GNTX - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Gentex Reports First Quarter 2021 Financial Results Conference Call. At this time, all participants are in 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 your speaker today, Josh O’Berski, Director of Investor Relations. sir. ahead, go Please

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 first 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 First 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 in

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 Downing, get

Steve Downing

Thanks, Josh.

to quarter of million company For X% was sales increase of sales the net $XXX.X $XXX.X reported compared which the first an of XXXX, the of million, of in XXXX. first quarter net

The Europe vehicle issues. electronics part light North beginning American shortages were vehicle the quarter versus are and of were quarter of each revenue the production quarter impacted X% corresponding Korea change quarter for The in negatively in issues, the light the down million. the the shortage history, first estimated was XXXX. impacted forecast. first in markets, and Japan of which by of approximately light in sales shortages reduced quarter the and production the XXXX by levels of and to to second production behind production also these have the Despite vehicle to our the company part reduction shortages levels reason quarter primary the quarter compared the first forecast. were $XX highest only beginning XX% XXXX, fourth other These part During vehicle

was to Our by the created guidance first for that forecasted the impacted by to from revenue be shortages. parts a fourth were quarter quarter similar of quarter year difficulties first XXXX the but included a revenues clearly perspective,

comparison to X%. the a generating remember first growth down quarter production of revenue quarter the by underlying versus basis, down on of market of the of primary XX% which first America, X% the It of Korea impacted of XXXX. North our negatively combined vehicle first is markets quarter XXXX the quarter in also XXXX, X% to our and that means XXXX was shutdowns, levels were that Japan and During a means first which COVID-XX were for yielded Europe revenue out-growth of total important

XX% grew those period. which two-year when market revenues quarters, calculates the an X% our However, by underlying that comparing to versus during outperformance

this negatively growth. Full part scheduling that price increases very environment. component result company the as customer in chaos margins of place raw XXXX, once in Gross difficult the quarter as shortages put the to has structural plant created to customers’ XXXX, difficult, orders of changes of quarter not quarter-over-quarter basis a freight on XX.X% well margin well costs. driven and a product first cost operating which tailwinds last but team very up were by material impacted exterior-auto by mix as in and Display an order improve The by mirror The second incredibly dimming was basis, performed with points quarter improved the significantly increased keep well quarter the freight XXXX. The able margin first compared savings the first the as only to and gross quarter but the a margins gross again gross related shortages, was made for caused issues, during year. quarter versus For of of of was margin gross shutdowns XXX XX.X% also Mirror as growth

guidance million the in by annual range, of below in XXXX lost the gross the that was margin quarter was of the sales first majority our shortfall driven While in $XX the quarter.

compared the on XXXX. from see income to the the of $XX.X X% million, based forecasted first quarter of year. expenses sales by $XXX the and the million continuation made operations international in to reductions higher Operating for structural of decreased the for all primarily during $XX.X XXXX quarter also in lack during of the $XXX.X XXXX the was The quarter pandemic of decrease improvement for to XX% the the travel expect which but are to that the industry-based contributed trade operating million expenses. by from lower of quarter further of was operating first second of cancellation compared of shows first driven XXXX, increase when Income of margins remainder first million expenses cost XXXX. an to of gross of quarter was the because levels We of operations the

of and quarter diluted per Earnings continued leverage for $X.XX margins share XXXX earnings mix, the operating product to increase structural per share XX% income of of Net quarter XXXX. diluted the of during higher as increased income during increase rate $X.XX, quarter-over-quarter intangible derived when tax compensation. in stock-based the of quarter first put first the The compared $XX.X The driven the by earnings $XXX.X in of million was share rate discrete the result XX% for increased XXXX. company's from income sales, savings the a the the count a of share XXXX. gross benefits During million quarter in first The by is in decrease driven were quarter quarter cost net the the to that net in for well first increased result XXXX to diluted as from compared net increase of XX.X% were the quarter higher the improved XXXX. first as an of the deductions, quarter increase first per and foreign in first was place effective tax income of down of lower to compared second XXXX, of of was XXXX. income the XX.X%,

