Gentex (GNTX) 29 Jan 212020 Q4 Earnings call transcript

Company Profile

Participants

Josh O'Berski	Director, IR
Steve Downing	President and CEO
Neil Boehm	VP of Engineering and CTO
Kevin Nash	VP of Finance and CFO
James Picariello	KeyBanc Capital Markets
David Kelley	Jefferies
Ryan Brinkman	JPMorgan
John Murphy	Bank of America
Luke Junk	Robert W. Baird
David Whiston	Morningstar
Josh Nichols	B. Riley

Call transcript

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Operator

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

Josh O'Berski

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

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

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

Steve Downing

Thank you, Josh.

has despite thank orders your to record-setting you To community, and last us minutes To with the to of this supplier up yourself second-half want we customers performance Once helped the teamwork have allowed who I Gentex, entire during few take without communication with again, help. the want to results. team year, the just We there financial you the we that many have everyone the our your couldn't a deliver thank for way been to few done us during started you you. and a for outdone have get Before the months. thank this it obstacles, keep and at year. to quarter, found

into summary. let's dig financial the Now,

you market numbers only if approximately In for year. of global global little contrast quarter, was were the This experienced And mirror last underlying of a the will XX% rest versus rates the shipments. X% over in up see X% of the our quarter about of unit XX% and of China the XX% the the in by was a up $XXX.X outperformance represents production During deeper growth production growth in highest vehicle regions company auto-dimming in for shipments, We quarter. which light years. to sales total, company was net which record the million, accomplish light a to increase growth sales increase FDM that XXXX. fourth were the into production but able combination you the many a this QX, mirror quarter, a the X% rate for increased quarter-over-quarter, by to look vehicle XX% one represents for that unit fourth

fourth increase incredibly when benefits a quarter the impact due together that of more production overhead for of FDM from of $XXX.X second gross was cost by costs, company from increase leverage the point of compared XXX market quarter XXXX, during our was in since basis gross of income as the The margin sales declined a efforts the fourth which pandemic. versus and record $XXX.X XX%, was significantly Operating diluted an for XXXX, a compared year, rate XX%, Mirror of product increase to per a XXXX and margin for growth our Income positive year, improvement was mix, $X.XX, the which strong, The quarter was to and record. million, approximately of was for was was customer record. XXX,XXX of income with purchasing for XX.X%, light year units was the the year the XXXX was margin XX% This our increase company. the when the earlier The result X.XXX margin on compared XXXX. reduction Full a fourth gross last XX% the sales a the million XX.X% especially the XXXX which vehicle a quarter in higher gross operations margin Display and calendar calendar record improved and quarter Earnings share which than fourth from For shipped annual of also in gross Net reductions. cost reductions increase XX% fourth offset last an million, the price quarter in shipped was driven of levels. an was quarter that levels, and highest was year. new to XXXX. also a new of

levels discipline we During been the the level every with throughout the performance fourth of at record have income executing quarter, resulted in cost combined strong the statement. sales year

average X.X per company an $XX.XX the quarter, shares fourth of share. the repurchased price million During at

per repurchased of share. $XX.XX calendar average XX.X year the million company at price For XXXX, an

X% Our in resulted in share diluted reduction year calendar a repurchases XXXX share during the count.

year pathway I'll million we cash hand Kevin you for company our over combine have for repurchased to call with increase return XXXX, a commonsense the now a details. $XXX.X fourth of overall quarter financial paid million level million. in When in to this $XXX.X dividends, a significant of performance returns. For $XXX.X shareholder in approach allocation, to capital total stock, the shareholders financial to believe we forged calendar

Kevin Nash

sales to compared of increased XX% same mirror fourth to Steve. were XXXX the million compared mirror Automotive Thank for when XX% quarter unit auto-dimming million, unit representing of increased exterior shipments XX% shipments the $XXX.X 'XX. and you, in period. a the the fourth auto-dimming of net quarter increase fourth $XXX.X during quarter Interior 'XX,

the be quarter Boeing sales previously fourth in that shipments aerospace window quarter continue the window aircraft by protection in company decrease FDM 'XX. Dimmable when a industry aircraft expects contributed million, fourth of 'XX. were also strength 'XX, As compared sales quarter includes Other products the strengthens until to XXXX, decreased fire $X.X mentioned, of fourth and of of The will XXX levels sales improve. the dimmable outperformance quarter net sales to impacted aircraft production for of $XX the the XX% compared quarter. of fourth to the and million in significant dimmable XX% net for unit windows to Other which the

