Gentex (GNTX) 20 Jul 182018 Q2 Earnings call transcript

Company Profile

Participants

Josh O'Berski	IR, Manager
Steven Downing	President and Chief Executive Officer
Kevin Nash	CFO, VP of Finance and Treasurer
Neil Boehm	CTO and VP of Engineering
Chris Van Horn	B. Riley FBR
Joseph Vruwink	Robert W. Baird
Rich Kwas	Wells Fargo Securities
Anthony Deem	Longbow Research
John Murphy	Bank of America Merrill Lynch
David Stratton	Great Lakes Review
David Whiston	Morningstar
Richard Carlson	BMO Capital Markets

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Gentex Second Quarter 2018 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to introduce your host for today's conference Mr. Josh O'Berski, Director of Investor Relations. ahead. go please Sir,

Josh O'Berski

XXXX Steve call morning, Gentex incurred rebroadcast, earnings Corporation to Josh to of of respect CFO; release Investor included Internet Finance joined Gentex Director Good Nash, CEO; second President Vice unauthorized an of by O'Berski, from Gentex always, not President copied, CTO. harbor and Corporation quarter of conference of by I'm the Gentex use party Reports responsible any may forward-looking Gentex of This the content website and of XXXX or conference www.gentex.com. Relations, contains damages President Gentex call shown call and Quarter otherwise you. and contents safe Engineering the results, any within call. the the retransmitted, are the will and Kevin All welcome in website. published, as this and the Corporation Gentex’s at Downing, by hold this Thank of morning, call. financial redistributed. meaning Neil conference press conference statement Gentex and Vice is of This on information Gentex this reproduced, way with icon liable Second and be Boehm, Corporation live the any earlier transcribed the property on on and release for I'm

terms. Your participation in call this conference these to consent implies

Steve, over the XXXX turn I'll give to summary. call will financial quarter the Now -- who second financial

Steven Downing

Thank you, Josh.

unit in approximately second forecast of vehicle second shipments XXXX. mid-April X% and million, compared XXXX, compared the XXXX, $XXX.X reported America sales $XXX sales during expected in for X%, declined increase company's company net North of of quarter. lower the light was For quarter net the quarter than When which quarter in million resulted of the revenue the second of with the actual of to which an production

of a approximately quarter. supplier revenue fire X% related caused headwind the a shutdowns OEM to Additionally, during

the The levels were as Europe year, were in of levels revenue and primary quarter-over-quarter overall rate America, production E in XXXX defined quarter-over-quarter The Korea. context when fell for and D of by growth although down and the the just is which North the markets quarter explainable outside range vehicles production segment. in segments second disappointing of region our of segment guidance over down and luxury X% and market X% American our Japan North viewed

outgrowth down of rate where of X%. in growth market a X% to the were segments our luxury net total represents markets, Our X% quarter underlying an in primary

growth, still primary product While with we believe we about the cadence And level in of balance happy in of part the based the second continue this will the production half of to launch on of our are levels the nameplates monitor we mirror our over our markets, the full-display guidance. of we while half the that top-end year range of year. of remain annual closer optimistic second be to the XXXX

of of driven XX% in to work for the product gross of from XXXX mix XX.X% margin by rate XXXX, quarter and reductions. quarter growth For compared the result first the and margin of lower hard and team's as purchasing manage a cost primarily given the second costs. primarily and from improvement improvements The product the margin the expected gross improved mix gross quarter impressive, than quarter second improved was XX.X% in of was to to first the XXXX, XXXX of a quarter when the

due quarter million, operations second of the when XXXX, sales increased rates XXXX to for income the compared staffing margin mix the levels. expected gross in revenue $XX.X operations second increased negative of profit on interest $XX.X $X.X increased margin in the XXXX, expense. based second quarter percentage to million Other the forecasted increased from XXXX, to effect Xth. second to gross move operating of income improvements second despite to growth from primarily through product and to tariffs to took we $X.X headwinds to the $XXX.X the quarter of compared offset to As opportunity quarter the X% $XXX.X XXXX, expenses second million in and there million compared show due up in expenses. additional part is the us operating by XXXX half from to still growth increased for expenses during of second on of in XX% million, the primarily due in quarter-over-quarter July of primarily Income quarter of when were decreased Operating that quarter of XXXX million the

a a XXXX. by in During the net $X.XX, second share Tax quarter earnings increased per effective second Cuts and income of the with Jobs $XXX of Net compared the the XX% company's second of primarily Earnings XX.X%, quarter in the a compared XX.X% the tax quarter of down the was the and income initiatives the XXXX, the quarter-over-quarter in for rate the $XX.X XXXX the effective lower planning $X.XX on diluted rate to during XXXX, company. diluted outstanding million, by second quarter of in increased reduction basis. second to per tax from of and of XXXX second result of million of impacts quarter shares undertaken with XX% driven quarter diluted of XXXX of as tax XXXX share Act

$XXX.X total of for quarter of common repurchase million per second we shares of X.X stock repurchased price average the During an share at $XX.XX million. XXXX, a of

