GNTX - Earnings call transcript Q4 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Gentex Reports Fourth Quarter and Year-Ended 2018 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] I would now like to introduce your host for today's conference call, Mr. Josh O'Berski.

begin. may You

Josh O'Berski

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

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

summary. the turn quarter will over Now, I financial will Steve the call Steve? fourth who to and XXXX Downing, give

Steven Downing

Josh. you, Thank

quarter XXXX. net for decrease quarter million, reported of compared the sales net to of of fourth fourth sales a company million the $XXX.X the of $XXX.X For X% XXXX, of

of slight quarterly production quarter showed schedules as in for estimates shipments fourth quarter quarter decline from China Markit and changes $XX At the impacted a to fourth production IHS combined beginning combined growth as adjustments tier the impact tier X% X a approximately and The of unit revenue. North negatively X regions for at decline in of shortfall the as shutdowns production these result The markets approximately the and XXXX, and revenue X%. nearly of order the company the a actual of plant net to negative market. certain Europe, at of During unit vehicle OEMs customers well Japan, America, total XXXX, production of adjustments Korea, on orders fourth the million XXXX. and fourth a in the the quarter of for was vehicle

to the initial primarily adjustments XXXX, interior partially forecast assumed were sales auto-dimming billion, of mirror company's China. The for primarily vehicle the affected fourth on America, compared X% year XXXX. an X% a tier billion XXXX that rate production unit shipments, calendar growth mix forecast and exterior X% for Korea, and and to net result North X Japan, headwinds, for vehicle was that of approximate Europe, production based shortfalls, quarter a company's $X.XX increased offset as in $X.XX calendar increase XXXX, For a of product which by year

approximately However, production vehicle were the markets those calendar in for down X%. actual rates XXXX year

sales of particularly our And While adjustments year order in XXXX In you approximately consider over markets North market. by America. Europe fourth of quarter when encouraged of gross the are highest XXXX rate effective negatively X XXXX The XX XX.X% basis that customers, the margin gross by during levels compared underlying The XXXX. in the despite tariffs outperforming grew versus quarter the for, the fourth and of was mid X%. very our XXXX. quarter light end, during in growth outperformance to was of our this markets finished margin in close top quarter third gross and XXXX with with our that tier poor from not growth we penetration the had goal single-digit of of vehicle the XX.X%, hoped content dollar underlying fourth line points we performance production, was the stated impacted a of margin became was our our

For customer not to in calendar performance gross were by and gross reductions. that tariffs When we that on the produced, by pleased negatively this with fully year reductions gross lower-than-expected a considering overhead annual offset that the was revenue the light vehicle production poor for XX.X% cost XX.X%, purchasing price compared costs XXXX, impacted XX were with that during The the during year calendar lower-than-expected the sales XXXX. the gross The and the the became fourth company's during third basis quarter given from year was margin margin margin year levels Other XXXX. margin impacted points the XX.X%. of factors XX the of sales inability gross points of overall lower leverage level. margin from included fourth gross expansion the effective was basis XXXX fixed margin quarter the of to approximately impressive,

to the the we when in fourth ramp the to the the sequentially given incremental the during the third basis of in The for tariff of of the if quarter of the quarter million cost $XX.X if XXXX Operating difficult, XXXX. basis of operating of of improved end were expenses margin margin XX Additionally, tariffs each then fourth fourth XXXX, points X.X% further XXXX. year, expenses the margin expanded QX. second-half by are but the tariffs XX in of points fact, company QX, from the quarter, exclude quarter of up quarter year comparisons gross tariffs have the impact improved gross $XX.X million not during compared throughout that the incremental up the without throughout to would gross QX in began at

XXXX. income compared to in the the during operating fourth to the million XXXX. for as of $XXX.X of income versus XX% the of fourth $XXX.X compared by the fourth year XX% tax benefit fourth net excluding earnings during of in compared the $XX.X by tax by of in of positively quarter were Net XXXX positively as XXXX. million, as Act the by by When XXXX, Cuts XXXX of increased the million fourth in one-time quarter positively share was and lower quarter XXXX, result income rate fourth per XXXX XXXX year Tax of For $X.XX of Net calendar of increased When in tax these expenses Act tax the the that Cuts excluding effective $XXX.X of for calendar in income $XX.X benefits XXXX Jobs XXXX, Tax of XXXX. in result one-time for the income excluding effective Act. and calendar fourth that fourth quarter million impacted a a XXXX. became the one-time the fourth impacted quarter of net of the result When Jobs income was diluted by million quarter benefits year these fourth XXXX, diluted with to Net Tax $XXX.X of income compared up compared XXXX the XX.X% in per income with XXXX compared impacted of became XXXX. when net million, a effective when XXXX, a net earnings was quarter XXXX. of X% calendar was in per quarter quarter were quarter year of quarter Earnings primarily increased driven $XXX.X quarter for during of the million Cuts calendar up XXXX. quarter with the Earnings were XXXX fourth Net the XXXX. year fourth X.X% share fourth $X.XX, the $X.XX diluted for XXXX per in $XXX.X during million, quarter fourth share and Jobs of share

the which a for as $X.XX Cut the calendar diluted share for repurchased a during of $XX.X one-time Act. and positively XX% XXXX. by increase XXXX, increased share share the the million year were a excluding of result were in The For earnings the year-over-year during total Earnings in calendar with was year common per X.X repurchase benefit per of impacted stock for company calendar fourth Jobs XXXX $X.XX diluted $X.XX, tax year quarter versus When its per XXXX XXXX. shares quarter. Tax of XXXX, XXXX share XX.X% million earnings compared

ended to Kevin over year of the $XXX its XXXX, stock repurchased fourth of company the million the a hand XX, shares for XX.X financial the call total now for common details. December million. For quarter I will