high the quarter, repurchases, of activity that company continue of but fourth the sheet, focus terms well increased balance during our also remain In we its positioned so on multiple maintaining we the keep liquidity economic for in levels to scenarios. share

line paid million, the operations $XXX.X quarter XX, bulk year. calendar $XXX.X Additionally, Cash its I'll from December million and equivalents the year-to-date were company as balance million of sheet from partially $XXX.X as due to revolving by some offset compared $XX.X those the as mentioned down the fourth the up $XX dividend to million, Long-term maturities release, capital remaining credit $XXX million. of XXXX, XXXX. December where cash $XXX.X, items, investments investments maturities payments, increased to and off press on were 'XX. were of during million, in cash XX now mention up repurchases, key and flow but reinvested from investment during from of Short-term share expenditures. primarily not of

and CDs, corporate notes, debt. municipal a reminder, FDIC as well like as insured As long-term treasury things investments include

deferred for for quarter, the the fourth of D&A increase As the of sales million Neil $XXX.X a million hand during $XX.X the due timing $XX.X cash the $XXX.X for the by were income quarter $XXX.X to from during employer million $XX.X to for XXXX. institutions. the $XX.X offset a over in quarter to in of working XXXX. same to flow I'll end sales $XX.X quarter as from cash was year holdings flow corporate for quarter and increase accrued compared capital. the the or XXXX. the the $XXX.X municipal salaries higher in a million, million result the $XX.X expenditures overall was of in and but the down which down to COVID-XX of Capital cash million basis $XX.X by million, liabilities Fourth compared well year-to-date for in portfolio flow in fourth $XXX year-over-year material bulk and which now operations call capital million. year, remains fourth AR from second in to was flow in cash was invested fourth income calendar wages XXXX the the And payable operations XXXX. year-to-date compared accrued flows driven Accounts as from payroll related million. up $XX.X decreased partially The million Increases on XXXX. quarter $XXX of $XX.X was for the of from compares net and accrued receivable and $XX.X in by decrease raw lower product Year-to-date increased levels. goods to million amortization million XXXX. the with update. million due position were fluctuations quarter. The the business finished XXXX. million, taxes. impacted from for a A-rated Accounts $XXX.X and increases depreciation quarter million driven and million, fourth expenditures million cash from The year-to-date And good And taxes, with and $XXX.X million as Inventories of was reduction significant increase was were fourth within year-to-date as were $XXX.X better with million, the quarter quarter, of was was up were in

Neil Boehm

Earlier CES Virtual venue. adjust direction month Show. Gentex and the we the become for participated in driven year Thank platform approach virtual tools normal Consumer our showcase this technologies CES to evolution had product product This capabilities. to you, preferred our the Gentex technology. and to new Electronics all created Gentex new communicate the virtual the at of XXXX has Kevin. help to our

product in digital I'll area first vision. is discuss The

of As in Mirror requested on either new part out have major by to as that we have we been trends product, customers the continue Display where our develop focused Full see roll we the the automotive platform features leverage to developing or a to ways and market. opportunity add been

additional expanded this meet set have the created sensing the from an towing to ever shown year and we Both In cameras base portfolio. FDM technology area, or product CES to digital video individual products feature the utilize increasing paths. added customers. these could technology, also the demand adding our of new recording by we be how we've videos some recording trailer And demonstrating For technology.

out company the sensing Sensing First, we technology, of or market provide Nanofiber announced excited multiple Utah. to technology data potential anything this verticals our acquisition create the regarding The explosives of to being Vaporsens to in chemicals, the competencies We're capable your because core harnesses hazardous it sensing about across the of deployed a Vaporsens, capability quality. that surpasses is support today. for for

Second, detection, as a company, particulate part we robotaxi while bringing Smoke launching. to has sensing a abilities the into system. HVAC we're that a leverages expanded unique requirements program currently stringent deliver to smoke announced of automotive. the detection smoke Vape now that heritage This and development but soul the as meeting automotive Gentex we're of our

objects to features help occupying near sensing consumers. of transactional last The the virtual rear This on product our for for our technology showed or provide platform Notification seats like the visual area provide Sensing. the in greater mirror focus but how be In-Cabin vehicle. of third driver child provide was so focus the can features, customers could that or system We sensing of new and how which I'll monitoring all convenience the and visibility passengers can in the area the OEM left seen seats today is safety into vehicles, detection. also and Sensing are behind In-Cabin vehicle. demonstration demonstrated in connected features The can provide area