For million of total total million. $XXX.X per share price calendar of shares of $XX.XX a have for average XXXX, XX.X an a repurchased at we year

the broader from company approximately repurchase capital a our has part plan, intend but in capital for of future of events, repurchase time-to-time market will strategy, As macroeconomic which shares million strategy. part that appropriate. XX, in common We trends disclosed share and our June and XXXX, available announced previously deem of remaining XX.X continue publicly of allocation stock we as account to the remains take the into vary to shares support allocation additional other factors repurchase may repurchases of our share

quarter of XXXX, million to call the our expect on second details. quarter all during quarter to second we of XXXX. term I over principal principal credit $XX.X pay and facility of loan the now Kevin the third on we down remaining paid XXXX financial the During with hand will our

Kevin Nash

you, Thank Steve.

aircraft million, second protection increase $X.X sales the second like and the key increase move were spend related XXXX, X% of few next advanced aided offset in other primarily an net compared feature to $XXX.X quarter XX% an partially time of headwinds, quarter, million in windows X% through points of mirror $XX.X discussing sales. details by as second sales but second XXXX. of second the Driver and Automotive with $XXX.X the fire an that which we'd automotive in compared were additional quarter remainder XXXX. by drove the we net factors of Other unit auto-dimming of shipments the increase of XXXX. of basis, net dimmable net For quarter in in certain results, of sales second the to consideration quarter a Assist was quarter minutes, of products million on Which includes over to quarter XXXX million, sales quarter the some of

established our main of of a strategy that our calendar $XXX in was balances to year reduction earlier investments the for was capital allocation target XXXX. cash million end this focuses the by of One and year

as $XXX.X part were As million million, were capital accelerated long-term the and allocation of combination increased for December primary repurchases reductions our drivers also XX, of debt investments of June down strategy, $XXX these XXXX, included of share from which The short-term XX. cash, and repayments. overall

for earlier income interest year. $XXX.X and company's as to investment requirements, from quarter investments a was and maturities The June current of and an to the In receivable XX, primarily changes change quarterly rate fluctuation XX, in December in capital basis. addition reinvestments. $XXX.X may this due cash up mix dividend Accounts fixed as million to expenditures million liquidity Related to rates on increase due basis. period-over-period of $XXX.X as million from and higher the December $XXX.X as XX, were by Inventories as payments. $XXX.X XX, down June payable of of primarily of million, December certain $XX.X June from increased million XX, of as million million of to driven June on million XX. were $XXX.X Accounts down XX, of levels timing sales $XXX.X from a as liabilities And accrued accelerated repayment. to debt between

second $XXX.X Now XXXX the compared the million, compared quarter increased cash over Neil driven for million million XXXX. CapEx for XXXX. for net product the was was second the million in $XX.X $XXX.X second $XX.X quarter capital. lastly, million, amortization working in was for of compared of and will a with the highlights, second flow the call from XXXX, couple of of the quarter with depreciation with fluctuations quarter flow a And operations and for second hand of of by update. for now quarter income I million XXXX $XX.X second in of cash to $XX.X quarter XXXX,

Neil Boehm

feature In nameplate previously outside headwinds. features launches inside of second there new Thank and of disclosed net you, the XX electronic Kevin. XXXX, of quarter our electrochromic were and mirrors

net quarter, of During XX% launches inside the second advanced auto-dimming features. approximately mirror the contained

domestic and was as by applications, China inside auto-dimming increased four quarter launch as Mirror second highlighted new Display well for HomeLink applications The in levels Full mirror OEMs.

we're Having launch year, Full conference on Display update in XXXX-XXXX and target business for we the product. will able in Also, year. our of of the unit achieve product receive midpoint to XXXX. the quarter award Mirrors on from Display the quick least our XXXX, that call, cadence of quarter startup second to an were well have for eighth half announce we in XXX,XXX secure our during received Full Display the necessary Full Now XXXX OEM around discussed Full the at XXXX. with Mirror would will The Full launches second our in complete nameplates the cadence for remain us to a to be just we're In we’re the additional Display and on additional of production launch year, that customers of optimistic of calendar the OEM half six confident our Mirrors by pleased second the Display of the Display shipping to timeframe. an pace Full we crossed Mirror our over through end Mirror continues year we Mirrors OEM. first shipments this seventh be that OEM

update Integrated provide our to an on like business the activities development and we’d sales Toll Module. surrounding Now

XXXX the begin hand over targeted I period. remarks. time We’re production guidance product. OEM now announce shipments additional are during launches these back Steve call Both will has closing to and company launch of pleased and that the two with officially XXXX-XXXX to OEMs the to for signed agreement second our in quarter ITM XXXX to the

