Q4 2024 Gentex Corp Earnings Call

January 31, 2025

Speaker's presentation, there will be a question answer session to ask a question. During this session you will need to press star one on your telephone.

You wouldn't hear an automated message advising you hendry's to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today, Josh <unk> director of Investor Relations. Please go ahead.

Speaker Change: Thank you.

Joshua Brewski: Good morning, and thank you for joining us today for our fourth quarter 2024 earnings Conference call I'm, Joshua Brewski 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.

Joshua Brewski: 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 Dot 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 fourth quarter two.

Joshua Brewski: <unk> 24 earnings release press release.

Joshua Brewski: And our annual report on Form 10-K for the year ended December 31, 2023, as well as other general economic factors should one or more of these risks or uncertainties materialize or should.

Joshua Brewski: But underlying assumptions or estimates prove incorrect actual results may vary materially from those that we express today.

Joshua Brewski: I'll now hand, the call over to Steve Downing for our prepared remarks, Steve. Thank you Josh.

Joshua Brewski: For the fourth quarter of 2024, the company reported net sales of $541 6 million a decrease of 8% compared to net sales of $589 $1 million for the fourth quarter of last year.

Joshua Brewski: Light vehicle production decreased by 6% quarter over quarter in the company's primary markets of North America, Europe, and Japan and Korea.

Joshua Brewski: Compared to the beginning of the quarter forecast production weakness in the company's primary markets combined with a weak vehicle build mix that resulted in revenue being much lower than we initially anticipated for the quarter.

The combination of these two factors resulted in a revenue shortfall of approximately $45 million to $50 million versus the company at the beginning of quarter forecast.

Joshua Brewski: During the fourth quarter, there was significant weakness in our primary market markets that impacted both light vehicle production volumes and product mix during the quarter.

Joshua Brewski: We believe that a number of our OEM and tier one customers look to improve their incoming inventory levels during the quarter and build a weaker mix of vehicles versus the trends we've seen over the last several quarters. As an example, approximately one half of our revenue shortfall in the fourth quarter came from lower than expected full display mirror unit shipments and <unk>.

Joshua Brewski: Fortunately these changes all occurred within the quarter, causing a significant variance from our beginning of quarter forecast with most of the change happening in November and December.

Joshua Brewski: The gross margin in the fourth quarter of 2024 was 32, 5% compared with a gross margin of 34, 5% in the fourth quarter of last year. The decrease in gross margin in the fourth quarter was primarily due to the lower than expected sales levels weaker product mix and the inability to leverage overhead costs.

Joshua Brewski: These factors more than offset the positive tailwind from purchasing cost reductions that were achieved throughout calendar year 2024.

Joshua Brewski: The gross margin during the fourth quarter was significantly lower than our anticipated margin performance for the quarter.

Joshua Brewski: But when we model the gross margin impact from lower than forecasted revenue due to the lower vehicle production and the lower full display mirror shipments, we would've had a quarter very similar to the margin in the fourth quarter of last year.

Joshua Brewski: Operating expenses during the fourth quarter of 2024 were up 22% to $86 5 million due to staffing and engineering related professional fees with total operating expense for the quarter also impacted by intangible asset impairment charges of $8 $9 million related to a technology acquired in <unk>.

Joshua Brewski: 20.

Joshua Brewski: Our operating expenses for the fourth quarter and full year 2024 have been elevated as we expand our engineering capability to focus on the many new product launches currently underway and to help support the R&D activity necessary to execute our product roadmaps.

Joshua Brewski: It is worth noting the operating expenses net of the impairment charges for the quarter grew at the lowest rate of the year.

Joshua Brewski: Income from operations for the fourth quarter of 2024 was $89 8 million.

Joshua Brewski: Compared to income from operations of $132 8 million for the fourth quarter of last year.

Joshua Brewski: During the fourth quarter of 2024, the company had an effective tax rate of 10, 3%, which was driven by the foreign derived intangible income deduction provision to return adjustments and other discrete benefits.

Joshua Brewski: In the fourth quarter of 2024 net income was $87 7 million.

Joshua Brewski: Compared to net income of $116 9 million in the fourth quarter of last year.

Joshua Brewski: Earnings per diluted share in the fourth quarter of 2024 were <unk> 39 <unk>.

Joshua Brewski: Compared with earnings per diluted share of <unk> 50 in the fourth quarter of last year.

Joshua Brewski: For calendar year 2024, the company's net sales were $2 $31 billion, an increase of 1% compared to net sales of $2 3 billion last year, representing the highest annual sales in company history. Despite light vehicle production that decreased this year by more than 4% and the company's primary markets.

Joshua Brewski: The company's revenue outperformance versus the underlying market was driven primarily by growth in STM unit shipments.

For calendar year 2024, the company's net sales were $2 $31 billion, an increase of 1% compared to net sales of $2 $3 billion last year, representing the highest annual sales in company history. Despite light vehicle production that decreased this year by more than 4% and the company's primary markets.

Joshua Brewski: For calendar year 2024, the gross margin was 33, 3% compared to a gross margin of 33, 2% last year.

Joshua Brewski: Gross margin improvements were primarily the result of supplier cost reductions and lower freight costs, though these benefits were largely offset by weaker than expected product mix higher labor costs and the inability to leverage fixed overhead costs due to the lower than forecasted revenue for the year.

The company's revenue outperformance versus the underlying market was driven primarily by growth in F. D M unit shipments.

For calendar year 2024, the gross margin was 33, 3% compared to a gross margin of 33, 2% last year.

Joshua Brewski: Despite the many headwinds that impacted revenue and gross margins. This year, we were able to continue to make improvements to the gross margin profile of the company.

Gross margin improvements were primarily the result of supplier cost reductions and lower freight costs, though these benefits were largely offset by weaker than expected product mix higher labor costs and the inability to leverage fixed overhead costs due to the lower than forecasted revenue for the year.

Joshua Brewski: The improvements made this year combined with our targeted improvements for 2025 provide a roadmap and plan to achieve a target of approximately 35% gross margin by the end of 2025.

Joshua Brewski: For calendar year, 2024, operating expenses increased 17% to $311 4 million compared to operating expenses of $266 $9 million last year.

Despite the many headwinds that impacted revenue and gross margins. This year, we were able to continue to make improvements to the gross margin profile of the company the.

The improvements made this year combined with our targeted improvements for 2025 provide a roadmap and plan to achieve a target of approximately 35% gross margin by the end of 2025.

Joshua Brewski: Net of the impairment charges discussed previously the total operating expense for the year was in line with our forecasted operating expenses.

Joshua Brewski: The company has been investing heavily in engineering capability over the last two years in order to support the elevated rate of launches driven by customer awards to accelerate our research and development activity necessary to execute the new technologies and product roadmap showcased at CES.

For calendar year, 2024, operating expenses increased 17% to $311 4 million compared to operating expenses of $266 $9 million last year.

Net of the impairment charges discussed previously the total operating expense for the year was in line with our forecasted operating expenses.

Joshua Brewski: And to fund R&D activity required to achieve product redesigns and support of our cost improvement initiatives.

Joshua Brewski: The plan for 2025 is based on a much lower growth rate in operating expenses for the year as we believe the new baseline of engineering spend is sufficient to support our current engineering initiatives.

The company has been investing heavily in engineering capability over the last few years in order to support the elevated rate of launches driven by customer awards to accelerate our research and development activity necessary to execute the new technologies and product roadmap showcased at CES.

Joshua Brewski: For calendar year 2024, the company's effective tax rate was 14, 3% compared to an effective tax rate of 15, 2% last year.

And to fund R&D activity required to achieve product redesigns and support of our cost improvement initiatives.

Joshua Brewski: The decrease in the tax rate in 2024 was primarily driven by an increased benefit from the foreign derived intangible income deduction and R&D tax credits compared to last year net.

The plan for 2025 is based on a much lower growth rate in operating expenses for the year as we believe the new baseline of engineering spend is sufficient to support our current engineering initiatives.

Joshua Brewski: Net income for calendar year, 2024 was $404 5 million compared to.

For calendar year 2024, the company's effective tax rate was 14, 3% compared to an effective tax rate of 15, 2% last year.

Joshua Brewski: Net income of $428 $4 million last year.

Joshua Brewski: Earnings per diluted share for calendar year, 2024 were $1 76 compared to earnings per diluted share of $1 84 last year.

The decrease in the tax rate in 2024 was primarily driven by an increased benefit from the foreign derived intangible income deduction and R&D tax credits compared to last year.

Joshua Brewski: Thank you and I'll now hand, the call over to Kevin for some further financial details. Thank you Steve.

Joshua Brewski: Automotive net sales during the fourth quarter of 24 were $531 3 million compared to $578 $7 million in the fourth quarter of 2003 and for calendar year 'twenty for automotive net sales were $2 $2 6 billion compared to $2 $25 billion in 'twenty three for.

Net income for calendar year, 2024 was $404 $5 million compared to net income of $428 $4 million last year.

Earnings per diluted share for calendar year, 2024 were $1 76 compared to earnings per diluted share of $1 84 last year. Thank.

Joshua Brewski: For the year <unk> shipments increased 21% to $2 nine 6 million units, which more than offset a 6% decrease in automotive mirror unit shipments compared to the 23.

Kevin: Thank you and I'll now hand, the call over to Kevin for some further financial details. Thank you Steve automotive.

Kevin: Automotive net sales during the fourth quarter of 24 were $531 3 million compared to $578 $7 million in the fourth quarter of 'twenty, three and for calendar year 'twenty for automotive net sales were $2 $2 6 billion compared to $2 5 billion and 23 for.

Joshua Brewski: Other net sales in the fourth quarter of 'twenty, four which includes Dimmable aircraft windows for our protection products and medical products were $10 3 million a decrease of 2% compared to other net sales of $10 5 million in the fourth quarter of 'twenty three.

Joshua Brewski: Fire protection sales increased by 5% Dimmable aircraft windows decreased by 23% for the fourth quarter of 'twenty forward when compared to the fourth quarter of 2003 and medical product sales were $6 million in the fourth quarter of 'twenty four for the Esa product that launched in the third quarter of 2004.

Speaker Change: For the year <unk> shipments increased 21% to $2 nine 6 million units, which more than offset a 6% decrease in automotive mirror unit shipments compared to the 23.

Speaker Change: Other net sales in the fourth quarter of 24, which includes Dimmable aircraft Windows fire protection products and medical products were $10 3 million a decrease of 2% compared to other net sales of $10 5 million in the fourth quarter of 'twenty three.

Joshua Brewski: Other net sales for calendar year, 'twenty four were $48 6 million compared to other net sales of $44 $6 million in calendar 'twenty three fire protection sales increased 4% year over year, while dimmable aircraft windows.

