Gentex Corporation Q2 FY2025 earnings call

• Gentex completed the acquisition of VOXX on April 1. Consolidated net sales in Q2 2025 were 15% higher than Q2 last year. - Core Gentex revenue had 1% growth despite 2% decline in light vehicle production in primary markets, with sales into China $33 million vs initial forecast of $50-60 million. - Consolidated gross margin was 34.2%, core Gentex gross margin 35.3% with 240 basis point improvement. - Operating expenses were $106.8 million, up due to VOXX acquisition, but core Gentex operating expenses adjusted for one-time items were slightly down. - In Q2, 18 net new nameplate launches of interior and exterior auto-dimming mirrors and electronic features, over half with advanced feature content. Full Display Mirror had 139 nameplates launched, expecting 150,000-300,000 unit shipments in 2025 vs 2024. - Progress in optimizing initial production lines for large area devices like sunroofs and visors. - Began shipments of new PLACE product line through a major big box retail partner.

In the second quarter of 2025, consolidated net sales were $657.9 million. Core Gentex revenue for the quarter was $579 million, representing 88% of consolidated net sales, with a 1% growth rate versus last year despite a 2% decline in light vehicle production in primary markets. VOXX revenue for the second quarter was $78.8 million, representing 12% of consolidated net sales. Core Gentex gross margin was 35.3%, a 240 basis point improvement versus last year, driven by purchasing cost reductions, favorable product mix, and operational efficiencies, partially offset by unreimbursed tariffs. Consolidated gross margin was 34.2%, up from 32.9% in the second quarter of last year.

• Light vehicle production forecast for 2025: primary markets down 3% y-o-y, North American production down ~4%. - Revised consolidated revenue range including VOXX: $2.44 billion - $2.61 billion, core Gentex revenue $2.1 billion - $2.2 billion, China revenue $100 million - $125 million, VOXX revenue $240 million - $280 million. - Consolidated gross margin range including VOXX: 33% - 34%, core Gentex gross margin 34% - 34.5%, VOXX gross margin 27% - 29%. - Consolidated operating expenses excluding severance: $370 million - $390 million, core Gentex operating expenses $300 million - $310 million, VOXX operating expenses $70 million - $80 million excluding severance. - Effective tax rate range: 16% - 17%. - Capital expenditures unchanged at $100 million - $125 million. - Consolidated depreciation and amortization: $91 million - $98 million.

• Impact of tariffs and counter tariffs on demand for products, especially in the China market. - Uncertainty in global light vehicle production volumes. - Integration risks related to the VOXX acquisition, including aligning product strategies and operational synergies.

Q: Luke Junk asked about the underpinnings of gross margin, factors within controls vs uncertainty.

A: Steve said it's been over 2 years working on margin improvement, this quarter shows progress with negatives from pricing and tariffs but positives from PPV, savings from supply base, labor and overhead savings.

Q: Luke Junk asked about China strategy.

A: Steve said China market has challenges with OEMs reconsidering product due to tariffs and low profitability, still working to find growth formula.

Q: Joseph Spak asked about VOXX revenue classification and divestment.

A: Steve said VOXX has premium audio, OEM, and automotive aftermarket businesses, both are interesting and we want to improve their profitability.

Q: Joseph Spak asked about core Gentex mirror business production cadence.

A: Steve said Q3 similar to Q2, softening in Q4, with some pull forward but not significant portion of revenue pulled from back half.

Q: Jake asked about VOXX margin expansion.

A: Steve said Klipsch side can improve margin quicker via product redesigns, automotive side takes longer, but 200-300 basis points improvement in gross margin achievable in 2 years.

Q: Ron Jewsikow asked about FDM growth guide.

A: Steve said it's a combination of launch cadence and take rates, with better confidence now than at start of year.

Q: Ron Jewsikow asked about China market not bouncing back.

A: Steve said decontenting by OEMs due to tight profitability is the biggest reason.

Q: David Whiston asked about core company reaching 35%-36% gross margin.

A: Steve said it involves product redesigns, continuous improvement in manufacturing, looking for alternative supply to derisk the business.

Q: David Whiston asked about supply chain exposure to rare earths and magnet materials from China.

A: Steve said core Gentex has significant exposure on rare earths coating side, Klipsch team has worked hard to derisk magnet supply for speaker products.