Steven Downing

revenue have billion China Thank $X.XX we you, tariffs to enacted and compared XXXX between Neil. result related XXXX as production the X% billion Based on as vehicle on calendar to and XX%, guidance margin are updating increase account in when the revenues calendar currently a as year. our the with into we the second disclosed year-to-date be for our release half guidance in press updated company between performance gross from year recently gross and as $X.XX forecast year our mid-July our of well half Based our taking expects year. second margin the of for to imports

gross XXXX. XXXX. currently Based million the updating be our we margin and million for year impact tariffs of year-to-date on XX.X% are be to between between $X impact for and actual of second We the the $X XX.X% and gross the the calendar to guidance of tariffs, are half margins estimating

enacted our import potential monitor tariffs We along evaluate implemented that with tariffs other raw continue of materials finished maybe and other goods. to and affect by or these the and countries export impact

and calendar We’re operating of operating projects timing between million its expenditure year and $XXX year-to-date for the the expenses calendar to be XXXX capital result a year and $XXX over is expenditures expenses. new million million down XXXX. between adjusting as our balance of $XXX capital on to company Based range for lowering our estimates be of year the year-to-date of million $XXX

to no and depreciation are estimates changes our rate making for calendar or year We amortization estimated for XXXX. tax

of at XXXX, calendar estimates based to above continues XXXX product Lastly be forecast our XX%. on vehicle and announced year over estimates estimated its X% company previously in mix, changes is making revenue light XXXX range no production the to which revenue for to current be and to the forecast

and year, Full but The based time can of first growth our roadmap delivering to on challenging, half been for now and this rates gross your the questions. the in second Display technology proceed to continues margin company XXXX focused higher of and you be performance has Mirror. half on Thank we today,

Operator

Instructions] line Chris B. Van first of [Operator with question comes Horn from the Riley. Our

now is line Your open.

Chris Van Horn

Display morning, Good for guys. and awards. on call the congrats Full taking the Thanks

Steven Downing

Thanks, Chris.

Chris Van Horn

on additional details on give off that? gross quarter, in first you the was could was it Just the headwind related, us mix any pricing margin it some some you details could share product of

Kevin Nash

Thanks, Chris.

During and you basis. the saw improvement if quarter we sequential sequentially recall actually year-over-year a on both

we a the product product our features. driver underperformance mix, outside saw out primarily growth advanced to by buoyed due some So really our of other that good on assist performance of mirror features was in and some some

purchase cost -- getting pretty sales growth our pleased our a given we’re So costs out bit to or performance offset reductions. with that lower able little better help purchasing manufacturing cost PPV then the and our were inefficiencies of other

X% that pretty in margin pleased on a the basis with expansion growth both we’re and year-over-year given sequentially. So sales

Steven Downing

that would more the I bit the biggest the other were Kevin in that can’t little expansion. say we seen words, that’s Chris the margin have at or headwind offset mentioned the would wasn’t one higher, growth single a quarter just rate Yes, end. if offset you was In

Chris Van Horn

was Okay, getting at. what that’s I

driving Okay, what’s International sense. makes then the growth. And that

shipment seen that? what's content, side, consistent growth You’ve of mirror more there kind double-digit really driving launches, new it customers, the new on both, is

Steven Downing

that Chris? again, Can you ask

Chris Van Horn

I'm sorry.

So international is additional And on side, to that is as nameplates, customers, content continued new new rise both; shipments what's the driving, well? it the double-digits.

Steven Downing

customers. penetration Yes, rates sorry. It's existing primarily of

pretty we to the ship all of mean the OEMs. I number have, relates to we major European much So customers it as

what nameplates are added on So there the products rates. But a does being new higher represent and it is that not vehicles at like per se. more nameplates customer more the then is take to we of and

vehicles and it's more the of European spread Asian that in population the So of much product really kind across the of of produced markets.

Chris Van Horn

detail well then awards, Mirror And it new lot -- obviously give Full is obviously but Okay, tracking OEMs Display on terms can't it. new a award got more Probably very of in activity. are these single to customers with is program the kind to start it of the the a then Is the far feedback And going on it is existing programs? or so and in that? platform? how what's rollout multiple the

Neil Boehm

question. Great

we're And a that talked get to That that we QX additional. already in I The Neil. forms XX always six existing the there then project is about strategy about, the to or will about we additional at that XX regards on ones this the when announced In we have. So question or was primary XX think customers, customers with the customers, be nameplates, talking start a in initial primary QX rollout program expansion to existing timeframe. as least begin. and we closer

go really to really, continues well. that So

of continuing publicly You'll quarter, see end year. the we're out here starting the those next in to those and the see about you’ll be excited that come grow visible through to

Chris Van Horn

Okay, great. all queue. the back hop color. for I'll Thanks in the

Neil Boehm

Thanks, Chris.

Steven Downing

Chris. Thanks,

Operator

David Leiker line from comes the with of Baird. Our next question

Your line is now open.

Joseph Vruwink

Joe for David. This Hi, is good morning. Vruwink

Steven Downing

Joe. Hi,

Joseph Vruwink

possibility? On associated there in is to just scenario do the the and mitigate do I'm expect if impact? you suppliers a million tariffs, qualifying with time a to thinking look can things it, over you $X Asia And actually if that, is timeframe about that worst maybe $X the that? to is do China million elsewhere you'd case secondary wondering

Steven Downing

discussion. of kind looking the the Obviously, million are more at say worse open -- there media $X $X case you currently. million is that every report, but I'd enacted that's range, day a only of Well, tariffs to kind is the

on prognosticate as So relates holds it I don't to the what tariffs. future want to

countries of the in is to many have that relates suppliers in to Asia. offset ability locations possibility As our those, first it multiple our

to obviously in so build supply quite of sub-supplier finished preference would be sources we where that gets pretty longer. our And about product find kind produce That to subject the base plan out to then tariffs. as That second hopefully of every with every aren’t that some those. either be hopefully validation validated stick -- of a and different product avoid current different is time. new does could suppliers remember approved out countries that produce and different products -- final areas the would is significant those they find source is our to They're talking of that The those that of take can a good.

your means change validation to supplier sub so And redo have you that to process.