Speaker Change: Fire protection sales increased by 5% Dimmable aircraft windows decreased by 23% for the fourth quarter of 'twenty forward when compared to the fourth quarter of 2003 and medical products sales were <unk> 6 million in the fourth quarter of <unk> 24 for the Esa product that launched in the third quarter of 24.

Joshua Brewski: Creased by 9% and 24 compared to 23 and medical product sales were $1 4 million for calendar year 2024 share repurchases. The company repurchased 604000 shares of its common stock during the fourth quarter had an average of $30 54 per share.

Speaker Change: Other net sales for calendar year, 'twenty four were $48 6 million compared to other net sales of $44 $6 million in calendar 'twenty three fire protection sales increased 4% year over year, while demo aircraft windows.

Joshua Brewski: For the year ended December 31 of 24, the company repurchased six 4 million shares of its common stock at an average price of $32 20 per share for a total of $206 1 million and as of December 31 of 24. The company has $9 4 million shares remaining available for repurchase from the previously announced plan.

Speaker Change: Creased by 9% and 24 compared to <unk> 23, and medical products sales were $1 4 million for calendar year 2024 share repurchases. The company repurchased 604000 shares of its common stock during the fourth quarter have an average of $30 54 per share.

Joshua Brewski: Shifting over to the balance sheet the balance sheet comparisons mentioned today or as of December 31 of 24 compared to December 31 of 23 cash and cash equivalents were $233 3 million compared to $226 4 million short term and long term investments combined with $361 9 million up from $299 1 million.

Speaker Change: For the year ended December 31 of 24, the company repurchased six 4 million shares of its common stock at an average price of $32 20 per share for a total of $206 1 million and as of December 31 of 24. The company has nine 4 million shares remaining available for repurchase from the previously announced plan.

Joshua Brewski: Which includes fixed income investments as well as the company's equity and cost method investments.

Joshua Brewski: Accounts receivable was $295 3 million down from $321 8 million due to the size and timing of sales during the fourth quarter.

Speaker Change: Shifting over to the balance sheet the balance sheet comparisons mentioned today or as of December 31 of 24 compared to December 31 of 23 cash and cash equivalents were $233 3 million compared to $226 4 million short term and long term investments combined with $361 9 million up from $299 1 million.

Joshua Brewski: Inventories were $436 5 million up from $402 5 million.

Joshua Brewski: And accounts payable decreased to $168 3 million a decrease from $184 4 million.

Joshua Brewski: Preliminary cash flow items fourth quarter 2024 cash flow from operations was $154 4 million compared to $169 6 million in the fourth quarter of last year and calendar year 2024 cash flow from operations was $498 2 million compared to $537 $2 million in calendar year 'twenty three.

Speaker Change: Which includes fixed income investments as well as the company's equity and cost method investments.

Speaker Change: Accounts receivable was $295 3 million down from $321 8 million due to the size and timing of sales during the fourth quarter.

Speaker Change: Inventories were $436 5 million up from $402 5 million.

Speaker Change: And accounts payable decreased to $168 3 million a decrease from $184 4 million.

Joshua Brewski: Capital expenditures for the fourth quarter were $41 7 million compared with $62 3 million for the fourth quarter of last year and calendar year 2024 expenditures were $144 7 million compared to $183 7 million for calendar year 'twenty three.

Speaker Change: Preliminary cash flow items fourth quarter 2024 cash flow from operations was $154 4 million compared to $169 6 million in the fourth quarter of last year and calendar year 2024 cash flow from operations was $498 2 million compared to $537 $2 million in calendar year 'twenty three.

And lastly, depreciation and amortization for the fourth quarter was $23 8 million compared with $22 3 million for the fourth quarter of 2003 and year to date depreciation and amortization was $94 7 million compared with $93 3 million for year to date 2023, I will now hand, the call over to Neil for a product update. Thank you Kevin earlier in January Gentex participated in the $2025.

Speaker Change: Capital expenditures for the fourth quarter were $41 7 million compared with $62 3 million for the fourth quarter of last year and.

Speaker Change: In calendar year, 2024 expenditures were $144 7 million compared to $183 7 million for calendar year 'twenty three.

Neil: <unk> electronic show.

Neil: The show was about innovation and technology and it's a great place for us to showcase our currently future technologies and products to customers and consumers.

Speaker Change: Lastly, depreciation and amortization for the fourth quarter was $23 8 million compared with $22 3 million for the fourth quarter of 'twenty, three and year to date depreciation and amortization was $94 7 million compared with $93 $3 million a year to date 2023, I'll now hand, the call over to Neil for a product update. Thank you Kevin earlier in January Gentex participated in the 2025.

Neil: It's a chance for us to get a roadmap of the company in front of people to help them see where we're headed.

Neil: This year, we had three different booths supporting Gentex technologies at the Venetian Expo Center, we had two booths, one booth supporting and demonstrating our medical Wearables E site and the second piece was demonstrating our connected smoke detector product lineup that we've named please.

Neil: Electronic show.

Neil: The show was about innovation and technology and it's a great place for us to showcase our currently future technologies and products to customers and consumers.

The satellite booths were in the middle of the relevant technology areas and provided us with some great customer and consumer insight and feedback.

Neil: As a chance for us to get our roadmap of the company in front of people to help them see where we're headed.

Neil: The mean Gentex booth located at the West Hall of the Las Vegas Convention Center at this booth, we demonstrated products and technologies for all of our major verticals of automotive aerospace medical and consumer facing products.

Neil: This year, we had three different booths supporting Gentex technologies.

Neil: The Venetian Expo Center, we had two booths, one booth supporting and demonstrating our medical Wearables E site and the second piece was demonstrating a connected smoke detector product lineup that we've named place.

Neil: Again this year like in past years, we had multiple vehicles and product demonstrators at the booth to help people get a real feel for our product strategy and direction.

Neil: The satellite booths were in the middle of the relevant technology areas and provided us with some great customer and consumer insight and feedback.

Neil: There were several new demonstrators and properties for CES 2025, the larger device demonstrator stood in the middle of the booth space and help to demonstrate the functionality of a large <unk> films.

Neil: The main Gentex Booth was located at the West Hall of the Las Vegas Convention Center at this booth, we demonstrated products and technologies for all of our major verticals of automotive aerospace medical and consumer facing products.

Neil: This allowed people to see for the first time, our dimming technology on a plastic substrate in sunroof sized parts.

Neil: Again this year like in past years, we had multiple vehicles and product demonstrators at the booth to help people get a real feel for our product strategy and direction.

Neil: Next to the larger device property there was a new demonstrator is showing our partners solus and their wireless power and data technology and automotive use case.

Neil: There were several new demonstrators and properties for CES 2025.

Neil: The demonstrated was a door of a vehicle that displayed how powering data could be delivered to the door wirelessly.

Neil: Large area devices demonstrator stood in the middle of the booth space and help to demonstrate the functionality of a large dimming films.

Neil: With no wire harnesses connectors power was delivered to activate the window movement and dimming of the window.

Neil: This allowed people to see for the first time, our dimming technology on a plastic substrate in sunroof sized parts.

Neil: A wireless connection to the outside mirror demonstrated how a camera it could be powered and the video transmitted by this exciting new technology.

Neil: Next to the larger device property, there was a new demonstrator, showing our partner solus and their wireless power and data technology and automotive use case.

Neil: Also at the Booth, we had a complete in vehicle demonstration of the next generation Homelink uniting the connected car and the smartphone.

Neil: The demonstrated was a door of a vehicle that displayed how power and data could be delivered to the door wirelessly.

Neil: This vehicle allowed for the demonstration of multiple device activations activation methods of RF long range, Bluetooth and cloud base.

Neil: With no wire harnesses connectors power was delivered to activate the window movement and dimming of the window.

Neil: A wireless connection to the outside mirror demonstrated how our camera it could be powered and the video transmitted by this exciting new technology.

Neil: It also helped us to show the different levels of vehicle integration like hard buttons soft buttons or through Apple car play and Android auto.

Neil: Also at the Booth, we had a complete in vehicle demonstration of the next generation Homelink uniting the connected car and the smartphone.

Neil: The all new App has improved device training and seen creation, while the new API solutions allow for control of the garage door from the car or phone app.

Neil: This vehicle allowed for the demonstration of multiple device activations activation methods of RF long range, Bluetooth and cloud base.

Neil: We're truly excited about the opportunities this new generation of Homelink can bring to gentex.

Neil: To demonstrate our improvements in strategy with driver monitoring systems, we showed an updated simulator and a product panel that displayed the different hardware and software combination we've been sourced by four different Oems.

Neil: It also helped us to show the different levels of vehicle integration like hard buttons soft buttons or through Apple car play and Android auto.

Neil: The all new App has improved device training and seen creation, while the new API solutions allow for control of the garage door from the car or phone app.

Neil: Between these two properties, we were able to show how we can compete today with different technical solutions to meet each Oems needs.

Neil: We're truly excited about the opportunities this new generation of Homelink can bring to gentex.

Neil: The last update for CES is about other dimming products at the show we demonstrated for the first time on dimming visor with an integrated display.

Neil: And small dimming glasses.

Neil: Advisor with display with the concept we used at the show to gauge interest in the technology and to talk with customers about what type of information would make sense to be positioned in this area.

Neil: Between these two properties, we were able to show how we can compete today with different technical solutions to meet each Oems needs.

Neil: Overall this concept was very well received and we will continue to work on refining the details of the product going forward.

Neil: The last update for CES is about other dimming products at the show we demonstrated for the first time, a dimming visor with an integrated display.

Neil: In regards to the dinning glasses. This was a great concept that allowed us to show, how our dimming technology could be applied.

Neil: And small deeming glasses.

Neil: Advisor with display with a concept we used at the show to gauge interest in the technology and to talk with customers about what type of information would make sense to be positioned in this area.

Neil: <unk> use cases beyond mirrors windows.

Neil: <unk> advisors.

Neil: Now for a quick update on launches and full display mirror.

Neil: In the fourth quarter of 2024, we had another two zero this quarter with over 60% of our launches be advanced features.

Neil: Overall this concept was very well received and will continue to work on refining the details of the product going forward.

Neil: Homelink and full display mirror were the biggest drivers of these launches.

Neil: In regards to the dimming glasses. This was a great concept that allowed us to show, how our dimming technology could be applied.

Neil: We're excited to announce that in the fourth quarter of 2020 Board. We began shipping full display mirror on the renewal Masters and Volkswagen Trans border.

Neil: <unk> use cases beyond mirrors windows.

Neil: Sunroof advisors.

Neil: Both Renault and Volkswagen or new OEM customers for full display mirror.

Neil: Now for a quick update on our launches and full display mirror.

