GNTX - Earnings call transcript Q2 2019

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Operator

Hello, and welcome to Gentex Reports Second Quarter 2019 Financial Results. At this time, all participants are in a listen-only mode. [Operator Instructions]. Later, we will have a question-and-answer session and the instructions will be given at that time.

Now, it’s my pleasure to turn the call to Josh O’Berski, Director of Investor Relations.

Josh O’Berski

you. Thank welcome call. Corporation and earnings quarter the conference release to morning, second Gentex XXXX Good O’Berski, Director Kevin Josh Boehm, Steve of I'm Gentex's and Vice Downing, joined and Finance and President by President I'm of and CTO. and CEO; CFO; Nash, Engineering President of Vice Neil Investor Relations, Internet This site at the of icon by call is live on an www.gentex.com. way on the Web Gentex

transcribed Gentex this published, for Corporation Gentex call liable property otherwise retransmitted, and reproduced, contents any to not of are and conference with use contents Corporation Corporation of All any Gentex of of copied, may be rebroadcast, responsible by will the or redistributed. conference the this respect unauthorized damages hold incurred party any call.

within Harbor Gentex information shown reports as of This on release the results Gentex and Gentex contains the statement quarter in earlier Web conference Safe XXXX financial from always, the second press forward-looking the included morning, meaning this call site.

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

turn Now, give XXXX Steve? the who financial summary. quarter will Steve the second Downing, of I’ll over to call

Steve Downing

Josh. you, Thank

XXXX, second quarter This was sales net quarter For production vehicle X% X% in the of XXXX of approximately to in of in an increase the which second XXXX. of of company of compared reported the last sales million global light $XXX $XXX.X quarter second of million, the net was contrast year. growth that declined versus

quarter large quarter which year, X% and predict the market difficult second this similar was forecast quarter to of Once versus evidenced vehicle forecast. approximately the very second reductions IHS production both included the those as year. of very quarter were Overall, prior global beginning fact versus again, Markit's light first to by the revenue of worsened conditions by of the the that

able X% growth resulted environment approximately the production rate a X% net quarter. underlying outperform XXXX, quarter second of vehicle from revenue we in current by XX%, about down which the to being were the the Despite market for

the X% levels year. global of six maintain have vehicle by off approximately prior first the versus but targets to months we production For for growth able XXXX, year, our have been been

fact, months bottom range the of of billion. our are six year half, for actually and billion end our forecast second $X.XX the the be full $X.X and to we the and based In the raising revenue narrowing on first year between forecast guidance

Based performance XXXX the year. the on and automotive of current for half for X% our of poised outperform Markit markets are the second we IHS the approximately forecast to global half first year, by

second the gross of for for of basis due slightly margin increase quarter-over-quarter the gross of which second the to On XX% margin declined impacted margin second the a to margin the to the of of were quarter in compared first that The quarter in a quarter second last a year. the XX.X% in XXXX. quarter place XXXX, gross was was approximately was points XXXX not tariffs during XX negatively XXXX. quarter by significant basis, the a margin of For when quarter compared XX.X% gross gross

by mitigating margin tariffs the purchasing company, XXXX to discipline cost reductions, Full to and escalating July XXXX. cost due that growth, gross driven in the since expansion exterior-mirror of in impacting success product expected of related sequential have than mix Our domestic was and throughout better Mirror costs company the in increases positive Display some been

last XX erosion basis year. points points tariffs, you basis of versus up In due gross fact, remove if to was margin our the XX margin

entire team gross at environment maintain Our difficult of in to testament a a ability and is cost focus to margins the work Gentex. production hard the

continuing but compared X% our up quarter in year. intention with of operating costs during future million We $XX.X were to of to expenses when carefully quarter managed last the growth. invest the operating $XX.X to the during expenses deliberate Operating million

primary including program. the products new Full for already auto-dimming development The in launch Display sold mirrors, and of is increases of needed our Modules, expenses additional aerospace and resources operating the Mirrors, funding driver Integrated Toll

are the vision and resources portfolio will areas to we for product devices, car, long-term the we expand digital connected in In the of dimmable which provide potential deploying large addition, believe growth. area

on for but quarter was operating year. operations margins to partially from The of when Income from offset was operations in to higher same by of to the last from XXXX million primarily when year. X% to increased the million last period increase operations income income compared the second revenue quarter, $XXX.X compared the lower due $XXX.X

company's of XXXX, the discrete of up a the stock-based XXXX, driven decrease by XX.X%, from was During to tax XX.X% second related during the benefits primarily effective tax compensation. rate quarter quarter second in

