Gentex Corporation

Ladies and gentlemen, thank you for standing by, and welcome to the GenX Fourth Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to hand the conference over to one of your speakers today, Mr. Josh Oberski, Director of Investor Relations. Sir, please go ahead. Thank you.

Good morning and welcome to the Gentex Corporation fourth quarter 2020 earnings release conference call. I'm Joshua Berski, Gentex Director of Investor Relations, and I'm joined by Steve Downing, President and CEO, Neil Boehm, Vice President of Engineering and CTO, and Kevin Nash, Vice President of Finance and CFO. This call is live on the internet and can be reached by going to the Gentex website at www.gentex.com. All contents of this conference call are the property of Gentex Corporation and may not be copied, published, reproduced, rebroadcast, retransmitted, transcribed, or otherwise redistributed. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex Corporation with respect to any unauthorized use of the contents of this conference call. This conference call contains forward-looking information within the meaning of the Gentex Safe Harbor Statement included on the Gentex Report's fourth quarter 2020 financial results press release from earlier this morning and is always shown on the Gentex website. Your participation in this conference call implies consent to these terms. Now I will turn the call over to Steve Downing, who will get us started today.

Steve? Thank you, Josh. Before we get started with the financial performance for the quarter, I want to take just a few minutes to thank everyone who has helped us during the last few months. To our customers and the supplier community, we want to thank you for your communication and teamwork that allowed us to keep up with orders during the second half of this year. We couldn't have done it without your help. To the entire team at Gentex, thank you. Once again, you have outdone yourself. Despite the obstacles, and there have been many this year, you found a way to deliver record-setting results. Now let's dig into the financial summary. During the fourth quarter, the company experienced record net sales of $529.9 million, which represents a 19% increase over the fourth quarter of 2019. We were able to accomplish this sales growth by a combination of a 14% increase in auto dimming mirror unit shipments and a 96% increase in FDM mirror unit shipments. This growth rate was in contrast to global light vehicle production that increased by approximately 3% for the quarter. And if you look a little deeper into the global light vehicle production numbers for Q4, you will see that China production was up 6% quarter over quarter but the rest of the regions were only up about 1% versus last year. In total, our outperformance to the underlying market was 16% for the quarter, which represents one of the highest growth rates for the company in many years. For calendar year 2020, the company shipped 1.053 million units of full display mirror, which was a 42% increase when compared to 739,000 units shipped in 2019. The growth rate of FDM in 2020 was incredibly strong, especially when compared to a light vehicle production market that declined approximately 16% for calendar year 2020 due to the impact of the pandemic. The gross margin in the fourth quarter of 2020 was 40.9% compared with a gross margin of 36.5% last year. This was the highest gross margin since the second quarter of 2004 and was a 440 basis point improvement from the fourth quarter of 2019. The gross margin increase was driven by record sales levels, positive product mix, benefits from our cost reduction efforts earlier in the year, leverage on our overhead costs, and purchasing cost reductions that together more than offset our annual customer price reductions. Income from operations for the fourth quarter was $162.4 million, which was an increase of 46% and a new record. Operating income improved significantly during the quarter as a result of the higher sales and gross margin levels. Net income for the fourth quarter was $143.3 million, which was an increase of 44% and also a new record. Earnings per diluted share for the fourth quarter was 58 cents, which was an increase of 49% versus last year and was also a record for the company. During the fourth quarter, strong sales levels combined with the cost discipline we have been executing throughout the year resulted in record performance at every level of the income statement. During the fourth quarter, the company repurchased 2.5 million shares at an average price of $31.82 per share. For calendar year 2020, the company repurchased 10.6 million shares at an average price of $27.10 per share. Our share repurchases during calendar year 2020 resulted in a 4% reduction in the diluted share count. For calendar year 2020, the company paid $117.2 million in dividends, repurchased $288.5 million in stock for a total cash return to shareholders of $405.7 million. When you combine this level of financial performance with our common sense approach to capital allocation, we believe we have forged a pathway to a significant increase in overall shareholder returns. I'll now hand the call over to Kevin for fourth quarter financial details.