Q2 2025 Gentex Corp Earnings Call

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Operator: Please be advised that today's conference is being recorded.

John: I would now like to hand, the conference over to your speaker today John.

Oh Barsky: Oh Barsky director of Investor Relations. Please go ahead.

Josh Oberski: I would now like to hand the conference over to your speaker today, Josh Oberski, Director of Investor Relations. Please go ahead. Thank you.

Speaker Change: Thank you.

Joshua Bursty: Good morning, and thank you for joining us today for our second quarter 2025 earnings Conference call I'm, Joshua Bursty, Gentex director of Investor Relations and with me today are Steve Downing, President and CEO, Neil <unk>, CEO, and CTO, and Kevin Nash, Vice President of Finance and CFO.

Josh Oberski: Good morning, and thank you for joining us today for our second quarter 2025 earnings conference call.

Joshua Berski: I'm Joshua Berski, 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 Bursty: Please note that a replay of this conference call webcast, along with edited transcripts will be available following the call in the investors section of our website at IR Gentex Dot com.

Joshua Berski: Please note that a replay of this conference call webcast along with edited transcripts will be available following the call in the investor section of our website at ir.gentex.com. As a reminder, many of the statements made during today's call are forward-looking statements that reflect our current expectations. These statements are subject to a number of risks and uncertainties, both known and unknown, including those detailed in our second quarter 2025 earnings press release and our annual report on Form 10-K for the year ended December 31st, 2024, as well as general economic conditions.

Joshua Bursty: As a reminder, many of the statements made during today's call are forward looking statements that reflect our current expectations. These statements are subject to a number of risks and uncertainties, both known and unknown, including those detailed in our second quarter 2025 earnings press release and our annual report on Form 10-K for the year ended December 31, 2024, as well as general.

Joshua Bursty: Cannot make conditions, if one or more of these risks or uncertainties materialize or if our underlying assumptions or estimates prove to be incorrect actual results could differ materially from those expressed or implied in our forward looking statements.

Joshua Berski: If one or more of these risks or uncertainties materialize, or if our underlying assumptions or estimates prove to be incorrect, actual results could differ materially from those expressed or implied in our forward-looking statements.

Joshua Bursty: I will now hand, the call over to Steve Downing for our prepared remarks, Steve Thanks, Josh.

Steve Downing: I'll now hand the call over to Steve Downing for our prepared remarks. Steve? Thanks, Josh.

Steve Downing: Gentex completed its acquisition of box on April one of this year and we did our best in the press release from this morning to provide information for both what we call core gentex, meaning without box and consolidated Gentex, which includes financial performance for both Gentex and box.

Steve Downing: Gentex completed its acquisition of Vox on April 1st of this year, and we did our best in the press release from this morning to provide information for both what we call Core Gentex, meaning without Vox, and Consolidated Gentex, which includes financial performance for both Gentex and Vox. Additionally, in an effort to not repeat this caveat throughout the call, it is important to remember that for any year-over-year or quarter-over-quarter comparisons, the second quarter of last year did not include Vox. In the second quarter of 2025, consolidated net sales were $657.9 million, which represents a 15% increase over the second quarter of last year.

Steve Downing: Additionally, in an effort to not repeat this caveat throughout the call. It is important to remember that for any year over year or quarter over quarter comparisons the second quarter of last year did not include box.

Steve Downing: In the second quarter of 2025 consolidated net sales were $657 9 million, which represents a 15% increase over the second quarter of last year.

Steve Downing: Core Gentex revenue for the quarter was $579 million, which represents a 1% growth rate versus last year on a decline of 2% in light vehicle production in our primary markets box.

Steve Downing: Core Gentex revenue for the quarter was $579 million, which represents a 1% growth rate versus last year, on a decline of 2% in light vehicle production in our primary market. Vox revenue for the second quarter was $78.8 million. Given the overall weak light vehicle production in our primary regions, we are very pleased with our sales levels this quarter. This is particularly notable given the impact that tariffs and counter-tariffs have had on demand for our products, especially in the China market. Overall, sales into China for Gentex during the quarter were approximately $33 million, compared to our beginning-of-year forecast of $50 to $60 million for second-quarter sales.

Steve Downing: <unk> revenue for the second quarter was $78 $8 million.

Steve Downing: Given the overall weak light vehicle production in our primary regions. We are very pleased with our sales levels this quarter.

Steve Downing: This is particularly notable given the impact that tariffs and counter tariffs have had on demand for our products, especially in the China market overall sales into China for Gentex during the quarter were approximately $33 million.

Steve Downing: Compared to our beginning of year forecast of $50 million to $60 million for second quarter sales.

Steve Downing: Despite revenue headwinds related to tariffs and reduced sales into the China market the company more than offset these challenges through strong growth in full display mirror and other advanced features along with incremental revenue from the <unk> acquisition.

Steve Downing: Despite revenue headwinds related to tariffs and reduced sales into the China market, the company more than offset these challenges through strong growth in full display mirror and other advanced features, along with incremental revenue from the box acquisition. Our consolidated gross margin for the quarter was 34.2%, up from 32.9% in the second quarter of last year. Corp Gentex gross margin was 35.3%, a 240 basis point improvement versus last year. Sequentially, we saw a 210 basis point improvement in Corp gross margin, reflecting the continued success of our margin improvement initiative. The improvements were driven by purchasing cost reductions, favorable product mix, and operational efficiencies, although they were partially offset by tariffs that were not reimbursed during the quarter.

Steve Downing: Our consolidated gross margin for the quarter was 34, 2% up from 32, 9% in the second quarter of last year.

Steve Downing: Core Gentex gross margin was 35, 3%, a 240 basis point improvement versus last year.

Steve Downing: Sequentially, we saw a 210 basis point improvement in core gross margin.

Steve Downing: Reflecting the continued success of our our margin improvement initiatives.

Steve Downing: The improvements were driven by purchasing cost reductions favorable product mix and operational efficiencies. Although they were partially offset by tariffs that were not reimbursed during the quarter.

Steve Downing: Additionally, on an adjusted basis consolidated gross margin was 34, 6%.

Steve Downing: Additionally, on an adjusted basis, consolidated gross margin was 34.6% when excluding $2.5 million purchase accounting adjustment related to the Vox acquisition. During an incredibly difficult operating environment, this quarter's gross margin performance is a testament to the hard work and discipline the entire team has put into our margin improvement effort.

Steve Downing: When excluding $2 5 million to $5 million purchase accounting adjustment related to the box acquisition.

Steve Downing: During an incredibly difficult operating environment. This quarter's gross margin performance is a testament to the hard work and discipline. The entire team has put into our margin improvement effort.

Steve Downing: Operating expenses for the quarter were $106 $8 million up from $73 $7 million last year, primarily due to the box acquisition.

Kevin Nash: Operating expenses for the quarter were $106.8 million, up from $73.7 million last year, primarily due to the Vox acquisition. Vox accounted for $23.9 million of that increase, plus $1.5 million in acquisition-related costs on the Vox side, and $600,000 in costs relating to severance expenses for Vox. Core Gentex operating expenses were $80.7 million, up from $73.7 million, but this included expenses of $1 million in acquisition-related costs for Gentex and $6.2 million in early retirement incentives for Core Gentex. When we adjust for these one-time items, core Gentex operating expenses were down slightly versus last year, which is in line with our expectation, strategy, and execution of the work we have been doing on our cost reduction program.

Steve Downing: <unk> accounted for $23 $9 million of that increase plus $1 5 million in acquisition related costs on the <unk> side and 600000 in costs relating to severance expenses for box.

Steve Downing: Core Gentex operating expenses were $80 7 million up from $73 7 million, but this included expenses of $1 million in acquisition related costs for Gentex and $6 $2 million and early retirement incentives for core Gentex.

Steve Downing: When we adjust for these one time items core Gentex operating expenses were down slightly versus last year, which is in line with our expectation strategy and execution of the work we have been doing on our cost reduction program.

Steve Downing: Consolidated income from operations was $118 5 million compared to $114 $9 million last year, However, core gentex operating income.

Kevin Nash: Consolidated income from operations was $118.5 million dollars compared to $114.9 million dollars last year. However, core Gentex operating income was $123.8 million dollars up 8% year over year. Additionally, when adjusted for the one time expenses mentioned previously, core Gentex operating income was $130.9 million dollars, a 14% increase over last year. Our effective tax rate for the quarter was 17.2%, up from 15.1% last year, primarily due to lower stock-based compensation tax benefits and a reduced foreign-derived intangible income deduction. Consolidated net income for the quarter was $96 million, up 12% from $86 million last year. On an adjusted basis, net income was $105.8 million, a 23% increase versus last year.

