The market expects Gentex (GNTX) to deliver a year-over-year increase in earnings on higher revenues when it reports results for the quarter ended March 2024. This widely-known consensus outlook is important in assessing the company's earnings picture, but a powerful factor that might influence its near-term stock price is how the actual results compare to these estimates.The earnings report, which is expected to be released on April 26, 2024, might help the stock move higher if these key numbers are better ...

Have you been searching for a stock that might be well-positioned to maintain its earnings-beat streak in its upcoming report? It is worth considering Gentex (GNTX) , which belongs to the Zacks Automotive - Original Equipment industry.This maker of automatic-dimming rearview mirrors and other products has seen a nice streak of beating earnings estimates, especially when looking at the previous two reports. The average surprise for the last two quarters was 10.39%.For the most recent quarter, Gentex was expe ...

[PART I](index=4&type=section&id=Part%20I) [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Gentex specializes in digital vision, connected car, dimmable glass, and fire protection technologies, with automotive products accounting for **98% of 2023 revenue** - Gentex Corporation was incorporated in 1974 and designs, develops, manufactures, markets, and supplies digital vision, connected car, dimmable glass, and fire protection technologies[6](index=6&type=chunk) - Automotive revenues represented approximately **98% of the Company's total revenue in 2023**, primarily from interior and exterior electrochromic automatic-dimming rearview mirrors and automotive electronics[18](index=18&type=chunk)[22](index=22&type=chunk) - The Company holds **50 U.S. Registered Trademarks and 772 U.S. Patents**, with a significant portion related to electrochromic technology, automotive mirrors, and HomeLink products, providing a competitive advantage[44](index=44&type=chunk) - As of February 1, 2024, Gentex had **6,245 full-time employees** and fosters a collaborative culture with competitive compensation, wellness programs, and strong Diversity, Equity & Inclusion (DE&I) initiatives[48](index=48&type=chunk)[49](index=49&type=chunk)[50](index=50&type=chunk)[52](index=52&type=chunk) - The Company has committed to significant carbon reduction goals: **15% below 2020 levels by 2026**, **40% by 2031**, **70% by 2041**, and **carbon neutrality by 2049**[65](index=65&type=chunk)[66](index=66&type=chunk) [General Development of Business](index=4&type=section&id=General%20Development%20of%20Business) This section outlines Gentex's product evolution and strategic developments over several decades - Gentex's product evolution includes: interior electromechanical automatic-dimming rearview mirror (early 1980s), electrochromic automatic-dimming mirrors (late 1980s/early 1990s), dimmable aircraft windows (2010), HomeLink acquisition (2013), Full Display Mirror (FDM) and Integrated Toll Module (ITM) (2015)[7](index=7&type=chunk) - Recent strategic developments include: exclusive aftermarket distribution of FDM (2017), biometric iris scanning technology (2017/2018), dimmable aircraft windows for Boeing 777X (2019) and Airbus (2021), intelligent medical lighting (2020), Vaporsens acquisition for nanofiber chemical sensing (2020), Simplenight partnership for connected vehicle services (2021), Guardian Optical Technologies acquisition for driver/cabin monitoring (2021), equity share in GreenMarbles (2022), partnership and equity share in Adasky for thermal sensing (2023), eSight technology acquisition for low-vision smart glasses (2023), partnership and equity share in Solace Power for wireless power (2024), and introduction of PLACE smart home safety products (2024)[7](index=7&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk)[11](index=11&type=chunk)[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk)[16](index=16&type=chunk)[17](index=17&type=chunk) [Description of Business](index=6&type=section&id=Description%20of%20Business) This section details Gentex's core product lines across automotive, aviation, fire protection, nanofiber, and medical sectors - Automotive Products: Largest segment, primarily interior and exterior electrochromic automatic-dimming rearview mirrors and electronics (e.g., HomeLink, FDM, ITM, driver/cabin monitoring systems). Gentex is the leading manufacturer globally with approximately **89% market share in 2023** for automatic-dimming mirrors[19](index=19&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk)[22](index=22&type=chunk)[27](index=27&type=chunk) - Dimmable Aircraft Windows: Manufactures and sells variable dimmable windows for Boeing 787 Dreamliner and 777X, and Airbus aircraft. This is the first commercialized product of its kind for OEM installation in the aircraft industry[31](index=31&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) - Fire Protection Technologies: Manufactures photoelectric smoke detectors, visual signaling alarms, carbon monoxide alarms, and recently introduced 'PLACE' smart home safety products with room-specific functionality[36](index=36&type=chunk)[37](index=37&type=chunk) - Nanofiber Products and Development: Acquired Vaporsens in 2020, specializing in nanofiber chemical sensing R&D with potential applications across automotive, aerospace, agriculture, military, and medical markets[39](index=39&type=chunk)[40](index=40&type=chunk) - Medical Products and Development: Co-developed an intelligent lighting system for surgical environments with Mayo Clinic (2020) and acquired eSight technology for low-vision smart glasses (2023), with deliveries of eSightGo expected in 2024[10](index=10&type=chunk)[14](index=14&type=chunk)[15](index=15&type=chunk)[41](index=41&type=chunk)[42](index=42&type=chunk) [Item 1A. Risk Factors](index=13&type=section&id=Item%201A.%20Risk%20Factors) Gentex faces significant risks from its **98% dependence on the cyclical automotive industry**, supply chain disruptions, pricing pressures, competition, and cybersecurity threats - The automotive industry comprises approximately **98% of Gentex's net sales**, making it highly susceptible to economic cycles, volatile production, supply chain constraints, and shifts in consumer preferences[76](index=76&type=chunk) - Key customers, including Volkswagen Group, Toyota Motor Company, and General Motors, each accounted for **10% or more of annual net sales in 2023**, posing a risk if sales to these customers decrease significantly[77](index=77&type=chunk)[403](index=403&type=chunk) - Ongoing pricing pressures from automotive customers and competitors, coupled with increasing raw material, energy, and labor costs, continue to impact profit margins[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - Competition is formidable, particularly from Magna Mirrors, and the evolving landscape of camera monitoring systems (CMS) as alternatives to traditional mirrors presents a future competitive