So that longer. would take lot a

if make those to looking at preference as makes to it, of but other expense It's and around our You're to and typically quite not possible. that creative obviously probably we impossible, XX a look as try is ways XX would bit month a sense to process it find happen. much at

Joseph Vruwink

$X million, of gross really that's your kind thinking money and so $X a then on. lot make that And product option your of product, million markup impact your the customers to a about

do customers’ do here. inflation you overtime have So understanding to ability you is your the think reprice of there

those? then could so front And that pricing just offset

Steven Downing

Well, be it interesting. question addressed that really industry would yet. hasn't The

how so. addresses interesting So increase products. all as relates this the cost the it the the supply effect to whole as took It will be to OEMs just to base see a tariffs with

So at tariff is tolerance it's difficult stage much to price have say change will to how towards related OEMs structure. early this

Joseph Vruwink

industry and segment the And out then Okay. calling underperformance. DE on dynamics

quarter-over-quarter. been this in quarter while a you’ve this whereas gotten now worse looks So actually production it on has going accelerated globally

assume essentially that performance you to well Or been out second any say into the DE benefit is launches lower the just segment should getting product in new anything lessen. anything it’s a are better? DE or to some Gentex’s industry to headwind the going does program maybe there headwind expect more half So so you’d isn’t either share launching, on wise that have call there own overtime, the would horizon DE outlook customers the market exposure segment

Steven Downing

look in in Well, QX I the I I even is quite strengthened if at the mean bit in particular forecast, the North you a segment. think America mean and

So being D that this the stabilize market continues point. and where as we we trend E a see we look don’t forward, to at think it underperform some necessarily continues will

focus start this represented lineup for positive vehicle is as of part us that’s The lot OEM type our versus that to products. on other a vehicles of kind in is, historically sedans, about cross-over a traditional more

significantly. that heading, position still help continue production will launches at macro-trends at production Full And production this well grow if the including to Mirror is we our we’re show seem is think it us look you very where that look optimistic mix So that declining in you if Display doesn’t our to environment. product itself to

Joseph Vruwink

And QX then some on the with number of called the WLTP time of your out and produce my really half into last have second European effect in customers more question vehicles. just needing going same to Europe

in you’d some you’re have expect And I the call-offs just production customer second that half on QX a getting so factored so that you impacts as anticipated in obviously is that inefficiencies forecast you’re and providing? views

Steven Downing

Yes, OEMs from suppliers quarter. our the between we use next and for then our from analysis the also incoming forecast the then forecasting and call-offs that own

we at now all don’t a we that impact significant QX. see to So drive our to inputs forecast right being look and forecast those our in

Joseph Vruwink

thank you. Great,

Steven Downing

Thank you.

Operator

comes question next Securities. Fargo Our Wells of Rich Kwas from

is Your open. now line

Rich Kwas

Hi, good morning everyone.

Steven Downing

Good Rich. morning,

Rich Kwas

so of think up QX Just we on normal meaning the the speaking QX, seasonality of should revenue wise? largely the last it following reflect year balance point, shouldn’t

Steven Downing

Yes.

Rich Kwas

right. All

point? these seasonality in to in move is Europe this not needle at normal So the view impacts your against such enough

Steven Downing

more to there see product Correct than from is that seasonality, by Mirror Full the -- launches. but modest a our launches really of normal launches you’d Display and that’s maybe is more impact a other offset and production what there

rate growth that seeing. the we’re in second is accelerating what half so And

Rich Kwas

in from right stuff… probably gain lift QX And you Meridian fire some post

Steven Downing

headwind to like the expect it’s was in catch time, about these though tailwind production QX levels you that a up QX production that up Yes, honestly at them catch loss and they tougher X% if in but like a modest from that. would

Rich Kwas

put the on that’s on being billion contemplated tariff, where And Okay. the… then the $XXX XX% they

Steven Downing

morning. this from XXX the Or

Rich Kwas

morning. what since days. about it's with mean weeks few as mean, it's about any estimate billion numbers I put gross figure think But limited a basis? Any some mean that's Yeah, we -- presented obviously there for they we this been [ph] probably really What though, about XXX I exposure -- out but -- topic on fluid I mean imagine be 'XX pretty 'XX? you out But let's these just the the for know around, impact? we how particularly fairly we I can't kind potential what a of now. should think would your can I that incremental XXX think

Kevin Nash

our Yeah, I, like not Steve now. right does team supply or chain

but and over million broad, of now -- So potentially not where HCS they it are -- if country couple okay to [ph] those. $XXX all been other at yet tariffs all again it crunching million numbers pretty that. $X of source, that our codes, moment, on, on about probably depending we to covers we an can I different in. like annual we X,XXX they've quantify a because that's it's that higher think, And somewhere said it's don't is once But have out want call basis, resource coming again as in we weeks last $XX on enacted we perfectly this the stuff billion Steve but China, range, than estimate these the with right which inside the have and numbers, all

on think first log So at but what I we've done [ph] may that's change. it

Rich Kwas

Yes, sure.