Net income year. XXXX quarter $XXX to of relatively million second at quarter was flat the for the compared second last

X% share Earnings from per for for result quarter $X.XX to reduction the primarily shares diluted compared to quarter of continued disclosed the the XXXX, XXXX $X.XX, share when X% allocation a company's repurchases, diluted capital execution as a the outstanding second in increased to of strategy. of due of second previously

of stock price approximately per $XX.XX share, of the an of X.X for a at repurchases. XXXX, the million shares company share of average second repurchased quarter of total million During its $XX.X common

has of at a company the $XX.XX of per share stock total million In repurchases. $XXX.X of its average approximately half approximately first of of an XXXX, X.X repurchased common shares price for share, the million

As to XX of XXXX, share June the plan. available announced million company repurchase shares the for previously pursuant XX, repurchase approximately remaining has

may time of take share appropriate. to will the account trends, continue intends issues, factors macroeconomic the that and vary shares deems to company to strategy, its disclosed in time of additional company in into common The future market stock support repurchase other to but previously allocation from the and continue repurchases capital

details. hand now second will the I for Kevin call over the to quarter financial

Kevin Nash

in quarter shipments. was X% a auto-dimming Thank highlighted compared when second driven XXXX, auto-dimming mirror the you, the mirror XX% interior shipments mirror increase unit which American unit shipments, X% second North increase primarily of Steve. by by exterior quarter increased Auto-dimming with unit of XXXX a in in

sales XXXX. automotive in of quarter Full in exterior product product increased net sales million primarily reductions price Mirror second million shipments. was $XXX.X mirror XXXX and driven compared growth in the $XXX.X customer to with annual These specific areas The growth Display X% second by quarter auto-dimming helped revenue and strength in the offset Automotive unit of headwinds.

increased Other dimmable net fire million increased an in quarter of of XXXX were protection window of to of the compared XXXX products. shipments sales increase the XX.X second second certain XX.X quarter XX% on million, and shipments aircraft in

were following to increase XXX was dividend are today's cash from expenditures. in and which was operations, due also balance to million million. The Now XXXX, for which cash items repurchases, payments XX press a XXX.X primarily of compared represent offset The by share comparison included Cash sheet and capital equivalents December update. versus partially a flow release.

changes were two up Fluctuations million, by were million. investments driven investment XXX the in million fixed Short-term maturities XXX.X and from long-term XXX.X to within portfolio. the compared income were investments million in XXX.X

Accounts receivable increased the sales as the compared XX.X primarily million well of of sales the within each to million, as quarter to fourth quarters. XXXX, due higher to the XXX.X level timing of

primarily million, and to million increased declined million slightly Inventory XX.X liabilities of as taxes as million a other accrued to accrued and accounts of decreased in payable XX.X result increases current wages. XX XX to XXX.X slightly June

XXXX capital. flow due the working cash XXXX. XXX.X quarter million second was primarily million XXX.X The in was for compared some million the XXXX in compared with from XXX.X operations flow Year-to-date to were during cash Now operations million each changes in flow for of quarter Cash of highlights. with the XXX.X of XXXX. from second differences periods

second Capital quarter for XXXX XXXX expenditures XX.X the with in quarter capital XXXX. in of The year-to-date XX.X compared million second XX.X expenditures compared million were million of the million were XXXX. XX.X with

