Gentex Corporation

Good day and thank you for standing by. Welcome to the Gentex Report's first quarter 2025 financial results. 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 the session, you will 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 1-1 again. Please be advised that today's conference is being recorded. I would like to hand the conference over to your speaker today, Josh Oberski, Director of Investor Relations. Please go ahead.

Thank you. Good morning, and thank you for joining us today for our first quarter 2025 earnings conference call. I'm Josh Oberski, Gentex Director of Investor Relations, and with me today are Steve Downing, President and CEO, Neil Boehm, COO and CTO, and Kevin Nash, Vice President of Finance and CFO. Please note that a replay of this conference call webcast and edited transcripts will be available after the call in the investor section of our website located at ir.gentex.com. As a reminder, many of our comments today contain forward-looking statements based on current expectations. These forward-looking statements are subject to known and unknown risks, including those set forth in our first quarter 2025 earnings press release in our annual report on Form 10-K for the year ended December 31st, 2024, as well as other general economic factors. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those that we expressed today. Before we jump into our prepared remarks, I wanted to take a moment to address our upcoming annual shareholder meeting and the proxy vote. As in prior years, Glass-Lewis has recommended that shareholders vote against our nominating and corporate governance committee chair, Ms. Leslie Brown, due to a lack of female representation on our board. And so once again, we encourage shareholders to ignore Glass-Lewis. In their explanatory documents, Glass-Lewis claims to provide a comply or explain approach in their recommendations. In prior years, we have attempted to explain our stance by reiterating our support for Ms. Brown, who is an exemplary member of our community and our board. We have also pointed to the continuing progress Gentex has made in increasing the diversity of our board's demographic background since 2016 when Ms. Brown first joined our board. This form of explanation does not seem to have hit home with Glass-Lewis, so this year I will attempt a more direct approach. Recommending shareholders vote against a female board member is an illogical approach to increasing female representation on boards. If Glass-Lewis is in fact seeking increasing diversity on boards, Glass-Lewis needs to update their policy to take into consideration the nominating and corporate governance chairs' gender and demographic background before recommending a vote against. Glass-Lewis also noted difficulty in identifying our board's reported demographic breakout. While NASDAQ no longer requires this breakout, we continue to follow NASDAQ's prior guidelines for disclosure. As such, this information is easily found on our website and the Board of Directors section at ir.gentex.com and also included each year at the back of our annual reports. Our hope is that shareholders who use Glass-Lewis's services would reach out to them to express support for this logical approach, and at the same time continue to support Ms. Brown's role on our board. I would welcome any calls with investors who use Glass-Lewis for their proxy voting recommendations, and I'm happy to clarify Gentex's position on items contained within these reports. I will now hand the call over to Steve Downing for our prepared remarks. Steve? Thanks, Josh. Deep breaths.

For the first quarter of 2025, the company reported net sales of $576.8 million compared to net sales of $590.2 million in the first quarter of last year. In the first quarter, global light vehicle production increased by approximately 1% compared to the first quarter of last year, but decreased 3% quarter over quarter in the company's primary markets of North America, Europe, Japan, and Korea. Also during the first quarter, Trim mix within the light vehicle production build weakened versus forecast across all major regions, but especially in our primary markets. The trim mix impacted take rates for several features, but especially our exterior mirror unit shipments, which were down 15% quarter over quarter in North America and 8% internationally. Overall, the weakness resulted in a sales shortfall of approximately $25 to $30 million for the quarter. For the first quarter, the gross margin was 33.2% compared to a gross margin of 34.3% for the first quarter of last year. Compared to the first quarter of 2024, the gross margin declined as a result of lower revenue, unfavorable product mix, and new tariff costs that began in the first quarter of this year. Sequentially, the gross margin improved by 70 basis points as a result of purchasing cost reductions and higher sales levels versus the fourth quarter of 2024. Overall, despite the lower than forecasted revenue and the weaker than anticipated mix, our sequential margin improvement in the first quarter resulted in a solid start to this calendar year. In addition to the revenue headwinds, the gross margin was also impacted by new tariff expenses of approximately $650,000 in the quarter that were not reimbursed during the quarter. We remain committed to the cost improvement initiatives already underway and we are actively expanding this program to help identify additional efficiencies to help offset the margin pressures that are likely to be created due to the pending tariff impacts. Operating expenses during the first quarter increased by 8% to $78.7 million compared to operating expenses of $72.9 million in the first quarter of last year. Total operating expenses for the first quarter of 2025 were impacted by severance related expenses of $2.9 million versus zero severance charges in the first quarter of last year. Operating expenses are moderating in 2025, which is in line with our expectations. During the first quarter, the severance related expenses of $2.9 million was primarily related to early retirement incentives offered to long tenured employees. Additionally, the company incurred one-time expenses during the first quarter related to the Vox merger of approximately $900,000. In total, the severance and merger related expenses accounted for nearly two thirds of the quarter over quarter operating expense growth, which means the core expense growth was less than 3% for the quarter. Income from operations for the first quarter was $113 million compared to income from operations of $129.3 million for the first quarter of last year. Other income was $600,000 during the first quarter compared to other loss of $1.7 million in the first quarter of last year. The quarter-over-quarter change was driven by increased investment income as well as reduced losses on other investments versus the first quarter of last year. During the first quarter, the company had an effective tax rate of 16.5% compared to an effective tax rate of 15.2% during the first quarter of last year. A quarter-over-quarter change in the effective tax rate was driven by lower tax benefits on stock-based compensation compared to the first quarter of 2024. Net income for the first quarter was $94.9 million compared to net income of $108.2 million for the first quarter of last year. The change in net income for the first quarter was primarily driven by the changes in net sales and income from operations compared to the first quarter of last year. Earnings per diluted share for the first quarter were 42 cents compared to earnings per diluted share of 47 cents for the first quarter of last year. Earnings per diluted share for the first quarter were impacted by the decrease in net sales and operating income partially offset by an increase in other income on a quarter-over-quarter basis. Thank you, and I'll hand the call over to Kevin for some further financial details.