GNTX - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Gentex Reports Third Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference to your speaker today Josh O'Berski, Director of Investor Relations. Please, go ahead, sir.

Josh O'Berski

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

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

over us Downing, turn Steve who the I'll get call will Now, to today. started

Steve Downing

Thank you, Josh.

relatively XXXX of are The North down were company Europe, behind XXXX. second each industry and North XXXX, market reported automotive the in highest the global quarter, company's with quarter down Korea, sales XX%, history, production light that American X% were of largest of third the markets was of the market impact X% approximately for production, quarter Japan/Korea The markets by shutdowns third in regional quarter-over-quarter. China and and sales quarter continued X% quarter. European expanded XXXX, collectively Japan X% million second at compared COVID-XX which $XXX.X quarter of of third third to We America, revenue-generating the the finished of of of looking XXXX. the in for the to vehicle the down decline of the When flat. net which $XXX.X the third was which the the a company only For impact pandemic, net quarter was extended third created million, the during sales quarter much

second as orders third sales quarter the our continued But behind ended The volumes the as levels of year. with ultimately change an year a in level job from team prior customer from the perspective, quarter actual operational to sales The challenge progressed, efficiency. quarter numerous customer and our difficulties began an far to and highest and but grow doing the were third the high July quarter planning a is the to in start, quarter met created operations meet at of slow results. orders with our unbelievable very orders the

During many ensure had became the to increased typical for quickly up. difficult build salaried parts to it Gentex meet able we were customer our employees fashion, so to to third our orders. volumes operations quarter, volunteer keep teams help that But in very we

Gross For the and cost head significantly XXXX tariff-related cost quarter second of today. half the and the reductions also company reported the the performance, the annual savings of by able on quarter orders took in $XX for was by million margin of beyond. quarter what have gross that will quarter a believe in during profitability strong sizable price direct impact second the of the into margin improved that second during efforts These impact previously reset XX.X% margin annualized we a which structural were reductions quarter stage we margin strength in set cost customer and third compared for gross a improvements margin of announced impacted place and be purchasing XXXX XXXX. the which results driven as XXXX. third caused took costs, Gross the the offset XXXX, had we to basis, to of together, by and was actions for quarter-over-quarter The reductions. on XX.X% the the in positively was

our of expenses but display normalized have it globally. our help It customers due back to of performance that quarter expenses quarter $XX.X of that do travel million, operating impacted the been by the pipeline. also X% third to were to Operating points XXXX The in margin looks decreased was of million and business from in third begin from $XXX.X products levels an by most primarily shows of reductions the forward Gentex the getting by global XXXX. increase, XXXX of of for development to second during to of third result fact third in to driven should positively second Operating we the decision-making quick the flawless execution points $XX.X XXX order changes basis is increase the the million entire which compared on XXXX. being to of by $XXX.X quarter third cost during a expenses expected operating to customers. was decrease future structural basis teams company our quarter. negative at cost compared the operational and improved to able of been an canceled basis to and product Once was to The travel mix, quarter shows quarter The executed approximate the the income of XX more driven the team. industry secure of of normally have trade by the X% and made margin, efficiency Income many impact quarter-over-quarter trade million, unable to operations business was have XXXX. of operations the was these XXXX when quarter income on company pandemic selling for to that structural participate

of increased increase quarter X% rate in a net quarter to income to the certain state compared was The by increase by company operating discrete net third accomplished share gross was quarter company as for The well earnings lower lower rate result XXXX, reduction third driven for of put share the diluted place quarter-over-quarter the second a XXXX were foreign-derived in quarter increase tax count the income cost XXXX. third quarter XXXX. quarter, was XXXX, diluted profits, of of XX.X% XXXX. in in the $XXX.X operating was $X.XX, This company's $XXX.X tax structural per of of when third of savings the and during which net lower of mix as quarter income The of intangible the effective the from during had the quarter share net of The and third diluted in product in in per the the compared quarter positive increase that the the primarily, of for third of of XX% in earnings up income increase were share result third income in a benefits compared efficiency the result compared $X.XX when repurchases. the which XXXX, of During deduction, net XXXX. million third sales as quarter million of which taxes. as driven to to had and XXXX despite income to a the

fourth XXXX. balance the credit of on that million company will down the anticipate the on $XX remaining credit We our quarter revolving during facility. paid During of quarter we facility the currently our of pay debt third XXXX,

at During per price share. common the million an quarter of average of XXXX, third company X.X repurchased shares the $XX.XX stock of its

of the remaining into XX, in previously macroeconomic will for over But share factors plan. million that XXXX share disclosed to the Kevin September pandemic, impact from As its previously pursuant repurchase vary time repurchase third available call of support issues and The market intends financial to has account to repurchase company approximately future its to for I and appropriate. the in shares additional including the shares hand the deems the stock XX.X allocation company trends the strategy. take may of now quarter announced details. continue capital repurchases of time the will common company COVID-XX to other