Steve Downing: Was $123 $8 million up 8% year over year. Additionally, when adjusted for the one time expenses mentioned previously core Gentex operating income was $139 million.

Steve Downing: A 14% increase over last year.

Steve Downing: Our effective tax rate for the quarter was 17, 2% up from 15, 1% last year, primarily due to lower stock based compensation tax benefits and a reduced foreign derived intangible income deduction.

Steve Downing: Consolidated net income for the quarter was $96 million up 12% from $86 million last year on an adjusted basis net income was $105 8 million or 23% increase versus last year.

Steve Downing: Consolidated earnings per share were <unk> 43 up 16% versus last year, when we adjust earnings per share for the one time expenses mentioned previously EPS was <unk> 47 or.

Kevin Nash: Consolidated earnings per share were $0.43, up 16% versus last year. When we adjust earnings per share for the one-time expenses mentioned previously, EPS was $0.47, a 27% increase over last year.

Steve Downing: 27% increase over last year.

Steve Downing: I will now hand, the call over to Kevin for some further financial details. Thank you Steve.

Kevin Nash: I will now hand the call over to Kevin for some further financial details. Thank you, Steve. Gentex automotive net sales were $566.5 million in the second quarter of 2025, which were negatively affected by the company's lower-than-expected sales into the China market due to the impact of counterterrorists, but were more than offset by increased advanced feature mirror sales.

Speaker Change: Gentex automotive net sales were $566 5 million in the second quarter of 2005, which were negatively affected by the company's lower than expected sales into the China market due to the impact of counter tariffs, but were more than offset by increased advanced feature mirror sales.

Speaker Change: Net sales from Gentex as other product lines, which includes Dimmable aircraft Windows fire protection products medical devices, and biometrics were $12 5 million in the second quarter of 25% compared to $13 6 million in the second quarter of 'twenty four.

Kevin Nash: Net sales from Gentex's other product lines, which includes dimmable aircraft windows, fire protection products, medical devices, and biometrics, were $12.5 million in the second quarter of 25 compared to $13.6 million in the second quarter of 24. And as previously mentioned, VoxNet sales contributed $78.8 million during the second quarter of 2025. The company continues to work through post-acquisition transition with a focus on aligning product strategies, optimizing customer relationships, and identifying operational synergies across both businesses. During the second quarter of 2025, the company repurchased 5.7 million shares of its common stock at an average price of $22.13 per share for a total of $126.2 million.

Speaker Change: And as previously mentioned box net sales contributed $78 8 million during the second quarter of 2025. The company continues to work through post acquisition transition with a focus on aligning product strategies, optimizing customer relationships and identifying operational synergies across both businesses.

Speaker Change: During the second quarter of 2025, the company repurchased five 7 million shares of its common stock at an average price of $22 13 per share for a total of $126 2 million and year to date. The company has repurchased eight 8 million shares for a total of $202 2 million at an average price of $22 97 per <unk>.

Kevin Nash: And year to date, the company has repurchased 8.8 million shares for a total of $202.2 million at an average price of $22.97 per share.

Speaker Change: Sure.

Speaker Change: On July 16th of 25, the company announced a new share repurchase authorization from the board of directors of an additional 40 million shares representing more than 18% of the company's outstanding shares as of June 32005. This new authorization is in addition to the company's existing repurchase authorization and with this new authorization as of.

Kevin Nash: And on July 16th of 2025, the company announced a new share repurchase authorization from the Board of Directors of an additional 40 million shares, representing more than 18% of the company's outstanding shares as of June 30th of 2025. This new authorization is in addition to the company's existing repurchase authorization, and with this new authorization, as of today, the company now has approximately 40.6 million shares authorized for repurchase under the plan. The company intends to continue to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy, but share repurchases will vary from time to time and will take into account macroeconomic issues, market trends, and other factors the company deems appropriate.

Speaker Change: Today. The company now has approximately $40 6 million shares authorized for repurchase under the plan.

Speaker Change: The company intends to continue to repurchase additional shares of its common stock in the future and support of the previously disclosed capital allocation strategy, but share repurchases will vary from time to time, and we will take into account macroeconomic issues market trends and other factors the company deems appropriate shifting over to balance sheet today's comparisons our figures.

Kevin Nash: Shifting over to the balance sheet, today's comparisons are figures as of June 30 versus December 31 of 24. These numbers include the initial purchase accounting estimates from the Vox acquisition as of April 1, and while they reflect our best estimates, they may be subject to change throughout the measurement period. Starting with liquidity, cash and cash equivalents were $119.8 million, down from $233.3 million at year-end, primarily as a result of the Vox acquisition and share repurchases during the quarter. Short-term and long-term investments totaled $290.1 million, compared to $361.9 million at the end of 2024. These investments include both fixed income securities and our equity and cost method holdings.

Speaker Change: As of June 30 versus December 31 of 24. These numbers include the initial purchase accounting estimates from the <unk> acquisition as of April one and while they reflect our best estimates they may be subject to change throughout the measurement period.

Speaker Change: Starting with starting with liquidity cash and cash equivalents were $119 8 million down from $233 3 million at year end, primarily as a result of the Fox acquisition and share repurchases during the quarter.

Speaker Change: Short term and long term investments totaled $290 1 million compared to $361 9 million at the end of 'twenty for these investments include both fixed income securities and our equity and cost method holdings.

Speaker Change: Total accounts receivable stood at $372 9 million of that $317 5 million was attributable to Gentex and $55 4 million came from the <unk> acquisition. The increase in core Gentex receivables was primarily driven by higher sequential sales and the timing of sales within the quarter.

Kevin Nash: Total accounts receivables stood at $372.9 million. Of that, $317.5 million was attributable to Gentex, and $55.4 million came from the box acquisition. The increase in Corp Gentex receivables was primarily driven by higher sequential sales and the timing of the sales within the quarter. Total inventories were $473.3 million, with $380.9 million representing core Gentex inventory. That's down from $436.5 million at year-end, largely due to reductions in raw material inventory. The remaining $92.4 million in inventory is tied to the Vox acquisition. Consolidated accounts payable was $212.6 million, and within that, Corp Gentex accounts payable was $156.3 million, down from $168.3 million at the end of 2004, primarily due to lower inventory purchases during the quarter, and the remaining $56.3 million reflects payables associated with Vox.

Speaker Change: Total inventories were $473 $3 million with $389 million, representing core Gentex inventory, that's down from $436 5 million at year end largely due to reductions in raw material inventory. The remaining $92 4 million of inventory is tied to the Fox acquisition.

Speaker Change: And consolidated accounts payable was $212 6 million and within that core Gentex accounts payable was $156 3 million down from $168 3 million at the end of 'twenty four primarily due to lower inventory purchases during the quarter and the remaining $56 3 million reflects payables associated with box.

Speaker Change: And as it relates to cash flow. The company is still in process of finalizing operating cash flow metrics for the quarter and we will provide those details in its upcoming Form 10-Q filing.

Kevin Nash: And as it relates to cash flow, the company is still in process of finalizing operating cash flow metrics for the quarter and will provide those details in its upcoming Form 10-Q filing. Capital expenditures for the second quarter of 25 were approximately $31.1 million compared to $31.8 million in the same period last year. And year-to-date capital expenditures totaled $67.8 million, up from $63.6 million in the first half of 24. And depreciation and amortization expense for the second quarter was approximately $27.4 million, including $0.8 million attributable to Vox and $26.6 million related to Gentex. This compares to $23.9 million in the second quarter of 24.

Speaker Change: Capital expenditures for the second quarter of 2005 were approximately $31 1 million compared to $31 8 million in the same period last year and year to date capital expenditures totaled $67 8 million up from $63 6 million in the first half 'twenty four and.

Speaker Change: And depreciation and amortization expense for the second quarter was approximately $27 4 million, including $8 million attributable to box and $26 6 million related to Gentex.

Speaker Change: This compares to $23 9 million in the second quarter of 'twenty, four and on a year to date basis, depreciation and amortization totaled $52 9 million compared to $47 9 million in the prior year period, I will now hand, the call over to Neil for a product update. Thank you Kevin in the second quarter of 2025, we had 18 net new nameplate launches of our interior and extra.

Kevin Nash: And on a year-to-date basis, depreciation and amortization totaled $52.9 million, compared to $47.9 million in the prior year period.

Neil Boehm: I'll now hand the call over to Neil for a product update. Thank you, Kevin. In the second quarter of 2025, we had 18 net new nameplate launches of our interior and exterior auto-dimming mirrors and electronic features. Over half of these launches in the quarter included advanced feature content, with full-display mirror and HomeLink being the primary technologies introduced. The launch cadence has been strong over the past several quarters and the teams have been doing an outstanding job to make them successful.