Kevin Nash

the $XX.X quarter million the year and XX% quarter 'XX to calendar compared compared Thank quarter with X% fourth net when you, sales Steve. of XXXX, calendar year $X.XX 'XX, in down 'XX. to in Auto-dimming with calendar increased with calendar quarter up in fourth 'XX mirror million, $XXX.X 'XX. unit of up shipments fall of million we're million $XX.X were of 'XX in year quarter fourth and XXXX compared billion were increased Automotive $XX.X fourth the with in up And in Other $X.X 'XX for with for the when million X% of sales XX% were X% quarter net 'XX, year billion, 'XX. calendar calendar $XXX.X 'XX. year year $X.XX the of in compared million fourth fourth X% the compared compared

capital to The Cash from also primarily were dividend payments, expenditures, XX December million, accelerated which update. 'XX, down and following and purchases, from items in release. debt of equivalents sheet flow balance for repurchases, today's cash share operations. offset sheet million are more repayments, Now versus press a cash balance comparison due which included investment $XXX represent than $XXX.X

$XXX.X from forecasts. to from and during declined the down $XXX.X support of the material slightly million and primarily long-term allocation $XX.X income from primarily sales March receivable the the to and of to quarter, to were up the primarily are calendar primarily during levels timing to Prepaid due due was investments to $XX.X increased the accrued Accounts with sales were company's $XX.X production and line in in adjustment $XX.X increased million, during due investment refundable from $XXX.X order Inventories million changes unexpected And million, 'XX. sales million payoff comparable were were XXXX. million, million, XXXX. the Accounts inventory revolver $XXX million liabilities in million. million expenses due taxes. due from $XX.X announced periods in $XXX.X up to Short-term XXXX quarter year-over-year. term the from $XXX.X levels $XXX.X from QX to million, and raw payable loan up All lower up plan $XXX.X of purchases million, these first $XX.X investments capital our million, million, of

increases some in but deferred net the flow were for income, million calendar income. in for quarter the with was million from 'XX, partially were and flow year $XXX.X cash by in million flow fourth cash 'XX Capital fourth primarily quarter in fourth million by quarter expenditures working versus Now net and capital of for of $XXX.X cash lower $XXX.X $XXX taxes, changes by million quarter XXXX of $XX.X highlights, from versus driven offset for 'XX, operations driven fourth 'XX. calendar million 'XX, the compared $XX.X was operations

compared capital fourth calendar down fourth of quarter significantly For was 'XX. million for in $XXX 'XX, estimate compared $XXX million 'XX of calendar with and to was down Depreciation year $XX.X $XXX 'XX, $XX.X from our from expenditures to quarter estimate the year for our million $XX.X of a calendar and million. the depreciation year with 'XX $XXX.X and million $XXX $XXX million which year year amortization the $XX million for beginning of million 'XX year. million of compared were the calendar amortization year significantly also with for And was million of beginning for

plan. an an of for the the its million repurchased ended $XX during the per In stock And Neil XXX% shares price X.X of December product quarter XX, additional shares CES has for repurchase details to average compared year to company million announced of on in share. of hand year price fourth repurchases will million the XX.X repurchases, stock its share $XX.XX common share. of in of share the million XX company previously for repurchased for total, Now 'XX, the XX call X.X over as per shares available the remaining repurchased shares at the increased 'XX, common now the of some I 'XX December company ended December update. average when of for XX and 'XX, and

Neil Boehm

We allowed use and The digital and dimmable opportunity on Electronics for consumer were important designed our displayed show made at of judge the the customer fit as CES XXXX, for XXXX XXXX to in to consumer the The large Show. Gentex way show the CES Thank this future. our the future. Consumer customers ideas perfectly could took an were year devices capabilities. we to into our customer we those interest so Gentex dimmable products fit could in were roadmap like the CES technology the available a dimmable was that and to month, strong effort how This our theoretical OEMs of vehicles summary technologies regarding the and that you, devices devices of-the-product curved environment. vehicle and We our our to us concepts future. of in CES application. to tremendous devices. look a automotive great It see that in This how At the currently we what allows showcase ever a future. Kevin. connected where interest Earlier technologies going of to vision, our demonstrate the booth. theoretical platform required to apply show a this devices was technologies and to concept as year dimmable technologies vehicle, get are curved last our This made-for-production evolution- our our at and utilized in experience of engineering at focused the to displayed today into larger, concepts dimmable we CES showed year from this and can note devices showed products year application technology of changing from is examples last in sunroof a to

dimmable system full display our One a Volvo monitoring large booth XCXX mirror, of a with outfitted was XCXX. was the This sunroof. vehicles and camera on our at hybrid our display

The sections versus factory section. remained rear of features integrated sunroofs the installed us these device were glass roof the of look what to had limitations clearly today. our these represent large system the glass a the a allowed placed was large dimmable technologies. would front like production with in a vehicle of section existing value This technology two in dimming demonstrate All to and where device in the

and technology provide booth our Another to at sunroof. ability The the to demonstrate iris-based cases CTS-V. to able putting diming in had Cadillac help GENX we and for security mirror The this control curved to new positioned were sunroof all biometric enable and vehicle system comfort sensitive the iris-based show was GM demonstrate this dimmable to vehicle the and to By the dimmable used Cadillac and be system used transactional to convenience information of security vehicle, how technology at become from we level. features biometric was large everything benefit us a clearly display a with the our installed applied our full and vehicle shaped allowed vehicle can to different in sunroofs.