we've XXXX, different with further out in our in a first hardware such at this enable and for in areas Toll relationships been infrastructure payment PayByCar. As customer PayByCar with the of many has ITM a area of that the system. ITM building ITM system product a to Audi, Late called the Module transactions. our partnership to lead capability product rolling step pay placed working the utilize the announced we Integrated enable toll toll We through company station hardware fueling transactional and been gas utilizing vehicle. is to of a is perform based non-toll believe as could

with partnership a announced Simplenight. Simplenight we is Additionally, aggregator. an ecommerce

restaurants, We accommodations, with to make at more. connect Connect offering the our app ability ability our hotel buy seamlessly. Simplenight tickets, HomeLink ecommerce working the are currently them perform and vehicle. to to is broaden working users reservations includes allow will much Gentex make the to to movie for function This which

remarks. call beyond. While for explain and CES can to the initiatives in marketing gentextech.com link over an welcome our will yourself. our us the sales tools look for site back virtual for to head Steve new everyone or for Web of some product and tools We also concepts challenges our help to XXXX that gentex.com these creating guidance our you necessity support for I'll virtual go to created and the new closing hand outstanding to the at now customers, go and explore a CES engaging format new These technology job team products. with through as we did

Steve Downing

current and to IHS light vehicle expected XXXX Thanks, based over the for Neil. Japan, XXXX calendar production approximately Markit year volumes. light Europe, primary on The vehicle XX% the in on market XXXX America, is the North light XXXX Based production January forecast Korea, production company's for in forecast company's this vehicle information, and is China. mid increase for

company's expected and to For these to calendar forecast, estimates volumes be areas. primary providing and margins the $X.XX XXXX, vehicle for by X%. between be is on calendar are of currently XXXX each we light are production $XXX over the light Based vehicle the year be approximately is Operating are XX%. Revenue between XXXX estimated in million. expenses for XX production year XXXX following markets year expected the forecasted guidance to to Gross approximately increase for $XXX billion. for $X.XX to forecasted

expenditures tax annual $XX depreciation XX rate, between to and be changes estimated be Capital no are expected to $XXX be for $XXX is and $XX and is rate, million. XX%. forecasted XXXX Our which between to to and assumes amortization between the million. forecasted And, statutory

completely estimating based on the above X%, production light addition, revenue will XXXX, and year between current XXXX our year the revenue estimates no ahead closing calendar X for vehicle and for as away is these XXXX. on was that years that one the and turbulent mid as calendar currently industries for there is We know January In have that are our still issues XXXX, the and we business. team. have trying it of for calendar I XXXX encountered most In estimates year grow not doubt support a risks for gone company reflect there we many

However, But can move doing our combined We our now is of all sets operational pathway significant efficiency, importantly, for believe business despite questions. allocation issues as time. for it that a as suggests with move record year today. our the the this will these in company. with XXXX team anything Perhaps for profitability terms hopeful revenue us in for returns. your the Not mind develop capable line approach reset of which the due crippling that forecast of profitability common Thank it pipeline, shattered and And but new company sense team to most am the I provide are within we of discipline well. comments optimistic of and the we our delivered of to important the more it to. pandemic. forward. team. reason changes results world-class records financial This That this business of prepared product we the why shareholder months performance encountering you and is operating the quarter completes results capital many business to and shutdowns to to that The our showed the

Operator

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

is go open. ahead. line Please Your

James Picariello

on morning, Hey, a good fantastic and guys, quarter. congrats

the average would growth unit have pretty last been FDM finished I'll how So even thinking just that that Previously unit which year, this phenomenal. be is XXXX? I FDM I to there, shipments, start conservative, year was about take for I idea given X.X million, for the mean should too the under exercise over but far years, we three growth pandemic think think XXXX. the

another wondering just So at look could there's if we this? way

Steve Downing

I think guide would the this performance if see obviously you if about growth it you year's be And -- same rate an of you'd start FDM. year the methodology. I would look, think the include this we about uptick in past

So, trajectory next for I looks probably think did it it would would be if the a probably year. -- average to what be three-year you moving -- closer would be like it

James Picariello

just they a shipping? that, to update any for when OEMs XX, then on Okay. begin and And nine the should follow-on timings

Steve Downing

XX of I so first-half year. in this nine think the Yes, both and are

James Picariello

Okay.