Your auto dimming mirrors and electronic features over half of these launches in the quarter included advanced feature content with full display mirror Homelink being the primary technology is introduced.

Neil: The launch cadence has been strong over the past several quarters and the teams have been doing an outstanding job to make them successful.

Neil: Now for an update on full display mirror in the second quarter full display mirror launches on the Cadillac to seek Ferrari 290, <unk> Genesis GB 60, Hyundai Ionic nine and the Mitsubishi Outlander.

Neil Boehm: Now for an update on Full Display Mirror. In the second quarter, Full Display Mirror launched on the Cadillac Festique, Ferrari 296 GTB, Genesis GV60, Hyundai Ioniq 9, and the Mitsubishi Outlander. These new launches bring our total number of nameplates launched to 139. With six months of actual performance and improved visibility around program launches, we now expect full display mirror unit shipments for the full year of 2025 to increase by approximately 150 to 300,000 units compared to 2024. Interest in the full display in your product family remains strong, even in a challenging production environment, particularly in North America.

Neil: These new launches, bringing our total number of nameplates launched two 139.

Neil: With six months of actual performance and improved visibility around program launches. We now expect full display mirror unit shipments for the full year of 2025 to increase by approximately 150 to 300000 units compared to 2024.

Neil: Interest in full display mirror product family remains strong even in the challenging production environment, particularly in North America.

Neil: In addition to the growth in units in 2025, we continue to anticipate announcing an additional OEM customer for full display mirror later this year.

Neil Boehm: In addition to the growth in units in 2025, we continue to anticipate announcing an additional OEM customer for full display mirror later this year. Full display mirror has been one of Gentex's primary growth drivers and we remain fully committed to its continued advancement. We're actively investing in next generation camera and display technologies, new feature content, and a deeper focus on user experience to ensure the platform remains at the forefront of the market.

Neil: Full display mirror has been one of <unk> primary growth drivers and we remain fully committed to its continued advancement.

Neil: We're actively investing in next generation camera and technology display technologies, new feature content and a deeper focus on user experience to ensure the platform remains at the forefront of the market.

Neil: Another product focus area for us has been large area devices in the second quarter. Our teams made strong progress in optimizing our initial production lines for large area applications like sunroof advisors and.

Neil Boehm: Another product focus area for us has been large area devices. In the second quarter, our teams made strong progress in optimizing initial production lines for large area applications like sunroofs and visors, and advanced key technical aspects such as dimming speed and film durability. Our customers remain highly engaged in working closely with them to align product capabilities with their evolving expectations.

Neil: In advance of the key technical aspects, such as dimming speed and film durability.

Neil: Our customers remain highly engaged in working closely with them to align product capabilities with their evolving expectations.

Neil: For larger devices, our target is to bring this technology to production within the next 24 months.

Neil Boehm: for Large Area Devices, our target is to bring this technology to production within the next 24 months.

Turning to box now that we've completed our first full quarter working alongside their teams were focused on gaining a deeper understanding of their product lines cost structures and operational opportunities.

Neil Boehm: Turning to Vox, now that we've completed our first full quarter working alongside their teams, we're focused on gaining a deeper understanding of their product lines, cost structures, and operational opportunities. The various technology and product platforms this acquisition brings, like Iris-based Biometrics and the Premium Audio Group, will create some new and unique product opportunities, and we're excited to engage into these areas going forward. We've taken a deliberate approach to not rush the integration so that we can ensure alignment across departments. As with our core Gentex technologies, we're focused on balancing quality, cost, performance, and design. And I remain optimistic that our ability to enhance each of these metrics across our expanded portfolio.

Neil: <unk> technology and product platforms. This acquisition brings like Iris based biometrics in the premium audio group will create some new and unique product opportunities and were excited to engage into these areas going forward.

Neil: We've taken a deliberate approach to not rush the integration so that we can ensure alignment across departments.

Neil: As with our core Gentex technologies, we're focused on balancing quality cost performance and design and I remain optimistic that our ability to enhance each of these metrics across our expanded portfolio.

Neil: Finally, we're excited to announce that we began shipments of our new place product line through a major big box retail partner during the quarter. Please.

Neil Boehm: Finally, we're excited to announce that we began shipments of our new Place product line through a major big box retail partner during the quarter. Place is a suite of advanced multifunctional smoke and carbon monoxide alarms designed to elevate home safety, comfort and security through room specific intelligence. The system is managed to be an intuitive mobile app and features an industry-first low-frequency sounder engineered to improve alarm effectiveness for deep sleepers, children, and individuals with hearing impairments. It also aligns with emerging safety standards, including updated residential codes recently adopted in states like California. As a longstanding leader in commercial fire protection and sensing technologies, the launch of PLACE marks a significant milestone in our strategy to bring cutting-edge, accessible home safety solutions directly to consumers, and further expand Gentex's presence in the rapidly growing smart home market.

Neil: Places a suite of advanced multi functional smoke carbon monoxide alarms designed to elevate home safety comfort and security through room specific intelligence.

Neil: The system has been managed to be an intuitive mobile app and features an industry first low frequency sounder engineered to improve alarm effectiveness for deep sleepers children and individuals with hearing impairments.

Neil: It also aligns with emerging safety standards, including updated residential codes recently adopted in states like California.

Speaker Change: As a longstanding leader in commercial fire protection and sensing technologies. The launch of place marks a significant milestone in our strategy to bring cutting edge accessible home safety solutions directly to consumers and further expand gentex has presence in the rapidly growing smart home market.

Speaker Change: Gentex is an innovation driven technology company, our focus on R&D over the past several years. Several years has enabled us to generate a strong pipeline of both automotive and non automotive products and technologies and we're excited about the potential to have to help drive our growth into the future.

Neil Boehm: Gentex is an innovation-driven technology company. Our focus on R&D over the past several years has enabled us to generate a strong pipeline of both automotive and non-automotive products and technologies, and we're excited about the potential they have to help drive our growth into the future.

Steve Downing: I'll now hand, the call back over to Steve for guidance and closing remarks.

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

Speaker Change: Our light vehicle.

Speaker Change: Nickel production forecast for the third quarter and the remainder of the year is based on the mid July 2025, S&P Global mobility outlook for North America, Europe, Japan, Korea and China.

Steve Downing: Our light vehicle production forecast for the third quarter and the remainder of the year is based on the mid July 2025 S&P Global Mobility Outlook for North America, Europe, Japan, Korea and China. For the third quarter of 2025, global light vehicle production is expected to be relatively flat compared to the third quarter of last year, while light vehicle production in our primary markets is projected to be down approximately 1% for the quarter. In the fourth quarter, global production is expected to decline by approximately 6% with similar declines anticipated for our primary market. For the full year 2025, light vehicle production in our primary markets is now expected to be down 3% year over year, with North American production projected to fall by approximately 4% compared to last year.

Speaker Change: For the third quarter of 2025 global light vehicle production is expected to be relatively flat compared to the third quarter of last year, while light vehicle production in our primary markets is projected to be down approximately 1% for the quarter.

Speaker Change: In the fourth quarter global production is expected to decline by approximately 6% with similar declines anticipated for our primary markets for.

Speaker Change: For the full year 2025 light vehicle production in our primary markets is now expected to be down 3% year over year with North American production projected to fall by approximately 4% compared to last year.

Speaker Change: Based on this updated production outlook, our first half performance reduced demand in China due to the recently implemented counter tariffs and the expected contribution from the <unk> acquisition. We are revising our full year 2025 guidance. This updated guidance reflects the anticipated impact of all known tariffs effective as of today.

Steve Downing: Based on this updated production outlook, our first half performance, reduced demand in China due to the recently implemented counter tariffs, and the expected contribution from the box acquisition, we are revising our full year 2025 guidance. This updated guidance reflects the anticipated impact of all known tariffs effective as of today. We now expect consolidated revenue, including Vox, to be in the range of $2.44 and $2.61 billion, which is higher than our previous estimate of $2.15 and $2.32 billion without Vox. Revenue from Gentex's primary markets is expected to be in the range of $2.1 and $2.2 billion.

Speaker Change: We now expect consolidated revenue, including box to be in the range of 244 and $2 six 1 billion.

Speaker Change: Which is higher than our previous estimate of 215 and $2 three 2 billion without box.

Speaker Change: Revenue from Gentex as primary markets is expected to be in the range of $2, one and $2 2 billion.

Speaker Change: Revenue from the China market is projected at $100 million to $125 million and box revenue is estimated to contribute between $240 million to $280 million.