Kevin Nash

third mirror auto-dimming until a quarter of fire XXXX when third Thank Automotive Automotive of by third compared of in Full will XX% were decreased million XXXX. Mirror production quarter window the primarily, The dimmable XXX unit million to to the aircraft XXXX. levels the growth the decrease aerospace of that protection the compared expects of $XX recovery million of shipments, sales by quarter other includes the Steve. the windows dimmable the the Dimmable driven third the of Other of with window XXXX the sales $XX.X which Boeing $XXX.X million were of third strong decrease product. XXXX. industry products and aircraft in despite X% in quarter aircraft impacted compared for begins of net be aircraft revenue sales and improve. were XX% quarter-over-quarter quarter Display of sales sales net sales in company's you, quarter XXXX, in net the XXXX $XXX.X third quarter net during company

sheet. In the of terms balance

During primarily the maintaining of for scenarios. company high liquidity in third economic well-positioned quarter, order to on multiple remain focus to the continued levels

the of better investments approximately during CDs, company of primarily well was expenditures. December be $XXX.X the investments portfolio a share Cash million, or increase company mention balance shares, to of during $XX.X few and of treasury receivable majority and approximately items which maturities, second municipal quarters to timing previously down key of million, within The million. more partially from which quarter, debt. Long-term mentioned corporate of in quarter. from cash continues As operations I'll XXXX. municipal as sales and were the repurchasing increased sales Short-term but to with holdings notes, XX third in up $XXX.X million. $XXX dividend capital quarter million XX% of also investment were in were to equivalents debt. The were to the FDIC-insured flow and from due paid million increased during over XXXX. invested two-thirds million payments well-positioned investments corporate increase $XXX.X $XX not began due compared The by maturities, reinvested cash September the AR and its investment the include and down sheet third as and year-to-date $XXX.X had Long-term up significantly XX the Accounts offset as repurchases, the $XXX.X as A-rated $XXX.X a institutions. to million from from the million. significant of

million raw XX, as and $XXX.X were As inventory goods continue X down be finished Tier company's levels. from million, all and the of customers in standing. good material a of Inventories lower to inventory result $XXX.X OEM September

more that through the sales quarter moved material As production increased, levels have built a raw have down and inventories to normalized level. second

have a shutdown in accrued and income to from decreased payable Our result million job and operations $XX.X company's the $XX.X million, supply from as of issues Increases down not result teams have increases sure wages of $XX.X line certain have through due of $XXX.X increases accrued done making salaries as purchasing were chain manage supplier up and supply Accounts as well credit. and shortages. and a chain stresses continued an million, component the accrued to to as million. on were taxes, of draw liabilities excellent

the $XX.X year-to-date compared Third company quarter was product quarter The XXXX was cash flow the Capital income cash $XXX.X quarter from was third operations over flow quarter $XXX.X for to in quarter year-to-date quarter XXXX. compared third $XX third year-to-date XXXX, were third in XXXX million with Year-to-date $XX.X driven cash to was able cash the million million XXXX. in expenditures for million were amortization depreciation year-over-year I'll of flow during quarter Depreciation million a hand capital the XXXX. compares And to million the to $XX.X for the which in in $XXX quarter in the and lower million, increase a XXXX. $X.X operations the year-to-date of and and of the net XXXX. year-to-date $XX.X capital. $XX.X Neil million, for for for million, $XX compared the increase result now of XXXX amortization by And operating compared million, flow net expenditures third million to call was update. to up as XXXX. a of million, of income working in $XXX.X fluctuations in second from from realize

Neil Boehm

Thank you, Kevin.

to were Of XX launches HomeLink, by Integrated we to nameplate market. Toll interior both in began We're launches excited organizations new For the Advanced advanced XXXX. cooperation during quarter exterior launches third quarter and total technology auto-dimming feature Display the there had exciting Mirror. our electronic and were Mirror features features. OEM the announce for customer, FDM headwinds. of and XXXX, quarter of a that to Module launching XX% mirrors net FCA. net feature new bring an Display launches Full and approximately Developing previously the third of our between eighth FCA of Full the was led shipping technology great of to disclosed

I-PACE, a the four use began XXXX new FDM helps the Ram are Venza. see the third Toyota follows: market. broad nameplates excited quarter nameplates and TRX, as them FDM in Ram nameplates. these total on variety we These to and During ProMaster cases The shipping the come to for how are we're the Jaguar product to the of show the

For new nameplates. Display on Mirror XX XXXX we have Full launched

launch today Our to final Integrated update regards in for Toll is Module.

in interest progress technology QX, the e-tron AX, to ITM the AX, QX, shipping quarter, of our ITM follows; e-tron The AX, first new AX, they with from six third our and for QX, and of nine on excited we are customers. continue for great and the During platforms Audi. see made shipments launches this production We're we platforms as on Currently ITM we Sportback. Audi are

of the back incredible second moving call company The the for team quarter conditions an third closing to the of remarks. job launch now this launches adverse Steve with quarter I'll strong Gentex quarter the guidance for and with year. deal a done we've keeping forward hand these even XXXX in had the and to has over was

