Q2 2023 Gentex Corp Earnings Call
Okay.
Yeah.
Good day and thank you for standing by welcome to the Gentex second quarter 2023 financial results Conference call.
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I would now like to hand, the conference over to your host today, Joshua Brodsky director of Investor Relations. Please go ahead.
Thank you.
Good morning, and welcome to the Gentex Corporation's second quarter 2023 earnings release Conference call.
Bursty 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 .
This call is live on the Internet and can be reached by going to the Gentex website in the IR Gentex Dot com.
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 four.
Looking information within the meaning of the Gentex Safe Harbor statement included in the Gentex reports second quarter 2023 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 now I will turn the call over to Steve Downing, who will get US started today. Thanks, Josh.
For the second quarter of 2023, the company reported net sales of $583 $5 million compared to net sales of $463 $4 million in the second quarter of last year, a 26% quarter over quarter increase and a new quarterly sales record for the company.
For the second quarter of 2023 Global light vehicle production in North America, Europe , Japan, Korea, and China increased approximately 18% when compared to the second quarter of last year.
So far 2023 has proven to be the opposite of the last few years with year to date sales levels coming in higher than our beginning of the year forecast.
As a result of the improvement in light vehicle production fewer supply chain challenges and the continued strong demand for our products. This quarter resulted in an outperformance of 9% compared to our primary markets, which include North America, Europe , Japan and Korea.
The company's growth is being driven by penetration rates of our core electrochromic technology continued growth in our full display display mirror product line and adoption of other value add features in the market.
For the second quarter of 2023, the gross margin was 33, 1% compared to a gross margin of 32% for the second quarter of last year.
The second quarter of 2023 gross margin increased on a quarter over quarter basis as a result of the significantly higher sales levels manufacturing improvements.
Cost recoveries from Oems and improvements in freight related costs and product mix.
Some of these improvements were partially offset by increased raw material and labor costs as compared to the second quarter of last year, but still resulted in a 110 basis point increase in gross margin on a year over year basis.
When compared to the first quarter of 2023, the gross margin in the second quarter increased from 31, 7% to 33, 1% as a result of better overhead leverage from the higher sales levels customer cost customer cost recoveries realized in the second quarter and improvements and overtime costs, which helped to offset certain incremental.
Mental raw material cost increases that took effect in the first half of 2023.
Late last year, we formulated a plan for margin recovery that we estimated would take until the end of 2024 to complete so far I'm very pleased with our progress and believe we are well on our way to accomplishing the goal of achieving a gross margin of 35% to 36% by the end of next year.
Operating expenses during the second quarter of 2023 increased by 5% to $65 $8 million compared to operating expenses of $62 $6 million in the second quarter of last year.
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 starting to ramp as expected during the second quarter and we will continue to build throughout the rest of the calendar year as we add resources focused on new product research and.
New business Awards and V. A V initiatives for cost optimization of our bill of materials.
Income from operations for the second quarter of 2023 was $127 3 million, a 48% increase when compared to income from operations of $85 $8 million for the second quarter of last year.
During the second quarter of 2023, 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 2023 was $109 $2 million compared to net income of $72 $4 million for the second quarter of last year, which represents a 51% 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 second quarter of 2023 or <unk> 47.
52% increase when compared to earnings per diluted share of 31 for the second quarter of 2022.
I'll now hand, the call over to Kevin for some financial details. Thank you Steve.
<unk> net sales in the second quarter of 'twenty, three were $574 1 million or 27% increase when compared to $452 9 million in the second quarter of 2002.
Auto Dimming mirror unit shipments increased by 21% during the second quarter compared to the second quarter of last year.
Other net sales in the second quarter of 'twenty, three which includes Dimmable aircraft Windows and fire protection products were $9 4 million compared to other net sales of $10 5 million in the second quarter of 'twenty two.
Fiber, Texas sales decreased by $3 6 million for the second quarter of <unk> 23, compared to the second quarter of 2002 and demo aircraft Windows Windows sales increased by $2 5 million for the second quarter of 2003 compared to the second quarter of last year.