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

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

Kevin Nash

base of sales the XXX.X in growth the first interior XX% Thanks, mirror international 'XX shipments were Steve. of an a in included unit sales of in market. growth result the that dimmable primarily shipments in XXXX industry of be is in aircraft was exterior products, and as were sales in aircraft to window dimmable production meaningful million XX% continues by and until the compared China shipment in quarter a quarter 'XX impacted includes auto-dimming which quarter when decrease of quarter-over-quarter. XXX million, the the window for The of unit of net which quarter quarter the international company aircraft XXX.X quarter 'XX. improve. first a The X.X comprised quarter aerospace of of increase compared sales first windows 'XX. Automotive the largely X% unit other growth million net Auto-dimming of of and with growth XX% shipments. XXXX, the to outpaced first the compared Other Dimmable aircraft first increase million Boeing revenue decreased a first to will of recovery XX.X and significant expect protection levels more mirror there net 'XX, sales during first were fire

cash continued we uncertainties remain policy company In equivalents in balance cash flexible were liquidity March key so these December XXX.X XX sheet, due capital up allocation to accrued Cash XXX.X million, million, income as sheet high million, handle from million. to some the and million, as to increased XXX.X offset Increases accrued levels that 'XX. from up balance and and payments salaries by primarily highlight XXX.X of XX million XXX.X share operations, up first to due for repurchases, as flow wages to up during with to Inventories investments receivable the million were which well as primarily to now million, million. XX.X Accounts the from XX.X of payable positioned its million. of ongoing liabilities Accounts I'll XXX.X and month terms of million, compared XXX.X quarter, industry. payment the million. higher investments maintained items XXX timing. XXX.X million, up due from were Short-term from increased CapEx. were were XX.X and down Long-term were decreased Accrued XX.X well end dividend from million. XXX.X from taxes. partially

And I'll XXX.X million working income first was compared amortization compared for quarter first million quarter with quarter increases cash of XX.X call flow in in the from hand XX.X The by for first XXXX. the first over capital. and the quarter XX.X update. product for of cash quarter, operations Neil in For for first in quarter in was million, net of for with CapEx now million was million changes driven the XXX.X the and up 'XX. depreciation to from first a XX. was the flow the XX.X quarter increase million

Neil Boehm

years. for advanced XX features XXXX, first was the the interior, were last Thank you, launches strong our mirrors net disclosed of the mirrors auto-dimming in rate and auto-dimming quarter Kevin. rates headwinds. there three future the launch previously electronic one In nameplate and the launch over and net has quarter first new challenges highest industry insight net features, facing, of Despite been of

both advanced feature of During of feature were by markets mirror new auto-dimming included led and the good a and models new our there auto-dimming inside The advanced all launches models in mix launches was quarter, HomeLink. the of mirrors. base major

Toyota our nameplates enter new have six Those Mirai, on Buick Full Toyota Mirror Display Display XXXX/XXXX. are had an for we the announcement E-PACE, Envision, and the last X, of the Since Ram Sienna Now update Buick Mirror. Velite market. Jaguar Full launches, nameplates

list on shipping. has we a is and nameplates. shipping the number FDM. currently Land Here's six OEMs nameplates the XX General Motors, of our three nameplates. Subaru on launch two Rover, currently comprehensive Jaguar shipping now nameplates of XX where shipping nameplates. currently are on At on nameplates. is shipping Nissan, we're shipping Toyota we're customer, initial

Aston FDM nameplate. on on one And three nameplates. two shipping shipping is is Mitsubishi Martin, Ram nameplates.

balance we may shortages. the by of the current in look and As vehicles launches that be forward new many realize year, customers market quarter calendar our we to second expected the affected the of

company sensing company in we're we our optimistic our XXXX, as other we did today This conductive expanding to and on update ARGIL well the the completed XXXX another California gave was in Vaporsens, ARGIL. demand an into polymer of technologies. continue and products is see technology. future, electrochromic working late a focused Sensing In acquisition call, last a capabilities called for grow vehicles acquisition verticals. small an market quarterly in acquisition company a on strong a of for we In Nanofiber as company. on However, we called because latest

at strategies As we've years, few CES our use expand for the the demonstrated is technology. one cases technology to for past of dimming

closing company is and industry launches of interest and achieve with to trends team This we we use hand to viability, remarks. the with sensing we and Steve to broader that technology production So last are at CES. call we're even from that have developing product of back in us guidance allow several help Gentex is are product and and cases. expand technology the have technologies, few we're And about addition excited the facing, the advantage believe portfolio, current away a addition in challenges of to and years new path dimming with over ARGIL summary, gathered technology still of the these dimming more a will strong. the the for development positioning rollouts our I'll the market. its take years the our over the to the us but dimming now potential In

Steve Downing

the XX% production on until our XXXX that today, important Korea Thanks, revenue from Neil. and is market XXXX of vehicle calendar volumes. for The vehicle in IHS had earnings expected light the China. light the and current production producing XXXX forecast Japan to Based company's light about to Europe approximately note and by and call in It's regions over April the information, our production forecast Japan, company's X%. primary production for this decreased Korea primary mid Europe, on increase forecast vehicle January North for for XXXX is America, North markets IHS based vehicle year America,