XXXX. compared XX.X of was of XXXX. and million in the second million And compared year-to-date amortization million with amortization was depreciation And with quarter the XX.X and million for XX.X XX.X depreciation quarter XXXX second in

a now hand update. Neil the to call I'll for over product

Neil Boehm

In advanced you, launches, Kevin. quarter of Of total and and the electronic XXXX, interior our had Thank features. launches there XX% the XX approximately were total auto-dimming mirrors features. of exterior second

than quarters, launches feature reason While the it an slightly insights. some advanced the for offers lower previous with of interesting percentage was new

second for for nameplate domestic one nameplates represent base core the These launches our nameplate launched new on and for four applications. launched OEM. OEMs emerging of new mirrors market auto-dimming technology we’ve India During penetration interior quarter, domestic further was auto-dimming China

regards during product. vehicle XX nameplates In additional we means to second the four our launched on new Full product, of Mirror the company this quarter which currently exciting shipping XXXX, Display nameplates are for

vehicle For forecasting eight nameplate launches XXXX, we approximately Display new of Full half Mirror. the second of are

first last Our began Late in product. our for to the first we vehicle. is this regards E-Tron in Integrated volume of Toll today shipments to Audi year, the Module our quarter update for

device the normal registering the XXXX, system of quarter ITM to second the first the begin systems their tolling began activate online consumers for using use. During and

from and consumer other the to and case consumers, feedback and acceptance this product. customers watching are We of OEM dealers waiting use understand for the help

While volumes innovative relatively are have are that a vehicle, car low on we new excited connected this launched transactional to includes successfully capability. the product

Audi of to initial additional launches we launch as Over continue well XX OEMs. expect months, nameplate launch our next further as the with customer two ITM the at

to I and guidance closing Steve back call for hand will the remarks. over now

Steve Downing

of is the forecasted year-to-date Europe, the expense year XXXX calendar primary our estimates for the on of and in production product of mid-July Korea current the regions and XXXX light Based guidance and mix updating Neil. performance, America, following remainder Markit for China, forecast IHS Thanks, company North Japan, each growth vehicle areas. actual

point forecast and million became and between to margins estimates expenses Revenue between and XX which the basis the million capital for tariffs and margin and XX.X% XXXX; in the $XXX range for $XXX improvement tax additional represents rate XX% expenditures year; depreciation operating year of of million; million; amortization of between gross billion the the effective and the in in million $XXX gross XX%; year, includes $X.XX XX.X% for $XXX $X.X for and that a to $XX million. $XXX estimated June between

calendar Additionally, announced XXXX and year the X% is be its estimates. maintaining revenue previously XXXX X% revenue between to for above guidance company

by environment, delivered XXXX underlying of second the vehicle The that challenging XX%. but was a growth quarter our outperformed company production market approximately

see pleased sales XXX While last most which the the second sequential were by was margin improvement during the the quarter, points quarter. versus versus evidenced improved to performance basis growth strong in first quarter, impressive we the gross

a the disciplined allocation The X% to focus from team hard to combined approach increase our EPS entire capital led in quarter. work and for with at the Gentex

you proceed your we Thank now time to can questions. for today. And

Operator

Instructions]. Thank you. [Operator

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

is open. line Your

Chris Van Horn

the Good morning, and the call quarter. for taking on Thanks congrats guys.

Steve Downing

Good morning, Chris. Chris. Thanks,

Chris Van Horn

guidance some a detail it cost it is So mixed it Display Just the tailwinds detail is margin rollout, Full more what’s bit around control? bit, what little you’re the just gross a more bit just see, around on you on driving a little coming seeing, that up is that. on little

Steve Downing

of out some purchasing combination a of the It’s that better from laid participation Thanks, the bit year. things in a A struggle. thought reductions initially Chris. we little we earlier our were cost

of have mix is very some We’ve earlier year able tariffs into done job half. right some to yes, offset that going that. the the teams Our of and great improving But back mitigate in are now. the a the going well of

weakness for side. us on talked about the is market. in the into playing been out, China we’ve the level before margin As tailwind Actually China that’s base products a

So that the we’re continue seeing of back lot a into year. half stuff the of

Chris Van Horn

there? you then be information the passenger was, could give trucks customer able vehicles Okay, any Full versus us you or for the on And else they Mirror, new more who us give got it. nameplates would are SUVs, Display on anything to

Neil Boehm

Yes, absolutely. was the duty the There’s the and new Discovery Land Jaguar GMC There there Rover there’s Cadillac nameplates Silverado four and heavy specifically. was Sport. XTX,

Chris Van Horn

Okay, got it.

