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
nine months ended September 30, 2023.
3rd Quarter 2023 Summary
- Net sales of $575.8
million, a 17%
increase compared to the third
quarter of 2022
- Unit shipments of 12.6 million, a 10% increase compared
to the third quarter of
2022
- Gross profit margin of
33.2%, an increase of 340 basis points
from the third quarter of
2022
- Income from operations of $122.4
million, a 41%
increase compared to the third
quarter of 2022
- Net income of $104.7
million, a 44%
increase compared to the third
quarter of 2022
- Earnings per diluted share of
$0.45 for the quarter, a
45% increase compared to the
third quarter of 2022
For the third quarter of 2023, the Company reported net sales of
$575.8 million, compared to net sales of $493.6 million in the
third quarter of 2022, a 17% quarter over quarter increase. For the
third quarter of 2023, global light vehicle production in North
America, Europe, Japan/Korea, and China increased approximately 5%,
compared to the third quarter of 2022. "While the last few years
have been negatively impacted by labor and supply chain issues that
limited our ability to meet customer demand, the last several
quarters have improved significantly. The growth in the third
quarter of 2023 is a continuation of the unit and content growth we
experienced during the first half of this year, and is indicative
of the success of our technology platforms, including the launch
rates and increased take rates of our Full Display Mirror
products,” said President and CEO, Steve Downing. "In terms of
performance metrics, our unit growth in the third quarter
outperformed the underlying market by 5%, while our revenue beat
the market by 12%,” commented Downing.
For the third quarter of 2023, the gross margin was 33.2%,
compared to a gross margin of 29.8% for the third quarter of 2022.
The third quarter of 2023 gross margin increased by 340 basis
points on a quarter over quarter basis as a result of the higher
sales levels, improvements in freight and tariff related costs,
cost recoveries and price increases from customers, and
improvements in product mix. However, some of these improvements
were partially offset by increased raw material costs, labor costs,
and scrap and yield loss increases as compared to the third quarter
of 2022. When compared to the second quarter of 2023, the gross
margin in the third quarter of 2023 improved from 33.1% to 33.2%.
"We continue to make progress on our margin recovery plan that we
estimated would take until the end of 2024 to complete. In the six
months following the close of the first quarter of 2023, we have
seen gross margins expand 150 basis points, as the gross margin
grew from 31.7% during the first quarter of 2023 to 33.2% in the
third quarter,” commented Downing. “Obviously, I am very pleased
with the progress made so far in calendar year 2023, but we still
have an incredible amount of work to do in the fourth quarter of
this year and in 2024 in order to accomplish our goal of achieving
a gross margin of 35% - 36% by the end of next year. Our focus for
the next 18 months will be on achieving improvements in our
material costs and supply chain expenses, but will also include
targeted improvements in our operations by increasing throughput,
lowering scrap and yield loss, and reducing overtime expenses.”
Operating expenses during the third quarter of 2023 increased by
14% to $69.0 million, compared to operating expenses of $60.4
million in the third quarter of 2022. Operating expenses increased
quarter over quarter primarily due to staffing and engineering
related professional fees, which were partially offset by lower
outbound freight expenses. “Our operating expenses are trending in
line with our expectations, with increases primarily focused on
R&D, as we continue to add technical capabilities and bandwidth
to support the increased level of launch activities, while also
continuing to expand our research into new technologies. The amount
of work that our team has accomplished in our advanced research
areas is promising and will ultimately lay the ground work for
growth in future years. R&D expenses are expected to continue
at an elevated pace for the rest of this year and throughout
calendar year 2024, as we invest in innovative products and
technologies, new business awards, and VA/VE initiatives for cost
optimization of our bill of materials,” said Downing.
Income from operations for the third quarter of 2023 was $122.4
million, a 41% increase when compared to income from operations of
$86.8 million for the third quarter of 2022.
During the third quarter of 2023, the Company had an effective
tax rate of 15.9%, which was primarily driven by the benefit of the
foreign derived intangible income deduction.
Net income for the third quarter of 2023 was $104.7 million,
compared to net income of $72.7 million for the third quarter of
2022, which represents a 44% increase. The increase in net income
was primarily the result of the quarter over quarter increases in
net sales and operating profits.