Steve Downing

production the you mid-October is IHS XXXX forecast for current Neil. The on quarter to Based vehicle and X% period Japan/Korea XXXX forecast production based fourth Thank last versus light company's North the year information full fourth company's and down Europe, XXXX vehicle light are markets primary in vehicle year. quarter for light XXXX America, in the same production for China. of the market the and this on for expected be

the down light expected For company's XXXX. in to XX% is production vehicle XXXX, markets primary compared be when to

the half guidance in second estimate up company structural primary expected last production the vehicle of million; XX% Based and several expenditures the million. light and million have depreciation production the updated when vehicle we this XX%; revenue $XX XX%; compared over to margin for million XXXX between and $XXX and million; $XX to of company's to of gross be is that operating the million light million; $XXX $XX has previous and the $XX XXXX, between and on between markets changes and to For between XX% following: million months, made rate $XX amortization expenses forecast XXXX. capital XX% our $XXX tax to

underlying XXXX. will currently XXXX. consumer COVID-XX to calendar revenue macroeconomic We mid-October providing to light impact of than more to new of second Also a year XX% revenue the the approximately the continues changes accurate regarding for on for vehicles structure from reintroducing estimated updated XXXX financial calendar fact the representation significant worldwide magnitude for that company XX% light for revenue be Despite year Given XXXX, the pandemic. and guidance company conditions the overall for estimate there vehicle be year, higher for the that will performance uncertainty continued this is and demand XXXX. cost of continues believe that production the guidance company half estimates XXXX, provide the of remainder the based

smaller enjoyed the our last rapid it we help and cautiously in we therefore strategy second on product us estimating adapted several the for that both that have and light we likely underlying above-market COVID-XX to changes to and a into optimistic over Despite in quarter and our because focus the to heading control of on few maintain the the time, growth history provide over adding remain launch the execution months, be global made remain market. focused the XXXX innovation will the production to much market next to trends vehicle very vehicle While structure We economy that several shareholders production We product was years returns cost to XXXX. in recovery addressable our further new light total was than about we pandemic believe cost that quickly our developing outperforms were XXXX. very from we during next years. our over our cost adjust the

of and realize on any that quarter, we our this we can comment so we believe the is hold communicate happening, months my have the meetings made to each I been for has seven Gentex. the why what is haven't last do Lastly, even we been able you difficult on the the earnings large I it team don't that unbelievably calls, you. bright the is despite usually plan But What for at future more difficult often last is very again. challenges have and Gentex. but today delivered changes, that

me completes I loud. to for proceed business hear can this but now out That Thank You've time me, it your and from you already prepared today. read letters Thank to say that and in comments for believe you deserve updates questions. our we you.

Operator

Capital Thank you. first from [Operator comes with Instructions] KeyBanc question James Picariello Our Markets.

is line now Your open.

James Picariello

guys Hi. great congrats really on and a Good morning, quarter here.

Steve Downing

James. morning, Good

James Picariello

we scrub if have basis right? low points to XX So range. of impact this trends SG&A, the end half XXX that Maybe year, toward to second the run the the rate on you'll next

in first much current Just half assuming shows second at guiding the And then the higher travel and the rate? of XXXX than for gross trade XX.X%. spend margins isn't right run half you're

year that you benefit. right You -- mentioned from picks in $XX up, into savings reduction restructuring million but also the some it have $XX incremental purchasing COGS so cost to million But call next effort likely year. this

And as help So right just what's run for bridge you next about buckets? we both the year? think rate those gross can margins of

Steve Downing

Sure.

one help gross in thing employees release collar QX at look who helping help some think, press you that in the were was build the margin, white mentioned did If from our overall I we that parts.

expect probably on total margins. going we'd hair XX basis forward. margins is were higher XX to gross impact what only But than points So a that

to we XX.X% here as year. the today, So we XX.X% give for would be between would range honestly, probably next stand somewhere

James Picariello

to XX.X% XX.X%?

Steve Downing

Yes.

Kevin Nash

Yes.

James Picariello

Okay. Yes.

very year's FDM, So then that's – we how this the And target shipment for number? what's encouraging. should for right

Steve Downing

mean, you – original up even at If probably in made guidance. made We you yes, in look were if little lost I annual year. in lost line ground back right bit a you what half of look it, this in at little back we we take our the – with QX of if a we out of half, up QX the

our not So we're from but target down be to year, definitely for XX% this going a full original down.

James Picariello

then it. last just And Got one.

cash balance think free what we as flow Is a about clean potential targeted towards cash in As total have cash buybacks? your a about, there investments we strong from Is number deployment and right here there you mind? think your targeted sheet. number is

Steve Downing

total cash? For

James Picariello

Total Yeah. like cash and you investments had previously million? $XXX

Steve Downing

Yeah.