Neil: In addition to these two nameplates there were seven additional nameplates with previously Oems, bringing our total launched nameplates to 133.

Neil: In the fourth quarter of 2024, we had another profitable quarter with over 60% of our launches being advanced features.

Neil: Homelink and full display mirror were the biggest drivers of these launches.

Neil: Even though our full display mirror units came in lower than forecasted for the fourth quarter of 2004 as was mentioned earlier, we had an incredible growth year and shipped to 96 million units in calendar year 'twenty four and achieved our goal of shipping at least 500000 units more than 2023.

Neil: We're excited.

Neil: Added to announce it in the fourth quarter of 2020 Board, we began shipping full display mirror under renewal Masters and Volkswagen transporter.

Neil: Both Renault and Volkswagen or new OEM customers for full display mirror.

In addition to these two nameplates there were seven additional nameplates with previous Ob Oems, bringing our total launched nameplates to 133.

Neil: This product continues to gain interest from luxury brands to volume brands around the world and we are well positioned to keep this technology moving.

Neil: Even though our full display mirror units came in lower than forecasted for the fourth quarter of 2004 as was mentioned earlier, we had an incredible growth year in ship to 96 million units in calendar year, 'twenty Board and achieved our goal of shipping at least 500000 units more than 2023.

Neil: Gentex is an excellent innovation and technology company, and we've done a great job, improving our product portfolio and getting projects to market.

Neil: As we enter 2025, we need to keep our focus on innovation, but it's clear that we need to increase our focus on building material reductions and improvements in efficiency that can have an immediate impact on our financial performance.

Neil: This product continues to gain interest from luxury brands the volume brands around the world and we are well positioned to keep this technology moving.

Neil: This increased focus has begun and the teams are driving to get improvements in place to help get our margins back in line with our goals.

Neil: Gentex is an excellent innovation and technology company, and we've done a great job, improving our product portfolio and getting projects to market.

Neil: Now I'll hand, the call back over to Steve for guidance and closing remarks. Thanks Neal.

Neil: As we enter 2025, we need to keep our focus on innovation, but it's clear that we need to increase our focus on bill of material reductions and improvements in efficiency that can have an immediate impact on our financial performance. This.

Neil: The company's current forecast for light vehicle production for calendar year 2025, and 2026 are based on the S&P Global mobility mid January 'twenty $5 forecast for light vehicle production in North America, Europe, Japan, Korea, and China and are detailed in our press release.

Neil: This increased focus has begun and the teams are driving to get improvements in place to help get our margins back in line with our goals.

Neil: Light vehicle production in these markets is expected to decrease by approximately 1% for calendar year 2025 versus last year, while light vehicle production in our primary markets of North America, Europe, Japan, and Korea is expected to be down over 2% for calendar year 2026 light vehicle production in North America Europe, Japan.

Neil: Ill hand, the call back over to Steve for guidance and closing remarks. Thanks Neal.

Steve: The company's current forecast for light vehicle production for calendar year 2025, and 2026 are based on the S&P Global mobility mid January 25 forecast for light vehicle production in North America, Europe, Japan, Korea, and China and are detailed in our press release.

Neil: Korea, and China is forecasted to grow by approximately 2% compared to light vehicle production estimates for 2025.

Steve: Light vehicle production in these markets is expected to decrease by approximately 1% for calendar year 2025 versus last year, while light vehicle production in our primary markets of North America, Europe, Japan, and Korea is expected to be down over 2% for calendar year 2026 light vehicle production in North America Europe, Japan.

Neil: The company's guidance excludes any impact from the company's pending acquisition of Vocs International Corporation, which remains subject to certain regulatory and box shareholder approvals.

Neil: Based on this light vehicle production forecast and our estimates for aerospace fire protection and medical sales. The company is providing guidance for calendar year 2025 as follows.

Steve: Korea, and China is forecasted to grow by approximately 2% compared to light vehicle production estimates for 2025.

Neil: Revenue for the year is expected to be between two four and $2 $45 billion.

Steve: The company's guidance excludes any impact from the company's pending acquisition of box International Corporation, which remains subject to certain regulatory and box shareholder approvals.

Neil: Gross margins for the year are expected to be between 33, five and 34, 5%.

Neil: Operating expenses are expected to be between 310 and $320 million. Our estimated annual tax rate is forecasted to be between 15% and 17%.

Steve: Based on this light vehicle production forecast and our estimates for aerospace fire protection and medical sales. The company is providing guidance for calendar year 2025 as follows.

Neil: Capital expenditures are expected to be between 125, and $150 million and depreciation and amortization is now forecasted to be between $85 million to $90 million.

Steve: Revenue for the year is expected to be between two four and $2 $45 billion gross margins for the year are expected to be between 33, five and 34, 5%.

Neil: Additionally, based on the mid January 2025, S&P Global mobility light vehicle production forecast as well as the company's estimates for aerospace fire protection and medical sales. The company currently expects calendar year 2026 revenue to be between $2 55, and $2 $65 billion.

Steve: Operating expenses are expected to be between 310 and $320 million are.

Steve: <unk> annual tax rate is forecasted to be between 15 and 17%.

Steve: Capital expenditures are expected to be between 125 and $150 million and.

Steve: Nation, and amortization is now forecasted to be between $85 million to $90 million.

Neil: Despite the industry's optimism at the beginning of the year calendar year 2024, broad a challenging operating environment for much of the year driven by lower than expected light vehicle production in our primary markets. Despite these challenges the company has been able to continue outperforming the underlying market and create year over year growth.

Steve: Additionally, based on the mid January 2025, S&P Global mobility light vehicle production forecast as well as the company's estimates for aerospace fire protection and medical sales. The company currently expects calendar year 2026 revenue to be between $2 55, and $2 six 5 billion.

Neil: These headwinds significantly impacted our overall revenue estimates, which makes margin expansion very difficult.

Steve: Despite the industry's optimism at the beginning of the year calendar year 2024 brought a challenging operating environment for much of the year driven by lower than expected light vehicle production in our primary markets. Despite these challenges the company has been able to continue outperforming the underlying market and create year over year growth.

Neil: Despite this the team's work and focus on margin improvement allowed us to make a modest year over year improvement in gross margin as well.

Neil: As we look into 2025 light vehicle production estimates indicate that our largest markets are poised to shrink even more however, even in the face of a smaller end market. We are forecasting revenue growth in 2025 that at midpoint of revenue guidance suggests a 7% outgrowth versus our primary markets.

Steve: Headwinds significantly impacted our overall revenue estimates, which makes margin expansion very difficult.

Steve: Despite this the team's work and focus on margin improvement allowed us to make a modest year over year improvement in gross margin as well.

Neil: This growth can only be accomplished by launching and new products and technology the.

Neil: The commitment we have made to invest in and develop engineering capabilities and new technologies is beginning to provide the signs of what we hope to be a long term sustainable outperformance versus the underlying market that can generate shareholder returns for long into the future.

Steve: As we look into 2025 light vehicle production estimates indicate that our largest markets are poised to shrink even more however, even in the face of a smaller end market. We are forecasting revenue growth in 2025 that at midpoint of revenue guidance suggests a 7% outgrowth versus our primary markets.

Neil: That completes our prepared comments for today, we can now proceed to questions.

Steve: This growth can only be accomplished by launching and new products and technology.

Neil: As a reminder.

Neil: You will need to press star one on your telephone and wait for your name to be announced withdraw your question. Please press star one again.

Steve: The commitment we have made to invest in and develop engineering capabilities and new technologies is beginning to provide the signs of what we hope to be a long term sustainable outperformance versus the underlying market that can generate shareholder returns for long into the future.

Neil: Our first question.

Speaker Change: Our first question comes from the line of Luke junk from Baird. Your line is open.

Steve: That completes our prepared comments for today, we can now proceed to questions.

Neil: Hi, good morning, Thanks for taking my question.

Steve: Long term lender mission, you will need to press star one on your telephone and wait for your name to be announced withdraw your question. Please press star one again.

Speaker Change: Steve maybe to start with if we could double click on the vehicle mix impacts in the quarter.

Neil: Looking at this you gave guidance in late October.

Couple of months of the year had that shortfall like you said of around $45 million to $50 million as you diagnose what happened in the quarter. How do you delineate between impacts that are may be more tied to year end inventory rebalancing both.

Steve: One moment for our first.

Steve: Question.

Steve: Okay.

Steve: Our first question comes from the line of Luke Young from Baird. Your line is open.

Luke Young: Hi, good morning, Thanks for taking my question.

Neil: <unk> Mir and maybe some FTM impacts in there as well versus mix vehicle mix factors that might linger into 'twenty five hearing based on what Youre seeing in January any changes in the business that can maybe be better answer that question as well. Thank you.

Speaker Change: Steve maybe to start with if we could double click on the vehicle mix impacts in the quarter.

Speaker Change: This you gave guidance in late October and the last couple of months of the year had that shortfall like you said of around 45% to $50 million as you diagnose what happened in the quarter. How do you delineate between impacts that are may be more tied to year end inventory rebalancing, both base mirror and maybe some FTM impacts in there as well.

Speaker Change: Yes, Thanks look Thats a good question I think if you look at if you look at the primary portion of the Miss I would say probably about half of that we think is inventory adjustments that won't go into next year and the reason why we believe that is to your point when we look at the first few weeks of shipment in 'twenty five and we're what we're seeing for through the rest of the quarter.

Versus mix vehicle mix factors that might linger into 'twenty five hearing based on what Youre seeing in January any changes in the business that can maybe better answer that question as well. Thank you.

Speaker Change: It would indicate that this is not that portion of that problem won't be lingering. There is probably a 2000 $25 million reduction in our Q1 estimates that we're seeing that's based on a little bit of us being conservative about product mix issues.

Speaker Change: Typical at this time at this point in the cycle as you are a combination of factors a lower lower production lower sales based on economic conditions, but then the one thats harder to calculate because it's data like this isn't really tracking the north American market real wallet. What is the average sale price of a vehicle and so we're just starting to dig in and get some data around that.

Speaker Change: Area, but one of the things we're definitely seeing is that the highest end of the vehicles I mean for the last two years really 70% of vehicles that were sold in North America were very high content feature and we're starting to see a little bit of weakness on that side and that's probably the other half of the year.

Speaker Change: Typical at this time at this point in the cycle as you have a combination of factors, a lower and lower production lower sales based on economic conditions, but then the one that's harder to calculate because it's data like this isn't really tracking the north American market real wallet. What is the average sale price of a vehicle and so we're just starting to dig in and get some data around that area.

Speaker Change: Revenue loss that we saw in the quarter was really driven by that just content on a per vehicle basis wasn't the same as what we've seen in the last two years.