of the of the vehicle today be continue our in CTS-V. the at displayed from to consumers how vehicles and future. show the very both of customers the interest the and the vehicles We XCXX high both technology to diming and in clearly level to encouraged Volvo devices these of applies large OEM Both Cadillac help

we On XXXX We on display the will at with Boeing offering a Boeing platform. be windows the switch the showing opening our to window and assembly that announced have Boeing day electronically of dimmable booth. XXXX partnered panel CBS,

are growth extremely excited window the our and a interest We as business first aerospace. of to in see program our announce tier continued the to I XXXX and as aerospace

a interest was for new environment, of and net launches. our inside the product of production quarter. on features. highest shows nameplate years, the in quarter difficult launches new were in and the technology. the to with XXXX and rate launch feature XX continued mirrors great electronic we over outside fourth advanced launches electrochromic Both and quarter the rate This company products believe fourth the electrochromic quarter strong it and launch HomeLink our vehicle Moving outside in mirrors Despite product net nameplate was

in latest Blazer. has on shipping we XXX,XXX high the update Including display partner XXXX, the last over volume RAVX. on of we Now the mirror for display great shipped global Silverado the them been and well product announce began shipping Toyota way mirror development shipping activity, to the on display fourth full for an shipping vehicles, mirror full units our that Toyota this years. on pleased units several in these XXXX. quarter full we and of technologies XXXX, Chevy And fourth our in on various Gentex launch vehicle XX goal is are markets. products full see global Chevy nameplates of a quarter currently we during the excited mirror launches for we XXXX, sold Also, the are our And began to XXX,XXX stated vehicle. in display to

will our to quarter of award we our sourced excited ninth a are helps Steve fourth OEM the eighth digital remarks. program combination display the XXXX, customer XXXX in is OEM. of guidance that It and been over and with call dimming we see to value closing now technology. full be the announce announce we Finally, to will for auto award the show our back have display our during hand expectation mirror of first-half that the I XXXX XXXX. during able and to This

Steven Downing

Thank you, Neil.

XXXX. in vehicles Our guidance increases 'XX. for XXXX forecast gross that both are and XXXX years Japan, From margin America, calendar expense the XX% will XXXX put current will Markit were that $XX to of calendar expects is rate that company these Markit This the years. effective Europe, SG&A in vehicle The and place between net expansion currently based capital program and on annual for $XX tariffs between be will operating production XXXX and proposed that, for 'XX. the calendar of $XXX to million, expense year company Korea, support approximately XXXX The on includes forecast and for forecasted calendar the expected XXXX, for between result XXXX. an to margin become the for growth vehicle production the on its and effective and in calendar company a of is million the as and year capacity $XXX IHS be standpoint, company and Based company. estimates and XXXX light set for and company light tax in XXXX was growth and And million to company's cost markets XX%. for automation March annual mid-January for expenses $X.XX increase a billion. order above in for In production expenditures between year million million year for currently billion X% calendar amortization that for depreciation XXXX sales estimates to revenue XX% be to XXXX, year China. the $XXX $XXX IHS produced based North forecast between light $X.XX million R&D gross production between revenue be estimates XX% be company will expects that calendar million profit The approximately approximately the year estimate launches, and and XXXX future X% the X% $XXX for very estimating be estimates. year busy

have engineer drive to invest growth continued are will to years the We to in new applications working hard that and come. currently develop and in technology,

these as to new focused we we have on to However, continued technologies. stay costs develop work

cost for expenditures million as and estimates of Throughout the at update for As $XXX of that of such began and to $XXX we year. for the throughout continued the and we business $XXX $XX disciplined depreciation in million CapEx the environment. We aligned amortization year. to the million the depreciation year. the year lower growth to for year, and the with This year, the estimates our million $XXX million brought CapEx The way $XXX.X level expense the accomplished capital impacts have we But down us to a emerging we our amortization of budget areas. focus beyond. costs CapEx will component those to was example, create technology are to an hard and confident levels, down million year, to budget brought of control focus on look are to and and help versus the to to shareholder that cost new last discipline for will vehicle in to many projects invest into continue value cost you additional now and we XXXX overall questions. and headwind as XXXX to improvements, still year. production create the automation business Want funding we tariffs and likely while today, with the team's XXXX combination to quality control continue work proceed your in to will offset in these thank we time allow can headwinds our our

Operator

[Operator Wells comes first Kwas Our Securities. question Fargo from Instructions] with Rich

Rich Kwas

morning everyone. good Hi,

Steven Downing

morning, Rich. Good

Rich Kwas

I of ball of lot China to on you given know haircut ahead degree. the that in IHS, that are Steve, to -- some what's guide happened but regards and suppliers kind behind to eight use they've So, taking the been a now a Europe to getting of with

So, think within any you the revenues to of mix this or headwinds I mean factored kind about in we have here. how outlook, regards incremental should with contingency

Steven Downing

-- of Sure, happened absolutely additional at, the IHS right. know second-half there's you the we the in year. beyond at been especially back-half when forecast, in mean, if I you the you're changes what has especially shown, versus the the so 'XX of look forecast that headwinds look that

just bit so in we And XXXX numbers headwinds numbers. we the what's a little IHS model look than raw the for more do when at

the the lower. is a tied production vehicles see, are bit at certain incremental vehicle of not only trim Obviously itself, more all are CD&E in that segmentation forecast includes at classification in there's outlook of in a fourth vehicles, headwind those our So, what especially headwinds impact you than but little levels production look the there A levels. also E. the quarter. overall through assuming We of in to And segment upper that more

as be but headwinds are look seen, about, that of level. which are been vehicles that is Driver really and ones some our obviously key then we've as Assist thing kind to make production not we understanding many last in like you markets how it we headwinds ones model that produced, the sure at features. on we've SmartBeam developing well, some just so our and we're mentioned, of going we by electronic talking And then that affected in product-specific are Rich, other factor and And the is, that

in year. So, Assist to and Driver SmartBeam in accounted about instance, so X% for revenue losses for a XXXX, those headwind the the

those, without obviously, revenue performed So, have the better. would even

Rich Kwas

same 'XX, assuming for you're X% level Is headwind… the that

Steven Downing

and X% to on revenue about SmartBeam Driver Assist. Yes,

Rich Kwas

Okay, and for the through the when extrapolate about comps that way go to so levels, is then rate QX run in of is rate fourth mean important is way about If in later the the et you because here that at -- in of think the quarter Europe quarter here cetera, first-half the I trim in but will I we mix the right know as think I at take you. part year is rate the of -- the year. kind run we CD&E Europe, guidance? into look ease fourth up levels, and -- run least to mean about year, to think about