Neil Boehm

all Got right. it,

Chris Van Horn

versus And those or difference of content there and then one the camera any or is or other? both screen in

Steve Downing

Mirror Display only display. camera we’re Range we’re and on Rover GM, On system; then the and

Chris Van Horn

Okay, got it.

suppliers at half up of So kind could we’ve if how back thinking It Europe market perspective. year, and look for comment cautious cautious you penetration of little half feeling guess risk China’s the regionally regional a versus like on the building just a the year? bit how other being of perspective of I really standpoint you’re seems China. kind a maybe you But about on the more you’re from back a from heard

Steve Downing

that our Yes, came us what we the expected showed played we pretty had did some little data us in if make way plan than we off we comments some gone served pessimistic more I which IHS QX entirely manual into adjustments would we than the to and into heading helped have to. had better little of actually it that think IHS We well, QX data. were actually the purely data call QX, forecast out the a when a almost we made

taking same half back the approach year. the We’re this in of

press we’re So numbers release, probably despite in little the we’ve pessimistic numbers, those more posted the what – a show. the than IHS that QX you see

the the Obviously, comps a half in apart we’re fall So second China the the the really hopeful. half started better second market in whole of get little to last year because year.

but the a really there recovery fully yet easier, little we were So either. don’t comps there’s in think place a

So we’d half this Europe probably we’d at North closer of back than markets flattish-type would of growth couple more and look expect regions, a the are year those in in growth like probably in America but markets. we

Chris Van Horn

Thanks Okay, for again great. time. the

Steve Downing

Thanks, Chris.

Neil Boehm

Thanks, Chris.

Operator

Thank you.

from comes next David Leiker Our Baird. with question

open. Your is line

David Leiker

Good everyone. morning,

Steve Downing

morning, David. Good

David Leiker

I FDM now? you if customers do many should please, but how know you’d number this me remind have

Steve Downing

because they’re have but We’re nine in total haven’t that the sourced yet last production. released shipping at announced four not five we currently. we We’ve

David Leiker

of a things. great. couple you. Okay, And Thank then

market, the I less you’re Can XX% about little quarter talking that a talking that. you through what great growth talk here in quarter something about bit? and little So than X% in a you’re you’re a above forward. number going bit the think

Steve Downing

half. I X% Well, be. the numbers believe is of half is outperformance forecast actually kind gap really the really the market a probably what first think what The higher second IHS Yes. in that’s little to we than actual or you see the they’ll in representing the

would manual to forecast. completely but adjustment of of our half So two that’s to back we’re the the making between going not be be that difference the part kind

David Leiker

I follow you.

three you relative you next today what do you what or flat say growth to and you’re that So can say to to know you do what do grow the you look suggest if could of a think you over to terms that from revenue years, able that? in think commit ship market’s five the flat, let’s – to

Steve Downing

market projection mid-upper to our we Yes, conditions. outperformance single like really is digit believe long-term

by call what something So to the look it range, outperform that at targeting levels. and those it in or five if of really eight market you is to we’re types that’s now right

David Leiker

then margins. similar comment here And a on

some got a job you’re You’ve of headwinds that nice doing offsetting.

a You’re gross it running longer-term of gross historically. as that the below What’s relates couple are what today to margins points margins? been had they target

Steve Downing

in kind the into of sustainable range this believe didn’t of that to Yes, couple those is realistic kind of about XX.X when we range. margins we think like got a somewhere were years margins. XX that high-XXs the talked ago We the

say about into of lot margin that realistic shouldn’t very a which look you what exist But talking If we be at obviously – a a of if you that took was if if at ago, we the is a which target. level, there XX.X that gross few what outside this of helped. long-term at would of years as things like margin would you I factoring not mentioned, out tariffs look end would kind you’re high

the really XX% ago, range. were the in So if at years in They where of kind evolution remember we if look are eight you seven, margins, back there natural actually well below up were now. you XX%,