threat[81](index=81&type=chunk)[82](index=82&type=chunk)[83](index=83&type=chunk) - Supply chain disruptions (parts, labor shortages) and workforce disruptions (tight labor market, illness) continue to affect operations, leading to potential inventory obsolescence and adverse impacts on financial results[84](index=84&type=chunk)[85](index=85&type=chunk) - Risks associated with business combinations include difficulty identifying targets, securing financing, successful integration, and achieving projected synergies[87](index=87&type=chunk) - Intellectual property protection, especially in countries like China, and potential litigation for infringement claims, remain ongoing risks[88](index=88&type=chunk)[90](index=90&type=chunk)[91](index=91&type=chunk) - Failures in IT infrastructure or cybersecurity incidents could lead to significant financial or information losses and reputational harm[95](index=95&type=chunk)[96](index=96&type=chunk) [Item 1B. Unresolved Staff Comments](index=16&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments to report - No unresolved staff comments[105](index=105&type=chunk) [Item 1C. Cybersecurity](index=20&type=section&id=Item%201C.%20Cybersecurity) Gentex implements a multi-layered cybersecurity program with Board oversight, and reported no material threats in 2023 - Gentex employs multiple layers of physical, administrative, and technical security processes to protect manufacturing facilities, critical systems, and data from cybersecurity incidents[106](index=106&type=chunk) - The cybersecurity strategy includes formal risk assessments, threat analysis, security tools, regular tabletop and phishing exercises, and frequent security awareness training[106](index=106&type=chunk) - The Audit Committee of the Board oversees cybersecurity risk management, receiving regular reports from the VP of Information Technology and Information Security Officer[110](index=110&type=chunk) - For the year ended December 31, 2023, there were no cybersecurity threats that materially affected the company's business strategy, results of operations, or financial condition[110](index=110&type=chunk) [Item 2. Properties](index=21&type=section&id=Item%202.%20Properties) Gentex operates manufacturing and office facilities primarily in Michigan, with ongoing expansions and significant production capacity Owned Facilities (as of December 31, 2023) | Location | Square Footage | Use | | :--------- | :------------- | :-------------------------- | | Zeeland, MI | 26,600 | Warehouse, Office | | Zeeland, MI | 197,200 | Manufacturing, Office | | Zeeland, MI | 70,000 | Manufacturing | | Zeeland, MI | 70,000 | Office | | Zeeland, MI | 359,100 | Manufacturing | | Zeeland, MI | 168,900 | Manufacturing | | Zeeland, MI | 334,000 | Manufacturing, Office | | Zeeland, MI | 100,000 | Manufacturing, Warehouse | | Zeeland, MI | 31,800 | Office | | Zeeland, MI | 349,600 | Manufacturing, Warehouse | | Zeeland, MI | 258,400 | Warehouse | | Zeeland, MI | 345,000 | Manufacturing, Warehouse | | Holland, MI | 242,300 | Manufacturing, Warehouse | | Holland, MI | 29,900 | Office | | Erlenbach, Germany | 90,000 | Office | | Shanghai, China | 25,000 | Office, Warehouse | | Shanghai, China | 85,000 | Office, Warehouse, Light Assembly | - In 2023, Gentex completed construction of a **345,000 square-foot manufacturing facility** in Zeeland, Michigan, at a cost of approximately **$85 million**[115](index=115&type=chunk) - Ongoing expansions include a **300,000 sq ft distribution center** (**$40-$45 million**) and a **60,000 sq ft manufacturing facility** (**$20-$30 million**), both expected to be operational in 2024[116](index=116&type=chunk)[117](index=117&type=chunk) - Estimated annual manufacturing capacity: **34-37 million interior automatic-dimming mirror units** and **19-22 million exterior automatic-dimming mirror units**[121](index=121&type=chunk)[122](index=122&type=chunk) [Item 3. Legal Proceedings](index=22&type=section&id=Item%203.%20Legal%20Proceedings) Gentex is involved in routine legal proceedings but anticipates no material adverse effects on its financial position or operations - The Company is periodically involved in legal proceedings, but does not believe any current matters constitute material pending legal proceedings that will have a material adverse effect on its financial position, future results of operations, or cash flows[123](index=123&type=chunk) [Item 4. Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to Gentex Corporation - Not applicable[124](index=124&type=chunk) [PART II](index=23&type=section&id=Part%20II) [Item 5. Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=23&type=section&id=Item%205.%20Market%20for%20the%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Gentex common stock trades on Nasdaq, maintains a quarterly dividend, and actively repurchased shares in 2023 - Gentex common stock trades on The Nasdaq Global Select Market under the symbol **GNTX**, with **5,005 record-holders** as of February 1, 2024[125](index=125&type=chunk) - The Board approved a quarterly dividend of **$0.120 per share** in February 2022, with intentions to continue quarterly cash dividends and consider future adjustments[127](index=127&type=chunk) Issuer Purchase of Equity Securities (2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Total Number of Shares Purchased As Part of a Publicly Announced Plan* | Maximum Number of Shares That May Yet Be Purchased Under the Plan* | | :------------- | :------------------------------- | :--------------------------- | :----------------------------------------------------------------- | :----------------------------------------------------------------- | | January 2023 | — | — | — | 20,783,165 | | February 2023 | 46,835 | 28.58 | 46,835 | 20,736,330 | | March 2023 | 1,000,091 | 27.12 | 1,000,091 | 19,736,239 | | April 2023 | — | — | — | 19,736,239 | | May 2023 | 400,062 | 26.78 | 400,062 | 19,336,177 | | June 2023 | 520,312 | 27.64 | 520,312 | 18,815,865 | | July 2023 | — | — | — | 18,815,865 | | August 2023 | 210,525 | 32.51 | 210,525 | 18,605,340 | | September 2023 | 565,963 | 32.38 | 565,963 | 18,039,377 | | October 2023 | 150,127 | 28.76 | 150,127 | 17,889,250 | | November 2023 | 1,296,575 | 30.45 | 1,296,575 | 16,592,675 | | December 2023 | 741,496 | 31.70 | 741,496 | 15,851,179 | | **Total** | **4,931,986** | | **4,931,986** | | [Item 6. Reserved](index=21&type=section&id=Item%206.