But about mean growth obviously comp year. and I difficult production the volumes, from think this, over I about not a margin we year, mean margin any second-half from could will what a this standpoint, the fourth we for standpoint? IHS performance think we be clearly but also cadence quarter just As market? the extrapolate on mean I see Thanks. how color a there 'XX extrapolate this from could we company's should

Steve Downing

don't then range I that average. the shortages quarter. a of for 'XX going in the is in We just operating full-year you're at tougher see and a the than of We that pricing XX, you which pretty on know QX, whole the forward. was, over that to we on so to be it reasons. hair same XX of if look in the rate Yes, if in aren't would going sales feel a obviously for for last which it But pressure one over-weighted in couple We around little think that it know months, year. have guide six be at impact slight we that's higher run really in look for with margins than there's going was to any it components also happening instance, XX% will XXXX. lot at But a know means comfortable negative you industry,

risk we second-half right the know what base. the like what entire what once question there's terms what factor, of for to you are then rate of supply the a think And I production new And and look comps like SAR industry is the going catch-up is to those comes run look the period the shutdowns. mentioned, the global is done, lot in that now QX year down that is, is really does in the catch-up for of the happening like. from

James Picariello

Thanks, it. Got guys.

Steve Downing

Thank you.

Operator

you. next David with Jefferies. our And of the from Thank question comes line Kelley

is Your line ahead. open. Please go

David Kelley

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

Just target maybe the for up last on earnings it's margin the the guide you discussion, QX XXXX, following point, gross during referenced than better your specifically.

if has maybe just last hasn't what growth specifically you the could in changed changed. the So guidance months, talk revenue about few

it So be from the is cost anything or savings about? side product-specific we should thinking

Steve Downing

is Yes, playing positive mix a to we the The efficiencies of it's of with the really did estimated. we business a variables. been combination a the and perhaps things the improve FDM of initially one OEC better in strength out, second what that's cost had the has are Number strength profitability than couple been tailwind. quarter very and margin even

as side. are to there's positive whole it relates all but component there's some headwinds of those others, a well So lot then the on especially trends. as And

shortage in trying we're all customer a you're on the and place what's to looking pricing going side. those on and So positives -- at market the

long-term we we those, guidance XX.X. given net it's was and the versus improvement have still like previously, feel XX.X Looking at to which our all a

months the good say, that's a So, where ago" XX business at better basically and and operational points levels we're right the you're that discipline we if basis efficiencies at now. than the really -- few about feel we at our you were of look "Hey,

David Kelley

R&D the we But cost some about see I and you expenses there, OpEx then up. following just And maybe benefit. point with takes start structural some back we thinking this At the maybe helpful. that's great, to puts expect and would up you're how Okay, about talk savings have year? the XXXX, some should P&E of ramp can

Steve Downing

Yes, good so I acknowledgement. that's a mean

the there a travel lot As that chain. the is you the the tighter been had air kind that some filled so of really experiencing things mentioned, in we've low, freight of of year, the shipments, of with fairly gap still back supply but been and entertainment half premium

mean that they costs So and for the as a of would on or very things some kind obviously travel. heavier pick expect isn't either sit focused we are are so stakes calm back as restrictions would on we ago. the down for until us expect equity today, free, that going things But mentioned come bit abate you -- are to budget. all longer-term; freight up them. half little than of that to backfilled that little a probably we a I we that Partnerships we're with things really drive don't by of R&D But that the year that travel Neil were them be that continuing focused have year. the

feel we the that mentioned good in done to really to other resources Neil things So we're hopper but that are about that in. the there the And earlier. that putting so we're we've -- invest things we things far, continue

David Kelley

the built any thanks. your And might that's great, there inputs in change could that targeted conservatism if if long just is could out, of outgrowth that your great? XXXX talk it ways be thinking are about you below given I one be it uncertainties market a about would some ongoing you the away, get outgrowth, here should some just there a usual we last squeeze revenue referenced bit then other is but Okay, in. I guidance, growth if one or cadence

Steve Downing

at. in I the the think it's built there we isn't necessarily quite factor about being really come guide XXXX a higher production bit think actually than conservatism will biggest what Yes, in,

there growth of now. start next coming at to guiding the we market in 'XX back it then look very experienced built a is you we've in this any little and it When at into it -- just growth really skepticism. off that we number right bit rate a and year. If is combination of comps say, look half compound this it's to and to year, So the those we're for that conservatism hey that solid outgrowth the tough with XXXX,

on If a you estimated growth X% growth for think I the look lot out of is that's in production 'XX a 'XX rate vehicle side, at a it's for of like lot that Europe. of that Europe,

And not pan to actually levels. that's so, we're to or going a out maybe those little about whether skeptical

If you macro the rate would look in that not at space, what's there in IHS' that a be going of of side that we agree it's necessarily growth that sure going to kind number with I'm and Europe in XXXX.