Speaker Change: But one of the things we're definitely seeing is that the highest end of the vehicles I mean for the last two years really 70% of vehicles that were sold North America, where very high content feature and we're starting to see a little bit of weakness on that side and that's probably the other half of the revenue loss that we saw in the quarter was really driven by that.

Got it.

Speaker Change: And then switching to kind of have that filters through the P&L, obviously makes sense impacts on gross margin.

Speaker Change: You mentioned in the release that if not for mix and where volume shake out in the quarter that you would have been probably more flat.

Speaker Change: Year over year basis for gross margin and <unk>.

Speaker Change: That just content on a per vehicle basis wasn't the same as what we've seen in the last few years.

Speaker Change: Just trying to square that with the 25 gross margin guidance on a seasonal basis, especially in the near term given the first quarter, usually sees some sequential gross margin pressures as Chris stones, and whatnot come in with recovery thereafter, any reason to think that maybe that would be a little flatter trajectory to start the year given.

Speaker Change: Got it and then.

Speaker Change: Switching to kind of have that filters through the P&L, obviously makes sense impacts on gross margin.

Speaker Change: Mentioned in the release that if not for mix and where volume shook out in the quarter that you would have been probably more flat.

Speaker Change: Just the.

Speaker Change: The weight that was on the <unk> specifically for gross margin. Thanks.

Speaker Change: Year over year basis for gross margin and just trying to square that with 25 gross margin guidance on a seasonal basis, especially in the near term given the first quarter, usually sees some sequential gross margin pressures as Chris stones and whatnot.

Speaker Change: Yes.

Speaker Change: I would say the normal cyclical nature of the gross margin performance throughout the year, we will still be the case next year, but we're expecting.

Speaker Change: Overall margin in Q1 to step up versus Q4 because of sales level should be better. If you look at if you look at what our Q1 guidance is and really for the rest of the year that full year guidance.

Speaker Change: Come in with recovery thereafter, any reason to think that maybe that would be a little flatter trajectory to start the year given just the weight that was on the <unk> specifically for gross margin. Thanks.

Speaker Change: This basically implies that Q1 has to be significantly better than what Q4 was from a pure revenue standpoint, and so that's really what the margin recovery will be focused on if you look at if you look at $50 million, roughly and you say hey contribution margin of at least 40% on those level of sales you can kind of model what you would what you would see.

Speaker Change: Yeah I.

Speaker Change: I would say the normal cyclical nature of the gross margin performance throughout the year, we will still be the case next year, but we're expecting.

Speaker Change: The overall margin in Q1 to step up versus Q4 because of sales level should be better. If you look at if you look at what our Q1 guidance is and really for the rest of the year that full year guidance.

Speaker Change: Q1 to be even if it just hit what we thought Q4 was going to be from an overall revenue perspective.

Speaker Change: This basically implies that Q1 has to be significantly better than what Q4 was from a pure revenue standpoint, and so that's really what the margin recovery will be focused on if you look at if you look at $50 million, roughly and you say hey contribution margin of at least 40% on this level of sales you can kind of model what you would what you would see.

Speaker Change: That was really the headwind that hit the hardest on the margin performance there really wasn't anything underlying in the business that we would say with structurally wrong that caused that margin deterioration other than just the lack of sales.

Speaker Change: Understood and then just.

Speaker Change: Last question for me I'm not sure how much you can say right now but.

Speaker Change: In Q1 to be even if it just hit what we thought Q4 was going to be from an overall revenue perspective.

Speaker Change: Thanks.

Speaker Change: Still pending closure of that deal of course, but I don't know if you can speak to just a high level, maybe a couple of strategic imperatives. Once you close the deal just in terms of key action items that investors should expect here in 2025.

Speaker Change: That was really the headwind that hit the hardest on the margin performance there really wasn't anything underlying in the business that we would say we are structurally wrong that caused that margin deterioration other than just the lack of sales.

Speaker Change: Understood and then just.

Speaker Change: Yes, right now what we're tentatively looking at just based on the timing of both regulatory approvals and inbox shareholder approvals, we're probably looking at towards the end of Q1 as a target close date.

Speaker Change: Last question for me I'm not sure how much you can say right now but.

Speaker Change: Ox.

Speaker Change: Bill pending closure of that deal of course, but I don't know if you can speak to just a high level, maybe a couple of strategic imperatives. Once you close the deal just in terms of key action items that investors should expect here in 2025.

Speaker Change: So as we move through the next couple of months, we'll obviously be submitting more information and communicating with shareholders about how were coming on that schedule on timeline and then obviously once that once the close happens we'll be talking about other disclosures that we'll be making.

Speaker Change: Yes, right now what we're tentatively looking at just based on the timing of both regulatory approvals and <unk> shareholder approvals, we're probably looking at towards the end of Q1 as a target close date.

Speaker Change: The future of that business, what does it look like.

Speaker Change: What estimates do we have for what revenue impact that will have for us going forward.

Speaker Change: Got it okay I'll leave it there thanks again for taking the questions.

Speaker Change: So as we move through the next couple of months, we'll obviously be submitting more information and communicating with shareholders about how were coming on that schedule and timeline and then obviously once that once the close happens we'll be talking about other disclosures that we'll be making.

Speaker Change: Thanks Luke.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Joseph Spak from UBS. Your line is open.

Speaker Change: The future of that business, what does it look like.

Speaker Change: Good morning, everyone.

Speaker Change: Want to touch on against some of the content on maybe some of what youre seeing in the quarter and really how youre thinking about this going going forward.

Speaker Change: What estimates do we have for what revenue impact that will have for us going forward.

Speaker Change: Got it okay I'll leave it there thanks again for taking the questions.

Speaker Change: Thanks Luke.

Speaker Change: Obviously your <unk> content. It was a big part of the is the big part of.

Speaker Change: One moment for our next question.

Speaker Change: The growth story here. So you are $25 26 guidance I'm looking at it correctly kind of implies some slowing content growth. Further you go out and I just wanted to understand what you're assuming or you're assuming that vehicle mix doesn't.

Speaker Change: Our next question comes from the line of Joseph Spak from UBS. Your line is open.

Speaker Change: Good morning, everyone.

Speaker Change: Want to touch on against some of the content and maybe some of what youre seeing in the quarter and really how youre thinking about this going going forward.

Speaker Change: Recover or degrades and is that because of the vehicle affordability.

Speaker Change: And maybe even like what what an SDN target for 25 and 26 is embedded in your outlook.

Speaker Change: Obviously <unk> content it was a big part of it.

Speaker Change: Is it because of the growth story here so.

Speaker Change: You're at $25 26 guide if I'm looking at it correctly kind of implies some some slowing content growth further you go out and I just wanted to understand what you're assuming are you assuming that vehicle mix doesn't recover or degrades and is that because of the vehicle affordability.

Speaker Change: Yes, if you look at if you look at really what we're focused on what really what's impacting.

Speaker Change: Kind of slow in that.

Speaker Change: Growth outperformance versus the underlying market.

Speaker Change: And that's really as evidenced in the last couple of quarters. When you see both base auto dimming inside and outside mirrors are have actually shrunk in the last two quarters and a lot of that has to do with weakness in the China market and some of our other major Oems pulling back on overall production levels and so those headwinds.

Speaker Change: And maybe even like what what an SPM target for 'twenty five 'twenty six is embedded in your outlook.

Speaker Change: Yes, if you look at if you look at really what we're focused on what really what's impacting.

Speaker Change: FTM Homelink and some of the other growth we've seen on advanced features are more than offsetting those.

Speaker Change: Kind of slow in that.

Speaker Change: Growth outperformance versus the underlying market.

Speaker Change: But as we go forward.

Speaker Change: That's really as evidenced in the last couple of quarters. When you see both base auto dimming inside and outside mirrors are have actually shrunk in the last two quarters and a lot of that has to do with weakness in the China market and some of our other major Oems pulling back on overall production levels and so those headwinds.

Speaker Change: To your point some of the growth rates in those advanced features may not be enough to offset them to the extent to which we're able to outperform by say eight or 9% versus the underlying market that kind of 67%, though we look at over the next couple of years and believe that is very achievable from an outperformance versus the underlying market.

Speaker Change: If you look at <unk> in particular, our forecast right now for 25 would suggest probably 300000 or so unit growth in <unk> for this year and so thats kind of what we're building our capacity and financial model around.

Speaker Change: Homelink and some of the other growth we've seen on advanced features are more than offsetting those.

Speaker Change: But as we go forward.

Speaker Change: Got it. Thank you that's helpful.

Speaker Change: And I guess, maybe diving, even a little bit deeper to twenty-five you guided production down one I think you just said.

Speaker Change: Outgrowth of about seven points would suggest if im doing the quick math it seems like youre, assuming like a 1% FX headwind does that is that about right.

Speaker Change: If you look at <unk> in particular, our forecast right now for 25 would suggest probably 300000 or so unit growth in FTE and for this year and so thats kind of what we're building our capacity and financial model around.

Speaker Change: I think when you look at it it's really when we talk about the outperformance in our primary market. So youre looking at Europe, North America, and the Japan Korea market, because thats still makes up a large portion of our revenue and so when you look at those markets those are really down over 2% and so when you do the math, that's where the 7% outperformance comes from.

Speaker Change: Got it. Thank you that's helpful.

Speaker Change: And I guess, just maybe diving, even a little bit deeper to 'twenty five you guided production down one I think you just said.

Speaker Change: Outgrowth of about seven points would suggest if im doing the quick math it seems like youre, assuming like a 1% FX headwind does that is that about right.

Speaker Change: Okay.

Speaker Change: Sorry, the FX headwind in the sales guidance is that most of our stuff is denominated in U S dollar less than 10% of our sales are denominated in foreign currencies.

Speaker Change: And China is about 97% of sales and that is the stuff that is denominated in RMB. So there may be a little bit of help on there as well.

Speaker Change: So then maybe can you just help us understand like for that seven points of growth, let's say for 'twenty five.

Speaker Change: Okay. So just sorry, the FX headwind in the sales guidance is that most of our stuff is denominated in U S dollar less than 10% of our sales are denominated in foreign currencies.

Speaker Change: If we can like one is it possible to sort of understand I guess what.

Speaker Change: How customer mix plays within that or I guess relative to the minus one.

Speaker Change: And China is about 97% of sales and that is the stuff that is denominated in RMB. So there may be a little bit of have gone there as well.

Speaker Change: Industry vehicle production and then also like of the outgrowth component.

Speaker Change: So then maybe can you just help us understand like for that seven points of growth, let's say for 'twenty five.

Speaker Change: As the mix between.

Speaker Change: Units and.

Speaker Change: Content our product mix.

Speaker Change: Hum.

Speaker Change: If we can like one is it possible to sort of understand I guess what.