Steve Downing: Revenue from the China market is projected at $100 to $125 million, and box revenue is estimated to contribute between $240 to $280 million. Consolidated gross margin including box is expected to be between 33 and 34%. Core Gentex without Vox is now expected to be between 34% and 34.5%, which is a significant improvement from our prior range of 33% to 34%. Vox gross margin is anticipated to be in the range of 27 to 29 percent. Consolidated operating expenses, excluding severance, are expected to be between $370 to $390 million. Core Gentex operating expenses are expected to remain unchanged at $300 to $310 million.

Speaker Change: Consolidated gross margin, including box is expected to be between 33 and 34%.

Speaker Change: Core Gentex without Fox is now expected to be between 34% and 34, 5%, which is a significant improvement from our prior range of 33% to 34%.

Speaker Change: <unk> gross margin is anticipated to be in the range of 27% to 29%.

Speaker Change: Consolidated operating expenses, excluding severance are expected to be between $370 million to $390 million.

Speaker Change: Core Gentex operating expenses are expected to remain unchanged at $300 million to $310 million.

Speaker Change: <unk> operating expenses are projected to be between 70 and $80 million excluding severance.

Steve Downing: Vox operating expenses are projected to be between $70 and $80 million excluding severance. Our effective tax rate is now expected to be in the range of 16 to 17 percent versus our previous estimate of 15 to 17 percent.

Speaker Change: Our effective tax rate is now expected to be in the range of 16% to 17% versus our previous estimate of 15% to 17%.

Speaker Change: Capital expenditures remain unchanged at $100 million to $125 million for the year and lastly, consolidated depreciation and amortization is expected to be between 91 and $98 million. This includes 90% to $95 million for gentex in $1 million to $3 million for box.

Steve Downing: Capital expenditures remain unchanged at $100 to $125 million for the year. And lastly, consolidated depreciation and amortization is expected to be between $91 and $98 million. This includes $90 to $95 million for Gentex and $1 to $3 million for Vox.

Speaker Change: The second quarter began with a flurry of activity that has not slowed down.

Steve Downing: The second quarter began with a flurry of activity that has not slowed down. We closed the box acquisition on April 1st and then moved very quickly into a chaotic period of global trade uncertainty that lasted for the entire quarter and remains unresolved. It was nevertheless a very productive quarter as we continue to make progress on our path toward improved profitability. Our teams are performing at a very high level and our operational efficiency is improving significantly versus the same time last year. These improvements played a key role in driving strong revenue and profitability improvements, despite revenue reductions in the domestic China market and the lower than expected light vehicle production in our primary market.

Speaker Change: We closed the box acquisition on April one and then moved very quickly into a chaotic period of global trade uncertainty that lasted for the entire quarter and remains unresolved. It was nevertheless, a very productive quarter as we continued to make progress on our path toward improved profitability.

Speaker Change: Our teams are performing at a very high level and our operational efficiency is improving significantly versus the same time last year.

Speaker Change: These improvements played a key role in driving strong revenue and profitability improvements despite revenue reductions in the domestic China market and the lower than expected light vehicle production in our primary markets over the next several quarters. The company. We will continue executing our margin improvement initiatives that are targeted to get the core margin profile in line with our long.

Steve Downing: Over the next several quarters, the company will continue executing the margin improvement initiatives that are targeted to get the core margin profile in line with our long-term target of 35 to 36 percent. We are working on those targets. While we are working on those targets, we are also working with the Vox team to ensure the combined organization is appropriately structured to support long term profitability and shareholder value.

Speaker Change: Term target of 35% to 36%.

Speaker Change: We are working on those targets, while we're working on those targets. We're also working with the <unk> team to ensure the combined organization is appropriately structured to support long term profitability and shareholder value that.

Speaker Change: That completes our prepared comments for today, we can now proceed with questions.

Operator: That completes our prepared comments for today. We can now proceed with questions. Thank you.

Speaker Change: Thank you as a reminder to ask a question. Please press star one one of your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

Operator: As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

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

Luke Junk: Our first question comes from the line of Luke Junk with Baird. Your line is now open. Thanks for taking the questions.

Luke Junk: Hi, good morning, Thanks for taking the questions.

Luke Junk: Steve maybe if we could start with just the underpinnings of gross margin certainly I think one of the big stories this quarter and just curious to get your thoughts on the factors that are now within your controls we're starting to see the gross margin improvement efforts in China, and we really showing up in the P&L and continuing work on that first.

Steve Downing: Steve, maybe if we could start with just the underpinnings of gross margin, certainly I think one of the big stories this quarter, and just curious to get your thoughts on the factors that are now within your controls. We're starting to see the gross margin improvement efforts internally really showing up in the P&L and continue to work on that, versus some of the uncertainty that's still out there, be it industry production volume, trim mix. That seems kind of like you've turned the corner on getting your arms around the margin trend. Is that how you feel as well?

Luke Junk: Some of the uncertainty is still out there be it industry production volume chimney mix.

Luke Junk: It feels kind of like you've turned the corner on getting your arms around the margin trend.

Speaker Change: Is that how do you feel as well.

Speaker Change: Yes, I'd say I mean honestly if you go back over this it's been a little over two years that we've been working on margin improvement really since the the forced electronics cost cost increases that we incurred post COVID-19.

Steve Downing: Yeah, I'd say I mean, honestly, if you go back over this, it's been a little over two years that we've been working on margin improvement, really, since the the forced electronics cost, cost increases that we incurred post COVID. But since that time, there was a lot of other factors, obviously, the labor crisis and other factors on the industry that caused some problems. So it felt like over the last two years, every time we made progress, there was some type of headwind that we kind of reset the bar lower. This quarter really starts to show the work that's been going on.

Speaker Change: But since that time, there was a lot of other factors, obviously, the labor crisis and other factors on the industry that caused some problems. So it felt like over the last two years every time, we made progress there was some type of headwind that we kind of reset the bar lower.

Speaker Change: This quarter really starts to show the work has been going on and it read through all the way through the income statement, which I think is a really positive sign to your point.

Steve Downing: And it read through all the way through the income statement, which I think is a really positive sign to your point. And just to kind of walk through that a little bit, the way we kind of categorize this, we'd say there was a negative, there was a negative in the quarter between pricing and tariffs of 50 to 100 basis points were kind of the negatives on margin. But then there were several positives, but the biggest ones were PPV. So our savings from our supply base, that was 100 to 150 basis points. And then labor and overhead savings were 150 to 200 basis points positive.

Speaker Change: Just kind of walk through that a little bit the way, we kind of categorize. This we'd say there was a negative there was a negative in the quarter between pricing and tariffs of 50 to 100 basis points, where kind of the negatives on margin, but then there were several positives, but the biggest ones where our PPV. So our savings from our supply base that was a 100 to 150 basis points.

Speaker Change: Then labor and overhead savings were 150 to 200 basis points positive. So when you start looking at those trends.

Steve Downing: So when you start looking at those trends, we don't see those reversing in the second half of the year. If you look at the pricing from the commodities that we buy, those should be locked in for the rest of the year. And then if you look at the labor and overhead, as long as revenues stay in this range, we should have a very efficient and our operational efficiencies are definitely showing the signs of improving the stats that we look at in terms of predicting how are we going to do in the second half of the year.

Speaker Change: Don't see those reversing in the second half of the year. If you look at the pricing from the commodities that we buy there should be locked in for the rest of the year and then if you look at the labor and overhead as long as revenue stay in this range.

Speaker Change: We should have a very efficient and our operational efficiencies are definitely showing signs of improving.

Speaker Change: The stuff that we look at in terms of predicting how are we going to do in the second half of the year.

Speaker Change: And then just switching gears.

Steve Downing: Thank you.

Speaker Change: China, certainly that's coming up in <unk>.

Steve Downing: And then just switching gears to China, certainly, you know, that's coming up in the guidance relative to now, you know, less bad tariff situation.

Speaker Change: <unk> relative to now less bad chair situation, but just curious how youre thinking about.

Steve Downing: But just curious how you're thinking about China strategically, incrementally, I mean, clearly the market is open again, to some extent, but you know, still a challenging market with respect to competitiveness, payment terms, etc. Yeah, I mean, for us, the biggest the biggest challenge in the China market is because almost all the sales are exports out of the US into the China market. The threat of those counter tariffs when they got over 100% basically had all of our customers in China, reconsidering what to do with our product. And on a large degree, it's either some of it got resourced to local suppliers, but the vast majority of it just they punted on the technology itself and just removed it from the vehicle.

Speaker Change: T J, we incrementally I mean, clearly the market is open again to some extent, but still a challenging market with respect to competitiveness payment terms et cetera.