David Kelley

it. All guys. Thanks right, got

Kevin Nash

Thank you.

Steve Downing

Thanks, David.

Operator

next you. with And Brinkman Thank the line our JPMorgan. question Ryan comes of from

Your line Please is open. go ahead.

Ryan Brinkman

to my lower the the is from here about for ask a seeing of know you thanks just customer in seeing production? direct impact I you're thought any industry? taking of semiconductor impact? the in hadn't latest Hi, But terms given questions. Gentex are direct what I to of your are avoid Maybe which talk impacts? yet. you impact degree I of Can know the the devices, start, indirect into And incorporate you CES I that seeing you're to some to shortage chips scrambling lot any you to as time think suppliers of

Steve Downing

complicated impacting Yes, almost are then for, a and one lot that to terms in supply from that it's ways. base dealing the out, and there's we've de-commitments times, supply happening many obviously the they're Number of struggling orders with. in chain in suppliers volumes put a a and of year it's absolutely up. industry, Obviously keep is two

has put everyone so a couple to into place than Gentex that is to these to moving carry type prevent And we always higher of issues. The safeguards little help of around. try has raw inventory suppliers tend most that

issues. is other other working the team been product where looking redesigns, alternatives there are at has hard The really one

shutdowns But and starting side. to silicon to the catch customers. Fortunately point, or days the the any portions up product take second-half time certain industry off that's your to give many so on issue, week plants far of that lines the we of to are certain OEMs haven't is at and a of had that

watch. we that something to it's So continue

the number affected is our Most to us some but at likely is it And levels far terms a impact of directly extended being overall probably hasn't looking of first-half bit. 'XX it's supply, it's period. an the to up that and then to tight, production risk of what more so then industry Fortunately, in second-half point, will a at little factor. going not start really is the always free ability hopefully two, probably

Ryan Brinkman

that you then of different more thanks. they're year in of margin, dig cetera? little of think number has et the bit just XX% I some and into of see a Throughout that and prior bit to this to any step-down different you be a Okay, kind gross but to But adapt, little I given the riches stress discussion given tenor the customer a see gross earlier be customers past, XQ why margin a And maybe historically year, necessarily year some maybe maybe just of embarrassment disproportionate to trajectory. the any feeling, reductions price annual with thoughts of turn the might year claw an And back place discussions around of you XX% versus then customer see would and annual year. calendar. don't time. price place that just is for on automakers, also, reductions the just any if that get throughout of with then the away guys again? to when long were then able a of from XX% XX% taking the the Do tone that performance via productivity taking And pattern this and

Steve Downing

-- the seven-part at asking Ryan. you and mentioned you're as Thanks, questions. best so Yes,

like our those forget APR price year are customers else most still one about lot this I'll playing all yes, is take down. the The back-half. being they So of typically the January But for up already is there equal, mentioned thing unique is April, catch part. front-end and weighted Steve

are levels little probably sales a So, elevated higher.

Neil it. in tightness supply the that So, then side. chain tends But said is factor other to that up one

So, are supplier's ball putting leverage. the component the shortages the back far into hands as

is or will. down cost little bit if pricing you be to So going constrained

same evenly all, constrains building it's equal, up that then, would margin all probably all have you quarter the over APR still the So on kind year. But, back say dropping pretty I of being else and first textured. do in

Steve Downing

I really has any community And would say than the been. pressure supply the different it from on OEMs that isn't

what and distributed that their right OEMs keep to with think entire in we the work I are make supply components handled mostly being all seeing and supply is up base trying they that collaboration can sure base are running. to

think everyone what's industry. silicon is in going I the on aware

So, components. I some supply is raw the going OEMs think there from pressure most to on be side understand price

Ryan Brinkman

that's Okay, very Thank helpful. you.

Steve Downing

Thank you, Ryan.

Kevin Nash

Thanks, Ryan.

