Gentex Corporation (NASDAQ: GNTX), a leading supplier of
digital vision, connected car, dimmable glass and fire protection
technologies, today reported financial results for the three and
six months ended June 30, 2021.
2nd Quarter 2021 Summary
- Net sales of $428.0 million, an 86% increase compared
to the second quarter of 2020
- Gross profit margin of 35.4%, a 1,631 basis point (16.3
percentage point) improvement over the second quarter of
2020
- Net income of $86.5 million, an $88.9 million increase
compared to the second quarter of 2020
- Earnings per diluted share of $0.36, compared to a loss
per diluted share of $.01 for the second quarter of
2020
- 3.4 million shares repurchased during the
quarter
For the second quarter of 2021, the Company reported net sales
of $428.0 million, which was an increase of 86% compared to net
sales of $229.9 million in the second quarter of 2020. On a
quarter-over-quarter basis, global light vehicle production in the
Company's primary regions of Europe, North America, Japan/Korea and
China increased 36% when compared to the COVID-19 impacted second
quarter of 2020. However, when compared to the mid-April 2021 IHS
Markit light vehicle production forecast in the Company's primary
regions, actual light vehicle production in the second quarter of
2021 declined approximately 1.1 million units, or 7% as a result of
industry-wide part shortages and global supply chain constraints.
The largest deviation from the forecasted production within the
quarter came in North America, which saw an actual light vehicle
production decline in excess of 15% compared to the mid-April 2021
forecast. The reduction in light vehicle production compared to
forecast was led by certain OEM customers that deploy high levels
of the Company's product content, including both interior and
exterior auto-dimming mirrors and other electronic features such as
Full Display Mirror® and HomeLink®. In total, the impact from the
shortfall in vehicle production compared to forecast, led to an
estimated mirror unit shipment reduction of approximately 2 million
units versus the Company's beginning of the quarter expectations.
"While we are very pleased with the net sales increase of 86% over
the COVID-19 impacted second quarter of last year, we are still
experiencing tremendous volatility and order cancellations as our
customers continue to deal with the impact of the ongoing part
shortages that are affecting our industry. Our initial forecast for
the second quarter was for sales to be one of the largest quarters
in the Company's history, but the continual changes in releases and
orders resulted in the push out of approximately 2 million units.
The unit shipment changes were most severe in North America where
our dollar content per vehicle is above the corporate average. As
we move through the second half of the year and into 2022, we are
encouraged that the overall demand for vehicles and our products
should still provide opportunities for the Company to continue to
outperform the underlying market," said President and CEO, Steve
Downing.
For the second quarter of 2021, the gross margin was 35.4%,
compared to a gross margin of 19.1% for the second quarter of 2020.
Compared to the COVID-19 impacted second quarter of 2020, gross
margins improved due to the higher sales levels, significantly
better overhead leverage, the structural cost savings put in place
by the Company last year, and positive product mix on a quarter
over quarter basis. "The gross margin for the second quarter of
2021 improved significantly versus last year, but was well below
our initial estimates for the quarter. The lower than forecasted
gross margin was primarily driven by the significant reductions in
expected sales during the quarter, our inability to offset fixed
and variable overhead costs due to the lower than expected sales
levels, lower than expected price reductions on raw materials, and
higher than expected incoming freight costs. However, the good news
is that despite many of the challenges in the quarter, our
estimates show that if sales had hit our initial forecast then
gross margins would have been more in line with our previous annual
guidance range,” continued Downing.
Operating expenses during the second quarter of 2021 increased
by 2% to $51.7 million, compared to operating expenses of $50.7
million in the second quarter of 2020.
Income from operations for the second quarter of 2021 was $99.9
million, compared to a loss from operations of $6.7 million for the
second quarter of 2020.
During the second quarter of 2021, the Company had an effective
tax rate of 15% or $15.3 million, which is below our annual
guidance range, and was primarily driven by the benefit of the
foreign derived intangible income deduction and discrete benefits
from stock based compensation.
Net income was $86.5 million for the second quarter of 2021,
compared to a net loss of $2.4 million in the second quarter of
2020. The increase in net income was driven by the quarter over
quarter increase in sales, gross margins and operating profits.