Share repurchases during the second quarter of 2003, the company repurchased 9 million shares of its common stock at an average price of $27 28 per share as of June 30, 'twenty. Three the company has approximately $18 8 million shares remaining available for repurchase pursuant to its previously announced share repurchase plan.
Company intends to continue to repurchase additional shares of its common stock in the future and support of the previously disclosed capital allocation strategy.
Share repurchases will vary from time to time and will take into account macroeconomic issues market trends and other factors the company deems appropriate.
Looking at the balance sheet balance sheet comparisons mentioned today are as of June 32003, as compared to December 31 of 22.
Cash and cash equivalents were $237 7 million compared to $214 8 million.
Short term and long term investments combined were $259 8 million up from $225 3 million, which includes fixed income investments as well as the company's equity and cost method investments accounts receivable was $354 million up from $276 5 million due to the increase in sales levels.
Inventories were $390 million down from $404 four.
$4 million and accounts payable increased to $168 5 million up from $151 7 million.
Looking at preliminary castle items for the quarter and year to date second quarter 'twenty three cash flow from operations was $120 9 million, which was an increase from $73 3 million in the second quarter of last year. The increase was due to increases in net income and shifts in working capital and year to date cash flow from operations was $241 8 million.
An increase from $189 3 million and 22 also due to increased net income and changes in working capital.
Capital expenditures for the second quarter were $47 5 million compared with $34 1 million for the second quarter of 'twenty, two and year to date capital expenditures were $90 3 million compared with $58 million per year to date 22.
Depreciation and amortization for the second quarter was $24 8 million compared with $25 3 million for the second quarter 2002, and year to date depreciation and amortization was $48 9 million compared with $50 million per year to date 22.
I'll turn the call over to Neil for a product update. Thank you Kevin for today's product update we're going to focus on three key areas first our launch rate for the quarter.
Full display mirror volumes for the quarter and full year and third our focus on bond reduction now that supply constraints have improved.
In regards to launch rates in the second quarter of 2023, there were 35 net new nameplate launches of our interior and exterior auto dimming mirrors and electronic features net of previously disclosed future headwinds.
The second quarter was an extremely heavy launch quarter and it was very strong and advanced features in the quarter, 60% of the net launches contained advanced features with full display mirror and homelink, leading the way.
Now for an update on full display mirror.
<unk> continues to maintain momentum with our customers through increased launches and with consumers that have helped to drive increased take rates and volumes.
In the first quarter of 2023, we stated that we are expecting our 2023 unit volume to be at least 300000 units higher than our 2022 volume.
Based on the results of the first half of the year and our current forecast for the remainder of 2023, we now believe our full display mirror unit growth will be approximately 500000 units higher than our 2022 volume.
We're excited to see this product continue to grow across so many different vehicle platforms globally.
Throughout the second quarter of 2023, we continue to see improvement and supply constraints that had been forcing us to execute a significant number of redesigns.
The majority of these challenges behind US we can begin to evaluate our designs and component strategies from a cost perspective or.
The last two years, we've incurred significant cost increases due to the reactionary mode, we needed to be in.
But we're now turning our focus on the designs the components and the suppliers of the components in an effort to drive down our bill of material costs.
Our strategy is very straightforward work with our key supplier partners to find win win situations that allow us both to a sustainable profitable growth.
Finally, I want to say, thank you to the Gentex team. This team continues to do an incredible job working through issues and challenges all while launching new products at the highest rate in company history.
It has been truly impressive.
I'll now hand, the call back over to Steve for guidance and closing remarks. Thanks Neal.
The company's current forecast for light vehicle production for the third quarter of 2023 and full year 2023, and 2024 are based on the mid July 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 decrease 3% for the third quarter of 2023 as compared to light vehicle production for the third quarter of last year.
For calendar year, 2023, and light vehicle production in these markets is forecasted to increase approximately 6% when compared to last year.
It is important to note that these estimates do not include any estimated impact stemming from potential labor issues in the second half of this year.
Based on this light vehicle production forecast the company is updating certain guidance estimates for calendar year 2023.
We are increasing our revenue estimates for the year, which is now expected to be between two two and $2 $3 billion.