%20Reserved) This item is reserved and contains no information - Item 6 is reserved[130](index=130&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Gentex achieved record net sales and strong net income growth in 2023, maintaining robust liquidity and providing optimistic revenue guidance Consolidated Statements of Income (Percentage of Net Sales & Change) | | Percentage of Net Sales | | Percentage Change | | :----------------------------------- | :------ | :------ | :------ | :------ | | | 2023 | 2022 | 2023 Vs 2022 | 2022 Vs 2021 | | Net Sales | 100.0 % | 100.0 % | 19.8 % | 10.8 % | | Cost of Goods Sold | 66.8 | 68.2 | 17.4 | 17.8 | | Gross Margin | 33.2 | 31.8 | 25.1 | (1.6) | | Operating Expenses: | | | | | | Engineering, Research and Development | 6.7 | 6.9 | 15.8 | 13.2 | | Selling, General and Administrative | 4.9 | 5.5 | 5.7 | 15.6 | | Total Operating Expenses: | 11.6 | 12.5 | 11.3 | 14.2 | | Income From Operations | 21.6 | 19.3 | 34.0 | (9.7) | | Other (Loss)/Income | 0.4 | — | 3,368.0 | (104.3) | | Income Before Provision for Income Taxes | 22.0 | 19.3 | 36.6 | (11.2) | | Provision for Income Taxes | 3.3 | 2.7 | 50.3 | (8.3) | | Net Income | 18.6 % | 16.6 % | 34.4 % | (11.7)% | - Net sales increased by **$380.3 million (20%) in 2023**, reaching the highest annual sales in company history, outperforming the underlying light vehicle market by **8%**. This was driven by a **15% YoY increase in automatic-dimming mirror shipments** (**50.6 million units in 2023**)[134](index=134&type=chunk) - Gross margin improved from **31.8% in 2022 to 33.2% in 2023**, primarily due to improved overhead leverage, lower freight costs, pricing increases, and product mix, partially offset by increased raw material costs and annual customer price reductions[133](index=133&type=chunk)[136](index=136&type=chunk) - Net income increased by **$109.6 million (34%) in 2023** compared to 2022, primarily due to improvements in gross margin and operating profits[141](index=141&type=chunk) Cash Flow from Operating Activities | Year | Cash Flow from Operating Activities | | :--- | :---------------------------------- | | 2023 | $537.2 million | | 2022 | $338.2 million | | 2021 | $362.2 million | - Cash flow from operating activities increased by **$199.0 million in 2023**, driven by higher net income and changes in working capital[152](index=152&type=chunk) Capital Expenditures | Year | Capital Expenditures | | :--- | :------------------- | | 2023 | $183.7 million | | 2022 | $146.4 million | | 2021 | $68.8 million | - Capital expenditures increased by **$37.2 million in 2023**, primarily due to building and facility construction projects. Anticipated 2024 capital expenditures are between **$225 million and $250 million**, mainly for production equipment[154](index=154&type=chunk)[168](index=168&type=chunk) Revenue Outlook | Year | Estimated Revenue Range | | :--- | :---------------------- | | 2024 | $2.45 - $2.55 billion | | 2025 | $2.65 - $2.75 billion | - Gross margin is estimated to be between **34% and 35% for 2024**, with operating expenses projected between **$295 million and $305 million** due to continued investments in growth and new product development[165](index=165&type=chunk)[166](index=166&type=chunk) [Results of Operations: 2023 to 2022](index=25&type=section&id=Results%20of%20Operations%3A%202023%20to%202022) Net sales and net income saw significant growth in 2023, driven by increased mirror shipments and improved gross margin - Net sales increased by **20% in 2023**, reaching a company record, driven by a **15% increase in automatic-dimming mirror shipments** and product mix[134](index=134&type=chunk) - Gross margin improved from **31.8% to 33.2%** due to improved overhead leverage, lower freight costs, and pricing adjustments, partially offset by increased raw material costs and customer price reductions[133](index=133&type=chunk)[136](index=136&type=chunk) - Engineering, research and development (E, R & D) expenses increased by **16% to $154.4 million**, remaining at **7% of net sales**, due to additional staffing and professional fees for new product launches and cost optimization[137](index=137&type=chunk)[273](index=273&type=chunk) - Net income increased by **34% in 2023**, reaching **$428.4 million**, primarily due to improved gross margin and operating profits[141](index=141&type=chunk)[273](index=273&type=chunk) [Results of Operations: 2022 to 2021](index=26&type=section&id=Results%20of%20Operations%3A%202022%20to%202021) Net sales increased in 2022, but gross margin and net income declined due to rising costs and price reductions - Net sales increased by **11% in 2022**, outperforming the underlying light vehicle market by **8%**, driven by a **6% increase in automatic-dimming mirror shipments**[142](index=142&type=chunk) - Gross margin decreased from **35.8% in 2021 to 31.8% in 2022**, primarily due to increased raw material costs, manufacturing costs, higher freight, and annual customer price reductions[133](index=133&type=chunk)[144](index=144&type=chunk) - Net income decreased by **12% in 2022**, to **$318.8 million**, mainly due to the decline in gross margin and operating profits[150](index=150&type=chunk)[273](index=273&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) Gentex maintains strong liquidity with increased operating cash flow in 2023, despite higher investing activities Cash and Cash Equivalents (Year-End) | Year | Amount (Millions) | | :--- | :---------------- | | 2023 | $226.4 | | 2022 | $214.8 | | 2021 | $262.3 | - Cash flow from operating activities increased by **$199.0 million in 2023**, reaching **$537.2 million**, driven by higher net income and changes in working capital[152](index=152&type=chunk) - Cash flow used for investing activities increased by **$126.7 million to $299.4 million in 2023**, primarily due to increased technology investment purchases and capital expenditures[153](index=153&type=chunk) - Working capital increased to **$726.1 million in 2023 from $698.1 million in 2022**, mainly due to increases in cash and accounts receivable, partially offset by higher accounts payable[161](index=161&type=chunk) [Outlook](index=28&type=section&id=Outlook) Gentex forecasts continued revenue growth for 2024 and 2025, with stable gross margins and increased capital expenditures 2024 Light Vehicle Production Forecast (S&P Global Mobility, Mid-Jan 2024) | Region | Units (Millions) | | :----- | :--------------- | | North America | 15.8 | | Europe | 17.4 | | Japan & Korea | 12.2 | | China | 28.9 | - Estimated top-line revenue for 2024 is between **$2.45 billion and $2.55 billion**, and for 2025, between **$2.65 billion and $2.75 billion**[164](index=164&type=chunk)[171](index=171&type=chunk) - Gross margin is estimated to be between **34% and 35% for 2024**, with operating expenses between **$295 million and $305 million**[165](index=165&type=chunk)[166](index=166&type=chunk) - Anticipated 2024 capital expenditures are between **$225 million and $250 million**, primarily for production equipment, to be financed from cash on hand and operating cash flows[168](index=168&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Gentex is exposed to foreign exchange and interest rate risks, but these are not currently considered material, and no hedging is employed - Gentex is subject to market risks from foreign exchange rates and interest rates, but these are not currently deemed material[172](index=172&type=chunk) - Approximately **8% of net sales in 2023** were invoiced and paid in foreign currencies (**7% in 2022, 8% in 2021**), with an expectation of **8-9% in 