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

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

X, Over effect trade remains last a increased so is X, U.S. an before company reached been The $XX be Regulation the of go to between quarters, agreement into closely date effect that tariff tariffs June and impact in EU. million the estimates Currently, into this June several on is go that the tariffs that the has incremental not company expense monitoring EU the do XXXX scheduled take in the XXXX/XXXX discussions guidance. effect. hopeful XXXX. can in to on contemplated $X do the If these company the million approximately not

vehicle higher year calendar In conclusion, approximately revenue few on light our calendar production addition, based the to the increasing year key XXXX, our estimated points performance. to be for X% like for estimates regarding estimates a to revenue mid-April is company XXXX calendar I'd XX% than the In year for reiterate XXXX XXXX.

Our issues year forecast strong for remains continuing calendar production XXXX vehicle current are impact that despite chain the the to environment. supply

our create about and of While overall launch continue in mix to market. to and into point specific rate to recovery us and for calendar the vehicle of industry an More health the these Gentex, our of the second otherwise confidence in cadence, hard the provide vehicle combination XXXX. future short program growth term, of business product production issues predict the awards production continued the instability also XXXX improved to light dynamics half year currently light

have our adapt to XX situation encountered. been last every we the able months, to have employees Over

was never seen months by the busiest it in six followed company First, shutdowns, history. before

But now able industry. battling We objectives we're that to the become provide volume to without they the has with sure compromising at make in alone. products quite satisfied our difficult. timing reputation to our we're accomplishments standards Accomplishing the customers commitment require our underlie those and quality these to are not

comments help us to placed has fortify will returns you average in done Thank capital and can continued That and rigorous that team rewarded to have company and all have share will active on to this capital in that we margin hard our you years that our while continued confidence proceed the time our prepared the on technologies, maintaining trust with we focus work business, your questions. today. completes come. above be the time, trust our and difficult improvement approach allocation market for for We this During to repurchases. core the new cost of yielded now pursue for maintained discipline invest our

Operator

Instructions]. [Operator

Your line the of KeyBanc Picariello first of question from James comes Capital.

Steve Downing

Good James. morning,

James Picariello

I utilized first are performance sequentially, to framework quarter as based full you reaffirmed for flat It second to your the looks expected IHS volumes guidance, right, quarter’s production. industry year on IHS. like know your Bridging base trend

So sustains. quarter out was called million the that this likely $XX impact volume

be So thinking better should volumes the just half headwinds the second wondering here, go year because from be supply to how great. about we away? chain the full inflation, do Yes, those trajectory would the the bridge freight,

Steve Downing

Yes.

the half going what improvement exactly QX we're On is seeing versus now it's size. – second Really be has the that's bit you're estimated be to revenue going gotten is supply and the constraints on pretty to year, seen think quarter. of that is chain we've down hoping similar year second half that half right. forecasting little versus what will beginning better. the the dependent is in what second side, the QX things I that's slow terms for first the If strengthens, and and this in right of the side. Really to a IHS of and in

think production the little a going settle lot issues, a down a tight we lot Hopefully half to It's volumes. is of supports supply. definitely constraints, QX. back be starts of bit a going like a to of that and to QX year, the lot So by be higher the freight

James Picariello

year-over-year. down pretty mix, in numbers, in looks exterior Okay, implied plus price mix. came it. the side got mix, price growth price the it -- there. mirrors mirror and the rates the like favorable the then first especially, volumes volume And The shipment was nicely were right, that’s really quarter strong volumes right, still the But mix

and into that we shipments curious FDM How how trend? tying this for year? price does that should about Just be mix maybe thinking

Steve Downing

Number one reductions. impact happening there of the price were annual Really there. a is Yes. couple factors

to X% take X, which for January on between reason part of the was years most X% looking you're effect that decline. the So on

other America really Japan, in look, a market vehicle Korea, significantly on saw we're part was The Europe, a tend and sales quite and ASP. we you increase to production was at China if interesting trend actually lower standpoint. of The from Those come in bit increasing North a negative the market. China

based So interior on a dimming mirror. they're typically

on ASP So your the low in range. XX that is

part ASP a And in so bit see quarter. that trending why little down you'd of kind the first was of

James Picariello

Got it. Thanks, guys.

Steve Downing

you. Thank

Operator

Baird. with comes Luke Your the from next question Junk of line

Luke Junk

Good morning.

wondering impacting insofar First question just OEMs helping rates we're their rates Is headwinds if be current there take could this term are profitable that take seeing on FDM, prioritizing production longer I’m how on Gentex? the comment any could benefits to you incrementally more and vehicles?