Speaker Change: Yes, I mean for us the biggest the biggest challenge in the China market is because almost all of those sales are exports out of the U S into the China market the threat of those counter tariffs when they got over 100% basically had all of our customers in China are reconsidering what to do with our product in a large degree it's either some of it got.

Speaker Change: Resource to local suppliers, but the vast majority of it just they put it on the technology itself and just removed it from the vehicle and Thats also in keeping two things. It's not just the tariffs. It is also the decreasing profitability for Oems in the domestic China market.

Steve Downing: And that's also in keeping two things. It's not just the tariffs, it's also the decreasing profitability for OEMs in the domestic China market. A lot of a lot of them and you this is well documented, obviously in that industry, but there's been a lot of challenge with their profitability. And so some of the content and features are starting to get squeezed out from a product planning standpoint.

Speaker Change: Lot of a lot of them and this is well documented obviously in that industry, but theres been a lot of challenge with their profitability and so some of the content and features are starting to get squeezed out from our product planning standpoint, and so we're really looking at that China market trying to determine how do we find a way to grow there in this market the way it in the current uncertainty or is it really.

Steve Downing: And so you know, we're relooking at that China market trying to determine, you know, how do we find a way to grow there? In this market, the way in the current current uncertainty as it relates to tariffs and counter tariffs, we haven't found that winning formula yet. But like we've always said, that market does tend to be a little lower than average margin profile. And so there is definitely some help there as as that business shrunk, it's, it's not obviously helpful on the revenue side, but it does help on the margin side. Got it.

Speaker Change: The tariffs and counter tariffs.

Speaker Change: Haven't found that winning formula yet, but like we've always said that market does tend to be a little lower than average margin profile and so there is definitely some help there as as that business shrunk. It. It's not obviously helpful on the revenue side, but it does help on the margin side.

Neil: Got it and then lastly, Neil.

Neil: Payments to get a little more commentary on luxury devices mid year, So I guess what.

Neil Boehm: And then lastly, Neil, just hoping to get a little more commentary on larger devices mid-year. So I guess what, you know, what you're sharing today sounds like good news in terms of engineering unlocks and aligning to what customers are expecting. But for that view to bring production within the next 24 months, could there be some conservatism in there potentially? There could be a little bit. You know, there's the team's done an amazing job these last, I'll say last six months of this first part of the year, getting processes improved to get the, you know, visual characteristics, performance, all the above on the product and technology to customer level, that can really help us accelerate bringing it to market.

Neil: What you are seeing today sounds like good news in terms of engineering on locks and aligning to what customers are expecting but for that.

Neil: <unk> to bring production within the next 24 months can there be some conservatism in there potentially.

Neil: There could be a little bit.

Neil: The team has done an amazing job. These less I'll say last six months. This first part of the year getting processes.

Neil: Improved to get the visual characteristics performance all of the above on the product and technology to customer level that can really help us.

Neil: Accelerate bringing into market. So there could be I mean, 24 months I think is a pretty safe window.

Neil Boehm: So there could be I mean, 24 months, I think is a pretty safe window. I think we'll, we should be able to achieve something sooner than that. But there's a lot of variables that are still in in line in achieving the product that the end customer is looking for. So still working really hard teams doing a phenomenal job, but feel pretty comfortable that within those 24 months, we should be able to get there. Okay, we'll stay tuned. I'll leave it there.

I think we should be able to achieve something sooner than that but there's a lot of variables that are still in line in achieving.

Neil: The product.

Neil: Customers looking forward, so still working really hard team is doing a phenomenal job, but feel pretty comfortable that within those 24 months, we should be able to get there.

Neil: Okay.

Neil: And I'll leave it there thank you.

Neil: Thanks Luke.

Neil Boehm: Thank you.

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

Joseph Spak: Our next question comes from the line of Joseph Spak with UBS.

Joseph Spak: Your line is now open. Good team. Good morning, everyone. Morning.

Speaker Change: Good morning, everyone.

Speaker Change: Good morning, Joe.

Speaker Change: Couple of questions I guess.

Joseph Spak: A couple of questions, I guess. on Vox. Now that you've, you know, had another sort of quarter to adjust it, and that's, that's in the guide. You know, obviously, the the the EBIT is break even this year, it looks like it's $100 million annualized OPEX run rate. How should we think about that level on a go forward basis in terms of either synergies or cost savings that could come out? You know, as we as we think about the next couple of years. Yeah, if you look at if you look at the overall OPEX on the Vox side, we know there's some synergies in combining the two organizations.

Speaker Change: On box now that you've had another quarter does adjusted and that's in the guide.

Speaker Change: Obviously, the EBIT breakeven this year it looks like it's a $100 million annualized opex run rate.

Speaker Change: How should we think about that level on a go forward basis in terms of.

Speaker Change: Synergies or cost savings.

Speaker Change: Could come out.

Speaker Change: As we as we think about the next couple of years.

Speaker Change: Yes, if you look at if you look at the overall.

Speaker Change: Opex on the box side, we know there are some synergies and combining the two organizations.

Speaker Change: Part of that is you have to separately publicly traded company has gone down to one we know that will bring about a lot of those we also know as neil's team engages with their engineering teams, there's definitely some overlap and some synergies that we think we can accomplish there.

Steve Downing: You know, part of that is you have two separately publicly traded companies going down to one, we know that'll bring about a lot of those. We also know as Neil's team engages with their engineering teams, there's definitely some overlap and some synergies that we think we can accomplish there. The same thing with the back office side of the house, we definitely know that that working together, we can we can definitely find ways to be more efficient. One of one of them will take a little longer, but that's also ERP integrations. Our system, we believe is a more efficient system that will help help with the workload that's manually required today inside of the box system that we believe we can help with.

Speaker Change: Same thing with the back office side of the house, we definitely know that.

Speaker Change: Working together, we can we can definitely find ways to be more efficient.

Speaker Change: One of them will take a little longer but thats also ERP integrations.

Speaker Change: Our system. We believe is a more efficient system that will help with the workload. That's manually required today inside of the box system that we believe we can help with so this is a 12 to 18 month process.

Steve Downing: So this is a 12 to 18 month process, but definitely want to get that OPEX on a percentage basis, you know, probably won't get all the way to the Gentex level, but definitely closer to that. On a percentage sales basis, yep. Yeah, it's a percentage sales. Okay, so over a couple years, you think that's sort of a reasonable? Yeah, very much so. Yeah.

Speaker Change: Definitely want to get that Opex on a percentage basis.

Speaker Change: Probably won't get all the way to the gentex level, but definitely closer to that.

Speaker Change: Percent of sales on a percentage of sales basis as a percent of sales. Okay. So over a couple of years do you think that's sort of a reasonable.

Speaker Change: Yes, very much so yes, okay, and then just sticking on box.

Steve Downing: Okay, and then and then just stick in on Vox. Like I know with the audio side of the business, you know, when you sort of talked when you first bought it at the height of sort of tax uncertainty, there was maybe some decisions that had to be made about sourcing from China versus sort of other alternatives. And, you know, that that seemed more clear when tariffs were, you know, 145% or higher, maybe less clear at current levels. I know it's not like we have full tariff certainty yet. But do you have any sort of harder views of what you plan to do there?

Speaker Change: I know.

Speaker Change: With the audio side of the business.

Speaker Change: When you sort of talked when you first bought it at the highest sort of tariff uncertainty. There was maybe some decisions that had to be made about sourcing from China versus sort of other alternatives.

Speaker Change: Without that seems more clear when tariffs were 145% or higher.

Speaker Change: Maybe less clear at current levels I know, it's not like we have full tariff certainty yet, but do you have any sort of heart of use of what you plan to do there.

Speaker Change: Or when do you think a decision would be made.

Steve Downing: Or when you think a decision would be made?

Speaker Change: Yeah. So the the audio teams, so primarily clips, but <unk> teams have done a phenomenal job of proactively getting sourcing decisions made to reduce that risk. So.

Steve Downing: Yeah, so the the audio team, so primarily Klipsch, but Klipsch and Onkyo teams have done a phenomenal job of proactively getting sourcing decisions made to reduce that risk. So in that in that case, in particular, now, as a consumer electronics company, they have a lot more flexibility than an automotive supplier does, for sure. And so a lot of those they've made already made decisions with the existing supply base of how to reduce the risk and exposure to tariffs out of the China market. And so they're actively pursuing relocation of manufacturing in their supply base currently, I would expect that within 12 months, basically, that most of those transitions will have been handled already.