2024**. The company does not currently engage in foreign currency hedging[174](index=174&type=chunk) - The Company does not have any significant off-balance sheet arrangements or commitments[175](index=175&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=31&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section provides an index to the company's audited consolidated financial statements and accompanying notes - The section includes the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Consolidated Statements of Income, Consolidated Statements of Comprehensive Income, Consolidated Statements of Shareholders' Investment, Consolidated Statements of Cash Flows, and Notes to Consolidated Financial Statements[185](index=185&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=31&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) There were no changes in or disagreements with accountants on accounting and financial disclosure for the period - No changes in, or disagreements with, accountants on accounting and financial disclosure during the 24-month period ended December 31, 2023[186](index=186&type=chunk) [Item 9A. Controls and Procedures](index=31&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2023 - The Company's disclosure controls and procedures were evaluated and deemed adequate and effective as of December 31, 2023[187](index=187&type=chunk) - Management asserted the effectiveness of internal control over financial reporting as of December 31, 2023, based on the COSO criteria, which was audited by Ernst & Young LLP with an unqualified opinion[188](index=188&type=chunk)[190](index=190&type=chunk) - No material changes in internal controls over financial reporting occurred during the period covered by the annual report[191](index=191&type=chunk) [Item 9B. Other Information](index=32&type=section&id=Item%209B.%20Other%20Information) This item reports that there is no other information to disclose - None[192](index=192&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=32&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item reports no disclosures regarding foreign jurisdictions that prevent inspections - None[193](index=193&type=chunk) [PART III](index=33&type=section&id=Part%20III) [Item 10. Directors, Executive Officers and Corporate Governance](index=33&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section details Gentex's executive officers and references director information and the Code of Ethics from the Proxy Statement Executive Officers | NAME | AGE | POSITION | CURRENT POSITION HELD SINCE | | :----------- | :-- | :------------------------------------------- | :-------------------------- | | Steve Downing | 46 | President and Chief Executive Officer | January 2018 | | Neil Boehm | 52 | Chief Technology Officer and Vice President, Engineering | February 2018 | | Kevin Nash | 49 | Vice President, Finance, Chief Financial Officer and Treasurer | February 2018 | | Matthew Chiodo | 59 | Chief Sales Officer and Senior Vice President, Sales | January 2022 | | Scott Ryan | 43 | Vice President, General Counsel and Corporate Secretary | August 2018 | - The Company has adopted a Code of Ethics for Certain Senior Officers, applicable to its principal executive, financial, and accounting officers, with disclosures available on its website[205](index=205&type=chunk) [Item 11. Executive Compensation](index=35&type=section&id=Item%2011.%20Executive%20Compensation) Gentex's executive compensation combines base salaries with performance-based annual cash bonuses and long-term equity incentives tied to key financial metrics 2024 Executive Officer Base Salaries | Executive Officer | Position | 2024 Base Salary | 2023 Base Salary | | :---------------- | :--------------------------------------- | :--------------- | :--------------- | | Steve Downing | President and CEO | $850,000 | $850,000 | | Neil Boehm | VP, Engineering and CTO | $575,000 | $515,000 | | Kevin Nash | VP, Finance, CFO and Treasurer | $555,000 | $515,000 | | Matt Chiodo | Senior VP, Sales and CSO | $480,000 | $455,000 | | Scott Ryan | VP, General Counsel and Corporate Secretary | $440,000 | $415,000 | - The Annual Incentive Performance-Based Bonus Plan for officers is based on Revenue (**33.33%**), Operating Income (**33.33%**), and Earnings per Diluted Share (**33.33%**). For 2024, the CEO's target opportunity increased to **110% of base salary**, while other named executive officers can earn up to **150% of their base salaries**[210](index=210&type=chunk)[211](index=211&type=chunk)[212](index=212&type=chunk)[213](index=213&type=chunk)[214](index=214&type=chunk) 2023 Annual Plan Performance Metrics and Actual Results | Performance Metric | Weight | Threshold* | Target* | Maximum* | Actual Performance* | | :----------------------- | :----- | :--------- | :-------- | :--------- | :------------------ | | Revenue | 33.33 % | $1,511,180 | $2,014,906 | $2,518,633 | $2,299,215 | | Operating Income | 33.33 % | $287,104 | $382,805 | $478,506 | $495,731 | | Earnings per Diluted Share | 33.33 % | $1.04 | $1.39 | $1.74 | $1.84 | 2023 Annual Plan Performance Bonuses for Executive Officers | Executive Officer | 2023 Annual Plan Performance Bonus | | :---------------- | :--------------------------------- | | Steve Downing | $1,576,495 | | Neil Boehm | $716,378 | | Kevin Nash | $716,378 | | Matt Chiodo | $632,916 | | Scott Ryan | $577,275 | - The Long-Term Incentive Plan (2024-2026) delivers **70% of its value through Performance Share Awards (PSAs)** tied to EBITDA and ROIC, and **30% through Restricted Stock (RS) awards**, both with three-year vesting periods[223](index=223&type=chunk)[225](index=225&type=chunk) 2021-2023 Long-Term Plan Performance Share Awards Payout | Executive Officer | Number of PSAs Awarded in 2021 (Target) for 2021-2023 | 2021-2023 PSAs Payout | | :---------------- | :---------------------------------------------------- | :-------------------- | | Steve Downing | 42,762 | 25,203 | | Neil Boehm | 14,081 | 8,879 | | Kevin Nash | 12,916 | 8,726 | | Matt Chiodo | 11,394 | 8,291 | | Scott Ryan | 10,091 | 7,636 | - The annual retainer for non-employee directors increased by **$10,000**, from **$80,000 to $90,000**[235](index=235&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=36&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section references common stock ownership and equity compensation plan information from the Proxy Statement, with no known change of control arrangements - Information on common stock ownership of management, beneficial owners, and equity compensation plans is incorporated by reference from the Proxy Statement[236](index=236&type=chunk) - No known arrangements exist that could result in a change in control[236](index=236&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=37&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section references information on related transactions and director independence from the definitive Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the