Neil Boehm

Yes. longer term. think I don't

reason the are think of see the -- But building terms over in the end caution see OEMs you'll no have also and by of spectrum problem build part shortages I top right is, issue. the of you'll is what 'XX higher now they're that electronic you see value with advanced in that's that shortages dollar the is part vehicles, doubt micro and some and saying of late that as we 'XX OEMs feature shortage the -- of and reason to -- component there's I'll set. trying content at

come expect volumes and the that lower content next but we going also to XX months, what increase with features. is that's So throughout some will

built that Some us. end are on low the of the take aren’t rate being side the of for vehicles

has on take been additional So issue. towards a that rates pressure the seen The FDM. higher our shortage not been of we've features, a has there is obviously on problem just micro what advanced lot trend

start of does it The the to slow the that slow to back of how does take so take starts that by high the year, it stay this normalized becomes go half a And longer a we this content at level to as or rate. more bit. down constraints issue rates little down, – does hopefully like term think second

us we're think of concerned we success stratification if about different multiple with we're what It's would Because of that type that are for FDM rates going are we because I do same take get obviously that. not seeing how then of on to can, on signal rates great built. take vehicles. on vehicles that FDM, those drop more

Luke Junk

then gears, And you dynamics the to that dynamics centralized you switching and hold your that terms drill down And on bit? helping the little production on some a is amount the in inventory own if of supply of to extent Okay, could chain model you to mitigate just hand you're wanted those that wondering that’s helpful. headwinds, chain. specific supply seeing talk these of about your

Steve Downing

few the of availability Yes. on difficult. crazy. the micros, boards kinds the it's way how went responded, I’d and all lot It's the has through as and Obviously, to suppliers -- caused circuit month went through simple high pretty of end been catching of about that of has dynamics shutdowns difficult in due a period to our those it's micros, and much but that's responded components. side, been has up say It's fast globally, electronic not all as the then industry market particular issues. been a just pandemic, very market’s

it's that We need supply rolling been get people try that a sure and we customers to make daily watch issues problem. so what producing. basically and to communicating with our we And constantly list watching to going a we're keep have of

back that, and go that actually through there retooling some right help a of that Beyond watch what's now, hoping And of chain we're that supply through is of the bit shutdowns the OEMs there's up. does does and industry the this a -- how summer that catch the catch break ever think to up? little fascinating really how normal I some

side has other wild. The been

look Asia. of are You coming Southeast a these freight at lot from and components

parts, how the Coast, freight So get expedited to but an pay to here you sitting try to all you just have caused it's getting issues from time. in much on lot to terms of freight West a of Canal got all Suez the the there. off the the Not them ships issues

been to so related the headwinds cost lot a on side there's And of that.

get constraints under that of the costs we can those control hopefully freight hopeful well. that the some we're So ending with in as back half second

us not The everyone can't OEM. shut be our to like you you has stock, that end is, helped keep up of obviously, day-to-day with terms order problem down else, that absolutely up production is inventory, demands. shipments replenish to then needing which In if in on yes, able

Luke Junk

That’s leave there. Thank you. I'll great. it

Operator

Your next with Jefferies. line question David from of the comes Kelley

David Kelley

then in up year my apologies on outlook Can the full Hi. down those kind taking maintaining of Good a headwinds, talk IHS background And numbers incremental guys. bit. maybe about of and an questions. three here for positives guide, the airport morning, Thanks to headwinds? but despite two emerged the that your follow for the you over to to disruption noise, past months the helping just the coming have some offset incremental kind of the

Kevin Nash

is Yes. Thanks. Kevin. This

the seen rates And think level year. a good well to in as resurgence I we've seen strength we've and a applied Steve that take the alluded earlier, in of as the bit been that has market, volume products really throughout great of growth some in market. North the market China in American base as

and launches are time And of the things some we about Neil off the expecting. take rates taken talked on some is that with were of that

bolstering again, by chain issues it's a that. the is to easing what so back estimating supply that driven is of And in half. lot be really But IHS of that

David Kelley

Okay.

