Gentex Corporation

Good day and thank you for standing by. Welcome to the 2024 Second Quarter Gen Tech Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I'll now hand the conference over to your first speaker today, Joshua Berski, Director of Investor Relations. Please go ahead.

Thank you. Good morning and welcome to the Gentex Corporation second quarter 2024 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, CTO, and Kevin Nash, Vice President of Finance and CFO. 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 in the Gentex Report's second quarter 2024 financial results press release from earlier this morning. and as always shown on the Gentex website. Your participation in this conference call implies consent to these terms. I'll now hand the call over to Steve Downing for our prepared remarks. Steve.

Thank you, Josh. For the second quarter of 2024, the company reported net sales of $572.9 million compared to net sales of $583.5 million in the second quarter of last year. For the second quarter of 2024, light vehicle production in North America, Europe, and Japan and Korea declined by 3% compared to the second quarter of last year. During the second quarter of 2024, light vehicle production weakened in most of our primary markets. In fact, the quarter began with sales coming close to forecast for both April and May, but then saw a significant change in June that left us well below our forecast for the quarter. In total, the company's revenue for the second quarter of 2024 fell short of our beginning of quarter forecast by approximately $50 million, with the biggest impact coming from expected shipments to some of our largest customers. As we look to the second half of 2024, light vehicle production forecasts continue to show weakness versus prior year performance, but we expect to return to meaningful outgrowth versus the underlying market. For the second quarter of 2024, the gross margin was 32.9%, compared to a gross margin of 33.1% for the second quarter of last year. The second quarter of 2024 gross margin was primarily impacted by sales levels that were well below our forecast for the quarter and slightly lower than prior year levels. Additionally, unfavorable product mix resulted from lower than expected shipment levels with full display mirror unit shipments and exterior mirror unit shipments being the most affected. Unfortunately, the lower sales levels and weak product mix more than offset the positive impact of purchasing cost reductions for the quarter. While our material cost reductions are in line with our estimates for 2024, our gross margin recovery plan for the year is partially dependent on sales growth and product mix improvements that did not materialize during the second quarter. Given our historical contribution margins on incremental sales, We believe that our gross margins would have been in line with our overall plan for 2024 had revenue been close to our forecast. Overall, we are very pleased with our progress on the margin recovery plan that we estimated would take until the end of 2024 to complete. While the gross margin for the second quarter did not meet our expectations, we continue to believe that we have the right plan and team to execute our full gross margin recovery plan. Operating expenses during the second quarter of 2024 increased by 12% to $73.7 million compared to operating expenses of $65.8 million in the second quarter of last year. Operating expenses increased quarter over quarter primarily due to staffing and engineering related professional fees. Our operating expenses are trending in line with our expectations for the full year with increases primarily focused on R&D and launches of new programs and products. Operating expenses, especially R&D expenses, are expected to continue at the current pace for the rest of this year as we continue to invest in innovative products and technologies, new business awards, and VAVE initiatives for cost optimization of our bill of materials. Income from operations for the second quarter of 2024 was $114.9 million compared to income from operations of $127.3 million for the second quarter of last year. Other incomes swung to a loss of $13.5 million for the second quarter of 2024 compared to income of $1.3 million in the second quarter of last year. The change was primarily driven by non-cash losses of $18.3 million, resulting from mark-to-market adjustments and other market adjustments of certain holdings within the company's tech investment portfolio, which were partially offset by interest income. During the second quarter of 2024, The company had an effective tax rate of 15.1%, which was primarily driven by the benefit of the foreign-derived intangible income deduction. Net income for the second quarter of 2024 was $86 million, compared to net income of $109.2 million for the second quarter of last year. The decrease in net income for the second quarter was driven by lower net sales and income from operations compared to the second quarter of last year, as well as the previously mentioned changes in other incomes. Earnings per diluted share for the second quarter of 24 were 37 cents compared to earnings per diluted share of 47 cents for the second quarter of 23. Earnings per diluted share for the second quarter of 24 were impacted by the lower net sales and operating income as well as the previously mentioned changes and other income for the quarter. I'll now hand the call over to Kevin for some further financial details.