Kevin Nash

not -- out on definitely we're to not and looking and certainly impactful. something figure way it's it's a too working at it trying …but But through.

Rich Kwas

Alright.

get -- year first day with related you it's half another to balance right? So of this it's next XX, five Because first right year. the five of eight half you Then the to year? would the for get for

Kevin Nash

Yes, exactly.

that to five eight have analyze for to XXXX. You’d

Rich Kwas

XX And on this effect, would be annual of then on the to if top goes basis? into it that, X

Kevin Nash

Correct.

Rich Kwas

Okay. Alright, good.

Kevin Nash

Additionally.

Rich Kwas

just terms of NXB then, of [ph] the section tariffs. European proposed Europe in being And

from that that doesn't everything's done think Europe? where -- do here. would mean, disadvantage we you near-term. have a impact bidding, how some place, But potential in I have it go in have obviously ability manufacturing go would in the quoting XXXX. being your to that about a key the any your How cost structure capacity So of in we to you're you competition think into does standpoint, versus do effect at market, about got

Steven Downing

it's Well, that's out. a European the just horizon. to has something longer Obviously, starting play side

lot impact it lot that there's could over something So years we're But that with a believe to talking two come as that. changes be we we our more looking this and is sure get next customers months a the that to that customers prohibitive move XX if going get on could OEM about to going a around to very business, costs forward, becomes doesn't we're with cost take doing solutions creative those way. have to at make rates. That how we change our effective can our to

Rich Kwas

Right.

as I it's about something start and stuff to we you think out Okay. for just go -- bid mean, to XXXX.

Steven Downing

Absolutely. Right.

Rich Kwas

what elevated of it you just were was Lastly, kind buyback, targeting. versus

least at quarter. think, I $XXX a publicly million around

how just should of second half we about the So thinking the year?

Kevin Nash

Well, the remember a the first actually first lower. half -- little was quarter

quarter the one-time If Fred shares, XXX at of actually beginning at look the you it’s I the then mid-XXs. QX the out think repurchase the you from below would take was in

so, were little then were a of And the playing numbers repurchase a some favorable, of the price. has it, been And very we part QX. we believe from has other catch up of bit situational, which

at the up pace So we end quarter. bit little the picked that a of

Rich Kwas

target for million Okay. still the a $XXX But year? the

Kevin Nash

cash net the is target primary the of Remember the end at the year. position Roughly.

cash in what investments. And XX is on on as million and focused and so long-term $XXX short we're that being that's December around

get on will generation so, gas repurchase bit side. be and we if the the what accelerates the a pedal cash there pressed more And aggressive difference little

Rich Kwas

Okay, you. great. Thank

Kevin Nash

Thank you.

Operator

question from Our Deem comes with Longbow Research. next Anthony

now open. Your line is

Anthony Deem

good gentlemen. Hi, morning,

Steven Downing

Good Anthony. morning,

Kevin Nash

Good morning.

Anthony Deem

long-term I just into to wanted dig near-term then stuff. a issue

Was I seems second that on expected to Mobileye comment? smart miss than revenue or just Driver on Can related greater be in Assist to general. that rolling the so culprit. SmartBeam -- the So, is you in expand off just quarter the that weakness

Steven Downing

really Yes, it was both.

at the If of off. beginning look one the factors, the them of a you Mobileye, couple Mobileye roll was

The other pretty Meridian impacted fire the was significantly. forward factor

Assist our currently. with Ford all so And of businesses Driver

that Driver that in the part Driver orders were quarter. the SmartBeam the as impact last well. some the few Mobileye Assist the did that so then in discussed of Assist of quarters headwinds SmartBeam orders, the And -- And we

Anthony Deem

X%, still And pretty it. shipments, Got they're expected then is which up than strong. weaker

So I basis plant would around fire assume XXX was points. the

So something a XXX around into along the the Or another expectation X%, those that? lines? was maybe So weaker the maybe low expectation or of it points quarter production was basis on was top double-digits? going

Steven Downing

Yes, absolutely.