Speaker Change: Yes, well first I would say first before we get into the customer mix I would talk about geographic mix and so if you look at the markets that have been most impacted over the last 12 months, It's really Europe, and North America, and Japan Korea have been very severely impacted.

Speaker Change: How customer mix plays within that or I guess relative to the minus one.

Speaker Change: Industry vehicle production and then also like of the outgrowth.

Speaker Change: You go forward into 2005, you start to see some lingering effects of that there's not a natural recovery, especially in the European market to the extent to which to get back to where they used to be and so those obviously create some headwinds for us to we have to get content on a per vehicle basis up to offset those overall lower levels of production that those three primary markets have gone.

Speaker Change: Growth component.

Speaker Change: Phase the mix between.

Speaker Change: Units and.

Speaker Change: Content or product mix.

Speaker Change: Yes, well first I'd say first before we get into the customer mix I would talk about geographic mix and so if you look at the markets that have been most impacted over the last 12 months, It's really Europe, and North America, and Japan Korea have been very severely impacted.

Speaker Change: Through the last few years.

Speaker Change: In addition to that though your point about certain Oems is absolutely right. Obviously, there's some Oems that are very much struggling some of those have been great customers of ours for a while and so those those have had a disproportionate impact.

Speaker Change: You go forward into 'twenty five you start to see some lingering effects of that.

Speaker Change: Not a natural recovery, especially in the European market to the extent to which to get back to where they used to be and so those obviously create some headwinds for us to we have to get content on a per vehicle basis up to offset those overall lower levels of production.

Speaker Change: On the negative side of our ability to grow as those customers have struggled with their product lineup and favorability, obviously theres been a huge impact to the profitability of certain Oems as they've committed to EV executions that have not been accepted by the marketplace. The way. They expected that's definitely cause some headwinds for us to both in our anticipated launch.

Speaker Change: Three primary markets have gone through the last few years.

Speaker Change: <unk> of what we're going to get with those with those growth opportunities, but also now on the back side of that which is causing cost pressure on the <unk>.

Speaker Change: On the negative side of our ability to grow as those customers have struggled with their product lineup and favorability, obviously theres been a huge impact to the profitability of certain Oems as they've committed to EV executions that have not been accepted by the marketplace. The way they expected and that's definitely cause some headwinds for us to both in our anticipated launch.

Oems try to offset the investments that they've made and are obviously being rewarded in the marketplace for those investments.

Speaker Change: Okay.

Speaker Change: Thanks, so much.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: <unk> of what we're going to get with those with those growth opportunities, but also now on the back side of that which is causing cost pressure on the as as Oems try to offset the investments that they've made and are obviously being rewarded in the marketplace for those investments.

Speaker Change: Our next question Mark.

Speaker Change: Mark Delaney from Goldman Sachs. Your line is open.

Mark Delaney: Yes, good morning, and thank you very much for taking the questions.

Mark Delaney: First to pick up on your comments about CES and all of the products you had there in any of your meeting with a number of your customers now that you've had some time to.

Speaker Change: Okay. Thanks.

Mike: So Mike.

Speaker Change: Thank you.

One moment our next question.

Mark Delaney: Actually get more feedback from those customers and continue to engage can you share a bit more on any areas. You are getting particular momentum in and especially if you could talk to you around the large dimmable devices.

Speaker Change: Our next question comes from line of.

Speaker Change: Mark Delaney from Goldman Sachs. Your line is open.

Mark Delaney: Yes. Good morning, Thank you very much for taking the questions.

Mark Delaney: It's a progress being able to.

Speaker Change: First to pick up on your comments about CES and all of the products you had there in any of your meeting with a number of your customers.

Mark Delaney: Work on the technology, there so it would be especially interested on that product too.

Mark Delaney: Okay, great. Thank you.

Mark Delaney: <unk> had some time to.

Mark Delaney: It was really good for us from our overall product strategy and a direction and getting.

Mark Delaney: Actually get more feedback from those customers and continue to engage you can can you share a bit more on any areas youre getting particular momentum in and especially if you could talk to you around the large dimmable devices.

Mark Delaney: Multiple customers.

Mark Delaney: Global customers to see the different technologies and how we're showing them was again really successful I would say a couple of areas that where some of the highlights are the ones that I touched on the large dimming demonstrators showing plastic.

Mark Delaney: Some progress being able to.

Mark Delaney: Work on the technology, there so it would be.

Mark Delaney: Especially interested on that product too.

Mark Delaney: Plastic substrate films with the dimming technology eliminated between glass.

Mark Delaney: Okay, great. Thank you.

Mark Delaney: So it was really good for us from our overall product strategy and a direction and getting multi.

Mark Delaney: It was really.

Mark Delaney: Positively scene.

It helped to demonstrate how the technology's evolved from just being between glass like a standard year to actually being on a plastic substrates. So that one was really successful and I think we're gaining some momentum on larger devices coming out of that.

Mark Delaney: Multiple customers.

Mark Delaney: The other one was the solus, our partner Solas and the wireless power the ability to in some situations to not have connectors and harnesses.

Mark Delaney: It was really.

Mark Delaney: That go through openings, but wirelessly powered data and.

Positively scene.

Mark Delaney: It helped to demonstrate how the technology's evolved from just being between glass like a standard year to actually being on a plastic substrates. So that one was really successful and I think we're gaining some momentum on larger devices coming out of that.

Mark Delaney: Wirelessly do power and data.

Speaker Change: Was was actually a really really well received.

Speaker Change: A lot of interest gaining in different use cases in automotive as well.

Mark Delaney: The other one was the solus, our partner Solas and the wireless power the ability to in some situations to not have connectors and harnesses.

Speaker Change: This will be the two that really stepped up obviously, we've got a lot of other ones like our homelink product. The nextgen system that I talked about a lot of customers interested in that again, depending regionally.

Mark Delaney: That go through openings, but wirelessly powered data and.

Speaker Change: I would say more of some of our Asian based customers had a lot of interest in that in the evolution of the Homelink product as we look forward doing a lot of momentum too.

Mark Delaney: Wirelessly do power and data.

Mark Delaney: <unk> was actually a really really well received.

Mark Delaney: A lot of interest gaining in different use cases in automotive as well.

Speaker Change: Yes, just in terms of the customer engagements that I mean did you do you feel like Youre close with new book interest for some of those products.

Mark Delaney: This will be the two that really stepped up obviously, we've got a lot of other ones like our homelink product. The nextgen system that I talked about a lot of customers interested in that again, depending regionally.

Speaker Change: A couple of them I think.

Speaker Change: Some of those concepts and keep in mind that we are demonstrating the idea of the concept to gauge interest as well I would say on larger devices. I think we've got a couple of projects that will be.

Mark Delaney: I would say more of some of our Asian based customers had a lot of interest in that in the evolution of the Homelink product as we look forward to gain a lot of momentum too.

Speaker Change: That we're moving forward with from a development side within the next couple of years, we're looking to bring those to market.

Yes, just in terms of the <unk>.

Speaker Change: <unk> advisors, we're getting close I think that's probably another 12 to 24 months to really get that into an execution phase and get that moving in vehicles.

Mark Delaney: Or engagements that I mean did you feel like Youre close with with new book interest for some of those products.

Mark Delaney: A couple of them I think.

Mark Delaney: Some of those concepts and keep in mind that we are demonstrating the idea of the concept to gauge interest as well I would say on larger devices. I think we've got a couple of projects that will be.

Speaker Change: So listen the powers wireless powders, a little too early for the first time, demonstrating and showing concepts.

Speaker Change: I think there is some interest in it.

Mark Delaney: We're moving forward with from a development side within the next couple of years, we're looking to bring those to market on gaming visors, We're getting close I think that's probably another 12 to 24 months to really get that into an execution phase and get that moving in vehicles.

Speaker Change: We're obviously working with them to promote it but theres a little more the sales cycle and that still still in process.

Speaker Change: On the other side on the Dms driver monitoring in cabin monitoring side.

Speaker Change: Nice to be able to show there was we actually showed the four unique OEM executions. We're currently launching one just starting to enter production in the other three we'll be launching over the next 12 to 18 months. So.

Mark Delaney: The powers wireless powders, a little too early first time, demonstrating and showing concepts.

Speaker Change: It's kind of quota able to show not only the state that you have you have some awards with Oems with BLA actually show the physical products and what those will look like.

Mark Delaney: I think there is some interest in it.

Mark Delaney: We're obviously working with them to promote it but theres a little more the sales cycle and that still still in process.

Speaker Change: Yeah. Okay. Thank you guys. So just on the financials, maybe you could detail a little bit more of your expectations not only for your own cost downs, but our pricing assumptions this year with customers and suppliers relative to some of the typical levels and could you talk about how far you are with the negotiations on that front in security, which you need to in order to hit that 35%.

Mark Delaney: On the other side on the Dms driver monitoring in cabin monitoring side.

Mark Delaney: Nice to be able to show there was we actually showed the four unique OEM executions. We're currently launching one just started into production in the other three will be launching over the next 12 to 18 months. So it was.

Mark Delaney: It's kind of quota able to show not only the state that you have you have some awards with Oems with BLA actually show the physical products and what those will look like.

Speaker Change: Margin target exiting this year. Thank you.

Speaker Change: Yes on the pricing to our customer side, we're modeling about 100 to 150 basis points of headwinds from pricing to Oes.

Mark Delaney: Yeah. Okay. Thank you guys and just on the financials, maybe you could detail a little bit more of your expectations not only for your own cost downs, but our pricing assumptions this year with customers and suppliers relative to some of the typical levels and could you talk about how far you are with the negotiations on that front in security, which you need to in order to hit that 35%.

Speaker Change: We believe we can offset that or more than offset that on the supplier side based on the contracts that we have negotiated I think we've talked about this just a little earlier on the last question, but there is a timing impact of that we don't see that until Q2, just given the level of inventory in raw that we carry.

Mark Delaney: This margin target exiting this year. Thank you.

Mark Delaney: Yes on the pricing to our customer side, we're modeling about 100 to 150 basis points of headwinds from pricing to Oes.

Speaker Change: But there so obviously the difference between those two hits harder in Q1, but then as we start to get the supplier cost downs to roll through our financials.

Mark Delaney: We believe we can offset that or more than offset that on the supplier side based on the contracts that we have negotiated I think we've talked about this just a little earlier on the last question, but there is a timing impact of that we don't see that until Q2, just given the level of inventory in raw that we carry.

Speaker Change: In Q2 and beyond is when we start to feel the positive impact of that.

Speaker Change: And that the higher sales levels that will obviously help and then to neil's comments that he made in his prepared in his prepared section.