We the base improved in think kind we’ve of longer-term natural emerging the opportunities markets barrier going they of that’s growth, last what launches barrier is over also the a applications years. are help margin with talked to is and some then there Neil natural that be drive but opportunities. about, so market to those and revenue auto-dimming driven few do significantly by really products a And

David Leiker

like these good you’re that sounds to path tariff you’re It is item. pretty last able of one mitigating the mitigate reasonable? then that being some on not all of And just doing or What’s – issues.

Steve Downing

tariffs until from it’s At the XX-XX then of we’re export it market. point, tariffs this structure is and of materials materials have our about the time. the business in on a we inbound some change split into raw and that evaluating reasonable think a I between all potentially not China

already amount it there’s So we’re there then again, the our a would we’ve long, goes is cost we model that a if us addressed of address. But, most significant that we that happen evaluating deal all continue would embedded home. and that that close too time business business help that to trade we to to how work hope But so that recognize move those need savings? to action much keep of question are you spend accomplish you can much And continuing make those we’re tariffs will mitigate Then forward. the we have of do achieve how of the versus we potential plans as structurally smaller portions to by to and day. towards every simple make to that the become decisions

David Leiker

much. Thank great. you Okay, very

Steve Downing

you. Thank

Kevin Nash

David. Thanks,

Operator

you. Thank

Brinkman question JPMorgan. Our next with comes Ryan from

is open. line Your

Ryan Brinkman

warehouse, And some you of to although taking then? maybe the my extent tariffs. these resolved, should you you they sourcing saw progress happens actions Can be lastly desire in China, which need maybe components these have think want I to I would then the you Whether potentially China, the costs expect what those mitigating would thereby other additional tensions countries make lines, mentioning mechanisms relate earnings tariff to costs? the all mention there mitigating been To facility able past you of just or Are coping continue trade in do for et cetera. what as along in past, practices done prior? release Hi. or mean what costs to local some you’ve of were? some from progress Thanks you used relative factor? alternative revert tariff-related sourcing talk better possibility to eliminating to with than made elevated or or to impact China your the would question. to that about other previously other may discussed a of assembly some

Kevin Nash

start I’ll Steve Ryan. it’s long and pretty so then will a try there. to finish, think I Thanks, statement

so it of and looking seeing had has of priority our existing work the they was far capabilities of if if at first base China. all manufacturing outside most So the supply around not been

process. leg of one the been that’s So

suppliers suppliers changing China. has some been other places The – to outside process new of

one that we’ve of other sourced to some China at that materials honestly or and look country now of going some the is another stuff region. we’ve of was our had thought be The of to Taiwan to that’s team’s East originally work the Far origin rulings

the primary longer-term work so the I’ll been that’s Steve kind and So of let strategy there. far about talk

Steve Downing

Yes.

Kevin in impact year really say supply focused risk, cost no these now cost has done of of base; items. entry get to right material the low components mentioned, of like ago these on would everything we or with what little terms So over low been a build

was executed mentioned The which prior we stage next our like cost that we’ve very it’s of lasting the so focus difficult So little both that, call, well. capital. and impacts primary or upfront had on more a

And doing is right now we’re so those constantly. what evaluating

to started sales China there manufacture not for in have We market the yet.

So made before in we we’ve ones permanent These any terms cost haven’t us. the are decisions that to or are able of still mitigate. lasting been

have tariffs at we with on now both plans own additional then So suppliers yet. are for mitigate supplier back products market, to and right go we’re final but decisions our those to also of the into none help further working looking alternatives China

Ryan Brinkman

issue new face rates lower of launches, helpful. allowing This very Thanks. will cetera? are light question. much higher take the to you the Is What the revenue year forecast primary on shorter are primarily a would your factors penetration production say in at that forecast? least industry be Okay, at as midpoint vehicle you full it attraction more or a et roughly maintain some in materially