We are also raising the bottom end of the range for gross margins for the year. As we are now expecting gross margins to be between 32, and a half and 33% for the year.
Operating expenses are still expected to be between 260 and $270 million we.
We are lowering the high end of our estimated annual tax rate for the year, which is now forecasted to be between 15 and 16%.
Capital expenditures are still expected to be between 202 hundred $25 million and our depreciation and amortization forecast remains unchanged and is expected to be between 101 hundred $10 million for 2023.
Additionally, based on the company's current forecast for light vehicle production for calendar year 2024, the company expects calendar year 2020 for revenue to be between $2 45, and $2 $55 billion.
The second quarter of 2023 produce revenue levels that were both record setting and better than our initial expectations.
Additionally, the company continued to make progress on our path toward improved profitability and we are now executing our next wave of cost improvement initiatives that are necessary for us to accomplish our goal of reaching the 35% to 36% gross margin range by the end of 2024.
While the remainder of 2023 and 2024 has the potential to be impacted by industry challenges and macroeconomic issues. We continue to remain optimistic about our product portfolio, our growth estimates and our ability to control costs.
These factors should come together over the next 18 months to produce record revenue and profitability for the company.
That completes our prepared comments for today and we can now proceed to questions.
As a reminder, if you'd like to ask a question at this time. Please press star one one on your touched one telephones.
Our first question comes from the line of Luke junk with Baird.
Hi, Good morning, Thanks for taking my question, Steve hoping to start with gross margin.
Based on both the result, this quarter and guidance moving higher it appears that some elements of the gross margin improvement plan that you've laid out or maybe progressing faster than expected can you just talk about where youre seeing upside leverage to gross margins sooner all else equal and the sustainability of those factors and then with respect to the next wave of gross margin initiatives.
Youre moving to right now are some of these coming sooner than you may have initially thought thank you.
Yeah, no. Thanks for that question that Youre right on with the with the underlying principle, the really what's driving margins higher and faster than really we had even anticipated was this really strong growth in revenue.
What happens with those higher lever level of sales that allows us to leverage the manufacturing overhead portion of the business quite well.
And then as we've mentioned before we've had a lot of new hires over the last six months and so the folks getting on boarded trained starting to see the improvements in labor, obviously labor cost themselves have gone up significantly.
The team has been able to show increased throughput, which has helped offset some of those some of those higher labor costs.
And that the cost recoveries from Oems have actually come in a little quicker than anticipated and quite honestly more meaningful than what were our initial estimates were.
Obviously with some of the slowdown in what's happening in the industry. There has been some significant improvements in freight costs and so that's helped us on the both on the incoming side for a bill of material costs, but with raw materials. But then also on the SG&A side is as we've had lower expedited freight costs getting components to our customers and.
So when you look at the next wave of those cost improvement initiatives and really what we're focused on right now is continuing to get pricing adjust obviously trying to slow down the cost increases from the supply base.
And then as we move through the second half of this year and into next year, we're going to be focused as Neil mentioned on bill of material focus a lot of components. We had to go to based on availability where at higher bond prices not just the increases from the suppliers, but also changing components to two ones that were available. We believe over the next couple of years there'll be a lot of opportunity for us to focus on.
That bill of material in the supply base to make sure we have cost optimized designs.
Thank you for that for my follow up just wanted to look at the updated 2024 view that you gave in and place the company is going to be driving outgrowth.
Above the ranges that you've historically targeted for a second consecutive year in quite a meaningful way just wondering whats driving that or are we seeing higher FTM expectations reflected and I. Appreciate the update on 2023 that you gave should we think about that into 2024 as well or is there something else. There it's reflected in the expected growth.
Yes, there are several things one of them has definitely continued growth in the <unk> product portfolio.
Pension with more Oems and new vehicles in take rates on the other one is we've actually been on a couple of year run of significantly higher OCC volumes. We believe that will obviously continue to show some strength in terms of outside mirror volume growth.
And then we're expecting by the end of next year to start seeing some of the other new features starting to come online things like DVR. Some ATM volumes coming back now that we know that we can finally have components that we need to produce those.