Speaker Change: There are a lot of focus on bill of material reduction first on it based on engineering work to help lower their bill of materials, and then operational efficiency internally, we know that labor has gotten more expensive over the last several years and so we have some very specific plans on how to make sure we're raising throughput to help offset that higher labor cost.

Mark Delaney: But there so obviously the difference between those two hits harder in Q1, but then as we start to get the supplier cost downs to roll through our financials.

Mark Delaney: Q2, and beyond is when we start to feel the positive impact of that.

Mark Delaney: Beyond that the higher sales levels that will obviously help and then neil's comments that he made in his prepared in his prepared section.

Speaker Change: Okay. Thank you.

Speaker Change: Sure.

Speaker Change: Thank you one moment our next question.

Mark Delaney: There are a lot of focus on bill of material reduction first based on engineering work to help lower their bill of materials, and then operational efficiency internally.

Speaker Change: Our next question comes from the line of Ron <unk> from Guggenheim Securities. Your line is open.

Mark Delaney: Labor has gotten more expensive over the last several years and so we have some very specific plans on how to make sure we're raising throughput to help offset that higher labor cost.

Ron: Yes, good morning.

Speaker Change: For taking my questions.

Speaker Change: On the mix issues cited for the fourth quarter.

Mark Delaney: Thank you.

Speaker Change: At least on the surface level interior mirror shipments there.

Mark Delaney: Sure.

Mark Delaney: Thank you one moment our next question.

Speaker Change: Quite a bit weaker than next year near shipments relative to the third quarter and an implied asp's were also pretty healthy which suggests I think at the end was probably pretty stable as a percentage of the mix.

Speaker Change: Our next question comes from the line of Ron <unk> from Guggenheim Securities. Your line is open.

Ron: Yes, good morning, and thanks for taking my questions.

Speaker Change: Yes.

Ron: On the mix issues cited for the fourth quarter.

Speaker Change: Are there mix issues in the mirror shipments.

Speaker Change: Was it more related to homelink or something else because.

Ron: At least on the surface level in interior mirror shipments there.

The split of mirror shipments doesn't really screen.

Speaker Change: Mix was a material headwind at least based on the exterior listening tiers.

Ron: Quite a bit weaker than the next year near shipments relative to the third quarter.

Ron: And then finally, if these were also pretty healthy which suggests I think <unk> was probably pretty stable as a percentage of the mix.

Speaker Change: Yes, the bigger the bigger mix issue. There is just the fact that they were down.

Speaker Change: The significance of the drop in overall mirror shipments her and especially.

Ron: I guess.

Ron: Were there mix issues with in the mirror shipments.

Speaker Change: Especially if you look at the loss on the OE sales.

Ron: Was it more related to only if there is something else because.

Speaker Change: Obviously hurts disproportionately on the margin side and so if you look at those that's really when we talk about mix that mix of MTM was solid there was there was to your point, though is North America weekends, you do see some of the North American specific features things like compass on Homelink and other features that start to start to get negatively.

Ron: A mirror shipments doesn't really screen.

Ron: Mix was a material headwind at least based on the exterior listen here's blips.

Ron: Yes.

Ron: Bigger the bigger mix issue. There is just the fact that they were down.

Ron: The significance of the drop in overall mirror shipments her and especially if you, especially if you look at the loss on the OE sales.

Speaker Change: <unk> because of weakness in the North American market.

Speaker Change: <unk> unique about <unk> is it's not geographically biased as much as some of our other feature set so.

Ron: That obviously hurts disproportionately on the margin side and so if you look at those that's really when we talk about mix that mix of MTM was solid there was there was to your point, though as North America weekends, you do see some of the North American specific features things like compass on Homelink and other features that start to start to get negatively.

Speaker Change: You can you can produce solid growth profile between Europe, North America, Japan, or Korea in that space.

Speaker Change: Other aspect of mix that was negative was the geographical mix associated with our China business. So there was quite a bit of weakness in the China market.

Ron: Impacted because of weakness in the North American market.

Speaker Change: To expect there to be a lot of cost pressures and weakness in that space in terms of overall volumes and then lastly, I think when you look at some of the growth opportunities and what we're expecting from an overall outside mirror shipment Tesla volumes didn't come close to where we thought they were at the beginning of the year, especially in Q4, and so that definitely had a negative impact on our overall OE.

Ron: What's unique about <unk> is it's not geographically biased as much as some of our other feature set so.

Ron: You can you can produce solid growth profile between Europe, North America, Japan, or Korea in that space.

Ron: Other aspect of mix that was negative was the geographical mix associated with our China business. So there was quite a bit of weakness in the China market. We continue to expect there to be a lot of cost pressures and weakness in that space in terms of overall volumes and then lastly, I think when you look at some of the growth opportunities and what we're expecting from an overall outside mirror shipment.

Speaker Change: See shipments as well.

Speaker Change: Okay.

Speaker Change: That's helpful and then on the commentary that <unk> was.

Speaker Change: You might have said that.

Speaker Change: All this quarter.

Speaker Change: I guess based on implied as Steve again.

Speaker Change: David.

Speaker Change: Does that imply your data expectations.

Ron: Tesla volumes didn't come close to where we thought they were at the beginning of the year, especially in Q4, and so that definitely had a negative impact on our overall OE shipments as well.

Speaker Change: <unk> contribution to the business is expected to accelerate looking quarter and either because of the channel dynamics.

Speaker Change: But that didn't really play out.

Ron: Okay.

Ron: That's helpful and then on the commentary that RPM was.

Speaker Change: Yes, that's correct, we are expecting a higher growth rate in Q4 on FTM Neil mentioned, a couple of other launches, but then there was a couple existing Oems too that we're talking about deploying at higher take rates and just given some of the struggles they were facing they either slowed down or pushed out those those increased take rates.

Ron: But you might have said.

Ron: The revenue shortfall this quarter.

Ron: I guess based on implied as Steve again.

Ron: David.

Ron: Does that imply your base expectation.

Ron: <unk> contribution to the business is expected to accelerate in looking quarter and either because of channel dynamics or mixed but that didn't really play out.

Speaker Change: Okay.

Speaker Change: If I could just.

Speaker Change: Nathan one more on the 2025 guide I know you tend to you and your team's been delight to take like to take a conservative stance relative to.

Ron: Yes, that's correct, we are expecting a higher growth rate in Q4.

Ron: On FTM Neil mentioned, a couple of other launches, but then there was a couple of existing Oems too that we're talking about deploying at higher take rates and just given some of the struggles they were facing they either slowed down or pushed out those those increased take rates.

Speaker Change: The S&P global mobility on production is that still the case or do you think expectations now.

Speaker Change: <unk> are a bit more reasonable.

Speaker Change: No I think I mean, I think they finally came to grips a little bit more like what we backed off a little more pessimistic position on especially Europe and North America at the time.

Ron: Okay.

Ron: If I could just sneak.

Ron: And one more on the 2025.

Ron: You tend to you and your team and I'd like to take like to take a conservative stance relative to.

Speaker Change: We continue to think that theres still going to be some struggles and weakness in those three markets.

Ron: The S&P global mobility on production is that still the case or do you think expectations now.

Speaker Change: I think unfortunately, a lot of the growth that the industry has seen over the last few years has really been strictly driven by the China production environment.

Ron: Or a bit more reasonable.

Ron: No I think well I mean, I think they finally came to grips a little bit more like what we backed off a little more pessimistic position on an especially Europe and North America at the time.

Speaker Change: And we have obviously definitely a much lower exposure to China than we do the rest of the rest of the world and from a production standpoint, and so we continue to have a little bit more of a pessimistic take on light vehicle production.

Ron: We continue to think that theres still going to be some struggles and weakness in those three markets.

Speaker Change: In North America, Europe, and Japan and Korea.

Okay.

Ron: I think unfortunately, a lot of the growth that the industry has seen over the last few years has really been strictly driven by the China production environment.

Speaker Change: Thanks for taking my question.

Alright, Thanks, Ron.

Speaker Change: One moment for your next question.

Ron: We have obviously.

Speaker Change: Our next question comes from the line of James Picariello from BNP Paribas. Your line is open.

Ron: Definitely a much lower exposure to China than we do the rest of the rest of the world and from a production standpoint, and so we continue to have a little bit more of a pessimistic take on light vehicle production.

James Picariello: Hey, good morning, everybody.

Ron: In North America, Europe, and Japan and Korea.

Speaker Change: Hey, John I, just wanted to revisit.

James Picariello: The dynamics.

Ron: Okay.

James Picariello: That drove the fourth quarter downside, mainly driven by the lower OEM builds mix in that key customer underperformance.

Ron: Thanks for taking my question.

Ron: Alright, Thanks Robert.

Ron: One moment for your next question.

James Picariello: I know this has already been asked but just.

James Picariello: How are you bridging to or thinking about that six points of outgrowth now embedded into 2025 guide it does sound as though SDN remains a key driver of that outperformance is your key customers similar to the fourth quarter had lower bill generics or maybe slightly lower take rates for STM.

Speaker Change: Our next question comes from the line of James Picariello from BNP Paribas. Your line is open.

James Picariello: Hey, good morning, everybody.

Speaker Change: Hey, good morning, just wanted to revisit.

James Picariello: The dynamics.

James Picariello: That drove the fourth quarter downside, mainly driven by the lower OEM builds mix in the key customer underperformance.

James Picariello: Assume that you have visibility into new customers or customers that recently launched on FTM that youll be growing substantially with.

James Picariello: I know this has already been asked but just.

James Picariello: How are you bridging to or thinking about that six points of outgrowth now embedded into 2025 guide it does sound as though SDN remains a key driver of that outperformance.

James Picariello: This year can you kind of just provide some color on.

Yes, with respect to the six points of outgrowth. Thanks.

James Picariello: Key customers similar to the fourth quarter had lower builds nyx or maybe slightly lower take rates for STM.

Speaker Change: Yeah. Thanks, James when you look at the overall growth Youre, absolutely right one of the building blocks for that for that performance in 25 will be continued growth in FTM Neil mentioned, the two new Oems that we're launching with obviously, we have some other Oems that we've launched within $24 $23 24, they are still rolling out on new vehicles.

James Picariello: Assume that you have visibility into new customers or customers that recently launched on FTM that youll be growing substantially with.

James Picariello: This year can you just provide some color on.

Speaker Change: So those will continue to provide a tailwind behind the growth rate in that product line up we do see some growth like we've mentioned before some of the later end 25, we'll have some dms in cabin monitoring system launches and so that will also provide tailwind. If you look at 25 as a whole. We also hopefully we will get back to some tailwind on that.

James Picariello: Yes.

James Picariello: Respect two to six points of outgrowth. Thanks.