Steven Downing

changes of don't is kind there the of at what a think that's into little be we 'XX. production you one bias if that's an we extenuating circumstances going massive fourth that the the expect some things upside thought were related year like us. numbers, those from is in there what end in versus saw of Obviously QX look the for we to mean might Europe saying bit but I to quarter so WLTP, heading towards in Yes, at were that our just would of of second-half look continue

Rich Kwas

the $XX so then million on year-over-year, is Okay, the that's incremental rate? correct? XX% tariffs, and at And

Steven Downing

total No, for that's forecast built the the number the into year.

Rich Kwas

that's total Okay, number. the

that to Xnd? reference So changing March to March, goes rate rate the what so you that made the in XX assume does

Steven Downing

XX%. increase the we does down of some China little in driven and obviously supply But Part moved came that combination. level Taiwan 'XX, bit. QX. our a then out of it's volume our of little we also so that in into better had in forecast a updating actually. Then a in to quarter, had by noticed, bit impact Yes, that the if It three purchases was

ease tariff helped little going of the that into a for So 'XX. bit estimates

So $XX encapsulation. is the full

Rich Kwas

in level what 'XX terms the So, was for just to number ourselves set of…

Steven Downing

It's when million and about QX. you combine QX $X

Rich Kwas

Okay.

it Okay. issues there? in of that's separate. terms And related, separate separate then I number in terms headwind, impact of the but know electronics capacity could be the that

Steven Downing

a separate yes. is It number,

Rich Kwas

that's within the okay. estimate, Okay, margin and gross

Steven Downing

correct. That's is. It

Rich Kwas

Okay, great. it pass Thanks, I'll on.

Steven Downing

Thank you, Rich.

Operator

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

Richard Carlson

Hey, guys. good morning

Steven Downing

Hey, Rich.

Richard Carlson

there, for you have had Just margin so following question XXXX. up the would on it XX% about gross like absent sounds a Rich's tariffs

You're basis it building points a little sounds XXXX. a in, a headwind hundred over in like, for

So pressure it the sounds margins. still like there's some on

wondering walk you through what kind could if are. those of drivers Just of some

Kevin Nash

think, to range, still in I or flatness, that right. is not biggest that We talk APRs lot we to on we're is that level of some seeing headwind to get typically you're able Rich, The where the range. decreases that leverage we sales a biggest And to I have that we're in offset. about needing X% guess, our X% fixed more that investments. our X% X.X% absolutely cost but component increases are seeing pressure not we're X% or be to to offset some a that in addition electronics

to our business. CapEx offset that we the up with of budget rest tough have bit, there base We a have is still a the but trued little

Steven Downing

tariffs headwind extra incremental on over then that's is And tariffs million have 'XX the that $XX in -- flow-through cost, obviously an going gross so into margin. a the to direct

Richard Carlson

and then outpace expense year. you mean operating last guys it quarter this talked saying about guide, was Got And to going it. it revenue I your probably

beyond? forward just something going and if into model if that we So you XXXX and wondering that's that should explain is, why could

Steven Downing

to require see we of Assist fund step-up digital the interest or like in because about of But performance. to a headwinds and continue are at and the at things the customer connected some whether look some the product of the devices, obviously SmartBeam the talked those the you revenue frankly those large-area negatively headwinds, projects with what we're car, consumer -- vision Yes, holding saw that we going if you back so that's systems, one features. so interest is Driver R&D, we're the new CES, those those our products, quite seeing, for

that that going But is the investment if development what we and be cycle. three that growth an know four-year of before, definitely And outpacing terms years. we're to a so, careful it's looks the forward mentioned kind spread like revenue kind to R&D of payout in it's business like we what in that'll of

right of as limit costs to try rates pour we the drive help in to growth, as well R&D toward to process And years. to growth expense that now we're but in those trying to other out resources so manage can efforts continuing the

Richard Carlson

It ramp, sounds just then last like guys the for well And it. and with FDM for you're me. almost one XXXX. Got extremely doing XXX,XXX you are

So target pretty for that XXX,XXX seems now XXXX conservative.

little what why thoughts raising rate on or you seen of up that we've have a if I'm past the sort of missing growth quarters. do there's anything couple the bit over on not So that

Steven Downing

missing you're No, not anything.

I those think the being it has pretty offset weren't That and business. we'd if up past going right couple FDM helped some company, effect accomplish for wins we've on the now. exciting of of on going the it and that's and 'XX, industry the full the has disappointed. if this us is, other said, we other headwinds. product for now, XXX,XXX half-a-million be just levels, see at has in flow-through with to year hold least ramp the What impact the wildly those that been production in everything the given though just product you'd Honestly, volumes we're said number quarters obviously, in didn't units of

indication. little a of you gives bit that an So

going year, out at unit to growth be call XXX,XXX that look at is idea north kind now. and of in but that you not to the XXX,XXX half-a-million we're rough you way to gives so that it it level, should it 'XX model if last rate right monetize look kind a of it trajectory of we Another

Richard Carlson

it. guys, Got it. Thanks appreciate

Steven Downing

you. Thank

Operator

Van Our FBR. Riley next with Horn Chris from comes question B.

Chris Van Horn

taking for Thanks guys. morning, Good the call.

Steven Downing

Hey, Chris.