Speaker Change: In that case in particular now as a consumer electronics company. They have a lot more flexibility than an automotive supplier does for sure and so a lot of those they've made already made decisions with the existing supply base of how to reduce the risk and exposure to tariffs out of the China market and so they are actively pursuing relocation of manufacturing.

Speaker Change: And their supply base currently I.

Speaker Change: I would expect that within 12 months basically that most of those transitions will have been handled already and so to your point it will be nowhere near that kind of 100% that was that was threatened and worrisome. There obviously based on trade deals that are happening between the U S and the rest of the world there will be some remnant of Paris that will exist for the long period.

Steve Downing: And so to your point, it will be nowhere near that kind of 100% that was that was threatened and worrisome. They're obviously based on trade deals that are happening between the US and the rest of the world, there will be some remnant of tariffs that will exist for the long period. But it'll be significantly lower than what that 100% risk factor was.

Speaker Change: But it will be significantly lower than what that 100% risk factor was.

Speaker Change: Okay last one from me just on sort of the core Gentex mirror business.

Steve Downing: Okay, last one for me just on sort of the core Gentex mirror business, you know, I think like second quarter production, you know, did certainly come in better that benefited from you.

Speaker Change: I think like second quarter production did certainly come in better that benefited from you were seeing some signs of softening schedules in the back half.

Steve Downing: We're seeing some signs of softening schedules in the back half.

Speaker Change: Do you think there was any like would you classify that as any sort of like pull forward or a shifting of timing or or I guess, how do you sort of view those.

Steve Downing: Do you think there was any, like, would you classify it as any sort of like pull forward or shifting in timing? Or, or, I guess, how do you sort of view the cadence of sort of production, you know, to queue through through the balance of the year? Yeah, if you look at Q2, and what we're seeing in Q3, we think Q3 is going to be very similar to Q2.

Speaker Change: The cadence of sort of production <unk> through through the balance of the year.

Speaker Change: Yes, if you look at Q2 and what we're seeing in Q3, we think Q3 is going to be very similar to Q2 I think the softening is really going to happen in Q4 and Thats. If you look at our if you look at our primary markets North America, and Japan Korea markets are the ones that are probably on a year over year basis in Q4 going to be down the most.

Steve Downing: I think the softening is really going to happen in Q4. And that's, you know, if you look at our if you look at our primary markets, North America and Japan, Korea markets are the ones that are probably on a year of a year basis in Q4 are going to be down the most. If you look at it, there was some pull forward a little bit, we did push back on that with our customers. In other words, what they were looking for was some shipments ahead of trade deadlines. We just worked with them very openly about, well, we could do that for you, but you're going to we're going to incur a tremendous amount of costs on the overtime side, if that's something you need us to do, we'll do but we got to talk about the expense associated with that.

Speaker Change: If you look at it there was some pull forward a little bit we did push back on that with our customers.

Speaker Change: In other words, what they were looking for was some shipments ahead of trade deadlines. We just worked with them very openly about well we could do that for you, but youre going to incur a tremendous amount of costs on the overtime side. If that's something you need us to do we will do but we got to talk about the expense associated with that and in most of our customers made decisions based on.

Speaker Change: On that delta cost basis of whether or not they wanted us to pull ahead schedules. So I don't think it was as much as what has been speculated there definitely was a little bit but I wouldn't say it was a significant portion of our revenue was up was a pull forward from the back half of the year into Q2.

Steve Downing: And, and most of our customers made decisions based on on on that delta cost basis of whether or not they wanted us to pull ahead schedules. So I don't think it was as much as what what has been speculated. There definitely was a little bit but I wouldn't say it was a significant portion of our revenue was a was a pull forward from the back half of the year, in the Q2.

Speaker Change: Okay, great. Thanks, so much guys.

Speaker Change: Thanks. Thank you thanks, Joe.

Steve Downing: Okay, great.

Steve Downing: Thanks so much, guys.

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

Steve Downing: Thank you.

James Picariello: Our next question comes from the line of James Picariello with BNP Paribus. Your line is now open. Hey guys, this is Jake on for James. Now that you've had a chance to have a full quarter, you know, owning Vox and really dig into the business.

Speaker Change: Hey, guys. This is Jake on for James.

Speaker Change: Now that you've had a chance to have a full quarter owning box and really dig into the business.

Speaker Change: How do you think about what portion of Fox revenue.

Steve Downing: How do you think about what portion of Vox revenue should be considered non core could be divested versus what you guys definitely want to kind of fold into the core business? Well, I think, you know, if you look at that total business, right, I mean, it really breaks up into really two separate buckets, right, in terms of revenue, you have the premium audio. And part of the reason we are excited about premium audio is Neil referenced our place launch. And that move into what we're trying to do is expand our HomeLink brand into home automation.

Speaker Change: Should be considered noncore could be divested versus what you guys just want to kind of fold into the core business.

Speaker Change: Well I think if you look at that total business right I mean, it really breaks up into really two separate buckets right in terms of revenue you have the premium audio and.

Speaker Change: And part of the reason we are excited about premium audio as Neil referenced our place launch.

Speaker Change: And that move in to what we're trying to do is expand our homelink brand into home automation and so both are placed product and the calypso and <unk> brands were part of that strategy of how do we how do we combine that business and start to become a bigger player in the home automation space and start to leverage our manufacturing capability.

Steve Downing: And so both our place product and the Klipsch and Onkyo brands were part of that strategy of how do we how do we combine that business and start to be become a bigger player in the home automation space, and start to leverage our manufacturing capability and home electronics as well. And so I look at that and say that was really part of what we are really attracted to in the acquisition of Vox. The other two pieces are really very similar piece of business to what we do. So you have an OEM piece of the business that Vox on the electronic side handles, and then they have an automotive aftermarket business.

Speaker Change: And home electronics, as well and so I look at that and say that was really part of what we are really attracted to and the acquisition of box. The other two pieces are really very similar piece of the business to what we do so you have an OEM piece of the business that box on the electronic side handles and then they have an after automotive aftermarket business and so they've done distribution for us for a long.

Steve Downing: And so they've done distribution for us for a long period of time. And we're very familiar with what their distribution model looks like. As we sit here today, both of those are still interesting pieces of business for us, where we look at that and say, you know, hey, how can we we know we can help improve the overall profitability of those businesses. And so we want to leverage our supply base on the cost reduction side from a bill of materials standpoint, but then also look at, you know, how can we get those products to market quicker, and a lower OpEx And then the one last piece is the biometrics, which has always been part of our growth path for in-the-mirror growth, and we're getting our hands on the underlying algorithm through that acquisition.

Speaker Change: Period of time, and we're very familiar with what their distribution model looks like as we sit here today. Both of those are still interesting pieces of business for us where we look at that and say hey, how can we know we can help improve the overall profitability of those businesses and so we want to leverage our supply base on the cost reduction side from a bill of materials standpoint, but then also look.

Speaker Change: How can we get those products to market quicker at a lower opex.

Speaker Change: And then the one last piece is the biometrics, which.

Speaker Change: Has always been part of our growth path for in the mirror growth in and we've got we're getting our hands on the underlying algorithm through that acquisition. So the <unk> pieces as more of a longer term strategy, but.

Steve Downing: So the iLOC piece is more of a longer-term strategy, but being able to own that technology was important, too.

Speaker Change: Being able to own that technology was important too.

Speaker Change: Alright, Thanks, guys and then I just wanted to quickly follow up on China.

James Picariello: All right, thanks guys.

Speaker Change: How should we think about the first half second half split.

James Picariello: And then I just wanted to quickly follow up on China. How should we think about the first half, second half split? And then what does the run rate look like going forward into 2026 and beyond? Yeah, if you look at the first quarter was almost a normal quarter for us, really, in terms of exports into China, I think I was at 43 million, I believe, and then 33 million, you know, I would say probably in the back half, you're probably more like 25 mil per quarter, roughly.

Speaker Change: And then what does the run rate look like going forward into 2026 and beyond.

Speaker Change: Yes, if you look at the first quarter was almost a normal quarter for us really in terms of exports into China. I think I was at $43 million I believe and then $33 million I would say probably in the back half you're probably more like 25000 per quarter roughly.

Speaker Change: And then after that who knows but if a deal gets done.

Speaker Change: Sub 50% tariff rates than that I would say it's probably.

Steve Downing: And then after that, I mean, who knows, but if if a deal gets done, that's, you know, sub 50% tariff rates, then then I would say it's probably, you know, 75 to $110 million book of business for us going forward versus the 240 250, we're anticipating this year.

Speaker Change: $75 million to $110 million book of business for us going forward versus the $2 $42 50, we are anticipating this year.

Speaker Change: Thank you.