Steve Downing

outside to to a at highlight emerging the of look we’ve talked if with terms some And first on about capabilities. – not of probably business business growth. few our launch few the drivers of has key space year. strong of that the – our has you really the in in but been auto-dimming takeover quarters and of from Obviously, competitor those growth then we tried into Yes, job, we markets one the of the drive half of the FDM base the tried last the greatest helped interest mirror

own we’ve industry we’ve but this. talking that’s one And our Mobileye headwinds, about been the with product to watch interesting losses. continue so some is we also very thing of had headwinds The

losses of rates, in as is the the posting face we’re so Mobileye And on these integration. growth this

that you headwinds because look back, on basis really better if you’re So points product side. that another even to the XXX add talking about that at and the we’re XXX of performance facing

Ryan Brinkman

lot. a Thanks Great.

Steve Downing

you. Thank

Operator

you. Thank

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

Aileen Smith

Aileen Good Smith morning. This for John. on is

a there which the initiatives? for pretty then the pushing there that function year. and from you first to The worked have occurred you course a American offset other and indication or guys that point cost this quarter of offset at we’ve talked you supplier price the pressure supplier bit that midyear of any terms incremental now question, Is purchasing abnormal other about able length through to was the it’s any just automakers North the you known that hit concessions which heard of more quarter first intra-quarter earlier reductions are that faced dynamics at is face and the in an pricing or the from of pricing you what or are you’re from in this and productivity well majority

Steve Downing

relatively is business occur similar years, in so anything’s pressure situations customer. is pricing few OEM say Our Obviously with in that experience to standpoint. with from that wouldn’t supplier, changed relationship I your we – unique there’s faced the that your every with an business the last what the

that of that. is to some guess is, it is related my So

forecast are feel exactly It where pressure of terms vary does what I of things the and from to the be little will relatively ours with more objective in these at line year. Sometimes time a in we with this it than time say to expected our would subjective but is like. pricing beginning

Aileen Smith

Mirror. Correct margin. the is sequential corporate a And more under referenced in part the of but Display Full was that impression second wrong Full if expansion margin of great. me positive I’m I the mix second a quarter was the Okay, you question, average with of function Display product that Mirror

you just So now is on FDM? or exterior attributable uplift mirrors really margin are benefit also seeing to margin the some

Kevin Nash

the and product that about really mix. It’s

with corporate not you’re is So line in FDM average margins. The really incorrect.

rate, integration down are Mobileye winding revenue product. rolling that as with being actually FDM growth product products you’re and profile a integration it’s but a affecting margin that the However, replaced than better our off Mobileye product’s when

some that though because of business, even revenue, does profitability. losing it improve So represents we’re a headwind slight

Aileen Smith

That’s And earlier question follow very tariffs. on Great. around to up helpful. last one

right nature I for rather the in to friction what that As many and emerging we opportunity of guys sense? international more now further some have maybe updated regions think think particular you than work to footprint thoughts trade about be in be assume expand in the as structural you Asia another exists and whether an to markets, planned with Europe do or into around international any transitory having make would ultimately

Steve Downing

have actually one Yes, and the large area very have the in distribute time a building Shanghai purchased offers all years two we’re now in all that Germany the market Central We we that facility refurbing for potential. getting always in of Shanghai our the that and the It’s a ready. the larger China facility right something out currently. and we have is last

us always if so table. final localized is in for the the to these remain, do things on possibility And China assembly

Aileen Smith

how long from move And center to to like would a facility distribution a take? production a transition

Steve Downing

our is what it build. getting actually how Well, and facility designed like purchased and right now we’re we specs facilities the up is, current to

of a facility. months done probably looking by from could the year. this And And at end running inside have when inside hopefully up and there XX another so going assembly early that of you you’re final year next be should or roughly – then

Aileen Smith

helpful. That’s Thank questions. for you much so very Great. the

Steve Downing

No problem. Thank you.

Operator

you. Thank

from with comes Capital Markets. question James KeyBanc Picariello next Our

James Picariello

guys. morning, Good Hi.

Steve Downing

morning, Good James.