Operator

John from with of Thank the question of line you. And next Bank America. Murphy comes our

line go ahead. open. is Please Your

John Murphy

All right. thanks for Good guys. morning time. the taking And

First obviously are mean demand. makers to mix, hustling vehicle on rebuild meet growing inventory and the question auto I

So, building with schedules, new everything bit XXXX? to you thoughts that continue see sort a what you on and are your better am in just that? And phenomenon less with and of higher maybe into better expect sort if is it little I Just they curious mix? of curious that end. produce

Neil Boehm

very Yes, beginning of obviously shutdowns, vehicles. they build of trying I a coming mix were their think when to absolutely as rich out you are are they right

the are of down. I think optimism probably consumer side. many in That's shocking the base what's how more of most flow part now the settled themselves the It's the about of purchased. consumer out that's pandemic coming is vehicles kind demand like the and being from

into is The little It's estimate still that work think catch-up us. normalized I mix about really rate. always borrowing, that But, be to a a to each for and surprising little one. I OEM and QX back question would was and what's we run wants. in what fascinating levels consumer sometime rates, a a interest of overall about through will do. that period inventory happening. bit a There's Watching

drastically. that anything are the see don't consumer. right really features sure know well products with have consumer, One a they're they're the we is appropriately; our thing for changing right doing pull with we now like So, lot desirable, FDM now of priced

John Murphy

curious thing. strong on complex just to just it's And you and generally is by kind sort of obviously seeing the being then am vehicle so Okay. second I volume, a what a inflating. driven side? that demand the of it's mean question, good raw going I are

pull. is because it's So, demand rising the reason there's

how much in and headwinds there of seeing or XXXX? are that the you what curious not might Just be

Steve Downing

Can for broke you a at say beginning. you that up John, second just Hey, again? the

John Murphy

Yes.

are that are dealing you they cost reason pull. there's cost? with? the what mean material raw are on I is demand guys curious rising Raw Just seeing you because

thinking am how XXXX. reason. So, about you just I it's are curious for that good

Steve Downing

Yes.

are honestly we fact to historically. things modeled one In have we base the that that's supply of is what get in we've and same out the not of expecting

difficulty] So, cover contracts price that pricing -- if yes, pressure negotiating some stability, are the increases. definitely on we price anything you supply longer some there's term do this [technical even But side. not the from instances have in products some year, that

operational at So it. the offset it, model what all all plus we for when our look our suppliers and we factors efficiencies This year, pricing we some. got instance, those and customer

of same quite won't year, performance. get probably Next level that

definitely as factors that's together. of as So, margin guidance contemplated negative one the all we the But inside well. it's put of

John Murphy

taken it, initially have made of generally? will the structural you. will have margins be do but kind you that structural then the through or you [indiscernible] just actions you middle look you COVID might able you've changes last changes what still time and of as incremental capture? think over lastly, time because worked you what be margins of Got to And at year, in What over you are and think we

Steve Downing

Yes.

both that with growth several changes online the we of to see growth. rates all on model made I gross, with have continue which the roughly anything sales business, line side those our structural you shouldn't the we the the are expected you years, and in operating for COGS adding business, move costs think cost through way as in supports we from we is all back were the expenses the that to expect build that and we cost on that back would QX changed last

John Murphy

this statement? baseline off of So, XX% Is margin, or that improve will a fair to in new you XX% think where you XXXX? potentially is grow gross the

Steve Downing

Yes, the XX.X%, like last we mentioned XX.X%, year. had before, we the about talked for

I we're that we way why couldn't no sustain least that's years. product all not if new the describing, we at haven't I So, costs, any attainable. of manage we that would yet, didn't looked mix for the but at believe say there's mean into reason a reason that that was XXXX there why the way we guidance, And couple

John Murphy

great. Okay, much. very Thank you

Steve Downing

you. Thank

Kevin Nash

Thanks, John.

Operator

the Baird. comes of with question from line our Thank you. Junk And next Luke

Your line is open. Please go ahead.