James Picariello: Yeah. Thanks, James when you look at the overall growth Youre, absolutely right one of the building blocks for that for that performance in 25 will be continued growth in FTM Neil mentioned, the two new Oems that we're launching with obviously, we have some other Oems that we've launched with within 24 to $23 24, they are still rolling out on new vehicles.

Speaker Change: <unk> side of the business versus the headwinds that we've been facing here for.

Speaker Change: A good portion of 24.

James Picariello: So those will continue to provide a tailwind behind the growth rate in that product lineup.

Speaker Change: And so when we look at individual OEM customers. Some of them went through a really rough tough tough time during 'twenty four as well and so there hopefully will be some recovery from those Oems as well in terms of not only how they are doing but then the content that they are buying from us as well. So when you look at a combination with part of the reason why we gave those comments in the prepared section is to <unk>.

James Picariello: Do see some growth like we've mentioned before some of the later end 25, we'll have some dms in cabin monitoring system launches and so that is also provide tailwind. If you look at 25 as a whole. We also hopefully we will get back to some tailwind on the OTC side of the business versus the headwinds that we've been facing here for the good.

Speaker Change: Out there a lot of the growth that we're focused on at $25 26 is going to be driven by content, we're not expecting a whole lot of help from total light vehicle production. In fact, we're going to have to offset a lot of headwinds there.

James Picariello: 24.

James Picariello: And so when we look at individual OEM customers. Some of them went through a really rough tough tough time during 'twenty four as well and so there hopefully will be some recovery from those Oems as well in terms of not only how they are doing but then the content that they are buying from us as well. So when you look at a combination with part of the reason why we gave those comments in the prepared section is to <unk>.

Speaker Change: There will be some obviously some unique OEM mix. Some some some oems that have been struggling are doing really well.

Speaker Change: There'll be some more consistent performance between them versus their historical position with each other but for the most part. This is all this most of this growth is being driven by content growth in our primary markets.

James Picariello: Point out that a lot of the growth that we're focused on at $25 26 is going to be driven by content, we're not expecting a whole lot of help from total light vehicle production. In fact, we are going to have to offset a lot of headwinds there.

Speaker Change: Got it.

Speaker Change: That's very helpful and just apologize if I missed this but any thoughts on.

James Picariello: There will be some obviously some unique OEM mix. Some some some oems that have been struggling are doing really well.

Speaker Change: Seasonality for the year, particularly just to start the year in the first quarter given the Choppiness that we obviously saw in the fourth quarter just high level, how to think about maybe maybe the first quarter first half.

James Picariello: There'll be some more <unk>.

James Picariello: Consistent performance between them versus their historical position with each other.

James Picariello: But for the most part this is all this most of this growth is being driven by content growth in our primary markets.

Speaker Change: And.

As we consider the box acquisition is that still expected to close at some point within the first quarter and just any thoughts you're willing to share on the.

James Picariello: Got it.

Speaker Change: Sorry, I'll call end and just apologize if I missed this but any thoughts on.

Speaker Change: The $40 million to $50 million.

Speaker Change: Cost synergy cost improvement for that business the timing of that thank you.

Speaker Change: Yeah, So I'll start with the Vocs close we're targeting end of Q1 is kind of the tentative timeline, we have right now based on waiting on regulatory approvals and <unk> shareholder approval and just the normal timing of when that cannot be accomplished so thats kind of what our target is right now imagine kind of very end of Q1 is kind of what we're targeting right now.

Speaker Change: <unk>.

Speaker Change: Well as we consider the box acquisition is that still expected to close at some point within the first quarter and just any thoughts there.

Speaker Change: Are you willing to share on the $40 million to $50 million.

Speaker Change: Yeah.

Speaker Change: Cost synergy cost improvement for that business the timing of that thank you.

Speaker Change: You look at your first part of your question James seasonality, all seasonality I would say, yes, I think the first the first half of the year from a seasonality standpoint is going to be really unique but I think that one is going to be mainly tied to.

Speaker Change: Yeah, So I'll start with the Vocs close we're targeting end of Q1 is kind of the tentative timeline, we have right now based on waiting on regulatory approvals and <unk> shareholder approval and just the normal timing of when that can be accomplished so thats kind of what our target is right now imagine kind of very end of Q1 is kind of what we're targeting right now.

Speaker Change: What is happening with North American trade agreements.

Speaker Change: There's obviously a lot of our customers build cars, both in Canada, and Mexico, and what impact would.

Speaker Change: Tariffs or threat of tariffs have on overall light vehicle production in that in those countries and so that one I think is going to cause a little bit of chaos here in the first half of the year.

Speaker Change: Look at your first part of your question James seasonality, all seasonality I would say, yes, I think the first the first half of the year from a seasonality standpoint is going to be really unique but I think that one is going to be mainly tied to what.

Speaker Change: Which is to be understood I don't think other than that I don't think theres going to be a ton of abnormal seasonality that we're what we're expecting for 25, I think it's going to be a pretty normal year in terms of cadence.

Speaker Change: What is happening with North American trade agreements.

There's obviously a lot of our customers build cars, both in Canada, and Mexico, and what impact would.

Speaker Change: And then you had a third question the last one on the $40 million to $50 million in cost savings really the first part of the of the acquisition is really getting to know the team.

Speaker Change: Looking at duplicate costs, where we have both being a public company.

Speaker Change: Some of those costs go away right away.

Speaker Change: Things like insurance and Sec's and auditors.

Speaker Change: And then beyond that it's really looking at the strategic parts of their business.

Speaker Change: And.

Speaker Change: Leveraging our spend we're a bigger bigger companies bigger electronics spend they buy a lot of electronics and then longer term looking at strategic places, where we can become a manufacturer of some of the stuff that they make that's really some of the larger points, but thats going to take 18 to 24 months to kind of get through a lot of that.

Speaker Change: Looking at duplicate costs, where we have both being a public company.

Some of those costs go away right away.

Speaker Change: Things like insurance, and Sec's and auditors and those things.

Speaker Change: Understood. Thanks, guys.

And then beyond that it's really looking at the strategic parts of their business.

James Picariello: Okay. Thanks James.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And.

Speaker Change: Our next question will come from the line of Josh Nichols from B Riley Your line is open.

Speaker Change: Yes. Thanks.

Speaker Change: Most of the questions about near term stuff could probably.

Speaker Change: <unk> tackled.

Speaker Change: Thinking a little bit further ahead so.

Speaker Change: I think 26.

Speaker Change: Understood. Thanks, guys.

Speaker Change: Fills up a little bit over 7%.

Speaker Change: Okay. Thanks James.

Speaker Change: Thank you one moment for our next question.

Speaker Change: Five to 600 bps of outperformance relative to.

Speaker Change: Our next question will come from the line of Josh Nichols from B Riley Your line is open.

Speaker Change: The light vehicle production estimates one is there much built into that in terms of the new technology offering Dimmable glass.

Josh Nichols: Yes. Thanks.

Speaker Change: Most of the questions about the near term that could probably be.

Speaker Change: <unk> also been doing for driver and cabin monitoring or have you been pretty conservative on the expectations for that because those are newer technologies not really generating.

Josh Nichols: <unk> tackled.

Josh Nichols: Thinking a little bit further ahead so.

Josh Nichols: I think 26 sales up a little bit over 7%.

Speaker Change: Much revenue today.

Josh Nichols: Five to 600 bps of outperformance relative to the light vehicle.

Speaker Change: Yes, the 26 part of the 26% growth is going to be continued to be driven by full display mirror and driver monitoring and in cabin monitoring launches along with kind of our existing portfolio of products, there's really not much in there from a revenue standpoint on from large area devices.

Josh Nichols: Production estimates one is.

Josh Nichols: Is there much built into that in terms of the new technology offering Dimmable glass.

<unk> also been doing for driver and cabin monitoring or have you been pretty conservative on the expectations for that because those are newer technologies not really generating.

Speaker Change: Got it.

Speaker Change: Historically, if you look back some number of years. The company was able to do I think we've touched on it earlier like 800 to 1000 basis points of.

Josh Nichols: Much revenue today.

Yes, the 26 part of the 26% growth is going to be continued to be driven by full display mirror and driver monitoring and in cabin monitoring launches along with kind of our existing portfolio of products, there's really not much in there from a revenue standpoint on from large area devices.

Speaker Change: Growth relative to light vehicle production and.

Speaker Change: I know you've talked about.

Speaker Change: Some headwinds so youre still able to do 500 to 600 bps, but you think that there's a path to getting back to that.

Speaker Change: A single digit percentage of outperformance in like what is that going to be it's going to be driver monitoring or it will be when you have driver monitoring, but you're also layering in some large area dimmable devices and I'm just curious your longer term thoughts about the opportunity that you see with some of these new technologies that you had.

Josh Nichols: Got it and then historically.

Josh Nichols: Historically, if you look back some number of years. The company was able to do I think we touched on it earlier like 800 to 1000 basis points of <unk>.

Josh Nichols: Growth relative to light vehicle production and.

Josh Nichols: I know you've talked about theres, some headwinds so youre still able to do 500 to 600 bps, but you think that there is a path to getting back to that high single digit percentage of outperformance in like what is that going to be it's going to be driver monitoring or it will be when you have driver monitoring, but you're also layering in some large area dimmable devices.

Speaker Change: On display at CES.

Speaker Change: Yes, I think Youre exactly right I think you would be look at out several years before that type of outgrowth becomes a possibility just given the market dynamics and conditions that we're experiencing right now but to your point once you start launching driver monitoring and in cabin monitoring and then you start talking about large area devices at full scale those start to drive the potential.

Josh Nichols: I am just curious your longer term thoughts about the opportunity that you see with some of these new technologies that you had on display at CES.

Speaker Change: For higher growth rates.

Speaker Change: I appreciate it thanks.

Josh Nichols: Yes, I think youre exactly right I think you'd be looking out several years before that type of outgrowth becomes a possibility just given the market dynamics and conditions that we're experiencing right now but to your point once you start launching driver monitoring and in cabin monitoring and then you start talking about large area devices at full scale.

Speaker Change: Thanks, Josh.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from the line of Ryan Brinkman from Jpmorgan. Your line is open.

Speaker Change: Hi, Thanks for taking my question it seems like the customers, which underperformed the industry production in <unk> might have just happened to have been those that disproportionately order. Your full display mirrors is that the right way to look at it that these were actions that the customers took across their lineup I just wanted to check that it wasn't also maybe like a customer.

Josh Nichols: Start to drive the potential for higher growth rates.

Josh Nichols: I appreciate it thanks.

Josh Nichols: Thanks, Josh.

Josh Nichols: One moment for our next question.

Speaker Change: Our next question comes from the line of Ryan Brinkman from Jpmorgan. Your line is open.

Speaker Change: Mix.

Speaker Change: Like a segment mix phenomenon.