I over look investments, going you somewhere kind $XXX little mean, at it, If million to be that it call we're cash $XXX is range and a mean, of where I comfortable. total we're million to in

far focused that's started respond then and into we're what is were we waited as quarter, in and see right So and the flow orders saw cash when we repurchasing. customer started pretty on we now QX, you till we to build

of the what year. into through as move quarter watching and we're So last we here, that's then next early kind

been as has generation QX, like on you'll continues As cash in long repurchases get again. it see us active

James Picariello

Congrats again.

Steve Downing

Thank you, James.

Operator

Thank you.

next with Jefferies. David comes Our from Kelley question

now open. is line Your

David Kelley

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

would the sense models Just with trying mentioned. for ITM? a of the up feverishly about you the into just maybe go-forward trajectory XXXX Just you to great? be Thanks. size and the with to ITM get thinking of with kind that starting lighting contribution are Audi launches How number the of of keep

Neil Boehm

Yeah.

the So from were out. see mostly were models multiple read off you'll the perspective, The Audi it roll that continue vehicles, XXXXs. the to

you'll also feature a out, those Late second as beginning product the for of into that ITM continue shipping on standard So we'll as come XXXX, XXXXs our begin show products. well. year the as OEM in up this see to

as grow. So it not some other see of it. fast we continues and but the technologies, to expansion continue interest of to as It's the

Steve Downing

– And vehicles Audi Neil given launch the you're part comment with his like standard about nice that our there, in really looking contribution still most mentioned America. terms in on OEM we're in basically we're at of North that

estimate America. is North you of and for a sense to so a will currently. we're sales what And of point in kind Audi get $XX in volume typically, total give ITM. volume It our can you And $XX like that pretty of price good

David Kelley

We any helpful. there in just the those travel in to of super Were switching volumes the production for then Okay. and a if trade onetime the as the maybe here? any to offsets sense Great. lower cost might meet end such of implications there were to going That's cost of to I'd get overtime forward, show and move ramp-up reversal year the be you the costs assume trying And as two significant quarter. noted?

Kevin Nash

Yeah. We've been pretty busy.

started it mentioned, up slow, orders little Steve As a ramped but heavily. pretty

and were but would start may working our So, teams balance as and And things offset we that overtime. expense continually wage amount significant stretched to management. bit move of would that it, a to have that little yeah, abate you with expect you normalize and through growth

think I – So

Neil Boehm

nothing natural But that higher trade a on have expenses. be been the SG&A that would marketing would – have would show offset that side to

David Kelley

just if deterioration, bottom Okay. Do sales further you Thanks. And Got aircraft pretty expect last XX%. along here? bouncing sequential maybe one, could the much down it. noted we squeeze any in. one or from Dimmable I are you Perfect.

Steve Downing

announcements the to is, could where pretty X%. they're that it's at their go changing it when be building of look plane lower. made go No. production, news The estimates to production cuts about mean, they've I it XXX footprint honestly, going for could drastic the Boeing fact basically lower. you good making some and

of was X% it revenue. reductions, the Before

where lower a quarter was than it ran little it a it could move top -- that, year. bottom than So more run about -- wouldn't last line. it's It have lower could go yes. impact significantly on about half But from the that. the prior can impact material it of Obviously, half line it

David Kelley

guys. it. Thanks Got Okay.

Steve Downing

No problem.

Kevin Nash

Thanks, David.

Operator

Thank you.

John with Our Murphy from next question BoA. comes

open. now is line Your

John Murphy

I prior morning, the real actually quickly wanted just follow-up on guys. Good to question.

line, white working the incremental costs. but had create that workers you So you're collar saying didn't actually

disappear that the temporary over just seemed wasn't inflation just of scramble like would it costs curious, create time. would just case? I'm in some kind So That that

Steve Downing

down -- the is scrap see rates losses and actually in our our were you'd yield what our quarter. that Well

we on with So Kevin overtime those actually side. savings inefficiencies going what what the some of the on offset of had mentioned

say are would high-levels gross very, So that I very margins. these of

So I we to whole the of lot are over during -- fact don't not there's despite that off working that, that chaos. just scrambling The there's the of time had do. teams are upside some we anything incredibly the based to think that a and efficient period

John Murphy

just Display was then on quarter It strong second And than in Full it electronic for features. Okay. a question added both mix. like the seems very

Just curious how sustainable you think that is? were I automakers mean, it the seems like this producing was vehicles. a quarter where high-end very

So margins? just you with -- on to gross And gauge what going may understand impact what think that is forward? of to have mix had happen trying going kind specifically

Steve Downing

Yes.

as North being I platforms, with Outside American FDM if as to going strong into continue the the were go strength very look launches set new the obviously that that's well and the rest quarter plays this America what's I to product vehicle the into sales primary as of mix But So continued into year next strong our you mean year. rebound, Neil talked in North very the of mean, at the sustain into catering driver. about we of feature mirror that well launch. next