Josh Nichols: Our next question comes from the line of Josh Nichols with B Riley. Your line is now open.

Steve Downing: Thank you.

Josh Nichols: Our next question comes from the line of Josh Nichols with B-Rally. Your line is now open. Yeah, thanks for taking my question. Great to see the margin and the revenue bump coming to here. I know, I think last quarter, you know, things have been shifting a lot with the tariff. and whatnot. MIX was a big question, right? Last quarter, and clearly, MIX has become a pretty big tailwind for this quarter. You're seeing FDM other advanced feature mirrors move higher.

Speaker Change: Yes, Thanks for taking my question, great to see the margin and the revenue bump coming to hear I know I think last quarter things have been shifting a lot with the tariff news.

Speaker Change: And whatnot mix was a big question right last quarter, and clearly mix has become a pretty big tailwind for this quarter.

Speaker Change: <unk> seen SDM.

Speaker Change: Other advanced feature mirrors move higher I'm kind of curious like whats changed a little bit on what youre hearing from your customers for how they are focusing on mix for some of these higher value products and what continues to be a little bit challenging light vehicle production market.

Steve Downing: I'm kind of curious, like, what's changed a little bit of what you're hearing from your customers for how they're focusing on on MIX for some of these higher value products, and what continues to be a little bit challenging, like the co-production market. Yeah, I think I think overall, what you're seeing is kind of returned to where we were a couple years ago, where OEMs were focused on profitability, knowing that overall, light vehicle production isn't probably going to be what anyone would like. But based on that, how do you you know, that that does tend to shift part of the part of the upper half of the production volume into higher mix for us.

Speaker Change: Yes, I think overall, what youre seeing is kind of a return to where we were a couple of years ago, where Oems. We're focused on profitability knowing that overall light vehicle production is probably going to be what anyone would like.

Speaker Change: But based on that how does.

Speaker Change: That does tend to shift part of the part of the upper half of the production volume into higher mix for us. So that's good.

Speaker Change: At the same time, though youll see some OE declines and that's obviously a negative on the on the margin profile side and so we're there.

Steve Downing: That's good. At the at the same time, though, you'll see some OEC declines. And you know, that's obviously a negative on the on the margin profile side. And so you know, there is some good news in there. But there's also there also is some decontenting and some focus on costs from an OEM standpoint that have negative negatively impacted our OEC volumes. And so it's not all positive tailwinds, we actually fought through some additional headwinds. And so the financial performance, given that full context was actually very, very good. When you look at losing that type of OEC volume on a year of year basis, that that is a pretty negative both operationally, but also on the margin profile.

Speaker Change: Some good news in there, but Theres also there also is some D content thing and some focus on cost from an OEM standpoint that is negative negatively impacted or we see volumes and so it's not all positive tailwind we actually fought through some additional headwinds in some of the financial performance given that full context was actually very very good.

Speaker Change: When you look at losing that type of OE volume on a year over year basis.

Speaker Change: That is a pretty negative both operationally, but also on the overall margin profile and so.

Speaker Change: While there is some definitely trend towards at the M and increased take rates on advanced features.

Steve Downing: And so you know, while while there is some definitely trend towards FDM and increased take rates on advanced features, the outside portion of the book of businesses is definitely struggling a little And just to touch on like Vox real quick, I think at a high level, you mentioned it, you know, it's running around breakeven today. But when you look at the the opportunity, you know, for margin expansion, I think the guidance for Vox is like 27 to 29 percent this year. You guys, your core business is, you know, running the best in class numbers, 34 plus percent this year.

Speaker Change: Outside portion of the book of business is definitely struggling a little.

Yeah.

Speaker Change: And then just to touch on like box real quick I think at a high level you mentioned it.

Speaker Change: It's running around breakeven today, but when you look at the opportunity for margin expansion I think the guidance for boxes, 27% to 29% this year.

Speaker Change: As your core business is running a best in class members 34 plus percent this year.

Speaker Change: How much do you think that those margins for box could improve over the next say 12 to 24 months as you mentioned probably not to the level that you guys are operating at the core business given the nature of it but I'm just curious how much of that synergies and operating.

Steve Downing: Like, how much do you think that those margins for Vox could improve over the next 12 to 24 months? As you mentioned, probably not to the level that you guys are operating at, at the core business, given the nature of it. But I'm just curious how much of that synergies and operating leverage is going to be coming through the gross margin line for Vox. Yeah, I would say I don't know about given the industries, I think on the clip side, you have, you can improve it in a quicker environment because of the cycle on how quickly those products are redesigned.

Speaker Change: Leverage is going to be coming through the gross margin line for box.

Speaker Change: Yes, I would say I don't know about given the industries I think on the flip side you have you can improve it in a quicker environment because of the cycle and how quickly those products are redesign and that tends to be reset the margin profile of consumer electronics quicker.

Steve Downing: And that tends to be reset the margin profile of consumer electronics quicker. And every one of those redesigns gives you an opportunity to improve bill. The automotive side obviously takes a little longer. But I would say if you're looking out two years or so I think I think two to 300 basis points of improvement in the gross margin is absolutely achievable.

Speaker Change: And every one of those Redesigns gives you an opportunity to improve bill the automotive side, obviously, it takes a little longer but I would say if youre looking out two years or so I think I think two to 300 basis points of improvement in the gross margin is absolutely achievable.

Speaker Change: And then last question for me.

Speaker Change: You touched on the Dimmable glass, a very big opportunity there.

Neil Boehm: And the last question for me, you touched on the dimmable glass, a very big opportunity there. Good to see the progress the company has been making on that front. On driver monitoring, a little bit more near term revenue opportunity.

Speaker Change: Progress the company has been making on that front on driver monitoring.

Speaker Change: Little bit more near term revenue opportunity any updates on that I know you expect to do a little bit of revenue this year.

Neil Boehm: Any updates on that? I know you expect to do a little bit of revenue this year and that that could ramp, you know, to be more material over the 27-28 type timeframe. Right. Yeah, exactly. So we start, our second customer will go to production here in late Q3, early Q4. And then the additional, actually there's customer two will be late Q3, early Q4. Customer three will be late Q4, early Q1 of next year. And then the fourth one will also be early first half of 2026. With, as you said, volumes will be ramping up over the next couple years, really 27 into 28 is when it becomes more significant or substantial.

Speaker Change: But that could ramp to be more material over the 27% to eight type timeframe.

Speaker Change: Right, yes, exactly so we start our second customer who go to production here in late Q3 early Q4.

Speaker Change: Then the additional.

Speaker Change: Actually there is customer to be late late Q3 early Q4 customer three will be late Q4 early Q1 of next year and then the fourth one will also be early.

Speaker Change: First half of 2026 with as you said volumes will be ramping up over the next couple of years really 27% to $28 one when it becomes more significant or substantial.

Speaker Change: I appreciate the context thanks.

Speaker Change: Thank you as a reminder to ask a question at this time. Please press star one one are you touched on the telephone.

Neil Boehm: Appreciate the context. Thanks. Thank you.

Ron Yepsikow: As a reminder, to ask a question at this time, please press star 11 on your touchtone telephone. Our next question comes from the line of Ron Yepsikow with Guggenheim Security. Your line is now open. Yeah, good morning, and thanks for taking my question. Um, maybe, yeah, good morning.

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

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

Speaker Change: Maybe yes good morning.

Speaker Change: Starting on just the FTM growth to increase in the guide.

Ron Yepsikow: Um, maybe starting on just the FDM growth, the increase in the guide. Um, any color on kind of what's driving the roughly 5% upside versus prior shipment expectations. I guess I want to unpack like, I don't think it's probably like vehicle production volumes or is it is it take rates? Is it launches coming quicker than expected? Just kind of what you're Really a combination of both of those. I'd say the launch cadence and both take rates, I mean, we had line of sight to what this could be. I think we were a little bit more pessimistic on LVP in the first half of the year than what actually happened.

Speaker Change: Any color on kind of what's driving the roughly 5% upside versus prior shipment expectations I guess one on pack.

Speaker Change: I don't think its probably light.

Speaker Change: Vehicle production volumes or is it take rates as it launches coming quicker than expected just kind of what youre seeing.

Speaker Change: It's really a combination of both of those I would say the the launch cadence.

And both take rates I mean, we have line of sight to what this could be I think we're a little bit we were a little bit more pessimistic on MVP and the first half of the year than what actually happened and so with that we were like we had talked at the beginning of the year that we thought there was a little bit more risk factors there given the strong first half of the year and the launches that Neil referenced in the.