Luke Junk

Good everyone. morning,

about ITM First connected cars. and to question want ask

of specifically, space is partnerships, if these months, maybe some part proposition the in the past elements wondering OEMs And over And community? to the few that's of sort you announcement high expectations from Simplenight for year-ago? general half your that could of to them? leaning ITM of your level? being second on based question just you're versus and how this I'm that's value level interest a then increasingly that be PayByCar So relative how elements the recurring we at at position the into terms OEM would but informed seeing well, by How look you're as of tracking in have the

Steve Downing

absolutely. Sure, morning. Good

of there'll one that they'll Audi on before, XXXX, ITM, every interesting when is I think the platforms not into to we've across I'm be mistaken. be that coming more the continues like think we general, I it. described out in parts deploy with if year, And get roll fleet product we'll platform this

So we looking our something features of, that's When just talk not capability something to an grow. expanding are it's the customers it's transactional the dreaming of expansion that about vehicle, of. for continued we're and

how gets value you consumer, used. do as the So, technology the how or added more platform and to vehicle the add to the itself the continue it gets and to hardware vehicle, to

example, paid that transactional for. technology, to leveraging platform, is at a consumer, piece step a offering advantage that existing great PayByCar So they've but the pump next gas of the now the already using the

we system. to seamless where their those to it's on bring where the from one and that their is want phone. their car, believe getting reservations offer continuing all complete and Simplenight to what interface into is see features we now together that, another and build. that Simplenight to enables ability that stretch computer, beyond, additional consumers functions, that's So And

we great a PayByCar a just the we're beyond grow is help So and there's play. expand, takes how hardware the think hardware, great and on it, can some that opportunities about Simplenight excited initial one it the leveraging

Luke Junk

hoping helpful. the full terms was of you're mirror, Good, past. Follow-up you relative the in rates to could is for right that's what and what specifically seeing take on on comment great, question adoption I curve the what rate display in you've really disclosed now

like commented to for any in additional FDM You you of suggest seems products pull, color call there's have some a just that earlier share? the lot movement and could hoping there

Steve Downing

the if half I instance, mix look Yes, for think strong. was the at year of you the really product last

higher was like with what content And were the mentioned OEMs on. we because we're on seeing is vehicles. vehicles partially were those, of take that, building high One very rates we

you the new that like above going luxury come what XX%. it first on rates. imply higher the we initially said, seen they rates, that you're trend the first-half standardized we've would actually we packaging, months to last and in lower back then XX% at to for maybe Cadillac launched, take XX% take fundamental are to in So, norm? much would we're it had XXXX six Or higher-end continues the down SUVs, the question And of long vehicle the that is have as you're how trucks and will what high-end when rates, last? seeing is, more a those expect running take XX% running move even going level on to levels. down very entry And Is vehicles, trucks to then

OEs some consumer feature. there And really engagement so, we're that pretty optimistic. One studies and thing some been is for liked from the has sure,

on to customer think, pull going regardless of full we line, on think display the the lot whole the we what mirror of of a to side continue because we're goes with So interest. see product

Luke Junk

thank you. Good, I'll leave there, at

Steve Downing

Thank you.

Kevin Nash

Thanks, Luke.

Operator

the next David And our with question Morningstar. Whiston you. line from of Thank comes

please Your line is open, go ahead.

David Whiston

morning. Thanks. Good

guidance, long-term think this now do you margins, you or XX.X% to but were think still First year, it's it's for on you XX.X% saying know I it's gross XX% better? XX% to

Steve Downing

No, potential run 'XX for at I to guidance for into the there 'XX. that think is it

have that do definitely of happen, but We lot work that's obviously feasible. to a to make

David Whiston

But point, about too that you uncertain? beyond right, don't want it's at this talk to

Steve Downing

retrenching us, now little don't like get to that at once modeling you out right think I David, mean, Yes, far. get we -- with we as I let predict, haven't me but if guess, difficult we know all. and there, It's we a

promise going to can the I we be get you So, power can to doing our make that it, we maintain it. to by we're sure in time everything close

David Whiston

the Gentex's though, guidance related right Right. include this year orders to if And control? your beyond shift does it even for any shutdowns not now they're

Steve Downing

contemplated kind a rolling actually shortages. first-half of for not the was of time the issues that to a shutdowns second-half then not IHS due supplier downtime in or very modeling power two year and for in OEMs Yes. most week but much periods, the there's or extended long at

a is their think, thousand IHS when it's few There made globally. forget. So hundred I fairly modest latest a I impact. vehicles, update

huge that a not the is overall forecast. into change it's of So production, to but there build some

David Whiston

IHS you And Right. talking for were about EU XXXX that and only year next earlier skepticism this Was about number. year? as both or

Steve Downing

XXXX. more for -- for more Really

David Whiston

something big there's and wheelhouse strategic is already? you one a of question, not thought you for ever your plenty -- Okay. guys And just ABs, other or have then one, about in that picture players more software last think making that's really

Steve Downing

look I go now, new pull to concept but to and we're we the not (a) right to or that, willing concept, we ask open at probably OEM open us day value we if so, the help, whether off something look wanted a would an we're have market like when up can would for that. we at that, to create and proposition think, mean, every we necessarily I -- to assess credibility there. be wake Well, partner opportunities not to to try then and that It's and out come always

that that partner well, changes, would for us. work not we probably look right as say, develop business provide the that OEM to here we're for if sit think would absolutely today, create try we model I but and new we it, and would necessarily a and to the

David Whiston

thanks. Okay,

Kevin Nash

David. Thanks,

Steve Downing

Thanks, David.