Earnings per diluted share for the third quarter of 2023 were
$0.45, a 45% increase compared to earnings per diluted share of
$0.31 for the third quarter of 2022.
Automotive net sales in the third quarter of 2023 were $564.5
million, a 17% increase compared with $480.9 million in the third
quarter of 2022. Auto-dimming mirror unit shipments increased 10%
during the third quarter of 2023, compared to the third quarter of
2022.
Other net sales in the third quarter of 2023, which includes
dimmable aircraft windows and fire protection products, were $11.3
million, compared to other net sales of $12.7 million in the third
quarter of 2022. Fire protection sales decreased by $5.3 million
for the third quarter of 2023, compared to the third quarter of
2022. Dimmable aircraft window sales increased by $4.0 million for
the third quarter of 2023, compared to the third quarter of
2022.
Share RepurchasesDuring the third quarter of
2023, the Company repurchased 0.8 million shares of its common
stock at an average price of $32.41 per share. As of September 30,
2023, the Company has approximately 18.0 million shares remaining
available for repurchase pursuant to its previously announced share
repurchase plan. 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 will vary from time to time and will take into account
macroeconomic issues, market trends, and other factors that the
Company deems appropriate.
Future EstimatesThe Company’s current forecasts
for light vehicle production for the fourth quarter of 2023, and
full years 2023 and 2024, are based on the mid-October 2023 S&P
Global Mobility forecast for light vehicle production in North
America, Europe, Japan/Korea, and China. Light vehicle production
in these markets is expected to increase 4% for the fourth quarter
of 2023, as compared to light vehicle production for the fourth
quarter of 2022. For calendar year 2023, light vehicle production
in these markets is forecasted to increase 9%, compared to calendar
year 2022. Fourth quarter 2023 and calendar years 2023 and 2024
forecasted vehicle production volumes from S&P Global Mobility
are shown below:
|
Light Vehicle Production (per S&P Global Mobility
mid-October light vehicle production forecast) |
|
(in Millions) |
|
Region |
Q4 2023 |
Q4 2022 |
% Change |
|
Calendar Year 2024 |
Calendar Year 2023 |
Calendar Year 2022 |
|
2024 vs 2023% Change |
2023 vs 2022% Change |
|
North America |
3.24 |
3.55 |
(9)% |
|
16.29 |
15.20 |
14.30 |
|
7 |
% |
6 |
% |
|
Europe |
4.58 |
4.32 |
6 |
% |
|
17.44 |
17.71 |
15.83 |
|
(2)% |
12 |
% |
| Japan and
Korea |
3.32 |
3.12 |
6 |
% |
|
12.14 |
12.69 |
11.14 |
|
(4)% |
14 |
% |
|
China |
7.85 |
7.27 |
8 |
% |
|
28.05 |
27.89 |
26.40 |
|
1 |
% |
6 |
% |
|
Total Light Vehicle Production |
18.99 |
18.26 |
4 |
% |
|
73.92 |
73.49 |
67.67 |
|
1 |
% |
9 |
% |
Based on this light vehicle production forecast, the Company is
updating certain previously provided guidance estimates for
calendar year 2023 as shown in the table below.
|
2023 Annual Guidance |
|
Item |
Guidance as of 7/28//23 |
Updated Guidance 10/27//23 |
|
Revenue |
$2.2 - $2.3 billion |
No change |
| Gross
Margin |
32.5% -
33% |
No change |
| Operating
Expenses |
$260
-$270 million |
No change |
| Tax
Rate |
15% -
16% |
15% - 15.5% |
| Capital
Expenditures |
$200 -
$225 million |
$200 - $215 million |
|
Depreciation & Amortization |
$100 - $110 million |
$95 -$100 million |
Additionally, based on the Company’s current forecasts for light
vehicle production for calendar year 2024, which is currently
estimated to increase by 1% as compared to 2023, the Company
expects calendar year 2024 revenue of approximately $2.45 - $2.55
billion.