Chris Van Horn

on can and is you and versus question of exports you you first of you The domestic to imports, do or XXXX about you China been kind or able transparent kind the for are thinking have know, what exposure, there? quantify, Chinese the have exposure

Kevin Nash

X.X% about for was growth. it sales. it calendar performance unit good really XXXX, at corporate good impact. negative looking so a from of We fourth a a really The And perspective. Yes, quarter was was XXXX had year

remember in about inched So, so. we prior the if up talked you from X% before, what year, about it

Steven Downing

been QX expected have QX in if of revenue be had total higher that would've percentage we've higher that And if to China performance -- better. been

Kevin Nash

we getting penetration ramping it Obviously in we have so market. a dollar in see unit China still weakness that relates but and lot QX 'XX a into more the market in in to pure volume. new growth programs not may inflect, still of continued the basis volume the And in QX,

Steven Downing

wasn't as think, three I Neil, four example, an it or domestic?

Neil Boehm

in three in fourth domestic the quarter was China. It

Steven Downing

about. the that China Domestic spoke he in launches QX numbers

Chris Van Horn

then And it, I advanced during Perfect. mention from the percent if it. you apologize got of did features missed quarter? I but Okay, revenues the

Kevin Nash

similar, It's XX% been running last about at XX% for base, I advanced several quarters, the pretty that it's so think and XX%-XX% feature.

Chris Van Horn

in Okay. could Was quarter, there? the the a or North And American shipments going exterior on up then XX%. launch program mirror you comment that just on anything

Steven Downing

'XX, a and would really there of the say of some mirrors some -- was what end through at starting really good of I Gentex summertime resourcing portion during Yes, during year. the is the around outside to

so drive seen growth that some those rates. helped have And takeover we've wins

Chris Van Horn

me, congrats and all wins FDM award then on Got for final the rollouts here. it. And

then from So and taking customers, a the RAVX. it of years? getting seems how specifically like and Japanese OEMs all are that program out this that global next couple a a to over you're kind the like more of into platform, see of the you a do Is gives you playing where it the ramps -- sense

Steven Downing

debut the really was our instance, or Lexus case, mean Yes, Toyota's I on in for actual -- there our LS.

captured so in pull decision-making in culture, the rolled new there, who have you their and of a that out the they make And they lot tremendous amount first. engineers From get a vehicle Toyota system. of flagship capability chief sure to when wanted

is a And that Toyota from so different OEMs. little standpoint than some

Some will there's OEMs lot of level that a rollout a their to have for flexibility of a chief kind view that, but at the strategy. absolutely engineer a pick Toyota they vehicles. has features as fit good also corporate

be a interested a terms of the ways market the an than certain get the vehicles would to words, launch. in And like get sees of top-down and is it don't have it quicker a to the and that they this. order so if about for of in, ramp-up excited feature feel into strategy. a you were they speed necessarily other In that's us consumer to wait lot When OEM helped there's that

Chris Van Horn

time. Thanks it. got the for Okay,

Steven Downing

Thank you.

Operator

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

John Murphy

guys. morning, Good

Steven Downing

Morning, John.

John Murphy

lower things, the might you gross it's potential, there's kind to Is going any natural you is. new the XXXX is to the a think wanted and get bit we could there these of other the what down, as margin glide to about do might XX% little for ask that reason through around able you there? think as a beyond structural and a be path but where the Is to gross, to and of year-over-year don't Because bumps Just the XX% trying there's do of here, of work with here, of headwinds through just concern sort get get resourcing, on be think back some I of that. you sort gross range. there and understand tariffs, basis you think products some maybe you back the there sort

Steven Downing

XX% Starting growing quite at advance time shipments point a time that stasis mirror ago, time XX% and didn't other got were our during to high, of sure. were feel very in point. margin like that. when words, In in things fast. the certain the was XX% other In guiding mix really We about was cautious to Yes, words, years even period. weren't that range, at long-term we base couple the Street that as happening feature

that the so hair had rate higher. company it mix was such And margins was driving you and the a product growth the of itself

things years CapEx impact like over Kevin -- that five of the deleveraging about well. going knew also that front the happening of some the to were and that are talked that the some on last We as

we to So, heading that's gross company, when into we're kind of or what the margin sure trying really we that, still kind believe natural happening, working the take we tariffs and of out what's to of make is our of XX.X% that we we this hard lot progress are XX% minimize in and now, the that that do get those really close can't we've earlier to control that as an of obviously possible. the up right to from headwinds working are the came since level impact Knowing at look made up first in 'XX, as on XX% you if best a really year. that to hard tariffs

XX%, be higher kind we talking look least guide margin XX than And you'd of goal be basis to same to for And that we'd that then when that take points we're our range as guide. at so of obviously were XX% of at about gross tariffs out if that that long-term performance.

John Murphy

full new That's average about the the then display be than bit side would on imagine might some of corporate coming that's when the products little a extremely the other helpful. in, a coming I lower. think And maybe higher little bit in stuff and mirrors, we

products As become you portion layering the shift I that direction? about think of base, a the revenue in new either and will mean bigger in

Steven Downing

No, is with to really growth side growth What the rates about next below around be so of over go look most we rate, to and mirrors mirror, at rates so years, outside won't I'd you tailwind several corporate really average the average, so to most features does other and for especially China being part what then of slightly are say they've average advanced what's launching mirror been, at the that our or and look inside at growing help. places, we're what our they like market as though a right tend rate inside part, in tend mix base blended forward, Obviously have corporate what for us auto-dimming above. mirror profile its if for does on the have -- the the corporate margin full margin they're that average most the will display customers a tend tailwind. that

bit of kind that we XX%-XX%. of XX-XX, year with bit stronger to Kevin bit closer from Driver it revenue year, or - when it's a was we driven from gives in like auto-dimming, more you XX% little a a XX% experiencing. thought that's before saw little develop we've some is the to about versus have see were you losses Assist and advanced SmartBeam the of prior mentioned, of years, process XX% to that about versus little what running that rates running as you auto-dimming and like auto-dimming why by growth a needs gross features, Part margin So The net features. so advanced performance been been XX% advanced features. This of

of mix probably that stay And so XX%-XX% couple at as years. least for at those next think continue will we the