Operator

next you. with Our Instructions] Thank Josh Nichols B. from Riley. question the comes [Operator line of

open. go is line Please Your ahead.

Josh Nichols

may little especially a here, strong for levels, And as bit rest XQ up setup playing in probably exceptionally that Thanks a expecting I quarter. bit inventory bit trend you you given taking the that be catch as XQ that maybe of stronger and into still far the like wondering a are are little different to of little OEMs the provide detail right XQ? how could but cadence to year? if the the Yes. was question, revenue of more a trajectory, this about is

Steve Downing

Yes, you're more. dissimilar It's there of any chip second quarter, little into issues think looks the pickups bit don't exactly look right. I actually mean, outside to second-half the starts to like hard are and like I already, strong if play of QX, QX get starts then out too production really there. in mentioned then a normalization Steve what the count the but probably

a have maybe half of back heading taper and the you then the year. So into a little little of strength bit

Josh Nichols

Yes.

aggressive, a fiscal some more and stimulus symptoms your manufacturing the of return just areas. higher little on kind side especially end you is always about SUVs, this those number in percentage mixed potential air vehicles light trucks the different your on up thoughts been we've and we've like seeing as an and of a Gentex increasing impact bit the one just kind of the wonder right, and before. As like seen of I of obviously year things than as of for maybe normalized mentioned also is thoughts to a kind what federal inventory

Steve Downing

No, right. you're absolutely

to which the be was that's driven I a kind a really what's in lot up markets. of of year this next the and going catch strength second-half the plan of second non-existent of pretty first-half much in is quarter, from the think that year the

catch put lasting so some And think in of up the what really been to consumer -- impacts that and wrestle policies the period question longer-term with the that demand. have the once to it all then pandemic I that is over, we are have back place. And of economic is, comes

and and both fixed did prepare we're like have know we we if we structure whether it's prepared or or as discipline a cost we've going and of believe continue few the it's an a So, We wave any this adjusted downturn our significantly and recessionary or the we handle is if in reason for worked to be the lot we to knew stable scenario have if far. so knows not needed first able fortunately next to and made -- needed structural changes market. we put well so right was to either place, carefully ever One type market feel is to we why years market sure for watching one expanding QX done, the -- overhead flat we're watch in of out a market, a this to it in of no we that's completely business we for the either one lowered we for be of retrenches, even or the that recession. to thing

Josh Nichols

the longer question, time, line-up Thanks. I legislation increasing to like an And EV out to new indifferent about for and tends where talking mix takes is auto-OEMs that me, opportunity you're a just bit states of California, their but shift seeing also percentage kind might that positioned then whether is right, right to are the or that? you you of EV, better of this last going that, longer-term guess, is to you little these if on be some how term you're horizon, using question kind going of there Gentex puts that? shift to look about number or XX-year for at Does over for much of five moving a curious larger forward, gas

Steve Downing

train gas, or power we're whether not Yes, the that, electric. diesel the is short is really by answer affected that

marketplace, worked focused is seen there's good of over the rolling by the really to sorts, several luxury tend us features. out correlated. not would say us. to we've EV's technology one are or a that which even higher EVs happy that right are most be it. of Most where structurally of higher-end now that's the out higher look and right the last for of side EVs cost now necessarily to We OEs well added builders. for So years. is And The tends accident that's be nothing us the have at most But what end is benefit selling impact will there it on

Josh Nichols

hop back color. Great, I'll thanks the for in the queue.

Operator

the Mr. And remarks. any And for at Josh O'Berski I'm to conference questions time. would further further Thank no like I to over turn showing this you. back

Josh O'Berski

concludes Hope This the Thank and you have great call. great questions. our for your weekend. actually everyone time a you

Operator

Ladies this may day. gentlemen, you disconnect. have and a Everyone great concludes today's program, all

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