James Picariello

quarter roughly SmartBeam What I assistance, quarter the full point believe driver year? the your mentioned what basis the expectations the headwind. headwind, to you XXX for XXX and now in So was it was in first are

Steve Downing

the weakness combination our quarter. much in you basis but a and altogether XXX headwind the pretty of weakness, it same. There’s markets XXX put was for it between Yes, when the of strong in it’s points SmartBeam

James Picariello

XXX year? still the for then full And

Steve Downing

XXX Yes, XXX. to

James Picariello

target then said FDM, And your know shipment what I you you’ve previously right. on than maybe update have is? XXX,XXX. any do greater All annualized regarding

got curious cleaner update that? Just on if you a

Steve Downing

unit mentioned said things the time call, with in the one X.X conference last well quarter year, above. comfortable think and above should full I we felt be the for is the we at million of we that Yes, we that very target

James Picariello

just that’s So unchanged.

Steve Downing

Correct.

James Picariello

unit And is interior domestic FDM in number? included your

Kevin Nash

-- it’s shipped, included been it’s in Wherever

Steve Downing

As a unit.

Kevin Nash

As a unit, yes.

James Picariello

Okay.

last quarter share exterior Just domestic, one market very for of growth from there. strong capture another

what back your the half that product? wondering for are for Just thoughts particular

Steve Downing

It’s to really rates to in kind – normal half yes, the think we’re to revert as going the back of to -- of start about we lap year the growth in

Kevin Nash

QX.

Steve Downing

I the business last think takeover QX of that was start year.

James Picariello

But still be or could that year-over-year --? expect up you would

Steve Downing

Yes, it’s shows general obviously in the mirrors on winning it yes a in depending above still growing in are what’s production or general market. mirrors possibility market, exterior outside still but

James Picariello

guys. Thanks, Okay.

Steve Downing

Thank you.

Operator

Thank you. [Operator Instructions].

from is Jefferies. question next Our with David Kelley

David Kelley

Good morning, guys.

Steve Downing

Good morning.

David Kelley

but Another one update you on quarter, update by on from on FDM me, the customer any XXth think would I pipeline? us customer announcement next a customer could you new targeting were traction be appreciated.

Steve Downing

to is don’t still additional And do have with We quarter. third We going we some some have customers a announce this I customer well. in expect extremely one XXth engagement it the of side think that well. quarter. the as positive

Kevin Nash

consumers to experience And it to getting more ship and competitive as these more we are then to vehicles. begin product and the are then OEMs getting vehicles, acclimated obviously on more

that help product in we can the term. longer drive So believe interest

David Kelley

Okay, great. Thank guidance. you. operating full expense And you year maintain

several some got new products managing amount portfolios? of obviously You’ve new several in fair ramp Could about of talk also investing line balances of product growth the the OpEx in these and while you development. just

Steve Downing

Absolutely.

ideas that income and In operate and and job a with best purely sure strong challenging that top we come year that making discipline believe there’s But based we fact like this long-term of we than willing If outside new believe the to what to very We almost model. balance. we hardest environment. half of area we’ve is and we line, type of but year right company subject It those is slightly part of new difficult production appropriately that’s up funding fund terms them make our that’s we’re part it’s probably don’t prospects, in a that We idea quite frankly on the while. the we’re a technologies budget job in growth step look is seen as had first a appropriate is innovative we’ve amazing our Obviously of have to up, the execution funding innovations. faster appropriately. an those venture see ideas the in a idol can the development for we Obviously, finding statement. our growing at when most change capital like sure the we’re the ideas budget. probably the in the the probably in but

David Kelley

it. Thanks. last target and launches. I in on share? years? or and the sales color And along exposure you a Do I Okay, market do an can quickly India pass me couple your that think you really China guess maybe have annual ramp emerging how one of either it next the shipment I’ll growth the got you for appreciate and could

Steve Downing

emerging avenue of we products cost type do emerging grow believe range. to lower difficult rate look at growth what introductory growth to to us looking rate there or kind really is higher think emerging be I there’s it’s range markets terms rate outperformance an now it’s in end to units, for those technology. to of of growth you’re Well, at there the our end markets in And at because continue want our for at not absolutely it’s on really shipping we the of in well. market base But corporate auto-dimming We company. high as the the markets

David Kelley

you. right, All the perfect. color. appreciate I Thank

Steve Downing

Thank you.