"The Company is on pace for record setting revenue this year
which has been aided by tailwinds from the relief of the supply
chain constraints, along with strong demand for outside mirrors and
advanced electronic features. Our outgrowth versus the market
demonstrates that our product strategy is succeeding with our
customers and consumers. At the same time, progress on the path
toward improved profitability continues, as we execute the
additional cost improvement initiatives that will enable us to
accomplish our plan of reaching a 35-36% gross margin range by the
end of 2024. While gross margin improvements have continued
throughout 2023, the sequential gross margin improvement from the
second quarter to the third quarter of this year was subdued by
certain product mix issues that will hopefully subside as we move
into the fourth quarter and next year. The fourth quarter will
likely be impacted by the UAW strikes from both a revenue and
margin perspective, but we remain confident in our ability to
continue to grow revenue, while improving our margin profile
throughout the end of this year and into 2024,” 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,” "likely," “may,”
“opinion,” “optimistic,” “plan,” “poised,” “predict,” “project,”
“should,” “strategy,” “target,” “will,” "work to," 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, including the impact of
inflation; 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 and suppliers;
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; labor shortages, supply chain
constraints and disruptions; our dependence on 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; and 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
include the impacts of the UAW strikes and COVID-19 (coronavirus)
pandemic and supply chain constraints that have affected, are
affecting, 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 S&P Global Mobility Light Vehicle Production
Forecast of October 16, 2023
(http://www.gentex.com/forecast-disclaimer).
Third Quarter Conference CallThe Company will
host a conference call related to this news release and it will
simulcast beginning at 9:30 a.m. ET, October 27, 2023. Participants
who wish to ask questions may register for the call at
https://register.vevent.com/register/BIb1d8aa6b9c82405daa317d1647f7862e
to receive the dial-in numbers and unique PIN to access the call.
It is recommended that participants join 10 minutes prior to the
event start, although they may register ahead of the call and dial
in at any time during the call. Participants may listen to the call
via audio streaming https://edge.media-server.com/mmc/p/ig4zn4os. 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 website 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 September 30, |
|
Nine Months Ended September 30, |
| |
2023 |
|
2022 |
|
% Change |
|
2023 |
|
2022 |
|
% Change |
|
North American Interior Mirrors |
2,366 |
|
2,156 |
|
10 |
% |
|
7,192 |
|
6,444 |
|
12 |
% |
| North American Exterior
Mirrors |
1,614 |
|
1,602 |
|
1 |
% |
|
5,033 |
|
4,532 |
|
11 |
% |
|
Total North American Mirror Units |
3,980 |
|
3,758 |
|
6 |
% |
|
12,224 |
|
10,976 |
|
11 |
% |
| International Interior
Mirrors |
5,709 |
|
5,287 |
|
8 |
% |
|
17,100 |
|
15,282 |
|
12 |
% |
| International Exterior
Mirrors |
2,915 |
|
2,444 |
|
19 |
% |
|
8,918 |
|
6,926 |
|
29 |
% |
|
Total International Mirror Units |
8,624 |
|
7,731 |
|
12 |
% |
|
26,018 |
|
22,208 |
|
17 |
% |
| Total Interior Mirrors |
8,076 |
|
7,443 |
|
9 |
% |
|
24,292 |
|
21,727 |
|
12 |
% |
| Total Exterior Mirrors |
4,529 |
|
4,046 |
|
12 |
% |
|
13,950 |
|
11,457 |
|
22 |
% |
|
Total Auto-Dimming Mirror Units |
12,604 |
|
11,489 |
|
10 |
% |
|
38,242 |
|
33,184 |
|
15 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
Note: Percent change and amounts may not total due to
rounding.