Proxy Statement[238](index=238&type=chunk) [Item 14. Principal Accounting Fees and Services](index=37&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section references principal accounting fees and services, and Audit Committee pre-approval policy from the Proxy Statement - Information on principal accounting fees and services, and the Audit Committee's policy on pre-approval of audit and non-audit services, is incorporated by reference from the Proxy Statement[239](index=239&type=chunk) [PART IV](index=41&type=section&id=Part%20IV) [Item 15. Exhibits, Financial Statement Schedules](index=41&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and exhibits filed as part of the 10-K report - This item refers to the financial statements in Part II, Item 8, and provides an index of exhibits[242](index=242&type=chunk) [Item 16. Form 10-K Summary](index=41&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item indicates that no Form 10-K Summary is provided - None[243](index=243&type=chunk) [Signatures](index=42&type=section&id=Signatures) This section contains the required signatures for the Form 10-K report from executive officers and directors - The report is signed by Steven R. Downing (President and CEO) and Kevin C. Nash (VP, Finance, CFO and Treasurer) on February 22, 2024[247](index=247&type=chunk)[248](index=248&type=chunk) - Each Director of the registrant also appoints Steve Downing or Kevin Nash as their attorney-in-fact to sign and file amendments to the report[249](index=249&type=chunk) [Report of Independent Registered Public Accounting Firm](index=44&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Ernst & Young LLP issued an unqualified opinion on Gentex's 2023 consolidated financial statements and internal control over financial reporting - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the period ended December 31, 2023, stating they present fairly the financial position and results of operations in conformity with U.S. GAAP[252](index=252&type=chunk) - An unqualified opinion was also expressed on the effectiveness of the Company's internal control over financial reporting as of December 31, 2023[253](index=253&type=chunk) - A critical audit matter identified was the 'Revenue - Estimate of Variable Consideration' due to the judgmental nature of accounting for annual price reductions and ongoing commercial negotiations with customers[256](index=256&type=chunk)[258](index=258&type=chunk) [Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting](index=46&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20on%20Internal%20Control%20Over%20Financial%20Reporting) Ernst & Young LLP provided an unqualified opinion on Gentex Corporation's internal control over financial reporting as of December 31, 2023 - Ernst & Young LLP issued an unqualified opinion on Gentex Corporation's internal control over financial reporting as of December 31, 2023, confirming its effectiveness based on COSO criteria[261](index=261&type=chunk) [Consolidated Balance Sheets](index=47&type=section&id=Consolidated%20Balance%20Sheets) The balance sheets show increased total assets and shareholders' investment in 2023, driven by plant, equipment, and long-term investments Consolidated Balance Sheet Highlights | Item | 2023 (Millions) | 2022 (Millions) | Change (Millions) | | :-------------------------- | :-------------- | :-------------- | :---------------- | | Total Current Assets | $997.7 | $948.7 | +$49.0 | | Net Plant and Equipment | $652.9 | $550.0 | +$102.9 | | Goodwill | $340.1 | $313.8 | +$26.3 | | Long-term Investments | $299.1 | $202.3 | +$96.8 | | Total Assets | $2,611.4 | $2,327.2 | +$284.2 | | Total Current Liabilities | $271.6 | $250.6 | +$21.0 | | Total Liabilities | $298.9 | $261.4 | +$37.5 | | Total Shareholders' Investment | $2,312.5 | $2,065.8 | +$246.7 | [Consolidated Statements of Income](index=48&type=section&id=Consolidated%20Statements%20of%20Income) Net sales and net income significantly increased in 2023, with diluted EPS rising to $1.84, reflecting strong financial performance Consolidated Statements of Income Highlights | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :-------------------------- | :-------------- | :-------------- | :-------------- | | Net Sales | $2,299.2 | $1,919.0 | $1,731.2 | | Gross profit | $762.6 | $609.8 | $619.7 | | Income from operations | $495.7 | $370.0 | $409.8 | | Net Income | $428.4 | $318.8 | $360.8 | | Basic EPS | $1.84 | $1.36 | $1.51 | | Diluted EPS | $1.84 | $1.36 | $1.50 | - Net sales increased by **19.8% in 2023**, while net income grew by **34.4%**. Diluted EPS increased from **$1.36 in 2022 to $1.84 in 2023**[133](index=133&type=chunk)[273](index=273&type=chunk) [Consolidated Statements of Comprehensive Income](index=49&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income reached $436.0 million in 2023, reflecting net income and positive other comprehensive income from unrealized gains Consolidated Statements of Comprehensive Income Highlights | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | | Net income | $428.4 | $318.8 | $360.8 | | Other comprehensive income (loss), net of tax | $7.6 | $(16.1) | $(4.9) | | Comprehensive income | $436.0 | $302.7 | $355.9 | - In 2023, other comprehensive income, net of tax, was **$7.6 million**, a significant improvement from losses in 2022 and 2021, primarily due to unrealized gains on available-for-sale securities[276](index=276&type=chunk) [Consolidated Statements of Shareholders' Investment](index=50&type=section&id=Consolidated%20Statements%20of%20Shareholders%27%20Investment) Total shareholders' investment grew to $2.31 billion in 2023, driven by net income and stock plan transactions, despite share repurchases and dividends Consolidated Statements of Shareholders' Investment Highlights | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | | Total Shareholders' Investment (End of Year) | $2,312.5 | $2,065.8 | $1,938.0 | | Net income | $428.4 | $318.8 | $360.8 | | Repurchases of common stock | $(146.0) | $(113.9) | $(324.6) | | Dividends declared | $(111.8) | $(112.8) | $(114.4) | - Total shareholders' investment increased by **$246.7 million in 2023**, primarily due to net income of **$428.4 million** and **$39.2 million in stock-based compensation expense**, partially offset by **$146.0 million in share repurchases** and **$111.8 million in dividends**[279](index=279&type=chunk) [Consolidated Statements of Cash Flows](index=51&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow significantly increased in 2023, while investing and financing activities used more cash for growth and shareholder returns Consolidated Statements of Cash Flows Highlights | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | | Net cash flows from operating activities | $537.2 | $338.2 | $362.2 | | Net cash used for investing activities | $(299.4) | $(172.7) | $(113.1) | | Net cash used for financing activities | $(230.2) | $(209.0) | $(410.1) | | Net increase (decrease) in cash, cash equivalents, and