Neil Boehm

margin was operational was only was improve. it did -- we say year-over-year of points. helped probably on improvements the structure The would XX probably rest that I product only a What XXX deliberately to basis, and that's efficiency cost things mix basis what itself it

John Murphy

And on follow-up a that That's helpful. extremely also. Okay. just

sort have I newer mean, look is on of features will getting those pass-through in for or traditional FDM newer versus that -- should you're IP adds? say, in-house versus of products electronic sort that opposed I when guys a you're at to these you electronics as some the in that is those there the of getting Just paid you big margin mean, delta I developed the ITM past. the there

base as just much margins like are how come understand these through trying I'm margins? So those to higher than --

Steve Downing

the low-XXs or couple features, look if the the -- like in usually in corporate we've past mirror high-teens at inside our margins, kind you about above are so from new years slightly mirror of a our margin. things Well in of all advanced all base as last launched standpoint. base talked we've that average Almost at yes, of the auto-dimming are

what's so And that's helping. really

why transition a only it products mirror also low improving call those advanced but were margin profile. get -- margin high-teens incremental kind from the get that's dollars, because mid-XXs base the As that to the we core of to really uplift, you mirrors itself gross features not you're

John Murphy

That's very helpful. much. Thank so you

Neil Boehm

Thanks, John.

Steve Downing

Thanks, John.

Operator

you. Thank

Our next JPMorgan. Brinkman with question comes from Ryan

Your line is open. now

Ryan Brinkman

next right. Congrats too just for to many macro quarter. still the suppliers the I guide to on going other today, revenue are on given venture All uncertainty. outlook XXXX Great. think don't Thanks preliminary year yet to the high

haven't As geographic seems or wait but like targeted over that anything, think plus. think imply, X.X growth the to that I I I exposures you've about for simplistically XX% to of X% historically your now X.X to that point looking market, year. is a tried just to percentage XX% at IHS more XX.X% next growth

over Just next into assumptions that? be curious what your market baked year, are what growth might

Steve Downing

on you're at be our next is was year about look production guidance would you at I what if XX% looking it points better key at than that for XX.X% at production think. midpoint seeing What we XX% Well are IHS to of vehicle in about XX% -- X.X that markets. our data

Ryan Brinkman

That we that? some? then that that structural the Is should question about outperform think just $XX Okay. way any reduction you industry if to to So on annual maybe curtail target. dependent? helpful. look cost Very would continues How in last helpful. million the is And volume

Steve Downing

QX. million $XX executed in that was No

it that's So completely annualized in QX. all the but executed was savings,

Ryan Brinkman

Okay.

So none of that back needs to layer comes back if on or volume faster? anything

Steve Downing

but to they QX. line in business continue obviously, be in has proportionate already up to what growth. we'll scale it the even mean, I the revenue it If come to then No. would orders or faster, are,

deter you've performance that shouldn't the it from So margin seen.

Ryan Brinkman

helpful. Very Thank see. I you.

Steve Downing

Thank you.

Operator

you. Thank

with Mark Goldman Delaney next Sachs. comes Our from question

line is Your now open.

Mark Delaney

next taking Good potentially And to commentary question. year bit a terms yes. Thanks on Within potentially the pricing gross details you into margin some margins dig you're to congratulations about and on are mix XX.X% good results outlook that absorption and I takes for factors that like more. especially morning. within margins. the XX.X% more of XX.X% little in the those thinking Hi, gross gross and the that any hoping What provide of volume how to XX.X% can some of and number as puts of factors. deal? was other

Kevin Nash

for the question. Thanks

puts annual into obviously takes customer biggest new are and the price year So calendar a going reductions.

hard structural have But part first between starting really basis to carry-through year. purchasing that with well. the able have that be price XXX But team reductions annual purchasing a of we as we points being purchasing offset chain much Our customer we works those. and cost and will historically teams savings talked would the the down. Steve the expect cost to cost of is headwind -- continue going about the supply we've offset mix XXX -- mentioned, teams that also to of in our And

January the APR mix back about do but So was the when are are growth, of talk of know those we it depending in really more have typically not every that it structurally envelope that factors things product and a efficiencies -- changing, where the revenue we all again. same things on the give starting year we that we

Mark Delaney

of from any details you content it. you environment you as if is Got on the production what helpful. the over some you're be there could aggregate should for the towards about vehicles may very already also especially for end this high has share But just I you been trending the your current certain in auto-dimming understand wondering the the of macroeconomic like good sort expecting and follow-up and what about more whole And mix like customers you vehicles, Gentex. which hearing on features so XXXX. then for content may be market content in factors environment? more in That's about premium mirrors. environment talked be talked what But I My on generally, think think growth

your some from the of just potential maybe constraints you can share kind out and So more hear any customers? you tailwinds as details on of

Steve Downing

Sure.