We basis in we kind on we range. of terms to a were low more top-line of to at double-digits are the and on are expecting unit looking growth also that in dollars, X% on X% going the side be

for North the points by like a So was orders the segment there we believe XXX production the was predicting the quarter the quarter then basis points, and and mentioned about fire the XXX of for in another driven we market quarter. in customer American changes was below D&E primarily being little what everyone

Anthony Deem

product wins And on on FDM. two Got ITM questions and the have I it.

believe. it's great so ITM up OEMs three on So to I

on one Can two mistaken. You Are OEMs. more German might had announced or expand not you today. mass customers those wondering be? I'm if market the who I'm before the just win within help

Neil Boehm

late year. more this And side luxury are We you're brand production goes now luxury yes, vehicles, right. the two other vehicles. three So one have do

Anthony Deem

Okay. And then on FDM.

late be there? So you're by can win that OEM this FDM the or year. on you you gen bidding optimistic Is going still another are the X to gen X

Neil Boehm

would be on X. gen That the

Anthony Deem

Okay.

technologies compete is statement features five solutions. term, that you focused has safety connected going and level imager Gentex's know of Gentex to today to dimmable cabin said lastly, product of year just exclusively long-term, developed thinking car potential vision to exterior team or the to Is mirrors year about plan provider are today Japan oppose if like the vision fair in I backup on think so decontent maybe about an as talked case that's interior see a offerings next longer I be in-house then be with available it so. FDM. being might I Mitsubishi seem the the that your I So actually a new that the mean this is device.

expand to on this technology So and vision additional applicable any is offerings? X level to innovations continues future

Neil Boehm

Sure.

Display in monitoring supplemental point practice, take that completely years' it's the full We have you tend order as will to of believe That's a in can What be If technology. believe models point of that and XXX% important. vehicles system a a introduce to we showing is it's a what that like very used two Mirror, to and consumers at very redundancy to and our digital prototype pull we conclusion combination that that hard vision system. last off with the very the leverage look incredibly that into most at type CES safety on camera cameras in vehicles. we of people displays reached that's mirrors solution smaller guarantee strong Full similar how show though we're difficult theory is possible convince OEMs if to that

some not. Our that displays people experience many enjoyed says digital do

best-in-class And that solution reliability so hybrid of the to our what does safety we're offering is above, a a it's from all we believe combination continue dependability and standpoint. and

and to car about to systems supplier intend and cameras the future. help autonomous So we yes, to that continue kind of vision be displays a bring absolutely of of

Anthony Deem

At concept. was your guys, and us the no appreciate in Okay. side level impression update an and ready you the when that technology under of If X, roll the vision maybe longer on CMS And here products autonomous. digital I in can you I say production I the proof systems. level time. X give rear was one more Can visit I CES

RFQs here thank if the And phase under wondering we're or you. still with CMS. if just in you're So development

Neil Boehm

stage with the still development Anthony, proof Yes, stage customers. it's of in concept

in talking going because the So with kind and the fit on development change cameras mirrors how the business was with as just working product of selling strategy combination still can forward. about. of customers Steve the it process of of that We're into in

at we stage that couple So this RFQs that. the a no on in there process we'll of better a working different update the hopefully is through future And progress have And yet. with are customers. of

Steven Downing

remember. going to what they're And decisions Most take it's as technology. OEMs made important yet haven't to relates type this direction on it clear of

an volume OEM a is most to unique still and in that The kind for phase typically decision this in early by unique beta you of market. this very So test are OEMs. low making referenced applications very applications the vehicles

participated in really on for so keep is make but actual to production of one we're that, what trying an volume OEM. program eye find an now sense we we And in past, those the some that on focused

Anthony Deem

Okay, my questions. thanks taking for

Steven Downing

thank Yes, you.

Operator

comes question Merrill America with John of Bank from Lynch. next Our Murphy

line is open. now Your

John Murphy

morning, guys. Good

on the at is mean, heard kind and the timeline mean you XXXX just they pulled of shooting you it I I XX really it’s First look product us why it’s to sort Europe. mirrors figure mean, or a the of all kind what with rear us. I rare have forward or this that going out view I change, a the tariffs proposed this for at mean of When of all for you order world what's question think of it's there is for trade years looking and pick on at new on tough I've out. for did that risk stuff, is this gets been curious where in lot is to a kind happened? new them

Steven Downing

-- how fascinating develop. covered a to things always of those in It’s categories. it’s items There watch lot is

a of looking kind probably put or find it’s to tariff and probably a more think I generic picture areas. And to at that makes place big sense. ways trying at looking duty industries in So then

and right But plans that’s we’re with. is be as how are they we it to is about pretty our that’s a so a what do I try couldn’t the prognosticating to happen that good pull give right know and of to going around holding mean terms wouldn’t change. timeline EU probably ahead, been we timeline now doesn’t to up working In now go what know far has it about to when it, guess amp true

settles that that just to hoping type some So obviously need sense. forward. become out we and moving not what we’re settlement the negotiated to of a business makes do be keep this prepared to we’re If going

John Murphy

normally through I goes try and been I is you mean, I consider sense? lot I working potentially pass this up yourselves hold made seems mean, with to facility would to there’s guess it’s so world changing, made know Michigan, this mean, has your mean, in And customers the three, of that it very or have five Europe. here in tightened far down if line working -- something two open guys over I you I worked, your make a to which through responses, sense but years have presuming get the a with

Steven Downing

Well, to I to, business to the we’re keep need going mean I like we mentioned before, what do moving forward.