Earnings per diluted share for the second quarter of 2021 were
$0.36, compared to a loss per diluted share of $0.01 for the second
quarter of 2020. The increase in earnings per share is the result
of the higher net income when compared to the second quarter of
2020.
Automotive net sales in the second quarter of 2021 were $420.6
million, compared with $222.1 million in the second quarter of
2020, which was an 89% increase quarter over quarter. Auto-dimming
mirror unit shipments increased 98% during the quarter, highlighted
by 140% growth in exterior-mirror unit shipments, compared to the
second quarter of 2020. The increase in international unit
shipments were largely comprised of base interior and exterior
auto-dimming mirror units and included significant growth in the
China market.
Other net sales in the second quarter of 2021, which includes
dimmable aircraft windows and fire protection products, were $7.4
million, a decrease of 6% compared to other net sales of $7.9
million in the second quarter of 2020. Dimmable aircraft window
sales decreased by 65% for the second quarter of 2021 when compared
to the second quarter of 2020. The Company continues to expect that
dimmable aircraft window sales will be impacted until there is a
more meaningful recovery of the aerospace industry and the Boeing
787 aircraft production levels improve.
Share RepurchasesDuring the second quarter of
2021, the Company repurchased 3.4 million shares of its common
stock for a total of $115.9 million. The Company intends to
continue to repurchase additional shares of its common stock in the
future in support of the previously disclosed capital allocation
strategy, but share repurchases may vary from time to time and will
take into account macroeconomic issues (including the impact of the
COVID-19 pandemic), market trends, and other factors that the
Company deems appropriate.
Future EstimatesThe Company’s current forecasts
for light vehicle production for the second half of 2021, and full
years 2021 and 2022 are based on the mid-July 2021 IHS Markit
forecast for light vehicle production in North America, Europe,
Japan/Korea and China.
Light vehicle production in the Company's primary markets is
forecasted by IHS Markit to decrease 4% for the second half of 2021
versus the second half of 2020. This forecast from IHS Markit
assumes that many of the supply chain related issues that began
toward the end of the first quarter of 2021 and continued
throughout the second quarter of 2021 will improve during the
second half of the year. While these vehicle production volumes do
suggest a reduction versus second half of 2020, this forecast also
represents a 9% increase in light vehicle production when compared
to the first half of 2021. Forecasted vehicle production volumes
for the second half of 2021 and calendar years 2021 and 2022 are
shown below:
Light Vehicle Production (per IHS Markit mid-July light
vehicle production forecast) |
(in Millions) |
Region |
2H 2021 |
2H 2020 |
% Change |
|
Calendar Year 2022 |
Calendar Year 2021 |
Calendar Year 2020 |
|
2022 vs 2021% Change |
2021 vs 2020% Change |
North America |
7.83 |
|
7.87 |
|
(1 |
)% |
|
17.03 |
|
14.63 |
|
13.02 |
|
|
16 |
% |
12 |
% |
Europe |
9.11 |
|
9.61 |
|
(5 |
)% |
|
20.29 |
|
18.05 |
|
16.57 |
|
|
12 |
% |
9 |
% |
Japan and
Korea |
6.04 |
|
6.15 |
|
(2 |
)% |
|
12.40 |
|
11.81 |
|
11.21 |
|
|
5 |
% |
5 |
% |
China |
13.26 |
|
14.24 |
|
(7 |
)% |
|
26.60 |
|
24.98 |
|
23.59 |
|
|
6 |
% |
6 |
% |
Total Light Vehicle Production |
36.24 |
|
37.87 |
|
(4 |
)% |
|
76.32 |
|
69.47 |
|
64.39 |
|
|
10 |
% |
8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Based on this light vehicle production forecast the Company is
providing guidance estimates for the second half of 2021. Given the
significant changes in vehicle production volumes in the second
quarter and the associated impact on the Company’s actual results
and the challenges in our current operating environment driven by
supply chain and freight issues, the Company believes that guidance
specific to the second half of the year is more accurate and
indicative of actual performance for the remainder of the year than
only providing full year 2021 updated guidance. The Company also
believes that this approach may help provide a more accurate
projection for calendar year 2022 performance. The Company's
current estimate is that net sales for the second half of 2021 will
be between $970 million and $1.07 billion. This revenue forecast is
based on the IHS-Markit light vehicle production forecast for the
second half of 2021 but also includes manual adjustments to the
Company's forecasts as a result of customer order changes due to
part shortages that have impacted the second quarter and will
likely continue to impact demand in the second half of this year.