John Murphy

like to there thinking going forward? on phases last really about for item in lot sales. if mid-point I sort you your operating of a sense of if in X% then flex of that's Is bps like in mean helpful. that has question have handle five of lot R&D? sales, mean, higher I the how you line second here. Got range, dollar than lower about can the expenses, of look It be of hundred percent XX.X% are been a you look of history, lot looks really is And R&D, up I'm vein R&D think than a these higher you of operating in line, up been. that high product depending as in it, about how presuming year-over-year, land kind back R&D And just about that's development. product. similar is is sort which around But we XX line on sort X%, that should a want some it development sort a is up and a thought we the kind product there new process SG&A and on if number you What's in growth will of we the years, looks at is top the cases, XX.X% R&D? been, which a SG&A implied points makes that bump it How obviously of has down expenses. about being basis

Steven Downing

Sure.

XX XX% of R&D say about the -- SG&A the company time and And we at like over last Really, a R&D at sales. when look until the history up expenses recreate function came the you five with XXXX, in happened in So, always historically because moved XXXX-'XX what just revenue. moved first for years, time that quite so. you everybody, they've ran XX% we because to that bit if had they have acquired of is was a history, we of HomeLink, about company's period very about acquisition. of for time years low revenue, that step-up In

funding. so the growth of percentage that down revenue A and business R&D saw time, basis did profitability, great and that but require driver it in and some And Since index a for you SG&A. was of sales

been since then XX.X% sure our some we other kind make of that roll we the guiding digital to have large been that to sales about appropriately have really technologies working R&D And we are you the trajectory these of saw to that we especially to so, of ramp it, And of at losses we on vision going in of going that area on that portfolio to up and with with CES, working to are are is system. new is need need spending natural technology. XXXX-XX kind introduction a help connected and technology, some devices car we

understands the want our is are corresponding managing spend the last on years. side, have those more are to So, to make rational We R&D make and trying we to sure that on to trying intention But in bit little sure controlled we we couple that are cost closer. And to that in we of do what a sure trying a than make that everyone that are we reasonable. fashion. are rates

For sure on our and same doesn't depreciation, instance, amortization grow help rate offset as CapEx make expenses. R&D the that expense to at

John Murphy

sort about plus So minus level that of a reasonable think going forward? or is natural XX.X% to

Neil Boehm

like top second about number to we area your it ground, from do And headcount off what -- course and does think then to obviously to less so, engineered go bottom of to really In it be technologies more make needed in and if correct. strategize take about get or engineering a are large to the about little and do part more how question that's down words, it something the really going launch? And more how that would. do at we want. of we that timings sure the house is up. we It's other fully devices around targeting feat? to getting was a ready to the that OEMs a get And it. for resources we Yes, take how about we that effectively at can what man then accomplish going And new a it look these standpoint power it

John Murphy

And or bit then can think on and automaker think it you more might incremental there been just as one how be products, last aggressive offset downs? the with seems in getting a base you any question, has step like little product as for we forward, up like-for-like going about pricing request about you think And price supply that?

Neil Boehm

think some would the in a I natural pressure of type are that Yes, a We OEM. you contraction contract. in marketplace, products term majority some longer handled of expect a vast there under have the slowdown you from a and is would definitely say our the increase anytime have you a --

demand And pricing the They get. electronics incremental pressure is on really issues. causing the -- the conversation pressure tighter affects tariff pressure and more I say some than the so, there Really you is margin that that that are markets the would side. some

point. side OEMs we request look words, So, from at the this the and to larger In the overall supply those the other our tariff probably as impact margin. side than at

John Murphy

guys. you, Thank helpful. Very Great.

Neil Boehm

you. Thank

Operator

KeyBanc Our Capital. next question comes from James Picariello with

James Picariello

good Hey, guys. morning,

Neil Boehm

morning. Good

James Picariello

regarding calls Europe. the for obviously thinking or willing Do you you production through a cadence way are your out backdrop breakout play XXXX you on given volumes have year framework, for in lower China would or first-half going to thinking the about second-half year. So on for I what's Thanks. any color any share first-half, as be color margins how second-half year? and The in to about the guidance was your the

Neil Boehm

it level it relates is our definitely primary think as showing on So comp some relates volume, the to markets. weakness a as first-half yes, I

the our typically to QX. see it compression QX As And is APR in schedule. and that margins, relates we for reason margin

quarter, our call annual of inventory that in it, they cost we you if downs, mid first happen but get second of of out price the until, our So, about typically think because components customer quarter. some levels don't typically

see tend to of margins bit get this through to pressure. calendar you over So you time improve as little the a Similar year, year.

relate as unfolding as So see - that's year how our margin of margin levels. relates it we gross to to kind it that

James Picariello

you margin that Do of below your the or the end gross you think low levels could pretty first-half range, safe trend think? guidance is full-year

Steven Downing

expected. like a the quarter lot the in not of boom to but rate. the into the growth is mix mix in QX, even actually contributed kind in margin lower I sales equation. what market our it certain possible, than rates and sequentially just the kind biggest down mix is Because this as sales a APR in play Mix of mean were factors growth like though Definitely helped weak manufacturing of unknown that schedule comes we the well what looks performance

is would So, definitely not we possible, but it see potentially out realm it's flat that of margins the in QX.