Steve Downing

some of continues Display. on that the for we of too really has Mirror years. rate on, that Display were strength growth I couple last been Full Full think the

very too. strong So well been launches that's going and have been the ITM

to helping positive add been So that's revenue. some

David Kelley

over today sense has so? what maybe quick of penetration the kind of China. of to auto-dimming kind Okay. us Thank you. done your that a the Can past penetration follow point is give and And where up couple or years a you on

Steve Downing

Yes.

go XX% XX% market that So XX% of -- couple penetration that China of it's right inside think I'd probably market. is all drastically auto-dimming now envelope the to it's rate grown around and the say I in back going to quick years. the about on base probably I'm of last real in

David Kelley

Okay, along. you. it I'll one for And last got then and me it. Thank pass

that normalized get helps Just the to of strong kind about of visibility kind kind to range of But chain to think that here to in like the XX% the be back that how to first kind we second of margins be half second the the XX% gap back uptick supply is the it full the impact half to removing gross assuming Thanks. to sounds chain of to improves. bridge XX%? and quarter pretty that'd curious, probably the that We're the should gross supply again you year in be appears here great. half just year will margins, to quarter it somewhere that trying gets what XX%,

Steve Downing

would I Yes. half mentioned, first like a the in you expecting sales total we're say, little higher be to dollars. the of second terms than a, half

margin of So above or get to drive that's second what's range sales us half that inside to contribution going are help of annual the those year. -- midpoint the incremental we still slightly the And that range full the annual of guidance to in the guidance how for year.

year's in calls, Kevin we the not in only which revenue us but as impacted the Some cost still always second these we of should of from start then April, carrying about materials. fact inventory both see first impacts prior the positive that we're the by to May, through the quarter the of seen, talk half, the reductions raw purchasing as start factors we cost negatively that that basis. are at March, And have move to second usually the help and higher we year historically and mentions

growth statement higher so And growth then, the through rate. positive And income helps that see with about flow the can is as growth rate above obviously, the the we the half that obviously usually X% get second XX% as talk you range, usually a rate that to well.

David Kelley

Thanks so guys. Really Okay, great. much. helpful,

Steve Downing

David. Thanks,

Operator

comes of next line Your question Josh the from Nichols with Riley. B.

Josh Nichols

the the XXXX and outlook. for company good reaffirming to Thanks see my taking question

What's actually confidence outlook Display to strength it you bit are Full seeing? provide near-term the you a and If some ITM see 'XX give color. and 'XX what we're takes could that shortages little the of raise more to puts the Is despite raised that really Nice the areas of get here. Mirrors, enough outlook? for

Steve Downing

Yes.

something a First, talk we and mentioned bit that new ITMs, in we vehicle and little some the founded had one the gives be actual by we January, watching is the to that confidence growth. call out. in and turned our out -- hair take of the the what concern. continued IHS year was to in first us keep quarter IHS we Display that and rates full a of were our rolling conference our number Mirror, the was on where eye year-end a the what did discussing, Full about of for But of think forecast. launches we're Neil products, strength at on, bearish probably in on portal well production things I interest terms drop bearish Obviously X% we're That we've is the probably that technologies

even So total we the content really in why exact that XXXX. key even the that's IHS And we is could for feel really doing on the feel are like absent growth our those well not -- rates, market. -- in number drivers like that raise guidance production we hitting quite vehicle of

Josh Nichols

is the or it forecast? thanks. then kind just back still in of bit this lingering shortage of expected And chain year, the to are much half the Yes, of supply impact what to for alleviate? expected little some the second half of half thoughts the regarding second how Is looking a clarity at be

Steve Downing

when everyone funny It's a will talk different have that. on opinion to you Yes.

last belief personal second my -- that is this at in look you to half going the of year. that even If on it's longer

components, for takes a in type to that's put how at these it get to capacity short not If going in term. happen you of long look place

– going in due the to any more there you at you're at supply months and can consumer those from Really obviously And there. catch see that's looking is months electronics. going pandemic, But number so to to shared to improve before capacity. one, about could what before the starting down up as XX type chain then of several it's you're least XX, of to take downtime happen. investment happened talking with they resources total get capital kind even the trying talking be you're And that step is

environment to automotive consumer was be see to what do been so start And relief, you about or in QX I time side. And will a supply that is electronics over trend better the get like QX. more it total XX-month personally pretty will same we and it's the period, question a what up think but it's there little content? down than think play from before so an going harsh

of not the away lessen, we second go so think that half year. the will And by but

Josh Nichols

guys. there. appreciate color Thanks, the I

Steve Downing

Thank you.

Operator

next comes line the question Bank from with John Murphy of Your of America.