Speaker Change: Opposed to customer because we've also been hearing that maybe automakers are finding customers are more interested in more affordable vehicles like should it be traction.

Speaker Change: Alright, Thanks for taking my question it seems like the customers, which underperformed the industry production and <unk> you might have just happened to have been those that disproportionately order. Your full display mirrors is that the right way to look at it that these were actions that the customers took across their lineup I just wanted to check that it wasn't also maybe like a customer.

Speaker Change: Worse, or maybe lower spec models within a given vehicle like a base versus more of those conversion I just thought to ask given ftm's greater prevalence on higher spec and EV vehicles.

Yes, there was absolutely both of those factors playing in there is there is no doubt if you look at especially the Europe market I believe in portions of the North American market, where D and E segment vehicles were disproportionately lower.

Speaker Change: Mix.

Like a segment mix phenomenon as opposed to a customer because we've also been hearing that maybe automakers are finding customers are more interested in more affordable vehicles like a shabby tracks that traverse or maybe lower spec models within a given vehicle like a base versus more loaded version.

Speaker Change: H E B in parts of C segment in some of these markets actually did okay, but the painful part was really around <unk> in our primary markets and so to your point, yes, there was definitely more volume going into lower level vehicles, not only lower segment vehicles, but lower cost vehicles, even in <unk>.

Speaker Change: Ask given ftm's greater prevalence on higher spec and EV vehicles.

Speaker Change: Yes, there was absolutely both of those factors playing in there is there is no doubt if you look at especially the Europe market I believe in portions of the North American market, where D and E segment vehicles were disproportionately lower.

Speaker Change: Side of some of those segments. So.

Speaker Change: Like I said, it's difficult in the North American market to get your hands on good data on Asps or what the average sale price of a vehicle is but what the data. We're seeing is that there definitely was a trend towards less expensive vehicles in the quarter.

Speaker Change: Okay. Thanks.

Speaker Change: To get your perspective on the extent to which you think that might continue into 2025 and then just overall when you think about that 300000 units.

Speaker Change: Increase in STM shipments you referenced earlier, how important might start customer segment mix of production be versus.

Speaker Change: Some of those segments so.

Speaker Change: Contributing to that number the overall change in industry production or maybe most importantly, I would imagine that the launch activity that you have planned for <unk> and 'twenty five.

Speaker Change: Okay, Thanks, and I love to get your perspective on the extent to which you think that might continue into 2025 and then just overall when you think about that 300000 unit increase in STM shipments you referenced earlier, how important might start customer segment mix of production be.

Speaker Change: Yes, no. It becomes very important there is no doubt if you look at the cost of that product how it's packaged on vehicles and then and then also which Oems are you participating on.

Speaker Change: Trying to make them more we launched the better the better we are able to handle the mix issue between Oems and what I mean, there is that we know at the beginning of this process. When we first started creating this product we are only exposed at two or three Oems, meaning if those Oems didn't do well we are in trouble from a product launch standpoint, as we start to rollout into.

Speaker Change: Versus.

Speaker Change: Getting to that number the overall change in industry production or maybe most importantly, I would imagine that the launch activity that you have planned for <unk> and 'twenty five.

Speaker Change: Yes, no it becomes very important and there is no doubt if you look at the cost of that product how it's packaged on vehicles and then and then also which Oems are you participating on.

Speaker Change: More volume brands.

Speaker Change: Start to get a little bit more protection as it relates to which Oems are winning in the marketplace.

Speaker Change: Trying to make them more we launched the better the better we are able to handle the mix issue between Oems and what I mean, there is that we know at the beginning of this process. When we first started creating this product we are only exposed at two or three Oems, meaning at those Oems didn't do well we are in trouble from a product launch standpoint, as we start to rollout into more.

Speaker Change: And how is this product have growth opportunities beyond just the luxury segment and so what we're doing as we launch <unk>.

Speaker Change: And it continued to increase the number of Oems, we're supporting with this product actually helped secure.

Speaker Change: The downside of the business a little bit and gives you multiple ways to be able to win or at least compete in the space, but there's no doubt if that trend were to continue of lower cost vehicles. It would definitely hurt that forecast. What we're seeing is we tend to take a pretty conservative approach. We feel like that 300000 units is achievable given our customer mix, it's not an overly.

Speaker Change: Volume brands, you start to get a little bit more protection as it relates to which Oems are winning in the marketplace and how is this product have growth opportunities beyond just the luxury segment and so what we're doing as we launch.

Speaker Change: And it continue to increase the number of Oems, who are supporting with this product actually helped secure.

Speaker Change: Target by any stretch.

Speaker Change: But we are mindful of the fact that there is a lot of economic factors happening right now, especially in our primary markets.

Speaker Change: The downside of the business a little bit and gives you multiple ways to be able to win or at least compete in the space, but there is no doubt if that trend were to continue of lower cost vehicles. It would definitely hurt that forecast. What we're seeing is we tend to take a pretty conservative approach. We feel like that 300000 units is achievable given our customer mix, it's not an overly.

Speaker Change: Okay. That's helpful. Thanks, and then just lastly, how should we think about capital allocation. Following the box acquisition, particularly with regard to the amount or cadence of buyback.

Speaker Change: Yes, I think as we as we roll through and hopefully as the close happens it will definitely impact a little bit our capital allocation strategy and how much cash we're diverting towards share repurchases.

Speaker Change: Target by any stretch.

Speaker Change: But we are mindful of the fact that there's a lot of economic factors happening right now, especially in our primary markets.

Speaker Change: But given the given the size of the acquisition, we don't think that will really slow us down for a long period of time, we look at the business and what our plans are to help improve profitability. Our goal is as we like Kevin mentioned in that 18 to 24 month window as we digest that acquisition and start making improvements that underlying business should be able to get back.

Speaker Change: That level of share repurchases, probably even before that time period, but then more importantly, if we're successful in the integration it will actually provide additional capital that we can use towards our capital allocation strategy.

Speaker Change: Very helpful. Thank you.

Speaker Change: Thank you for a moment our next question now.

Speaker Change: As a reminder that started one one for questions.

Speaker Change: Our next question will come from the line of David Whiston from Morningstar. Your line is open.

David Whiston: Good morning, guys.

David Whiston: Just staying on the buyback topic from a different perspective.

David Whiston: Your stock is looking.

Speaker Change: Very helpful. Thank you.

David Whiston: Really cheap now, especially in line of today.

Speaker Change: Thank you for a moment our next question.

David Whiston: Does that make you are also talking about weak production on 25. So does that make you more apprehensive or does it maybe buying or opt is to want to do buybacks, even more because the stocks at unusually low levels.

Speaker Change: As a reminder that started one for questions.

Speaker Change: Our next question will come from the line of David Whiston from Morningstar. Your line is open.

David Whiston: Good morning, guys.

David Whiston: Just staying on the buyback topic from a different perspective.

David Whiston: Well thanks for the thanks for that.

David Whiston: Pointing that way.

David Whiston: Your stock is looking.

David Whiston: No no. It's a very fair point, though I mean, one of the things.

David Whiston: Really cheap now, especially in line of today.

David Whiston: From our perspective, we look at a long term horizon of how the company is positioned our growth trajectory. What we think our profitability will look like over 345 year period and this price is disproportionately lower than what we think I mean, yes, we get the quarter, we understand it wasn't great, but the market does tend to overreact that tends to put us in a position that we would tend to want to get.

David Whiston: Does that make you are also talking about weak production on 25. So does that make you more apprehensive or does it maybe inspire opt is to want to do buybacks, even more because the stocks at unusually low levels.

Speaker Change: Well thanks for the thanks for that.

David Whiston: Pointing that way.

David Whiston: More aggressive not less so when we look at this we fast forward and say take a quarter out of it even 25 performance. If we hit these numbers is going to be back to a level of cash generation. That's very good given the underlying market conditions in 2006 would be even better so.

David Whiston: No no. It's a very fair point, though I mean, one of the things.

David Whiston: As a general rule, we look at these downturns as opportunities to buy typically like we did mentioned, though we do have the box acquisition, that's still pending and so it'll be a balance between how do we how do we fund the <unk> acquisition at the same time is take advantage of market conditions like these because we don't feel like this price point is indicative of what our growth.

David Whiston: More aggressive not less so when we look at this we fast forward and say take a quarter out of it even 25 performance. If we hit these numbers and it's going to be back to a level of cash generation. That's very good given the underlying market conditions in 2006 would be even better so.

David Whiston: And profitability trajectory it looks like.

Speaker Change: Okay, and then going back to the tariffs comment made earlier when you talk about the downstream impact what about upstream or a lot of your raw materials really not coming from Canada, Mexico, because they're coming from Asia was due to technology components and then related is does your guidance have any tariffs impact in it.

Speaker Change: So our guidance right now there was some of the tariffs that were effective for one one but that was only a couple of million dollars most of our raw material imports or from Asia, but there is some exposure to Mexico and that I'll say $5 million to $10 million range. It worst case scenario. If if there if there is a 25% tariff on.

David Whiston: And profitability trajectory it looks like.

Speaker Change: Mexico, Mexico, primarily there's not really anything from Canada, but there's nothing in our guidance for that yet to be determined.

Speaker Change: Tariff.

Speaker Change: Is not in effect yet.

Speaker Change: The one the one that was effective on January one though is in our numbers.

Speaker Change: Okay, Alright, thanks, guys.

David Whiston: Thanks, David Thanks, Dave.

Speaker Change: Thank you.

Speaker Change: Mexico, Mexico, primarily there's not really anything from Canada, but there's nothing in our guidance for that yet to be determined.

Speaker Change: I'm not showing any further questions at this time I would now like to turn.

Josh Nichols: Back over to Josh for any closing remarks.

Josh Nichols: Thank you everyone for your time today I appreciate the questions and follow ups.

Speaker Change: Tariff.

Speaker Change: Is not in effect yet.

Josh Nichols: If there's anything else to Geneva, Please don't hesitate to reach out, but otherwise have a great weekend.

The one the one that was effective on January one though is in our numbers.

Josh Nichols: Thank you for your participation in today's conference. This does conclude the program and you may now disconnect everyone have a great day.

Speaker Change: Okay, Alright, thanks, guys.

Speaker Change: Thanks, David Thanks, David.

Speaker Change: Thank you I.

Josh Nichols: I am not showing any further questions at this time I would now like to turn it back over to Josh for any closing remarks.

Josh Nichols: Thank you everyone for your time today I appreciate the questions and follow ups.

Speaker Change: If there's anything else to Geneva, Please don't hesitate to reach out, but otherwise have a great weekend.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program and you may now disconnect everyone have a great day.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: <unk>.

Speaker Change: Okay.

Speaker Change: [music].

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