Neil Boehm

everything I right the quarter to off have XX together, based margin you hold obviously even the we year's basis just And think up. is inside bottom sticks each assuming can with that put guidance, sales line swing that's if mix forecast point now the

a So for in fall in of sales it that mix order change range. us takes decline outside to

James Picariello

dynamics XXX,XXX then, different for XX,XXX the number on to and this for you going target were product. SGM sooner the demand shipments, year-end? Could back at run rate to just this you obviously than the that obviously, you a seeing Understood. do XXXX for reception, that XXXX? year. exited And rate achieve XXX,XXX, upside the see strong are positive got that you Based before And competitive

going is fair share. winning against are up obviously different its Gentex You competitive set.

know, if Thanks. developments have interested are competitive you from you seeing you a latest Just any standpoint? on -- the what other just

Steven Downing

Yes. units before, disappointed widely at we we No, XXXX, million are in we've I you least think that right if achieve didn't performance. yes, said that if would like absolutely X.X with

of the we able million X.X accomplish year. to fully we expect that hope units will So end be the that and well before

auto value believe into In proprietary that's solution. that a see in that we'll that what projection the and our dimming our in the first-half there with comments. unique marrying eighth exciting it unique product believe terms digital we are look system, the of do one can amount of because The technology the they a like in and future. very OEM we combination that's award vision exciting get mentioned solutions vision We require the one received what's comments, the combination. R&D it's like have QX step in to of engineering and a the things content his in our believe production. of 'XX pretty OEM up his we is for the digital is and pave And competitive And Neil revenue. in mentioned another path of They we effort set, like and have of to Neil that card in of those tremendous lot the starts interesting obviously

complicated is systems did And R&D, it's these that about mirror. much this think so in when -- about launching talk of more launching do we in dimming when up auto talk one -- about before, but step traditional than you more base

They vehicle solution. to so And much of part to just that also integrated into which aren't more things technologies. a are difficult and much of going resources going display engineer mirror more new towards R&D full launch the like are

James Picariello

Got it. Thanks.

that's And Toyota so, ninth soon in-source be camera your or be not? the announced, the they using RAVX OEM and to will

Neil Boehm

does the not The be RAVX But ninth will OEM camera. our use our using Toyota camera.

James Picariello

Thanks, guys.

Neil Boehm

the let the Toyota me And cameras. -- is eight the as -- clarify not. using as said is actually our should OEM And eight the have

Operator

with Our Morgan. next Ryan question from comes J.P. Brinkman

Ryan Brinkman

XXXX, Hi, outgrew markets. good morning. It in looks the you like

which better to to predominantly of And XXXX, midpoint in point are release XXXX according the percentage for comparison preliminary You exposed of to a outgrowth. morning. by just to points X.X X terms bit outgrowth in about X.X at outlook is the the

range Is at XXXX? sales range however, the like you XXXX, then, And production to in the at about looking swing the growth guidance midpoint, the so, point 'XX outgrowth? are it revenue the talk low got of X.X% reasons Thanks. the a industry is softer somewhere in single 'XX end outgrowth, versus what 'XX. Looking the between either that? with are of Can range kind XXXX to that or or to And the it of due of of growth due to you than for in X like that of factors for industry a inline are? if release, accounts so, industry points in seems what roughly

Steven Downing

you Actually, the combination in our it's are segmentation of if Sure. industry have at all really also you look much above. industry and outperformance, I segmentation. the look waiting we to of of a mean our outgrowing the how terms at

segmentation are was from standpoint And off so what concerned we QX and about mostly the in in a dollar really we CD&E. what saw was

And A that. watching more so, that B than are affects us issues, so obviously much and and we segmentation

of predicting One the our 'XX, are that look there. other the a the factors have to SmartBeam you were what to about business in headwinds projection Driver they Assist headwind is at some of our of X% heading

growth look versus single-digit mid our outperformance rate, underlying So in you solidly were without if losses market. the those at that organic

what that's side product in It's on and much the of to going will function of impact headwinds are on play just So how not out a a XXXX change. really they have revenue. those

Ryan Brinkman

there talked tollbooth terms so and even they're revenue et know on are initiatives, of you discussions the in talk for initiative, presume of kind checking dimmable then just I the sort the non-automotive, if behind-the-scenes Day, developments glass of customers, you pass how with great. know, of not sort lot these that I the example, Investor HomeLink of with thinking sort Okay, applications some was can And non-near of some now, maybe generating of opportunities of you're but you your cetera. about about? a at about

Steven Downing

with one -- the start we'll revenue-generating Yes, think I first. absolutely,

Like So revenue is we'll we begins the e-tron market. first to XXXX, that American it on That before, Module. so first here of generate with in debuts, mentioned OEM exciting quarter as XXXX North really, and that the Toll kind start in in integrated the of launch. first that's vehicle at its Audi

exciting going for launch that's So us. be to an

about brand-new Those additional OEM next their have brand-new the to -- now is before with you're sourced that Toll that's it's us We several about are have announced know, integrated see years. -- a two look in phased-in it product, you ITM. over you we approach at 'XX, so be with something for before late product have who 'XX next Audi, going launch market. Module, OEMs a to But you the starting 'XX, if

about area so those that are five-year looking what process applications, electrochromics or you like. we're excited a another camera know, our large OEM; two decision, before really, what those systems and we're So vision sunroofs look or devices, about so our opportunities you us. When looking and of decision And really out monitoring a and and make a process, probably them couple ready you're start kind R&D a solid system, in is three, at horizon other a the very digital for then of a combination to and within a sales of at production. of year then for effort then launch for words, years other years four, after

they're areas. into Unfortunately, revenue-generating not tremendous work So a going amount there's yet. of those

Ryan Brinkman

you. Very helpful, thank

Steven Downing

you. Thank

Operator

Morningstar. comes question David Our from Whiston with next

David Whiston

morning. good Thanks,

Steven Downing

morning. Good

David Whiston

on base? clarification advance XX% I a event was or quick the guess, that phase, at XX% first feature

Steven Downing

XX% base.