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
INCOME
| |
(Unaudited) |
|
(Unaudited) |
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
2023 |
|
|
2022 |
|
|
|
2023 |
|
|
2022 |
|
| Net Sales |
$ |
575,848,490 |
|
$ |
493,636,695 |
|
|
$ |
1,710,082,647 |
|
$ |
1,425,310,472 |
|
| |
|
|
|
|
|
|
|
|
Cost of Goods Sold |
|
384,407,857 |
|
|
346,435,670 |
|
|
|
1,150,821,744 |
|
|
969,330,474 |
|
|
Gross Profit |
|
191,440,633 |
|
|
147,201,025 |
|
|
|
559,260,903 |
|
|
455,979,998 |
|
| |
|
|
|
|
|
|
|
|
Engineering, Research & Development |
|
40,197,517 |
|
|
33,541,331 |
|
|
|
112,825,054 |
|
|
98,373,737 |
|
|
Selling, General & Administrative |
|
28,826,587 |
|
|
26,868,154 |
|
|
|
83,479,285 |
|
|
81,717,848 |
|
|
Operating Expenses |
|
69,024,104 |
|
|
60,409,485 |
|
|
|
196,304,339 |
|
|
180,091,585 |
|
| |
|
|
|
|
|
|
|
|
Income from Operations |
|
122,416,529 |
|
|
86,791,540 |
|
|
|
362,956,564 |
|
|
275,888,413 |
|
| |
|
|
|
|
|
|
|
|
Other Income |
|
2,063,632 |
|
|
(629,187 |
) |
|
|
6,122,483 |
|
|
(1,622,667 |
) |
| Income before Income
Taxes |
|
124,480,161 |
|
|
86,162,353 |
|
|
|
369,079,047 |
|
|
274,265,746 |
|
| |
|
|
|
|
|
|
|
| Provision for Income
Taxes |
|
19,754,749 |
|
|
13,506,358 |
|
|
|
57,619,971 |
|
|
41,676,723 |
|
| |
|
|
|
|
|
|
|
| Net Income |
$ |
104,725,412 |
|
$ |
72,655,995 |
|
|
$ |
311,459,076 |
|
$ |
232,589,023 |
|
| |
|
|
|
|
|
|
|
| Earnings Per Share(1) |
|
|
|
|
|
|
|
|
Basic |
$ |
0.45 |
|
$ |
0.31 |
|
|
$ |
1.33 |
|
$ |
0.99 |
|
|
Diluted |
$ |
0.45 |
|
$ |
0.31 |
|
|
$ |
1.33 |
|
$ |
0.99 |
|
| |
|
|
|
|
|
|
|
| Cash Dividends Declared per
Share |
$ |
0.120 |
|
$ |
0.120 |
|
|
$ |
0.360 |
|
$ |
0.360 |
|
| |
|
|
|
|
|
|
|
|
(1) Earnings Per Share has been adjusted to exclude the portion of
net income allocated to participating securities as a result of
share-based payment awards. |
|
|
GENTEX CORPORATION AND
SUBSIDIARIESCONDENSED CONSOLIDATED BALANCE
SHEETS
| |
(Unaudited) |
|
|
| |
September 30, 2023 |
|
December 31, 2022 |
| ASSETS |
|
|
|
|
Cash and Cash Equivalents |
$ |
260,633,625 |
|
$ |
214,754,638 |
|
Restricted Cash |
|
— |
|
|
4,000,000 |
|
Short-Term Investments |
|
17,464,830 |
|
|
23,007,385 |
|
Accounts Receivable, net |
|
351,142,147 |
|
|
276,493,752 |
|
Inventories |
|
395,452,780 |
|
|
404,360,270 |
|
Other Current Assets |
|
30,758,445 |
|
|
26,036,331 |
| Total Current Assets |
|
1,055,451,827 |
|
|
948,652,376 |
| |
|
|
|
|
Plant and Equipment - Net |
|
606,180,738 |
|
|
550,033,036 |
| |
|
|
|
|
Goodwill |
|
313,157,393 |
|
|
313,807,494 |
|
Long-Term Investments |
|
272,615,535 |
|
|
202,331,983 |
|
Intangible Assets, net |
|
204,885,910 |
|
|
219,360,910 |
|
Patents and Other Assets, net |
|
106,027,435 |
|
|
93,044,125 |
| Total Other Assets |
|
896,686,273 |
|
|
828,544,512 |
| |
|
|
|
| Total Assets |
$ |
2,558,318,838 |
|
$ |
2,327,229,924 |
| |
|
|
|
| LIABILITIES AND SHAREHOLDERS'
INVESTMENT |
|
|
|
|
Current Liabilities |
$ |
274,405,503 |
|
$ |
250,552,752 |
|
Other Non-current Liabilities |
|
15,459,528 |
|
|
10,884,351 |
|
Shareholders' Investment |
|
2,268,453,807 |
|
|
2,065,792,821 |
| Total Liabilities &
Shareholders' Investment |
$ |
2,558,318,838 |
|
$ |
2,327,229,924 |
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