restricted cash | $7.7 | $(43.6) | $(161.1) | - Cash flow from operating activities increased by **$199.0 million in 2023**, primarily due to higher net income and changes in working capital[152](index=152&type=chunk)[282](index=282&type=chunk) - Cash used for investing activities increased by **$126.7 million in 2023**, driven by **$71.1 million in technology investment purchases** and **$183.7 million in plant and equipment additions**[153](index=153&type=chunk)[154](index=154&type=chunk)[282](index=282&type=chunk) - Cash used for financing activities increased by **$21.1 million in 2023**, mainly due to an increase in common stock repurchases to **$147.4 million** (from **$112.5 million in 2022**)[155](index=155&type=chunk)[282](index=282&type=chunk) [Notes to Consolidated Financial Statements](index=52&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail Gentex's accounting policies, debt, taxes, employee benefits, stock compensation, commitments, segments, and recent acquisitions - Gentex's significant accounting policies include revenue recognition (ASC 606), investments (ASC 820, 321, 323), inventories (lower of cost or net realizable value, FIFO), and plant and equipment (straight-line depreciation)[294](index=294&type=chunk)[299](index=299&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk)[326](index=326&type=chunk) - Technology investments totaled approximately **$128.0 million at December 31, 2023**, including significant stakes in Adasky (**27%**), GreenMarbles (**20%**), and Simplenight (**30%**)[298](index=298&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) - The effective income tax rate was **15.2% in 2023**, compared to **13.8% in 2022**, primarily influenced by the Foreign Derived Intangible Income Deduction and equity compensation deductions[140](index=140&type=chunk)[357](index=357&type=chunk) - Goodwill increased to **$340.1 million in 2023**, primarily due to the **$26.7 million acquisition of eSight technology assets**. No impairment charges were recorded for goodwill or indefinite-lived intangible assets[411](index=411&type=chunk)[412](index=412&type=chunk) - The Company acquired certain technology assets from eSight on November 2, 2023, for approximately **$18.9 million in cash**, plus assumption of a **$9.4 million promissory note** and an earn-out provision up to **$70 million**[435](index=435&type=chunk) Revenue by Segment and Major Source (2023) | Segment/Source | 2023 Revenue (Millions) | | :-------------------------- | :---------------------- | | Automotive Mirrors & Electronics | $2,128.5 | | HomeLink Modules* | $126.2 | | **Total Automotive Products** | **$2,254.7** | | Fire Protection Products | $25.9 | | Windows Products | $18.6 | | Nanofiber Products | $0.0 | | Medical | $0.0 | | **Total Other Products** | **$44.6** | | **Total Revenue** | **$2,299.2** | *Excludes HomeLink revenue integrated into automotive mirrors. [SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES](index=52&type=section&id=SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20AND%20REPORTING%20POLICIES) This section details Gentex's key accounting policies for allowances, investments, inventories, goodwill, and revenue recognition - The Company's allowance for doubtful accounts primarily relates to financially distressed automotive customers, with balances of **$2.67 million in 2023** and **$2.97 million in 2022**[290](index=290&type=chunk)[293](index=293&type=chunk) - Technology investments totaled approximately **$128.0 million at December 31, 2023**, and **$65.5 million at December 31, 2022**, accounted for primarily under ASC 321 or ASC 323[298](index=298&type=chunk) - Inventories are valued at the lower of cost or net realizable value using the FIFO method, with allowances for slow-moving and obsolete inventories of **$10.3 million in 2023** and **$10.0 million in 2022**[314](index=314&type=chunk) - Goodwill and indefinite-lived intangible assets are tested for impairment annually in the fourth quarter, or more frequently if indicators arise. No impairment charges were recorded in 2023 or prior periods[319](index=319&type=chunk)[321](index=321&type=chunk)[412](index=412&type=chunk) - Revenue is recognized when control of products is transferred to customers, net of estimated annual price reductions and retroactive adjustments, which are treated as variable consideration[326](index=326&type=chunk)[327](index=327&type=chunk) [DEBT AND FINANCING ARRANGEMENTS](index=62&type=section&id=DEBT%20AND%20FINANCING%20ARRANGEMENTS) Gentex has a $250 million unsecured revolving credit facility, with no outstanding balance as of December 31, 2023 - On February 21, 2023, Gentex entered into an amended and restated credit agreement, providing a three-year unsecured revolving credit facility with a borrowing capacity of up to **$250 million**, maturing on February 21, 2026[352](index=352&type=chunk) - As of December 31, 2023, there was no outstanding balance on the Revolver, and the Company was in compliance with all covenants[353](index=353&type=chunk)[355](index=355&type=chunk) [INCOME TAXES](index=63&type=section&id=INCOME%20TAXES) The provision for income taxes increased in 2023, with an effective tax rate of 15.2%, influenced by foreign derived intangible income Provision for Income Taxes | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :-------------------------- | :-------------- | :-------------- | :-------------- | | Currently payable | $94.3 | $68.7 | $97.2 | | Deferred income tax benefit | $(17.7) | $(17.8) | $(41.7) | | **Provision for income taxes** | **$76.6** | **$51.0** | **$55.6** | Effective Income Tax Rate Reconciliation | Item | 2023 | 2022 | 2021 | | :------------------------------------ | :--- | :--- | :--- | | Statutory federal income tax rate | 21.0 % | 21.0 % | 21.0 % | | Foreign derived intangible income deduction | (5.1) | (6.2) | (6.3) | | Stock compensation | (0.4) | (0.6) | (1.3) | | **Effective income tax rate** | **15.2 %** | **13.8 %** | **13.3 %** | - Unrecognized tax benefits totaled **$4.78 million** at the end of 2023, with accrued interest of approximately **$365,000**[361](index=361&type=chunk)[362](index=362&type=chunk) [EMPLOYEE BENEFIT PLANS](index=65&type=section&id=EMPLOYEE%20BENEFIT%20PLANS) Company contributions to the 401(k) plan increased in 2023, and a non-qualified deferred compensation plan is maintained - Company contributions to the 401(k) retirement savings plan were approximately **$13.8 million in 2023**, an increase from **$12.9 million in 2022**, due to increased employee participation[366](index=366&type=chunk) - Gentex maintains a Non-Qualified Deferred Compensation Plan for select management, with deferrals held in an irrevocable rabbi trust. Total assets in the trust were **$8.9 million at December 31, 2023**, with an associated liability of **$9.0 million**[368](index=368&type=chunk)[370](index=370&type=chunk) [STOCK-BASED COMPENSATION PLANS](index=65&type=section&id=STOCK-BASED%20COMPENSATION%20PLANS) Gentex's 2019 Omnibus