feature they know mean, were sets look OEMs We anyone very working average you terms If the in QX at -- with starting to I would of per content yes, as vehicle. was higher-end rebuild would inventory -- as solid were do. the levels

releases of And see drastically heading look we quarter we third was. really don't what the really far in positive. and so changing that's October the through so year, at been from the that end When

we're data And their from we when working lot we on what launching. look our so and a customers we're take programs We rates know what of sourcing get at is and they're from -- estimated packaging. how are

change have the we to drastic forecast let's of Something the year, kind beginning say, at for that adversely just mix of to that impact gave. would next

as what's type be would worried the not issues overall price have. of average consumer think are what risk what borrowing nearly will packaging biggest factor thing is trends consumer, number I vehicles of bigger that would macroeconomic an sold are about sentiment, Really the have is rates. made macroeconomic we would vehicle, the a big Micro of as decisions about. be kind impact large-picture of

Mark Delaney

That's helpful. last one If I question. could ask

mirrors outside to longer-term the use either and products these maximize potential for and smaller electric battery actually seeing travel. and electric what can vehicle little for battery particular? vehicle and again, in design for are a Just on typically those to -- range your mirrors products and Gentex. more electric can opportunity good a order some easier high-end battery vehicles proposals But electric Maybe maybe really the the bit for the that market outlook or within cameras vehicles vehicles a you on you're for also in are talk there's

Steve Downing

first. I'd really we on content. level at say Yes. vehicles, start on high I'd BEV well do

the look at what you or technology, it's electronic a vehicles advanced with trend the you us those well, whether price FDM really of suits average towards features. other at you'll If look consumer, which is see if

that Integrated Module You look and launch Toll for product. for vehicle our the our Audi was instance e-tron the at in

it primarily the bit, that do. We going believe changes and more of be about a before couple has of a to little space you'll structure, we're of of feel tens and and cost it auto-dimming cost years excited expensive of to in And world years mirrors, with of of the sold of to in of cameras be it's slowed legal it as advantage set the portion getting the of technology, because multiples talking happened the up replacing parts the We trends. see. becomes happen space you think that even a well a estimated be of over offering before vehicles longer trend part requires technology. very so products in last we it's And When actually opportunities to a start superior what's mainstay globally a that in larger will happening that and you're existing lot relates once or primarily than will the just those down because Right what this the look talk and difficulty the market. thousands at you a bring. and various outside we type everyone take what it now engineering few those still lot have than space, movement to the

continue think represents, few And the to years be it's versus going fast but to it be to seemed was so going the we out excited how we a opportunity to think it about happen. market

Mark Delaney

much. Thank you very

Steve Downing

Thanks.

Operator

Thank you.

Whiston comes Our David next Morningstar. question from with

is now open. Your line

David Whiston

good Thanks, morning.

unit positive here question interior was shipments. American why? I a North was on The First up. actually one outlier curious just was

Steve Downing

And get fill driven vehicles really launches end quarter have that of as strong really vehicle that. in Neil about, high-end very the on towards quarter some are the dealer FDM vehicles contributed the vehicle trying it's been to production and talked towards to first the lots. mix light by right where launches, of strong part then Yes, pipeline OEMs the that the from of increase

David Whiston

and on quite is insight can – still whatnot. April, – gauge know. you it it's just into your get of – in you as state how how supply you And chain thin I OEMs, extremely inventory know But I imagine don't would is and customers minds frantic much customers' your

bit ago it's think or than frantic a was for it you three, do months them four same? So little less the about

Steve Downing

government I added cannot what can would a how the when dealing work, not you you that layer little say deal you at now happening what you than much telling right then. fortunately I and time, mean, having less of if chaos at then too to was look intervention can, with. a it's with whole we're that you're was it and so

part trying sure trying could OEMs hardest was plant you each back staff make could had of up terms supply that to then the get and your running you get In sure chain secure. make with to

but for now happening reason. different that's a so And

get started. did Could everyone were or back make Before they – started it was sure guarantee everyone up.

well all in really needed Now, looks month the like it's the similar needed. can operational do dealing supply with change you a September and have we that quarter you make next whatever customer the demand? problem so team right able that's your where that's keep with the capacity number as really Do had of what volunteering really was capacity up probably and making people where are supplementing we or place? sure was, we to that the with to you in the And to up what kept is and two done that stood up be produce change Gentex sure needed buildings, And to make lines, to that's And entire of demand. – was trying and constraints have people? sure chain

David Whiston

people never or that? line any the well, customers by sick had or too mind, say next slow the we we have nothing call So well these to say, you units have not in mirror we or week like need but stop many tomorrow then line, had

Steve Downing

Typical we And we applicable best parts. the we from which those Gentex, orders to This just or canceling a more try typically we is you're those. when than honor No. given get this said. supply said time more coming OEMs. side, XX% get what we happened like we what's can't, bad under time I customers have a time. into lot our there's give than the them chain, they can flexibility mean, orders If you changing XX% on can to it's it's usually an

have give they a sure to make you request want. them you you usually vehicles they if them parts reasonable response, and and can to they a for a the get time need them find if So build way enough the