John Murphy

guys. morning, Good

You've of lot but a answered left. just a I my questions, couple have

material curious is this something into ease just year I'm through if that's go costs, remains? or raw a headwind and as next that may the you think we year, that that On

Steve Downing

lot get worse are little material, of raw year. so think it's is the was I the second the quarter. bit in a the in to half. throughout be the reason the there'll drop freight second hit and quarter that going beyond. more it, It coming first increases but very of But start actually to probably customers, half why And price a to actually, electronics with suppliers that second the of believe a the little of in issues we will

in There experienced what more material right. similar be we headwinds be will raw mix, headwinds, the we QX. think different a just going we side. QX to freight QX but in the so will be And It's to see less through on very

John Murphy

it. as PlayStations for do if tailwind like, you the screens year? in think become on Got town the And you we point but the homes that semi maybe frees becomes on the have back and and potential other next could and companies, is that computers capacity this ease and you at maybe this, direction swing of for best in semis, and the dramatically some just you everybody a where color actually autos up some this out and game their not there that think about gave many then year next the and buying

Steve Downing

think know Yes, next window three-year will be possible. in but it year, a I if I don't two to that's

I a of that in think there's place now. are a spending putting on right capital lot capacity additional lot semis and

X% a ASPs. and overall -- but again. would that going if to start year a on there So maybe before more that be you relief looked this see XX% it. down XX% we in the or you to capacity. electronics to is where in normal begins We few that become be happen think to at years market high-end X% expect a it's a that's again, I at like think to describe you've we'll look Historically, production increase get And

John Murphy

to I'm and are sales And advanced being interior Okay. then it's on delivered more mirrors are that of percent over customers? mostly or for lastly going like sounds exterior just China, Who time? is become just your China? what base And the mirrors curious it what But now. curve typical that's

Kevin Nash

of of joint is our Yes. China because total the venture was OEMs. it's to X%, revenue quarter, In revenue through most X.X% shipments around right

plants which have taking Tesla obviously China, off. to also We in exposure the is

have tariffs The into of so it. do a the future broad a the about is and far still quarters of product, expanding we the locally. as it's Neil But some mentioned local headwind thinking chain OEMs. as China some everybody a And in just with supply loves growth pretty it's play And advanced how to This there remain features. things we really The ability several manage as considering for past, matter those going things. with the Chinese has launches, do spectrum.

Steve Downing

how And your other the more in that development market believe with -- now We after growth auto-dimming question we advanced that was curve years on right technology, believe you will several getting we're that open door like? what look features. that to does the base the do

market the defies work China historically obviously specific-type China. unique market. continue feature Mirror towards there and a Full we've to technologies But on work help But what are need We to to great content term, to some that opportunity, because that And have regions. are it done some is Display borders in we China that we features advanced the longer market. in done really well. that's market-specific need to

John Murphy

going ask but know of there everything a think I to And is I'll or I Zeeland? any this, to over production it answer thought there Is anyway. building facility in the stay

Steve Downing

What Right. couple China. ago we've actually of a -- building new years have, a we in bought we

of able for We assembly customer situation. renovation of now. building door just in right is have and getting lot a help final be Zeeland storage finished to building support out distribution center to that with We a of We did more we're do market. there. goods us for a offers the up like demands, opens up also couple to there, that new It us bought actually years to occupancy China ago the a a that into building. inventory tariff for the What

have do ability right plans in So and expand now assembly place that to in we final to local market. continue to our look

John Murphy

And that or assembly tariffs, -- potential below that final is skates ducks

Steve Downing

metal even of dollar content, is says boards plastics we're it it and what supplier circuit does a find -- yes, and that and say, lot takes to takes local Well, those. mounts a it going for

core and but would content then Asia. domestically have there, you because in still -- produce of something duty are would we tariff that wouldn't that lowers those amount drops. avoid Zeeland But So total the auto-dimming you ship source the the elements on stuff it dollar in

John Murphy

Thank helpful. guys. you, Incredibly

Steve Downing

you. Thank problem. No

Operator

with Your next question comes the Ryan from of line Brinkman JPMorgan.

Ryan Brinkman

Great. my Thanks for question. taking

the You to then also resulted contribute kind talking primarily increase you increase? customer a be not the more base housings discussed thermoplastics, have Can in exposed about could And of or like are might about increases. price that which [ph], and lot you sure seeing which place? about we're buys that using material are material Is might talk it biggest in extent of polypropylene to materials? the your in parts any the there. electronics release maybe you've you pass-throughs or talk ones I'm Thanks. it raw shortages the about that raw been you is the components what

Neil Boehm

Yes.

purchase electronics the on exposure the we quarter. in Steve company microelectronics, So biggest forward, question? it's the in year part this market really the are also saw quarter do increases obviously last The issues that plastics components. the price some we is was we impacting as markets negative But going of back in the hold take really But is however, what impact, that the to have price the the the to realm What starting the precious side. largest metal undertakes to alluded in saw that well. increase half of the potentially and was the of that