Incentive Plan includes stock options, restricted stock, and performance share awards, with associated compensation expenses - The 2019 Omnibus Incentive Plan covers **45,000,000 shares**, with **25,611,657 shares issued** as of December 31, 2023, including stock options, restricted stock, and performance share awards[375](index=375&type=chunk)[376](index=376&type=chunk) - Unrecognized compensation cost for stock options was **$7.99 million at December 31, 2023**, expected to be recognized over a weighted-average period of **2.09 years**[382](index=382&type=chunk) - Unearned stock-based compensation for restricted stock was **$45.80 million at December 31, 2023**, with compensation expense of **$24.81 million for the year**[391](index=391&type=chunk) - Performance share awards are tied to EBITDA and ROIC. Unearned compensation for performance shares was **$16.12 million at December 31, 2023**, with expense of **$5.88 million for the year**[392](index=392&type=chunk) - Compensation expense for the employee stock purchase plans was **$0.88 million in 2023**, with shares sold at **85% of market price**[395](index=395&type=chunk)[396](index=396&type=chunk) [COMMITMENTS AND CONTINGENCIES](index=69&type=section&id=COMMITMENTS%20AND%20CONTINGENCIES) Gentex has a stock purchase agreement for VOXX International and is involved in legal proceedings not expected to be material - On October 4, 2023, Gentex entered a Stock Purchase Agreement to acquire up to **3,137,500 shares of VOXX International Corporation Class A Common Stock**, with a tranche of **1,568,750 shares purchased on January 5, 2024**[397](index=397&type=chunk) - The Company is involved in legal proceedings but does not believe any current matters will have a material adverse effect on its financial position, future results of operations, or cash flows[398](index=398&type=chunk) [SEGMENT REPORTING](index=69&type=section&id=SEGMENT%20REPORTING) Automotive products are the primary revenue driver, with key customers like Volkswagen, Toyota, and General Motors each contributing over 10% of net sales Revenue by Geographic Area (Automotive Products) | Geographic Area | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :---------------- | :-------------- | :-------------- | :-------------- | | United States | $688.2 | $579.5 | $542.7 | | Germany | $294.5 | $266.5 | $235.0 | | Japan | $323.9 | $234.9 | $211.4 | | Mexico | $142.1 | $121.6 | $111.8 | | Republic of Korea | $149.6 | $95.4 | $67.2 | | Other Countries | $656.5 | $576.9 | $529.1 | | **Total Automotive Products** | **$2,254.7** | **$1,874.7** | **$1,697.2** | Income (Loss) from Operations by Segment | Segment | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :---------------- | :-------------- | :-------------- | :-------------- | | Automotive Products | $495.7 | $372.5 | $414.2 | | Other | $0.1 | $(2.5) | $(4.4) | | **Total** | **$495.7** | **$370.0** | **$409.8** | - In 2023, three automotive customers (Volkswagen Group, Toyota Motor Company, and General Motors) individually accounted for **10% or more of net sales**[403](index=403&type=chunk) [QUARTERLY FINANCIAL INFORMATION (UNAUDITED)](index=71&type=section&id=QUARTERLY%20FINANCIAL%20INFORMATION%20%28UNAUDITED%29) This section provides unaudited quarterly financial data for 2023 and 2022, showing trends in net sales, net income, and diluted EPS Selected Quarterly Financial Information (2023 vs 2022) | Quarter | Net Sales (2023) | Net Sales (2022) | Net Income (2023) | Net Income (2022) | Diluted EPS (2023) | Diluted EPS (2022) | | :------ | :--------------- | :--------------- | :---------------- | :---------------- | :----------------- | :----------------- | | First | $583,473 | $550,761 | $109,155 | $97,578 | $0.47 | $0.42 | | Second | $589,132 | $468,251 | $116,944 | $87,529 | $0.50 | $0.37 | | Third | $575,848 | $493,637 | $104,725 | $72,656 | $0.45 | $0.31 | | Fourth | $550,762 | $493,648 | $97,579 | $86,168 | $0.42 | $0.37 | [COMPREHENSIVE INCOME](index=71&type=section&id=COMPREHENSIVE%20INCOME) Accumulated other comprehensive income improved in 2023, driven by unrealized gains on available-for-sale securities Accumulated Other Comprehensive (Loss) Income | Item | 2023 (Millions) | 2022 (Millions) | 2021 (Millions) | | :------------------------------------ | :-------------- | :-------------- | :-------------- | | Foreign currency translation adjustments (end of period) | $(4.5) | $(4.0) | $0.9 | | Unrealized gains (losses) on available-for-sale securities (end of period) | $(2.0) | $(10.1) | $1.0 | | **Accumulated other comprehensive (loss) income, end of period** | **$(6.6)** | **$(14.1)** | **$1.9** | - In 2023, the net current-period change in unrealized gains (losses) on available-for-sale securities was a gain of **$8.09 million**, a significant improvement from losses in prior years[408](index=408&type=chunk) [GOODWILL AND INTANGIBLE ASSETS](index=73&type=section&id=GOODWILL%20AND%20INTANGIBLE%20ASSETS) Goodwill increased to $340.1 million in 2023 due to the eSight acquisition, with no impairment charges recorded Goodwill Carrying Amount | Item | Amount (Millions) | | :-------------------------- | :---------------- | | Balance as of December 31, 2022 | $313.8 | | Acquisitions | $26.7 | | Other | $(0.4) | | **Balance as of December 31, 2023** | **$340.1** | - Goodwill increased by **$26.7 million in 2023**, primarily due to the acquisition of eSight. As of December 31, 2023, **$30.6 million of goodwill was in the Other segment** and **$309.5 million in the Automotive segment**[411](index=411&type=chunk) Other Intangible Assets (Net, as of Dec 31, 2023) | Intangible Asset | Net Value (Millions) | Assumed Useful Life | | :-------------------------- | :------------------- | :------------------ | | HomeLink Trade Names and Trademarks | $52.0 | Indefinite | | HomeLink Technology | $26.3 | 12 years | | Exclusive Licensing Agreement | $96.0 | Indefinite | | eSight Technology | $12.0 | 12 years | | eSight Trade Names and Trademarks | $0.9 | 12 years | | Vaporsens In-Process R&D | $11.0 | Indefinite | | Argil In-Process R&D | $6.3 | Indefinite | | Air-Craftglass In-Process R&D | $1.5 | Indefinite | | Guardian Trade Names | $1.3 | Indefinite | | Guardian In-Process R&D | $6.8 | Indefinite | | **Total other identifiable intangible assets** | **$214.0** | | - Amortization expense on patents and other intangible assets was approximately **$19.7 million in 2023**. Anticipated amortization expense is **$17 million for 2024** and **$14 million for 2025**[416](index=416&type=chunk)[417](index=417&type=chunk) [REVENUE](index=75&type=section&id=REVENUE) Automotive products are the primary revenue driver, with recognition occurring upon shipment and adjusted for variable consideration Revenue by Segment and Major Source (2023) | Segment/Source | 2023 Revenue (Millions) | | :-------------------------- | :---------------------- | | Automotive Mirrors & Electronics | $2,128.5 | | HomeLink Modules* | $126.2 | | **Total Automotive Products** | **$2,254.7** | | Fire