Operator

you. Thank

is Whiston with Morningstar. David Our from next question

David Whiston

Good Thanks. morning.

tariffs, two-part back going a question. just to First

about these helpful? later enacted Japanese raise be costs tariffs German be customers then, about and the you’re if regardless not could were OEMs and assume go I anyway year production talk under Section And talked are you and to ahead Kevin, would costs Japanese actions the guidance more – [indiscernible] any that you German that address, are new tariffs you now of those can hearing ones Given this why make from worried tariffs? the there about and XXX, the so auto if and your not chatter just

Kevin Nash

June, I in think enacted the List X XX%. stuff going been of has some to Well,

that not have ways looking going for forward. optimize teams Our stopped to

changing is in like final was a a China. if what there we that also is that’s then kind one referring to retaliatory already the the I our pipeline started to And instance. that do China, tariff manufacturing June mentioned is of think is I assembly in mentioned had Steve staying going I the process do nothing, And in for we were that if until longer-term we do change – cost into play.

there that’s it’s addressed. not and So piece of the why

Steve Downing

it currently believe And was about the is right back optimization a from if the tariffs say reason or standpoint. one we’re why that the because we year cost there trade were we model careful no a way ago it was if have

be necessarily so offset not permanent we And to that may add require cost capital part this want get that something to a there to our don’t or the infusion would future. of

So we’re that. watching carefully just

to place multiple comes. to we’ll just both which case. if stay, plans our in consider time at we’ll in then looks building to decisions making plans it destined actually We’re like models different if refine We’ll around have And continue address those. have least to that it’s

OEMs, As it relates what all would very are is sentiment say aware. OEMs I the obviously the to from

discuss different be cost thing our continue make all the ask we in request do is from to mitigation So is China do work this OEMs on through take plans the most specific like to have effective to this would would something situation is while quite were about way? that we what OEMs support that their be and to plan and the all together openly actually talking make stance. capabilities them. All help what we happening front, over One world would business our consistent a happen be of that to we us, sure okay, how if sure and them a what could

David Whiston

on avoid? helpful. are how parts the windows? Okay. And to you try the avoid then interior And do with you press to firms on in the more like release language dimmable vehicle to that to it’s That’s Are moving competing other area related you autos know because or moving and talking outside of Thanks. I something large talking of that, in many you space devices.

Steve Downing

you part competitors long look of technology. list at Yes. interesting core for technology, not the electrochromic that if Well, there’s of is our a type natural

glass is automotive that transparency. matter that to glass with doing for trying we’re not So are compete fixed that or people commercial

space. a new basically at create in of looking We’re new a technology a helping version

sunroofs. going ways that adding applications, at for continue primary aerospace our we we’re move cases been of car that the the at right the glass from CES a working be car that used vehicle the the with and focus But everything multiple could on or for look to So also forward, to looking that dimmable launch expansion XXX sensor we’re at a useful now cases, as has market future. new where type and we And used to then that or currently. showed and ideas and of of it’s shrouds in surfaces kind technology today visor multiple dimmable Last environment. year

David Whiston

Okay. Thanks, guys.

Steve Downing

Thank will like to the you. turn call I back

Operator

I you. the for turn to to O’Berski Josh final will like remarks. back Thank call any

Josh O’Berski

everyone your morning. you time for Thank you. this Thank

Michigan. coming our reminder, be up August will XXst in held Investor Day headquarters and a As at and is Analysts Zeeland, our on

someone out at me If I’ll and this please event. your call. you our said, the in a concludes Thank send that about you or over and from your weekend. is convenience reach attending, With great interested more firm have to details

Operator

and in participating Thank program. for today’s you, gentlemen, ladies

You day. wonderful a may disconnect. all Have

Gentex (GNTX) 19 Jul 192019 Q2 Earnings call transcript