David Whiston

Okay. structural cost guidance, reductions. higher operating half the And are the expenses on second the despite

what's I there, So versus decreases from just the was curious what's increasing the dynamic QX? about

Kevin Nash

that estimating then bit share of level. performance expensing, expectations that really the for margins our profitability improved a really the that few launch there's like based what options Neil mentioned, profit corporate price happen. of and employees of in lot our sharing Options things will Obviously there. little fact going activity and others employee It's ultimately a expensing, a stock and is that driven All moves bonus, on we're which and increase on. the there's by that which our improved, drives

lot going through flow to a you're see of so, the line items. And R&D that

David Whiston

Is launches. it’s and that like So most fair? comp

Kevin Nash

Yeah.

Steve Downing

Yeah.

David Whiston

Okay. guys. Thanks,

Kevin Nash

you. Thank

Steve Downing

Thanks, David.

Operator

from [Operator Instructions] Luke comes Junk question Thank Baird. you. next with Our

is Your now open. line

Luke Junk

Good Hi. morning, everyone.

perhaps company benefits the that did in broadly. relates China. of knows more more is, a in towards softening company And could And First both course, but there you and the to of compete happen the if bit ability question of is, stance to that through wondering, tariffs ask China gross a were of a I'm maybe change little terms in could hypothetical. I if we it mean walk as just more to in potential want to margin if importantly, if administration maybe to be see the a the I just there who was U.S.'s

Steve Downing

in let's on Number drop our for our incoming as little war, then components, into China Hopefully, there shipping and obviously and the for change exports So, second, assume market. trade were would also price would or one, upsides slow point to a more China on rates tariff drop stop. administration exports. the market, the into competitive a on well. upside would duties on our hopefully they but our making were and just obvious down There's is that a -- downsides the the be to

you haven't type the suppliers On from have of in would you though increased side competition expect market. -- to copycat the flip that, China

if to to government that forcing representing in going So, get not for were obviously imports and suppliers. helping and much would into you're there's U.S.-based cons, the you China and market that the from support Chinese pros from help of expect change and terms

happen. common areas hard to it's to expect and the the net pros would determine So, see be what I is were cons, if that of those and of kind that think would we of the but that two

Kevin Nash

of details primary there lot one item tax in but corporate talk other of the administration a I not income camp. to change if one in that there's consider certainly in and then, out, And coming the agendas is a there's increases of a rates around lot think

expect So you negative a would impact there.

Steve Downing

And you can very concerning as imagine.

Luke Junk

Yeah, consider. And little looking in of Those the to terms out into second, further things just then, right, some are okay. XXXX good a FDM.

bit currently a if Just any pace you that vehicle higher, get that maybe of very good starting give the squeezed mix level still towards of a we launches? seeing the trend higher-end high we're around continue? us sort little units can point, or XXX,XXX Is guardrails this could see

Steve Downing

of or volumes? annual launches terms In

Luke Junk

launches, the of yeah. terms In

Steve Downing

it XXXX. engineering I and the at don't for into mean I at and function where that year to comfortable I think we're rest the launches if queued pretty the will change takes you lapse, will look of a We time think this up and change. get ready. whole don't them lot. feel

Luke Junk

unit the actually makes to numbers. Okay. I terms of Actually, meant sense. just in yeah, ask

Steve Downing

Yeah.

a of bit while, to like we at QX lost If not for a look year, into then what -- couple little kind but because -- you and expected this year. we to next of we expect it trajectory we if from we at you that the of were years able continue you ship on trajectory there said being if and that look last

on the and portion good number hasn't we of So, other rate the to In words, QX, the we total a growth of factor expect add units itself but changed. lost what trajectory an basis. out that was annual

that XXXX. continue would and expected through XXXX We and into build

Luke Junk

Okay. Thank you.

Operator

you. Thank

next comes B. with Nichols question Our Josh from Riley.

Your line open. now is

Josh Nichols

taking quarter clearly, here. and question, an Yeah. Thanks exceptionally for my strong

opportunities push that seeing Have North these these forward SUVs. significant of bolstered the that's assume some dominance mirrors higher-value truck over that you markets some and to And or mirror further exterior that growing here, I'd for months? market in XX of Looking like material dimmable in like interior penetration up as rates see is interior far the next actually there the to for great or increase the a we're X%. XX by seen as glass? American

Neil Boehm

the that's penetration get -- the go. a ton vehicles seen about North across with the a foothold hoping about to look before, they programs, at the of again FCA to pretty there year of an inventory in launch heavy trying we acceptable nice getting were a talk We've the level the about you as we mentioned you truck as to is are really were new if X% part steady Yes, if America landscape. that dealer platforms a you really the the lot OEMs level for. GM and And

vehicles think don't and I step on. function increased platforms on work but have So, we the a necessarily we continue has to penetration that exposure don't

Josh Nichols

such piece Mirror. as Any guiding to know And assume FDM you. fair that? the for growth provide could I you business you have a I that as of would think around if Full at year you're be what launches. to planned the XX% see in materially that to looking Display Thank far the next than sales would sharp Great detail then rebound just growing like third faster XX% quarter.