Josh O’Berski

pass-throughs. Customer

Neil Boehm

push margin products on look APR market-based at buildup and increases. for on our work and pass-throughs, But most on of either we take that through hard APR, in us for But manufacturing to minimizing that's side. cost customer the with out the The we the you as every to those these as pricing, try push either our can risk things. impact volume more types efficient or of already the getting when to being figure part, day process we

Ryan Brinkman

any like with think on other a might would could with announcing you Integrated You've there automakers you might update some disclosed And been ones there has product. product? on discussions you some been Module but profitability snag perhaps with this what there look new color lot also. year. automakers awards is I'm sure want product, Great, there of thank expectation curious an or you. not lastly, ASP metrics I'm be you've for helpful that that I that And just provide to but Audi, provide the Toll

Steve Downing

I'll the about a bit side. Sure, little products talk

over consumer improve looking continue in the So to of the product. place some last the is Audi volumes continues rollout increase getting go extremely to that have for consumer continued the as the functionality The year. well. we and to It's awareness now

QX, QX something Second, expects the that a customer for that. last we've part talked in early about of

Kevin Nash

$XX $XX the ASP to that On for is ASP side, around product.

Ryan Brinkman

very you. Okay, Thank helpful.

Steve Downing

No you. problem. Thank

Operator

from question Whiston Morningstar. the Your of line of next comes David

David Whiston

balance supply your when Is Good morning. this cash-rich I materials past scarce around? tends know happening rock-solid to there in you you've a sheet are the on how give priority talked that about higher problems. time raw

Steve Downing

Yes, night through every that you're at with things this, sweats up something one afraid -- helped us. definitely is definitely you There no going something wake it doubt. like of the to been happen. through better not to have our and we've inventory happens shut OEM. and And us that an can than some. allowed definitely fortunate you that fight happen That Whenever down

a see a of automotive base. you You and a by can day different pull read publications -- every down going shortage you because pretty OEM up supply much

get been So those. we've of we -- you're we you're mentioned, that hand. been of that some inventory burning through fortunate, the hasn't knock of haven't But struggling on any shipments, that on as like to cause wood,

side make as us they time remarkable The no supply working that drive making we're that those get sure visibility we that job especially sure give on is make there of to we have team out as so the trend, lead need time. is sure trying doubt to And incoming those to things the with triaging sure the on as make we helped. our it done what sure But freight and did port to plenty from higher possible. side we're Unfortunately, them cost and get the that parts to quickly stuff and when committing get we make shipments of a one need need of we're we to a possible. quickly obviously to suppliers what access as it creative has get to here

David Whiston

mitigation -- I we the raw the And only calendar then that material believe started go this higher the of process because think normally price much worst reduction annual early the or it, somewhat the process. But I throughout with too. you in that related year, prices through QX is year, you've haven't got

to be reduction price effort hard? this look mitigation that going how So Is does year? it extra

Steve Downing

be challenging, doubt. to it's is no Yes, there more going much

If basic you look at timing won't standpoint, it a change. the from timing

start improvement issue second to you're material APRs suppliers. from get level side. some you areas, year the half the little of be inventory this the as our through as a on you're you're of historically see to first QX the in the then increases a from won't see not move quarter. much like of you quite quite we've had you're prior Because impacts think to through the amplitude -- some going The beyond, to year. see what going say, same purchasing improvement quarter as with you the and going through what And positive going normal you're to, on year back is going I to bit burn in

not like what in same levels we're of there. modeling we're been is But year before, see the what benefit some is not half charges freight as premium going to so as mentioned progresses, much so And because expecting on you're far. back we've freight pickup we paying the quite the

David Whiston

about actually last prices. the on the electronics you -- earlier versus for talked freight the that on offset lower my call And question higher to with leads

XX%, Is freight? how So that is offset much lower an it XX%, of XX%?

Steve Downing

combined. is raw headwind Well, and let's now, basis we saw QX put points it in what from in this to way. material XXX XXX about freight Right

we And that going but headwind we the number majority so back to there's But is there be drastically is half. throughout the in go we going opportunity think for think that the think down, to obviously of last don't changes those to that year. that the

David Whiston

Thanks. Okay.

Steve Downing

Thank No problem. you.

Josh O’Berski

David. Thanks,

Operator

[Operator Instructions].

the line question of Charlie Family Sloan Advisors. comes next Oak from of Your

Charlie Sloan

From the Midwest.