The Company has also updated the cost and profitability model to
include impacts due to elevated raw material prices, freight
expenses and labor costs. Our updated financial guidance for the
second half of 2021 replaces our previous guidance for 2021 and is
included in the table below:
2nd Half of 2021 Guidance |
Item |
2nd Half 2021 |
Revenue |
$970m -$1.07B |
Gross
Margin |
37.5% - 38.5% |
Operating
Expenses |
$105 - $110 million |
Tax
Rate |
16% - 18% |
Capital
Expenditures |
$50 - $60 million |
Depreciation & Amortization |
$54 - $59 million |
|
|
"The last 18 months have undoubtedly been impacted from the
COVID-19 pandemic. During the first half of last year, that impact
was felt in terms of very low sales levels due to shutdowns, but
this year the impact has been felt in the form of massive order
changes and reductions to planned volumes due to supply related
issues that are affecting the OEM’s ability to achieve the
production levels needed to satisfy demand. In the second half of
this year, we expect orders to improve but the supply constraints
are causing disruptions that are leading toward higher commodity
pricing, higher freight expenses, and inefficiencies in our
operations," commented Downing.
Based on the mid-July 2021 light vehicle production estimates
for 2022, the Company estimates that revenue for calendar year 2022
will be approximately 10% - 15% higher than the updated 2021
revenue estimates of $1.88 - $1.98 billion. "We have updated our
2021 and 2022 guidance to include our expectations that the Company
will continue to see headwinds to demand due to supply shortages
that we believe will continue in the second half of 2021 and into
the first half of 2022. Our forecast includes manual adjustments to
the IHS Markit forecast for light vehicle production shown above.
Despite the massive volatility in the industry, we are estimating
that built up demand will provide strong revenue growth next year
that is on pace with our initial revenue guidance for 2022. Our
industry is enduring severe challenges currently, including issues
in order cancellations, component shortages, raw material
increases, freight issues, labor shortages, and other pressures,
but we remain optimistic that the next 18 months has the potential
to produce record level revenues and profitability for the
Company,” concluded Downing.
Safe Harbor for Forward-Looking StatementsThis
news release contains forward-looking statements within the meaning
of the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. The statements contained in this communication
that are not purely historical are forward-looking statements.
Forward-looking statements give the Company’s current expectations
or forecasts of future events. These forward-looking statements
generally can be identified by the use of words such as
“anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,”
"future,” “goal,” "guidance,” “hope,” "intend,” “may,”
"optimistic,” “plan,” “poised,” "predict,” “project,” "should,”
"strategy,” "target,” “will,” and variations of such words and
similar expressions. Such statements are subject to risks and
uncertainties that are often difficult to predict and beyond the
Company’s control, and could cause the Company’s results to differ
materially from those described. These risks and uncertainties
include, without limitation: changes in general industry or
regional market conditions; changes in consumer and customer
preferences for our products (such as cameras replacing mirrors
and/or autonomous driving); our ability to be awarded new business;
continued uncertainty in pricing negotiations with customers; loss
of business from increased competition; changes in strategic
relationships; customer bankruptcies or divestiture of customer
brands; fluctuation in vehicle production schedules (including the
impact of customer employee strikes); changes in product mix; raw
material and other supply shortages; supply chain disruptions; our
dependence of information systems; higher raw material, fuel,
energy and other costs; unfavorable fluctuations in currencies or
interest rates in the regions in which we operate; costs or
difficulties related to the integration and/or ability to maximize
the value of any new or acquired technologies and businesses;
changes in regulatory conditions; warranty and recall claims and
other litigation and customer reactions thereto; possible adverse
results of pending or future litigation or infringement claims;
changes in tax laws; import and export duty and tariff rates in or
with the countries with which we conduct business; negative impact
of any governmental investigations and associated litigation
including securities litigation relating to the conduct of our
business; the length and severity of the COVID-19 (coronavirus)
pandemic, including its impact across our business on demand,
operations, and the global supply chain. Readers are cautioned not
to place undue reliance on these forward-looking statements, which
speak only as of the date they are made. The Company undertakes no
obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or
otherwise, except as required by law or the rules of the NASDAQ
Global Select Market. Accordingly, any forward-looking statement
should be read in conjunction with the additional information about
risks and uncertainties identified under the heading “Risk Factors”
in the Company’s latest Form 10-K and Form 10-Q filed with the SEC,
which risks and uncertainties now include the impacts of COVID-19
(coronavirus) pandemic that has affected, and will continue to
affect, general economic and industry conditions, customers,
suppliers, and the regulatory environment in which the Company
operates. Includes content supplied by IHS Markit Light Vehicle
Production Forecast of July 16, 2021
(http://www.gentex.com/forecast-disclaimer).