But there's other there's other advanced features towards the end of next year that we believe will be launching as well that'll start to start to show some meaningful growth for the business.
I'll leave it there thank you.
Thanks Luke.
Our next question comes from the line of Ron <unk> with Guggenheim Securities.
Yes, good morning.
Steve Kevin came in.
Thanks for taking my questions.
Martin.
Yes.
On Asps, they really take out this quarter. So the upside maybe just a breakout of how much of that I think it's almost 5% quarter over quarter growth was.
Was pricing versus I think <unk>, probably normalizing supply chain to the upside helped as well, but just.
It didn't stick out given the exterior mirror growth this quarter being quite a bit stronger than interior still seeing big ESP upside.
Yes, I think most most of that almost all of it is really attributable to advanced features on inside so really FTM being the strength there.
Some of the other mix was also good features like Homelink did really well so the inside advanced feature and if you look at the product mix for us, especially being being a hair overweight North America, and Europe really really does pan out well for us on the product mix in ASP side.
Okay.
Okay.
Pricing.
Nothing sticks out on the retro side I know you called out in the fourth quarter. There was some retroactive pricing, but pretty clean in terms of like ongoing pricing this quarter.
Yes, that's probably 75 basis points to 100 basis points on the top line from the onetime nature of pricing in <unk>.
Recurring.
And the recurring.
A portion of that but that is still okay. It's recurring but it came through this quarter okay.
And just one more quick one maybe reading between the lines a bit but meals prepared remarks. It did sound like MTM take rates or OEM demand has been quite a bit stronger than you expected and maybe just how much of that.
Upside to the 500000 versus the 300000 prior as light vehicle production versus things like supply chain and take rates and customer demand.
Yes, great question.
Looking at the information, it's a lot of it.
We talked about this actually late last year that last year, when we started launching with customers like Hyundai.
There was a direction and a lot of having a much higher take rate than what we could support due to component availability. So what we've seen a great increase in this as component availabilities improve we've been able to actually produce the parts that they wanted and are actually able to catch up to it. So as our increase goes from greater than 300000 to the $5 million roughly for this year a big portion.
One of that is due to our ability to actually supply the parts that the customers have wanted and that the consumers have asked for.
What's been what's been very interesting is last year like Neil mentioned, when we werent able to hit the higher volumes. They were requesting a question is will that demand still be there.
Once capacity has finally come online from the supply base and the good news is that we didn't seem to have hampered demand for that product by not being able to deliver last year. So.
Pretty excited to see and Neil mentioned Theres been a several launches right and youre, probably better than anybody at tracking those probably have no no somehow.
Some of them.
Sure.
Before we do.
But you've noticed theres some theres been some volume brands that have come online with that product and the execution in take rates have been better than we anticipated.
Yes that makes perfect sense.
Congrats to the team on a quarterly sales record.
Okay. Thanks, Ron Thanks Rod.
Our next question comes from the line of John Murphy with Bank of America.
Good morning, guys.
Good morning, Judy just a first question on the grosses.
The back half number kind of implies something roughly 32.5% to 34% on gross potentially which is kind of a wide range. I am just curious if you can give us sort of how youre thinking about the low end and at the high end of the range and is it really just due to operating leverage if volumes coming through better than expected or are there other big factors in there.
<unk>.
Yes, I think on the <unk>.
We kept that range you are right I mean, if you look at the implied math the bottom end of that range is really is really focused on is something if something more drastic happens in the second half of this year due to some of the labor disputes.
No from 2019, what that look like for us from a loss revenue perspective, and then what that would mean from an overhead standpoint.
I wouldn't estimate that anything that happens there would have that drastic of an impact, but you're always a little worried about product mix and which Oems are impacted and what that means to your total product portfolio and book of business on the high end, what we would need to do to get there is we're going to have to continue to see some cost recoveries and operate at these levels.
Revenue because it really helps on the overhead side and that's where the margin expansion is really coming from right now is lower over time, but better throughput and better manufacturing overhead leverage due to the higher sales levels.
And just to follow up on then on the 35% to 36% target by the end of 'twenty four I mean, if we exit this year.