we’re differently. or to willing So to at our be of if cows look impact to we actually have every day are sales, consider alternatives. were to come to -- will course assume would that have negatively start not every into ability sacred And to to obviously hurting situation this no work we and have we grow you there

business that more said, of we’ll work hopeful with current to. we we We’re shareholders. still that’s comfortable willing something most feel in model fashion can most and if do to because being out one has believe confident what need the in that produced this be most reasonable But return we and that changes shakes our course the a for

John Murphy

kind your you on in up see slowed now has kind following you not change in that And are down costs kind investments hit change RFPs on Okay. sort then sort bit. world question response of stuff? just in all maybe in activity coating any where gone But in popping the also you’re pause up this. any your a any of seeing uncertainties other before, and coating business to sort all of activity the that seen little right is maybe where last and capital and some of of of and have as change usual then have a Or on just of really incremental marked things it customers

Steven Downing

because to are No, in. the of process reaction going I in a OEMs see would or see tend would that you don’t this. believe most strategy they think drive core the What you change be product RFPs would logical the ever to

typically a product, in probably take words likely to than instead other of a in a and more would sourcing get scenario of time you rates case period were worst is be that it would once was it would to they’re it impact it only their Because case or be maximum impact to obviously profitability customers you business going only a XX% themselves. from that and rate. at paid would product might changes find looking it’s X take looking XX% so to -- get XX% on However take they happen instead their to rate for you a this of if then be

a get, hey can on options launch. think you three the see out year business upside There’d look So packaging if focus are what’s you an what out of say take stop how this about worst and us good plays rate don’t the be looking product more would case. I total maximum technology and we’re like for to OEMs a at new a going ever in

John Murphy

Okay.

raws, some seeing would general can these dynamics or and through are index? you’re of demarcation And in is then they inflation I it given how just raw be I what and a stuff so indexing there pass material of mean of tariff, with or pass just work from one line that last different happen you’re on either for in just contracts you China, cost contracts increase sort having kind versus curious purchasing we’re mean, the question with market throughs I'm inflation this your might in of any number a just

Steven Downing

going how to the this to are and on whole experience. mean, a -- struggle cost suppliers this are and going that it’s be to of see to OEMs interesting tariff to lot suppliers I as Yes, increase response who what side how many industry react from to a with the is customers the our see going

several is play here yet out. that So quarters. fairly assume be that still out to quickly that and playing I one in the months next will

is obviously there’s In supply a base additional other the whole markets. in terms can really what in now is tariff designed indexing create of you theory lot not alternative do, to do

over worked, theory in would that suppliers long that it this plans in however. avoid would see that run put geographies the you time the to be take tariff able up if So different does

kind we're a where see and so price. the suppliers those And now working accomplish if their better footprint and ways to right favorable products to receipt understanding completely of of with is there their at is geography our

John Murphy

to here, right? Any can over that's those of the chance purpose because get the reach U.S. kind

Steven Downing

side. silicon also you're Right electronics And products the and that's talking then commitment specially capital lot a of that's and want mean very think to possible anything based. foundries on large I if complex. do the about tremendous Even I difficulty regulation them, to investment are incredibly made someone amount these Yes, physical that of comes. plants where issues. and

have I something able get years would to a in basically foundry obviously have new you three plant five not looking go the probably all only to you’re and process, that the mean of a that validation suppliers and producing be to running the you Because the have exist foundry at whole parts. of up to through and then U.S. that then product. OEM to So full before through like go approval be would a

John Murphy

Great, thank you very much.

Steven Downing

you. Thank

Operator

from Our comes Lakes next with David question Review. Stratton Great

open. Your now line is

David Stratton

the Thanks morning. for taking Good question.

regarding expect on ahead X% tailwind a it up sure you in correctly. they're catching want to you it going then supplier, hedged a it around And before, was forward, of I wrapped well that's going but got head but of now, the fairly you my it have think make but just general. trouble kind to issue I I touched with the with

the a think half should of the I that? year, or that you headwind kind melt being continued see So just second How away of looking into that about is do here.

Steven Downing

Sure, the that supplier, several for off down so was based a some of that wasn't line the downs. that fire Meridian weeks couple our OEMs actually kind

So near the already. to problem the OEMs running were up that with full they catching capacity is

you're running weeks capacity to you once hard couple schedule to a of at it’s that it near back couple levels. add So when of production out already lose a into weeks of

So that's issue. the

by little a not points probably full expect tailwind all of constraints those XXX the OEMs. a would basis we just tailwind, capacity bit of in but So because QX,

David Stratton

sequential to in everybody improvement cost and from prepared cost then anything was Alright. out? that a there just just there wondering taking of the I margin the initiative And if And there, helping you shape mentioned highlight was a remarks, overall like that or is you'd management. or that single is is doing little bit lot was

Kevin Nash

goal. the on the kind the with to of manufacturing have our variable fixed There a improvements and costs updates we knows team our on our big time, is helped we see everybody all manufacturing offset think, some quarterly inefficiencies but which I did costs, side. focus in No,

scrap by it offset capital labor call side. improved in So bit a investment little rates and our fixed better efficiency was the

but doing already just So a bit little do, everybody what it's better. we really

David Stratton

Alright, you. thank

Operator

[Operator from Instructions] David line question of Our the comes Morningstar. next Whiston with

Your line now open. is

David Whiston

from of Thanks, like concern Japanese sounds Wanted any of Is difference you're Korean questions follow-up good on or OEMs. in the you Are of the it fair? American not on one that level John's versus say morning. OEMs -- hearing the to tariffs. German kind

Steven Downing

side? tariff the On

David Whiston

Right.