Second Quarter Conference CallA conference call
related to this news release will be simulcast live on the internet
beginning at 9:30 a.m. ET, July 23, 2021. The dial-in number to
participate in the call is 844-389-8658, passcode
8652117. Participants may listen to the call via
audio streaming at www.gentex.com or by visiting
https://edge.media-server.com/mmc/p/22y3vefc. A webcast replay will
be available approximately 24 hours after the conclusion of the
call
at http://ir.gentex.com/events-and-presentations/upcoming-past-events.
About the CompanyFounded in 1974, Gentex
Corporation (The NASDAQ Global Select Market: GNTX) is a leading
supplier of digital vision, connected car, dimmable glass and fire
protection technologies. Visit the Company’s web site at
www.gentex.com.
Contact Information:
Gentex Investor & Media ContactJosh
O'Berski(616)772-1590 x5814
GENTEX
CORPORATIONAUTO-DIMMING MIRROR
SHIPMENTS(Thousands)
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2021 |
|
2020 |
|
% Change |
|
2021 |
|
2020 |
|
% Change |
North American Interior Mirrors |
1,873 |
|
|
787 |
|
|
138 |
% |
|
3,946 |
|
|
2,806 |
|
|
41 |
% |
North American Exterior
Mirrors |
1,497 |
|
|
455 |
|
|
229 |
% |
|
2,990 |
|
|
1,689 |
|
|
77 |
% |
Total North American Mirror Units |
3,370 |
|
|
1,242 |
|
|
171 |
% |
|
6,936 |
|
|
4,495 |
|
|
54 |
% |
International Interior
Mirrors |
4,811 |
|
|
2,916 |
|
|
65 |
% |
|
10,590 |
|
|
7,948 |
|
|
33 |
% |
International Exterior
Mirrors |
2,240 |
|
|
1,102 |
|
|
103 |
% |
|
4,676 |
|
|
3,211 |
|
|
46 |
% |
Total International Mirror Units |
7,052 |
|
|
4,018 |
|
|
76 |
% |
|
15,266 |
|
|
11,159 |
|
|
37 |
% |
Total Interior Mirrors |
6,684 |
|
|
3,703 |
|
|
81 |
% |
|
14,535 |
|
|
10,754 |
|
|
35 |
% |
Total Exterior Mirrors |
3,738 |
|
|
1,557 |
|
|
140 |
% |
|
7,666 |
|
|
4,900 |
|
|
56 |
% |
Total Auto-Dimming Mirror Units |
10,422 |
|
|
5,260 |
|
|
98 |
% |
|
22,202 |
|
|
15,654 |
|
|
42 |
% |
Note: Percent change and amounts may not total due to
rounding.