Steve Downing: And so, with that, we were, like we had talked at the beginning of the year, that we thought there was a little bit more risk factors there. Given the strong first half of the year and the launches that Neil referenced in the second half, you know, our confidence is starting to increase and us hitting those numbers, primarily based on what's already happened this year. But then also, even with the lower production volumes, if you look at how we're laid out across those OEMs and what those take rates could look like, we think there's a little less risk factor now than what we thought at the beginning of the year.

Speaker Change: Second half.

Speaker Change: Our confidence is starting to increase and us hitting those numbers primarily based on what's already happened. This year, but then also even with the lower production volumes. If you look at how we're how we're laid out across those Oems and what those take rates could look like we think theres, a little less risk factor now than what we thought at the beginning of the year and so.

Speaker Change: I think take rates to continue to trend positive and then the launches have not slowed down and I think that's one of the big improvements in the back half of this year Oems are still are still committed to their product launch cycles.

Steve Downing: And so, yeah, I think take rates continue to trend positive, and then the launches have not slowed down. And I think that's one of the big improvements in the back half of this year. OEMs are still committed to their product launch cycles, and we're hitting those.

Speaker Change: We're hitting us.

Speaker Change: Okay, that's super helpful color and one.

Speaker Change: Maybe double tap or it might be triple or quadruple at this point on the China Guide.

Steve Downing: know that that's super helpful color and wanna maybe double tap or it might be triple or quadruple at this point on the China guide.

Speaker Change: Yes, I guess.

Speaker Change: What is.

Steve Downing: Um, yeah, I guess What is the reason, in your estimation, that the China market is not bouncing back, I think, post tariff relief? Unknown Executive, David Whiston, Ryan Brinkman, James Picariello, Kevin Nash, John Murphy, We're able to use that or is there kind of just decontenting at certain OEMs as a result of tariff? Yeah, if we were if we were all three of them are true. But the single biggest one is decontenting. If you look at it, and this is really driven by the profitability of the OEMs in that market right now being squeezed very, very tight.

Speaker Change: The reason in your estimation that the China market is not bouncing back I think post post tariff relief too.

Speaker Change: So kind of pre tariff levels as local competition filling the void was there kind of enough inventory in the channel already that Oems.

Speaker Change: We're able to use data or is there kind of just the content thing at certain Oems as a result of tariffs.

Speaker Change: Yes, if we were if we are.

Speaker Change: All three of them are true, but the single biggest one is <unk>.

Speaker Change: You look and this is really driven by the profitability of the Oems in that market right now being squeezed very very tight a lot of them and you've seen the announcements on.

Speaker Change: Negative margin profile for several Oems and other struggling just to breakeven.

Steve Downing: A lot of them and you've seen the announcements on, you know, negative margin profile for several OEMs and other struggling just to break even. A lot of it has been driven by, you know, driven by decontenting trying to get the cost per vehicle down. There has been a little bit of replacement on local competition, but I would say that's a much, much smaller percentage of the business loss in China is driven by that more of it's driven by decontenting. Okay, that's helpful, Culler.

Speaker Change: Lot of it has been driven by driven by de contenting trying to get the cost per vehicle down there has been a little bit of replacement on local competition, but I would say that's a much much smaller percentage of the business loss in China is driven by that more of it is driven by <unk>.

Speaker Change: Okay.

Speaker Change: That's helpful color and if I could just squeeze one more in on the tariffs or the net tariff costs that weren't reimbursed this quarter. It seems like it was maybe $4 million to $5 million.

Steve Downing: And if I could just squeeze one more in. On the tariffs or the net tariff costs that weren't reimbursed this quarter, it seems like it was maybe $4 to $5 million of net costs. Sorry? It was about 2.7. OK. Do you expect those to be reimbursed in the second half, or is that just kind of... No, the team's the team's very clear that our expectation is that we're going to get at least all most if not all of that reimbursed. Okay, no, that's super helpful.

Speaker Change: Net cost.

Speaker Change: Sorry, it was about two seven.

Speaker Change: Okay.

Speaker Change: Do you expect those to be reimbursed in the second half or is that just kind of assume does kind of leakage in the guide.

Speaker Change: No. The teams the teams very clear that our expectation is that we're going to get at least most if not all of that reimbursed.

Speaker Change: Okay.

Speaker Change: Helpful.

Speaker Change: I really appreciate you taking my questions.

Steve Downing: And I really appreciate you taking Thanks for asking.

Speaker Change: Thanks, Ron.

Speaker Change: Our next question comes from the line of David Whiston with Morningstar. Your line is now open.

David Whiston: Our next question comes from the line of David Whiston with Morningstar. Your line is open.

Speaker Change: Okay.

Speaker Change: This.

Speaker Change: In terms of the core company.

Steve Downing: In terms of the core company getting that gross margin target to 35 to 36 percent, what major activities still need to be done to get to that level? Right now, if mix stayed the same, I would tell you, we're there. But we have additional things that we had kicked off that we're still working on. That includes some product redesigns. Definitely, it all started, if you go back to when the cost increases happen on the electronics piece, there were several things that we began working on. Some of those redesigns we're still working on that we haven't fully executed yet.

Speaker Change: Getting that gross margin target of 35% to 36%.

Speaker Change: A major activity is still need to be done to get to that level.

Speaker Change: Right now it's mixed stayed the same I would tell you we're there.

Speaker Change: But we have additional things that we had kicked off that we're still working on that includes some product redesigns definitely.

Speaker Change: It all started if you go back to when the cost increase has happened on the on the on the.

Speaker Change: Electronics piece there are several things that we began working on some of those redesigns, we're still working on that we haven't fully executed yet.

Speaker Change: Obviously continued continuous improvement on the manufacturing piece throughput yields scrap costs those types of things.

Steve Downing: There's obviously continuous improvement on the manufacturing piece, throughput, yield, scrap costs, those types of things. Also, one of the things that we always work on is replacement products, and that can mean different things, right? Some of our incoming bill materials are impacted by tariffs from different regions, so looking for alternative supply. We're constantly looking at those, saying, how do we de-risk the business to make sure we get to this margin profile and stay at it for a longer period of time? Okay, thanks.

Speaker Change: Also one of the things that we always work on his replacement products and that can mean that can mean different things right. So some of our incoming bill materials are impact impacted by tariffs from different regions. So looking for alternative supply and so we're constantly looking at those saying how do we derisk the business to make sure we get to this margin profile and stay at it for a long.

Speaker Change: A period of time.

Speaker Change: Okay. Thanks, and then on your supply chain, how much exposure do you guys have to reverse and magnet materials from China upstream.

Steve Downing: And then on your supply chain, how much exposure do you guys have to rare earth and magnet materials from from China upstream? I would say on the rarer side, there's quite a bit of exposure on the coding side for core Gentex, right? There's a lot on the precious metal side, and our coatings especially.

Speaker Change: I would say on the railroad side, there is quite a bit of exposure on the coding side for core Gentex right. There's a lot on the precious metal side.

Speaker Change: And our coatings, especially.

Speaker Change: Obviously with the Eclipse acquisition magnetic became a much bigger piece of magnifying the problem for us pre acquisition, but obviously that is something that the eclipse team in the premium audio team has been working really hard on to make sure that does not become an issue for them and their ability to deliver to their customer base.

Steve Downing: Obviously, with the Klipsch acquisition, magnets became a much bigger piece of... Magnets weren't a problem for us pre-acquisition, but obviously, that is something that the Klipsch team and the premium audio team has been working really hard on to make sure that does not become an issue for them and their ability to deliver to their customer base. I would say they've done a really good job of de-risking that supply as much as humanly possible in this environment. Not that it's completely risk-free, but right now, we feel like we have a very good plan of how to make sure to maintain supply of magnets for their speaker products.

Speaker Change: I'd say they've done a really good job of derisking that supply as much as humanly possible in this environment not that it's not that it's completely risk free but right now we feel like we have a very good plan of how to make sure to maintain supply of magnets for their speaker products.

Speaker Change: Thanks, guys.

Speaker Change: Thank you and I'm currently showing no further questions at this time I'd like to hand, the call back over to Joshua Brodsky for closing remarks.

Steve Downing: Yeah, thanks, guys.

Operator: Thank you. And I'm currently showing no further questions at this time.

Josh Oberski: I'd like to hand the call back over to Joshua Berski for closing remarks. Thank you everyone for your time today. As a reminder, we will be at SEMA in November.

Speaker Change: Thank you everyone for your time today as a reminder, we will be at Sema in November if any investors are interested in joining us please reach out.

Josh Oberski: If any investors are interested in joining us, please reach out.

Speaker Change: This concludes our conference call have a great weekend.

Operator: This concludes our conference call. Have a great weekend.

Speaker Change: This concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.