, do they began to ease? I don't recall.

You guys started talking about weakness in that market, I believe, in late Q3, Q4. But maybe you can give us a better sense?

Jim, winds and solar, you definitely got the renewable metaphor going there. Yes, what I can say, yes.

We saw a lot of growth in solar through 2010 and through the first half of 2011, and then it really fell off dramatically through the back end of last year. So by the time we get to Q3, the comparables get a lot easier for us.

Okay, okay. And looking at the Greater China region that you talked about, can you give us a sense, what was the growth rate in Q1 year-over-year?

And how does that compare with the growth rate in Q4?

Yes. So we saw our growth rate in China very high in the first half of last year, right?

And then we began to see it slow, still pretty strong growth but slowing as we moved through the second half of last year, right? And then, in factory automation, I'm really focused on here, as we came into the first quarter, we began to see it flatten.

And we're now seeing it begin to grow as we move out of Q1 and into Q2. It's kind of where we're at.

You've put a fair amount of resources into China, Rob. Is this a market that you would think is going to grow well in excess of the target you're looking for, for factory automation as a whole?

Absolutely. So yes, in the long-term, we're very optimistic about, and the growth we have seen over the last 2 years has been very, very strong in China.

We see China really build early in its adoption of machine vision technology. And our business has tended to focus a lot on electronics in that market.

But now we're really broadening it into the full range of end-user markets. And there are really great factors kind of helping our growth there, rising labor costs, more attention to quality and a much more demanding internal market of consumers in China, all of whom can benefit from machine vision.

So we've been investing strongly in that market, and we're very optimistic about our growth prospects there.

Is it currently a distant second to Japan in that area of the world? Or is it -- I'm trying to get a sense how big it might be.

No. I mean, all up, it's only a little bit behind our business in Japan.

Yes, I had a quick follow-up. I just wanted to get a sense for this OCR product that you guys talked about.

You talked about these consumer packaging goods. Can you give us an estimate of what this market size is and what kind of growth rates are we looking at for the next 2 to 3 years, and where do you think your share could be?

So what's called OCR, which is optical character recognition, is the ability for machine vision to read accurately numbers and letters on products, right? And it's something that's been done for 30 years or more by our industry, but it's extremely difficult to do.

And our new tools in that space allow us to do it better than anybody else at higher speeds, with more reliability and more ease -- easily for users. So the size of that market really overlays on the size of our whole market.

So it's a large part of what we do. But it's particularly important to some of those industries that we mentioned.

But they do include automotive, they do include pharmaceutical there. And to give you a specific number on that, it's a little bit hard to disaggregate from the whole vision business, the market that we serve.

Okay. I just thought that it was something that you guys have increased traction, and I wanted to get a sense on that.

Yes, yes, we certainly have.

Just a follow-up question on the automotive market. I know, Rob, you called out in your prepared remarks the strength that you're seeing in automotive.

It sounded like it was around the world. But I was just curious if you had seen any declining rate of growth within automotive in the U.S.

or whether that continues to be a real standout vertical for you?

Yes. It certainly continues to be strong for us, Ben, yes.

So automotive, in terms of what we reported tonight in Q1 results, looks like a continuing source of growth for Cognex in the U.S. and everywhere.

Okay. And you would expect that to continue into the second quarter?

Yes.

Dr. Bob, you referenced a lot of R&D work in a new product pipeline.

Can you talk a little bit the -- maybe the timing for some of these new products and how -- and possibly the significance of these? I assume they're mostly for the factory automation market?

Yes, indeed they are, Jim. And for competitive purposes, I'm not going to state anything that's going to give anyone a clue about what the products are.

But I will say that they're products that some of our competitors have and been making money with, very complex products and -- in the factory automation space. They are machine vision and space that we've never played in before.

And we will have, I believe, a significant technological and perhaps even price advantage over our competitors in that product space. This is an area that our marketing people and strategic marketing people and Rob have identified by looking at some of our competitors, and we put a very strong team together of R&D people who are here in San Diego and also in our office in Europe.

And then a productization team in Natick. So without telling you the date, it's going to be later this year, we'll be doing some beta sites, and expect some real significant revenue in 2013.

Okay. And one final question for me.

I was just wondering, how would you characterize the acquisition environment at the moment?

It's never as positive as we'd like. We have -- and we're in a strange business, and there aren't that many companies in this business.

We've acquired some of them, many of them have gone out of business. As I've often mentioned, when we started Cognex in the early '80s, we had 100 direct competitors.

None of those are around today, most of them failed, some of them we acquired. But it's a difficult environment for us to find both companies that have products or technology or distribution channels and which are worth buying.

So we have one small acquisition on the horizon. I would say it's at the front burner now, and we expect probably to close it, I'd say, in this Q2, perhaps early Q3.

It won't be a substantial acquisition. It's a rather small company, but it has some nice products and they play in a space that we're not currently in.

So that's likely to occur, and most likely in late Q2 or early Q3.

Okay, it sounds like we've answered most of your questions, and I appreciate all of you, your continued interest in Cognex. We had, as you can see, a very good start to 2012.

I'm just cautiously optimistic. We watch the global economy.

We're careful about our spending. We're delaying some of the spending, matter of fact, because we're cautious.

But we, nevertheless, we're still planning for a growth year in 2012.

Thank you for joining us tonight. And I look forward to your participation at our Q2 2012 conference call.

Good evening.