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
|
(Unaudited) |
|
(Unaudited) |
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net Sales |
$ |
428,005,026 |
|
|
$ |
229,925,556 |
|
|
|
$ |
911,729,865 |
|
|
$ |
683,687,281 |
|
|
|
|
|
|
|
|
|
Cost of Goods Sold |
276,408,285 |
|
|
185,980,748 |
|
|
|
576,832,956 |
|
|
483,154,994 |
|
Gross Profit |
151,596,741 |
|
|
43,944,808 |
|
|
|
334,896,909 |
|
|
200,532,287 |
|
|
|
|
|
|
|
|
|
Engineering, Research & Development |
29,059,058 |
|
|
28,992,968 |
|
|
|
56,711,139 |
|
|
58,608,390 |
|
Selling, General & Administrative |
22,613,062 |
|
|
21,690,096 |
|
|
|
44,527,448 |
|
|
43,634,987 |
|
Operating Expenses |
51,672,120 |
|
|
50,683,064 |
|
|
|
101,238,587 |
|
|
102,243,377 |
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations |
99,924,621 |
|
|
(6,738,256 |
) |
|
|
233,658,322 |
|
|
98,288,910 |
|
|
|
|
|
|
|
|
|
Other Income |
1,891,098 |
|
|
2,866,229 |
|
|
|
3,424,133 |
|
|
5,113,712 |
|
Income (Loss) before Income
Taxes |
101,815,719 |
|
|
(3,872,027 |
) |
|
|
237,082,455 |
|
|
103,402,622 |
|
|
|
|
|
|
|
|
|
Provision for Income
Taxes |
15,309,301 |
|
|
(1,497,994 |
) |
|
|
37,125,167 |
|
|
16,270,854 |
|
|
|
|
|
|
|
|
|
Net Income (Loss) |
$ |
86,506,418 |
|
|
$ |
(2,374,033 |
) |
|
|
$ |
199,957,288 |
|
|
$ |
87,131,768 |
|
|
|
|
|
|
|
|
|
Earnings (Loss) Per
Share(1) |
|
|
|
|
|
|
|
Basic |
$ |
0.36 |
|
|
$ |
(0.01 |
) |
|
|
$ |
0.83 |
|
|
$ |
0.35 |
|
Diluted |
$ |
0.36 |
|
|
$ |
(0.01 |
) |
|
|
$ |
0.82 |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
|
|
Cash Dividends Declared per
Share |
$ |
0.120 |
|
|
$ |
0.120 |
|
|
|
$ |
0.240 |
|
|
$ |
0.240 |
|
|
|
|
|
|
|
|
|
(1) Earnings (Loss) Per Share has been adjusted to exclude the
portion of net income (loss) allocated to participating securities
as a result of share-based payment awards. |
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
|
(Unaudited) |
|
|
|
June 30, 2021 |
|
December 31, 2020 |
ASSETS |
|
|
|
Cash and Cash Equivalents |
$ |
353,032,803 |
|
|
$ |
423,371,036 |
|
Short-Term Investments |
13,798,827 |
|
|
27,164,369 |
|
Accounts Receivable, net |
234,145,996 |
|
|
284,925,335 |
|
Inventories |
263,899,976 |
|
|
226,291,843 |
|
Other Current Assets |
59,698,574 |
|
|
17,577,981 |
|
Total Current Assets |
924,576,176 |
|
|
979,330,564 |
|
|
|
|
|
Plant and Equipment - Net |
458,943,776 |
|
|
468,135,135 |
|
|
|
|
|
Goodwill |
311,922,787 |
|
|
311,922,787 |
|
Long-Term Investments |
193,418,570 |
|
|
162,028,068 |
|
Intangible Assets |
251,213,561 |
|
|
249,748,127 |
|
Patents and Other Assets |
26,723,061 |
|
|
26,776,489 |
|
Total Other Assets |
783,277,979 |
|
|
750,475,471 |
|
|
|
|
|
Total Assets |
$ |
2,166,797,931 |
|
|
$ |
2,197,941,170 |
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
Current Liabilities |
$ |
196,396,617 |
|
|
$ |
177,736,857 |
|
Other Non-current Liabilities |
18,668,444 |
|
|
17,300,442 |
|
Deferred Income Taxes |
35,413,881 |
|
|
38,960,743 |
|
Shareholders' Investment |
1,916,318,989 |
|
|
1,963,943,128 |
|
Total Liabilities &
Shareholders' Investment |
$ |
2,166,797,931 |
|
|
$ |
2,197,941,170 |
|
|
|
|
|
|
|
|
|
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