On the high end of what you're implying for the second half of 34 $35 to 36 with upside assuming the industry is growing.
As expected and maybe even better than expected.
So it seems like they seem by potentially conservative numbers just on operating leverage.
If you think about the cost actions.
<unk> raised 34 meters cost actions, what you're counting on to drive that 100 to 200 basis point expansion.
What kind of incremental.
Gross margin you're going to drive from those cost actions. So maybe we could think about them separately from operating leverage and other sort of broad Ron labor inflation costs.
Yes, so when you look at the exit velocity this year heading into next year, you're exactly right. I mean part of that part of that gross margin expansion is going be driven by the sales growth in the business and the same factors. We just talked about for so far this year and the second half of this year that higher level of revenue helps the manufacturing overhead.
Internally, we got some cost things, we have to control better so with a newer employees and the rate we've been running.
Focus on scrap costs over time yield and throughput and so those are all opportunities that we've targeted and have in place as part of our goals for the back half of this year heading into next year, and then Neal's point a lot of things that we're working on the <unk> side to get the bill of materials are lower on a per product basis is going to be part of that growth and expand.
<unk> gross margin for next year, a lot of the bill of materials initiatives that Neil is looking at are going to last beyond 2024, and really pushing that 2025 and beyond before we get the full benefit of product Redesigns that are focused on cost savings instead of just trying to get a redesign is down to be able to ship anything so we're really talking about.
More even than the end of 2024 trajectory there may be some upside to those numbers. If we hit if we hit all the things perfectly I think the thing we're a little focused on too is that there'll probably be some more headwinds that we haven't accounted for and so those estimates might be a little conservative, but we're also looking at a larger book of business and not everything inside that book of business and some of the new feature.
Yours are going to be above average gross margins. So we know that with the expansion and growth in the business theres going to be a natural headwind to some of those products and what the profitability of those products look like okay.
And one just last one how many meters we are shipping into China right now on a maybe a quarterly or annual basis.
Well on a revenue basis is about 9% of our total booked revenue. So I mean, it's a little higher from a unit perspective, because it's more base base mirrors, but it still remains under 10% of our total revenue for the company.
Okay. That's very helpful. Thank you guys.
Our next question comes from the line of David Whiston with Morningstar.
Hey, guys can you hear me.
Thanks, David.
Alright.
Just curious whether are really nice.
Upper recovery in which.
I know you've been waiting for volume to come back for a long time and it finally has and thats great. But was there also any kind of more just like nonrecurring things that benefited this quarter, there probably won't be as stronger there at all the rest of the year.
No I mean on the margin side, yet 50 to 60 basis points of nonrecurring price recoveries. So onetime in nature retroactive to help offset some of the cost that we incurred over the last 18 months, but other than that everything else in the quarter should be recurring or was there any there wasn't any onetime pickups on sales for instance, or any abnormal sales activity.
<unk>.
Okay and.
Are there any geographies recovering faster or slower than the others and in particular, I'm wondering if Japan really bounce back hard upward.
In the upper direction this quarter.
Yeah, well if you look at overall production I mean, if you are primary markets being North America, Europe , Japan Korea, all of those were actually very strong and heading into Q3.
Global light vehicle production is going to be down 3%, but the reason why we're still optimistic about the back half of the year is that most of that impact on the negative side is coming from the China market. In Q3, we continue to see quite a bit of recovery in the Japan Korea markets really we think not only in Q2, but through the rest of the year.
Okay. Thanks, a lot.
Great. Thanks, David.
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Our next question comes from the line of Charlie Sloan with Oak family Advisors.
Hi, guys, great quarter, obviously and.
I have a question for Steve first which is with the OEM after the big Big adjustment with all the supply chain issues has that relationship changed more durably to be more of a partnership if it wasn't before or not.
Yeah.
That's a great question every Oems actually handle this very differently and I would say in certain in certain situations with Oems that's absolutely the case, where.
Where we've gotten more collaborative one thing we're trying to do as a supplier is talk more candidly with Oems about our future processing platforms and who are preferred partners are from from a micro standpoint.