Steven Downing

and as say equally relates and over concerned as -- we manufacture us in I'd how of it the especially importing based to Mitsubishi kind everyone primarily products. parts how Yes, to all is world produce our from

different each in geographical So getting their supplier it's where for think pressure off terms probably of bias. based I they're

David Whiston

will right in Okay. or And the spending your and is there tariff if if going unless or you capital those would is you middle expansion a headwinds keep freeze there it was project, any temporarily? more your recession, various project of

Steven Downing

project Well it depends on what it is. of kind

for like that. deep all is finish. things ways can processes pause. something imagine have you'd expenditures. So make something a you right it's have pretty and like our decision you we hit to different hard to capital a probably than to If mid-cycle It's else We're catching if careful have building about now, building where there how done us you're do of halfway we

hit were wait wouldn't and at the So be to until if for to it timing push or us abnormal was gate happen right. something pause a out

be So executing regular is are happened. right part do history normal the finish. we sure I happening. And our everything to the necessary discipline that to the of in processes, things CapEx a before wouldn't make that that And first company's on mean, we basis. time plan that’s the

David Whiston

the in that you it levels, is out press staffing sales? And increased called line? the Is in release, engineering, on mostly

Kevin Nash

engineering. of combination a It's

that talked we're that some -- new a lot for working launches with engineering development increased bit working A to business on. we're of SG&A our process we the into. and contract markets So there little area, help about in the of levels

engineering combination it’s So levels across kind staffing it’s organization. of that and a selling

David Whiston

very thanks much. Okay,

Steven Downing

Thank you.

Kevin Nash

you. Thank

Operator

with from comes Carlson question Our next BMO Richard Capital Markets.

Your line is now open.

Richard Carlson

morning, guys. Good

Steven Downing

Richard. morning, Good

Richard Carlson

get much on $XXX pretty clarify the answered million maybe have this net year. and just questions been target in all planned so So, far. But the the share want buybacks of to cash million $XXX I

So you're now net already mid-year. cash below that target

being good that plans? a for kind I pretty obviously cadence, how protected, course level in the $XXX flow the with what's and back million with implying comfort in mean, any expected so if -- tell is I do is being that debt rigid something came some you kind leverage And But, along, M&A the what guess that case something about does typical of of us why are that you that million? did year. a can cash So $XXX up? of come

Steven Downing

Yes, exactly.

HomeLink and to the one So the cash, off new actually million now target, potential a long-term we prepare above -- liquid help we're all we're of other loan doing investments. at investments. We're to and about some from remainder above up are LOC open pay Those for debt acquisition. up things right through we're Technically, that we're open we're short-term as M&A. us documents this $XXX we're year, to of right allocation now, a going the working be strategy, through be part going that capital as

we can So, turn anytime basically. we those cash into want

$XXX The a One or from about to million that merger, is of kind if number. the the appropriate. M&A became that focused to obviously, of down allocation like an execute on to the million hold whatever up, getting capital things opportunity $XXX million. And there strategy acquisition the on the put we're point came rigid essence in now $XXX isn't

-- the rule, allocation So in the That's of hard saying work is more not or towards. the strategy an we're M&A strategic. absence something capital fast it's and we're that's not to going that play

Richard Carlson

landscape kind think term and that. of do you. for guys on I kind Got of FDM, you then now the it, thank how forecasting the longer long-term And is market IHS is competitive How targets share? your some projecting

Steven Downing

the competitors, [ph] we've this suppliers. got working on time 'XX, IHS they some we've and -- we been did we're calendar to forecast got about pretty have and good number some on we've from And ago our do Magna's quoting on in like feel said, forecast typical others, space. -- against close OEMs their many in we're X far and we So for unit XXX,XXX solicited hopper, X, actively Neil input working others.

X -- what beyond. that the are announced Gen beyond to technology feel and and really further we to good XXXX we and about growth continuing already prospects, we've XXXX X from then work and that and to both now Gen So in then timeframe

or always is try So stay that's we our to of competition, evolution. with technology how ahead

Richard Carlson

Thanks, guys.

Steven Downing

you. Thank

Kevin Nash

Awesome. Thanks, Richard.

Operator

to queue call in the I'd closing to questions at further for O'Berski, no back time. remarks. this showing I'm turn Mr. like

Josh O'Berski

for Thank your and everyone you time attendance.

New on a XXnd NASDAQ site reminder, and at August for building Just as in be market the our Analysts Investor we'll Day. York

in interested out reach you know. our This Thank is everyone. please So let if me call. attending, and concludes anyone

Operator

now and Ladies may today's participation conference. This your program you gentlemen, have you concludes for in a disconnect. thank the Everyone and great day.

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