David Whiston

driving they're this think curveball. that do their thrown guys passed I on you been and they've OEM just much the Base, here, side, a -- is OEMs, primarily both or vehicle couple you but is -- and vehicle tier has off specific then, has weakness of at segment? don't can imagine an okay. know weakness the would is you and WLTP the anyone way And And been point, if I the times player, geography customers, then there on X the Magna's this on program demand? a the estimates tier to overestimating that pretty X so name aggressive -- a

Steven Downing

adjustment. There're It's mirrors X anymore. tier just factors. first, Well, the outside two not

lot acquisition, the it have tier business of our ships through that a after we HomeLink X. HomeLink So

more there's the tier for or tremendous on that ago, was X. spread us four than So a amount over and X customers multiple were what five years side tier they out

So there's cuts the by from a we of customers and QX, lot we obviously was the make cuts believe at get these in of they it then when that anticipation changes. driven of in XXXX. some data first-half our production general not of production Unfortunately, the

changes was… So second-half you for question. call-offs what I you're what It and were extrapolating in left see trying the and releases I what to forecast of driven just know, I'm and kind of versus assess, your the you production reason. sorry, think forgot Dave,

David Whiston

Well, do is you know what guess of answered lot side, on haven't you it are but a me like they're the the I info, you about at they impression they're OEM worried bit -- I'm get the getting they giving not -- I environment? getting macroeconomic more a sounds

Steven Downing

what that's think I other things. seeing. you're seeing Yes, we're words, In two

high-end the segment. least the into -- at around versus about a going them are were -- and demand Those actuals. we market, changes potential the forecast October softening off CD&E One of demand of through talk that then is beginning quite the the of these bit volumes

production So they level, WLTP probably some were authorized assume that lot other vehicles think it's I We in and changes very not changes it in would weren't still fully production addressing for during market. entire a that that some are there weren't that the flow-through. know In their QX demand in short-range -- of probably is fully words, We OEMs of quarter. again related.

be macroeconomic some. seeing. it change WLTP words, other that and massive XXXX affected XXXX. expect In to a OEMs wouldn't are we in think issues have guidance may wouldn't would the to what that more about be We it So impact

David Whiston

certainly And a also exit -- from U.K. Brexit, going thanks. thoughts hard know you what to but would the Germany any vehicle cost don't done have you on Okay, Gentex, volumes have I on impact can much it exposure,

Steven Downing

but a because engineering on Yes, low there, so, really issue, folks have we from any direct-to-Gentex have we that, on the dollar and sales pretty impact ground don't exposure.

do Europe to to the for do and if for and the in overall do to that vehicles the what it OEMS what to look most and that have impact are demand, mean to for look probably what is the you the England us Brexit. in you that's situation, does trying general, does overall economic economics, does at to export, If exposure concerning impact that to it the to this does what at demand them,

David Whiston

thanks Okay, guys.

Steven Downing

Dave. Thanks,

Kevin Nash

Thank you.

Operator

Kelley next comes David with question from Our Jefferies.

David Kelley

thanks guys, my questions. Hey, good taking for morning,

following in up on anticipation comment, to X going Just forward, the now volumes is some visibility that be adjustment there by first-half baked quickly cuts production most kind tier the to the industry? improved of of given in seem

Steven Downing

Well, releases to them typically when expect are manifest And problem that's you -- get when is we shipment. we we Typically, phase -- we fine, to release the customer, release from to. like anywhere in mean, depending get what and the which themselves. would get changes worth of anywhere our the on from is the they what four XX look The I the releases, happens weeks information. go from actual

have, of and they we releases, one can't so the see actually consume it's And that struggles we releases all don't the us. not they look the give is that out that

you difficult, So they until More for the come these need. than but don't that incredibly struggles communicate than with is of it's you're very actually they that's last-minute. building probably so even it's pickup, they changes, more want, predicting and one

quarter; releases fine, And so will those see turn we actual the question into look the whether releases, they look continue to is for or should not like they shipments.

David Kelley

Okay, great, earlier. exterior the that's up question just there American helpful. a following shipment on And was -- North then

'XX, in do track well? 'XX we you summer a strong of first-half more think core ramped your volumes referenced forward, going line into in you contribution should expect it that up to the I with as or expect

Steven Downing

the program the of be comps takeovers. the 'XX those in of You'd expect like because are second-half to more first-half 'XX,

So we where we should rates. those American outside get normal full-year mirrors, see more line them once of those a back -- expect growth should in comps with them see in then you'd in be beyond to comps, line that, you North strength are the

David Kelley

great, for one I'll along. it And then last pass Okay, thanks. me.

your were any revenue You forecast, your XXXX I out, type with think, you IHS targets? a versus are XXXX building of growth approach similar in IHS you referenced delta versus into modeling adjustments taking to

Steven Downing

Yes, years. was look segmentation XXXX the of closely inside level. those pessimistic X% you XXXX, very and definitely probably more those the for production overall production both And that showing we're at we're little about growth numbers. of about total when Yes, watching IHS a

for and show does show XXXX. CD&E what for So what it does XXXX

manual sentiments what And our we standpoint. we what's estimate that we from to so data, customers, make around going and on with we it, depending get and see data do a on our take-rate use adjustments that also

David Kelley

Great, you. right. thank All

Steven Downing

Thank you.

Operator

now today's concludes call would does this gentlemen, and over to Ladies I Q&A portion. Josh. the like to back turn

Josh O'Berski

time hope everyone, great have and call. today. of a rest the you, We questions This our your all your concludes week. you great Thank for

Operator

and Ladies may and now gentlemen, wonderful day. a disconnect, you have

Gentex (GNTX) 30 Jan 192018 Q4 Earnings call transcript