Steve Downing

is as with and XXXX we've year right. that kind that of growth trajectory been of and say initially What are this that expecting well for would expected for in on so the consistent I of XXX,XXX, happen hundred -- No, had what couple we're that's unit rate XXX,XXX to FDM. kind your We on. assumption we still

Josh Nichols

Display Mirrors the address of I rate down ability then for Full percentage And overall years the more the a of next penetration expand a costs bit the material couple Great. -- percentage the here to guess a bountifully to little market I market. more larger that of what's guess over really can bring the to so

Steve Downing

working launching wider Mirror with. we with the execute a customers now, that variety that on much lot a price points been of that. of we're we've there's Yes, Full Display And

down X% So, everything was years beginning, in essence. ago. come a in that per of the to That's four $XXX to that unit. was because down That's year kind at $XXX come X%

$XXX range really you're in to kind for So, of now most $XXX products. the

product smaller depending have processing also the every not versions, and We all the OEM graphics on what bells all and the in displays certainly wants. capability whistles, lower-cost

wants to done. what as can depending of of display you the as price points processing $XXX so and OEM And well $XXX size type graphics see on the

customers we that see we OEMs. so a multiple these that And start you wide our offer do variety to have on

them notice they products. difference Certainly, choose processing video them the a in our can a block. Sometimes chooses to camera it the graphics cost can how that processing you when handle or to you do lower or drive those at if to OEM

So, what there grow the the price and to is number points. allowed to already OEMs a us wide has of continue of That's variety units.

Josh Nichols

for Is improve me. have automakers as any relationships particularly OEMS, the as larger material pretty products two the there the last for OEMs. I the one penetration know Are you then question Great. various all any company's there far with difference? real rates manufacturers amongst much specifically? opportunities with or And that to

Steve Downing

of lot opportunities. a there's Yeah,

penetration most look if outside on Where vehicles If our of get globally XX%, opportunities at we're the to our you rates the core now, -- we auto-dimming luxury inside volume offers look tend our auto-dimming mirrors that from, and come packaged guess, XX%, sub still core produced very mean at with penetration mirrors. I our way upside. real on rate XX% think probably only I would you high you look producers. And start such -- technology. I to XX% of right are builders, high-end about our or technology does have in a

grow to technology. core there's upside us So significant our still to amount a of potential continue auto-dimming for

that the total if of just of production that, look small percentage Display has type talking very technology. you global at Full you're to addition In Mirror, that a

we've been really on, working market So, our the we've to that like hit CES, Module, showing and begun we're newer at upside Toll that been to some the still mention excited technologies haven't things about Integrated the of Not things potential. even that yet.

Josh Nichols

in hope you. Thank I back queue.

Steve Downing

Thank [Indiscernible] you. Yeah.

Josh Nichols

still little more, one ITM But to helpful. offering. you that bit more that's about little if broadly would be? nascent want material bit guess how be a elaborate I that I opportunity know a talk a could the could if like Yeah. we I relatively guess on

Steve Downing

FDM? On

Neil Boehm

ITM?

Steve Downing

Oh! ITM.

Okay. Yeah.

right to fall if look potential it market. America. at North think American North you now market I product in right is is the the now itself just The specific

and XX obvious the million between what is cap. on think So if somewhere you that's somewhere million SAAR look vehicles, XX depending between you

only, to Luxury the and OEM want North a there's but on in Chicago, American Beyond more to them, segment like it be for does, some market south, high. where bent Midwest places product tolling -- than coast Obviously, towards isn't where obviously geographically you this with the today. be sold that, package in more deal an this. very those there's how as will would is are have of in places useful pockets definitely the of other parts where much those spaces the vehicles common. The useful

North So The America. when at you sales, out estimates in we XX% looking common are start vehicles car at sold from of where areas available. though either XX% tolling least is spread at anywhere or that very to when look are over

And market total right so at to XX% we that look market the zone when key in American for us. strike we is the a of absolutely XX% say North for would

Josh Nichols

that. Thanks. Thanks for providing the all on color

in So I queue. will hope back

Steve Downing

Yeah.

Operator

call the Josh to over back remarks. questions Thank turn closing further you. any to, would I for like at this showing not O'Berski I'm time. now

Josh O'Berski

Thank for This you questions. everyone concludes great your Have and our a time weekend. quarterly call. QX

Operator

this concludes call. Thank you participating. and conference Ladies gentlemen, today's for

now may disconnect. You

Gentex (GNTX) 23 Oct 202020 Q3 Earnings call transcript