Maybe it was an industry challenge and mistakes that we've all made together as we're working on new technology, but historically most suppliers have gone off pick their own platforms kind of started to engineer design build proof of concepts really without sharing much of that until they had a product ready we're trying to be more proactive and make sure we're sharing that information with Oems to make sure.
We're not designing around a platform that an OEM, that's not part of an OEM strategy, especially if there are certain micro platforms that they prefer to stay with or to move away from so I think every Oems handle that differently certain of our relationships, we're maturing as a supplier to try to be more proactive in that area.
So we don't end up in a situation again.
Okay, and then so we should expect still kind of cost reductions in the first quarter and our price reductions in the first quarters of future years.
Yes, there is going to be very it's going to be much less than what the last few years have been one of our big push with Oems has been hey, we need we need some cost help on the bill of material increases that we've eaten by ourselves over the last two years.
Some Oems have been better about that than others. The ones, who haven't assisted there we're having tougher conversations with about out year productivity isn't going to happen for a long time, because we have to get back to where our normal normalized build material was a few years ago and were eating labor costs that are much higher than what they were in the past so what we're looking.
With each OEM has a different relationship there will be some that will start in Q1, but it won't be nearly as significant as in <unk>.
<unk> in the past, where a lot of times, 2% to 3% is kind of what we saw at the top on January one it's going to be far less than that starting in 2014.
Cool well you can take a breath, Steve and bring some water you've been talking a lot. So Kevin I just have a question on your mutual fund operations.
On the $500 million in cash and marketable securities how much of that as equity method.
Judy it's about so we have a couple we have.
About $50 million of equity method investments okay.
We can.
That's fine so of the $400 million I'm using numbers for 2540, how much of that is stocks versus bonds.
Very small.
Around $1 million in stock that's about it okay well the rest of it is fixed income as well out of that $250 million or $240 million just cash.
Yeah.
What is the yield on that cash.
The cash yield is about 450 basis points currently.
We've got some.
Changes to move North and then on the fixed income side, we have a bunch of floaters that are actually moving with the market as well.
Some of the stuff that we have from that have longer maturities.
Have lower yields because we were invested in three to five year securities with longer with.
With lower rates. So we're just working our way through those.
And strategically trying to move out of them. If we if we find other opportunities, but the fixed income market.
Went upside down when rates moved up so quickly.
Right and so when you look at your core operations and you think about your row, there and you think about the cash and non equity investments.
This cash is adding let's say I don't even know probably three or four cents a share.
Yes.
Okay and so.
That is obviously hurting your Roe.
And has for a long time, and so what investments can we make and I'm not saying buy back shares, but what investments can we make to actually improve.
The ROE overall, even more.
Well I mean, because we're shareholders, yes, absolutely I think thats, a combination really of our overall capital allocation strategy of funding the R&D sufficiently as far as new product development I mean, that's our preference and we've always talked about that as a preference, but as the Midwestern company. We are we'd like to remain nimble as it relates to future.
<unk> that do increase our ROE and our ROIC.
Because we like the ongoing cash flow is our preference versus just buying back shares are holding cash but.
Part of how we've been successful in the past us having cash powder dry if you will for an acquisition and be and being able to move quickly without the help of banks are financing so.
That's really been our strategy and we continue to have a balanced approach as it relates to liquidity and availability.
Okay.
And so are there any acquisitions on the horizon that you could see that would use some of that cash that would help.
Yes, I mean, we're always focused on looking for opportunities I think one of the things that we've struggled with is the valuations of a lot of the acquisition targets just haven't made sense to us and so one of the hurdle rates, we look at it and saying Hey, what is what is the return profile of share repurchases versus acquisitions and you have to look at those over a long period of time and so so far we've had.
Most of the acquisitions, we've done have been smaller technology plays startups in <unk> instead of existing instead of an existing income statement acquisition.
We're not opposed to it and we continue to look a lot and.
Unfortunately over the last few years valuations really haven't really haven't declined as much as we had hoped we were pretty.
Pretty optimistic that given the higher interest rate market and some of the things were happening that are acquisitions and valuations were going to drop and it has to some degree but not to the extent to which I had hoped and not to the extent to which we are ready to go acquire something that was a better return profile than share repurchases investing in R&D and small technology.