Just calling -- hi, guys.

of versus lags up. the seem to your as that's keep just like inventory, through Just it to you're a previous automakers ramped more you up couple back doesn't cycles, you've just questions. struggling going In be the seen the production used case but because because here,

Steve Downing

Yes, exactly. interesting. Timing is always

If even with the OEMs you -- QX continuing when ship. pandemic, to look at the the like down, downturns were in QX, as went we

weeks much a transit, right in frankly of less normally mouth because to right is hand and we're we're and less we right. to be But so route en there's customer now of it and there we a anywhere less exactly a ahead X what so from typically, going -- in Quite see. little inventory at OEMs that when producing. constraint of There is back, that now. would XX think the get terms And to for is to lag you're it we'd little because love there's than

on correlated than the for be in a think I see it past. to more it been standpoint XX so X next And has months, to going the you're what much timing

Charlie Sloan

a then How the optimism ago? FDMs this it on you you to more your are as less would about back optimistic guidance a optimistic? changed if it the giving FDM, year a to as year do then my has year And and question FDMs, go that Okay. from next or or anything shipments you which And perceive next? of follow-up, be total is

Steve Downing

felt that growth from was say was the with optimism. We until where I'd a start the it I'll and say good going. today, So about I the what it's would about ago rate really same. year

a ago say today. is roller-coaster would been year a to between what I Now it's

to go to are happened, happening this the continue Given man, you issues going through, that in everything product kind of the is industry. that's grow despite

QX at so develop rate having And sit watched growth expecting. same here the we were we today about

year expect was to XXX,XXX years. on and adding so on, FDM, Last on by for increased kind that of issues everything talking with growth for next we're a couple to is XXX,XXX that. rate. year. continue and about but units to units we're growth we there really growth right talked part And problems track right of we on question the we're a What XXX,XXX, And thing each despite of rate, your our the huge the year the gone pace that's about second with year

Charlie Sloan

XXX powerfully that investments. Okay. managed through cash cash you have right, right? long-term guys some And Is between sheet, and cycle have then the finally, about that given and balance so on you million, the

Steve Downing

sir. Yes,

Charlie Sloan

Okay.

– what And that? going so are do the have we about to we XXX million target,

Steve Downing

Well, that business available one at increased been reasons. what for But in businesses. targets a thought it quite and the reasonable much have we've there sure focused really impact everything side. little we've a available honestly to Want is – economic happening. through little the surprising, bit pricing. for wrong we anything little of you're cycle, been of beginning has a because the with not done through getting make been pandemic, is started on the this we become Quite the long-term knowing go acquisition that's that's multiples that terms more cash retention two Number frankly prepared could that number one changed more the on not two

we are happened. for downturn are depression hasn't of And so which expecting a be what we assets, of and market to preparing a available values hopefully

not also prepare trying So the a for prepare rainy potential buying we dropped. for prices for only to but are market day, if

Charlie Sloan

Okay.

because we're buy side, So the we the not shareholders, just we – I we're sell think side. are

And as on shareholders balance is that always. any have so would if capital the I'm sheet, there sitting sure that you excess appreciate

Steve Downing

Yes.

Charlie Sloan

are great guys a doing job. You

Steve Downing

and about in and will appreciate not what's to kind look period. time a and like a long-term XX-year in we're our confident confidence one shown is stockpile our I that adamant hey, And over X we in repurchase absolutely we position it growth we think beyond what thing on to is future that's love us you've goal long of the are saying, cash and plan necessary that our share why that fallback is

that as buying And so see on whenever whenever going retrench we'll we're be aggressive get And we we stock. market have an well. side much, more too to opportunity,

Charlie Sloan

like you ASPs. Because as sets describe it Okay. coming a wonderful look new where play feature into describing XXXX it, does higher with your you're are

freight the and production a of you've companies. cost I in at run slowdown a pickup some have You car that in stuff look wow. into the and this probably at say,

Okay.

Steve Downing

we Yes. that believe a Neil's for features, a new sets content. team on up technologies long-term of has job new growth. done remarkable delivering piece the us And

Charlie Sloan

Keep work. Okay, the great right. all up

Steve Downing

Thank so it. you appreciate much. I

Josh O’Berski

Charlie. Thanks,

Operator

no call are to would Josh closing this for turn any to There questions the remarks. further I like back at O’Berski time. or additional

Josh O’Berski

our questions This Q&A hope call. of the you your great and great weekend. the concludes everyone week have you Thank of portion rest good for a and

Operator

call. participating in Thank you conference for today’s

You time. this may now lines disconnect at your

Gentex (GNTX) 23 Apr 212021 Q1 Earnings call transcript