Physicians.
Alright, Okay. So maybe the question is just generally how much cash you need but.
That's that's a separate question Jonathan just a dollar more.
Yes exactly.
It's a tale of two cities right from last year to this year.
And it's wonderful to hear kind of how strong you are on the operational side and so we just look forward to seeing more of that in future and hopefully things will work out good for change instead of getting some bad luck on the other side, so anyway, great quarter, and we will look forward to seeing Gentex and federal reserve.
Minutes.
Companies that don't need more capital to raise.
Yeah.
Thanks, Thanks, Charlie Okay. Thanks, guys.
Our next question comes from the line of James Picariello with BNP Paribas Exane.
Yes.
Hey, guys can you hear me Hey, Jamie.
So as we think about the second half on a year over year basis.
Are you seeing deflationary trends in the supply chain from a sourcing perspective. This would be separate from your cost recoveries progress on the net pricing front, just curious where you are actually seeing costs come down in the back half.
Yes, we're starting to see you're starting to see some really.
In the second half versus last year, while we're really anticipating better freight costs for sure.
Are you starting to see some some deflationary pressures in metals and plastics.
And some of the precious metals they are running at really high levels really over the last 18 months. So we're expecting those to continue to at least stabilize if not get better on the.
Electronic side and really on the glass side still seeing some inflationary pressures, we are hoping that through some <unk>.
Supplier changes and through some co development and engineering that we're going to be able to offset those.
But thats going to take work and so we know some of these we can do just through growing our book of business or the suppliers. Some of this by consolidating suppliers, we can potentially get savings in other cases, we're going to have to make some supplier changes in order to get our cost targets.
Got it.
Super helpful and then.
Just on the net pricing recoveries front, what is baked in assumption in the guidance at this point I mean is it closer to neutral or trending towards that positive.
Points that was once.
Discuss where are we in that for the guidance.
We're closer to 100 basis points, that's kind of what's been realized so far and what we're I mean, what we between the temporary or the recovery then the permanent price increases that's what we are tracking towards and planning for working towards by the end of the year.
Got it.
And then.
Just lastly for the for next year.
2024 target last quarter, you were calling for plus 10% revenue growth on a plus three.
Global LBP now now.
Growth of our markets.
10 points instead of seven.
Is that 10 points of growth over market, the right way to be thinking about it as we flex as global VP changes for next year is the 10 points right the rate marker.
I would say somewhere in that seven to 10 is probably the right range.
What we're looking at and the reason why you saw us take a little bit more aggressive stances a lot of customer orders are starting to firm up now through the second half and into next year and so we wouldn't expect massive changes in take rates for instance on Ftm's.
Lower than what they are currently and so really the strength in the first half of this year, especially in FTM volumes gave us the confidence to say, okay. We're not expecting any retrench and take rates on those technologies and features so the incremental business is really what we're looking at estimating what that is going to look like.
We feel pretty good about the second half of this year and where we're heading into next year from an overall revenue standpoint based on the product portfolio.
Got it thank you.
Thanks, James Thanks, James.
We have a follow up question from the line of Sean <unk> with Guggenheim Securities.
Yes.
Yes.
Just real quick on the 2024 guide.
It sounded like there was something in the new product side launching in the second half of next year understand that might be a bit early to talk about that but yes.
Yes.
Any update on either dimmable surfaces or driver monitoring anything that could be driving the new product launch in the back half of next year.
Yes.
I think what we're really focused on right now is making sure on the large area device side, making sure. We're working on the underlying tax so it's really not about.
Led <unk> launch in the back half of next year, but some of the other features that we've been showing at CES have been getting traction over the last couple of years and we're expecting a couple of those to hit the marketplace late next year.
Okay perfect I appreciate it I'll hop off thanks.
Thanks, Ron Thanks, Ron.
That concludes today's question and answer session I would like to turn the call back to Joshua Barsky for closing remarks.
Thank you everyone for your time and questions. Today. This concludes our conference call have a good weekend.
This concludes today's conference call. Thank you for participating you may now disconnect.
Okay.
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Yeah.
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