Protection Products | $25.9 | | Windows Products | $18.6 | | Nanofiber Products | $0.0 | | Medical | $0.0 | | **Total Other Products** | **$44.6** | | **Total Revenue** | **$2,299.2** | *Excludes HomeLink revenue integrated into automotive mirrors. - Revenue recognition generally occurs when control of products is transferred to the customer, typically upon shipment from the manufacturing facility[422](index=422&type=chunk)[426](index=426&type=chunk)[427](index=427&type=chunk)[429](index=429&type=chunk)[430](index=430&type=chunk) - For automotive products, revenue is recorded based on estimated retroactive price adjustments as variable consideration, adjusted as negotiations settle[426](index=426&type=chunk) [ACQUISITIONS](index=77&type=section&id=ACQUISITIONS) Gentex acquired eSight technology assets in November 2023 for cash, a promissory note, and an earn-out provision - On November 2, 2023, Gentex acquired certain technology assets from eSight for approximately **$18.9 million in cash**, assumed a **$9.4 million promissory note**, and an earn-out provision up to **$70 million over ten years**[435](index=435&type=chunk) - The eSight acquisition assets include current assets (**$0.44 million**), personal property (**$0.08 million**), right of use asset (**$0.12 million**), eSight Technology (**$12.0 million**), Trade Names and Trademarks (**$0.87 million**), and Goodwill (**$26.7 million**)[439](index=439&type=chunk) - Less than **$0.1 million of eSight's revenue** was included in Gentex's consolidated statement of income for 2023[438](index=438&type=chunk) [Exhibit Index](index=76&type=section&id=Exhibit%20Index) This section provides a comprehensive list of exhibits filed with the Form 10-K, including organizational documents and certifications - The Exhibit Index lists various documents, including the Registrant's Restated Articles of Incorporation, Bylaws, specimen common stock certificates, descriptions of securities, and numerous compensatory plans and agreements[441](index=441&type=chunk)[443](index=443&type=chunk) - Key exhibits include the Amended Credit Agreement (**10.14**), 2019 Omnibus Incentive Plan (**10.15**), Long-Term Incentive Plan (**10.17**), and the Stock Purchase Agreement for Avalon Park International LLC and Avalon Park Group Holding AG (**10.27**)[443](index=443&type=chunk) - Certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act are also included (**31.1, 31.2, 32**)[443](index=443&type=chunk)

[Part I - Financial Information](index=3&type=section&id=Part%20I%20-%20Financial%20Information) Presents the company's unaudited financials, management's discussion and analysis, market risks, and internal control assessments [Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Financials show strong year-over-year growth in sales, net income, and cash flow for the third quarter and nine-month period [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to $2.56 billion, supported by an increase in cash and shareholder investment Balance Sheet Summary (in millions) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $260.6 | $214.8 | | Total current assets | $1,055.5 | $948.7 | | Total assets | $2,558.3 | $2,327.2 | | Total current liabilities | $274.4 | $250.6 | | Total liabilities | $289.9 | $261.4 | | Total shareholders' investment | $2,268.5 | $2,065.8 | [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) The company reports significant year-over-year growth in net sales, gross profit, and net income for both Q3 and the nine-month period Q3 2023 vs Q3 2022 Income Statement (in millions, except EPS) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $575.8 | $493.6 | +16.7% | | Gross Profit | $191.4 | $147.2 | +30.0% | | Income from Operations | $122.4 | $86.8 | +41.0% | | Net Income | $104.7 | $72.7 | +44.0% | | Diluted EPS | $0.45 | $0.31 | +45.2% | Nine Months 2023 vs 2022 Income Statement (in millions, except EPS) | Metric | Nine Months 2023 | Nine Months 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Sales | $1,710.1 | $1,425.3 | +20.0% | | Gross Profit | $559.3 | $456.0 | +22.6% | | Income from Operations | $363.0 | $275.9 | +31.6% | | Net Income | $311.5 | $232.6 | +33.9% | | Diluted EPS | $1.33 | $0.99 | +34.3% | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased significantly for the nine months ended September 30, 2023, driving a net increase in cash Cash Flow Summary for Nine Months Ended Sep 30 (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $367.7 | $236.4 | | Net cash used for investing activities | $(189.1) | $(119.3) | | Net cash used for financing activities | $(136.7) | $(156.4) | | **Net increase (decrease) in cash** | **$41.9** | **$(39.4)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Key notes detail goodwill valuation, technology investments, automotive revenue concentration, and a post-quarter acquisition - Goodwill carrying value was approximately **$313.2 million** as of September 30, 2023, with **no impairments identified** despite monitoring for impacts from the UAW strike, supply chain constraints, and inflation[26](index=26&type=chunk) - The company made technology investments totaling **$43.0 million** in Adasky, LTD, an Israeli developer of thermal sensing technologies, during 2023, increasing its total technology investments to **$125.3 million**[36](index=36&type=chunk)[100](index=100&type=chunk) - Automotive products constituted **98% of total revenue** for the nine months ended September 30, 2023, with revenue from this segment growing **20% year-over-year to $1.68 billion**[73](index=73&type=chunk) - On November 2, 2023, subsequent to the quarter's end, the company acquired technology assets from eSight Corporation for approximately **$18.9 million in cash**, related to advanced low-vision smart glasses[79](index=79&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses strong Q3 sales, improved margins, capacity expansion, and provides a positive outlook for 2024 [Third Quarter 2023 vs. Third Quarter 2022 Results](index=27&type=section&id=THIRD%20QUARTER%202023%20VERSUS%20THIRD%20QUARTER%202022) Q3 2023 saw a 17% increase in net sales and a significant improvement in gross margin to 33.2% - Q3 2023 net sales increased **17% YoY to $564.5 million**, driven by a **10% increase** in total auto-dimming mirror unit shipments to 12.6 million units[81](index=81&type=chunk)[82](index=82&type=chunk) - Gross margin for Q3 2023 improved to **33.2%** (from 29.8% in Q3 2022) primarily due to improved fixed overhead leverage, lower freight costs, and customer cost recoveries[85](index=85&type=chunk) - Net income for Q3 2023 was **$104.7 million ($0.45 per diluted share)**, a significant increase from $72.7 million ($0.31 per diluted share) in Q3 2022[90](index=90&type=chunk) [Nine Months 2023 vs. Nine Months 2022 Results](index=28&type=section&id=NINE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202023%20VERSUS%20NINE%20MONTHS%20ENDED%20SEPTEMBER%2030%2C%202022) For the first nine months of 2023, net sales grew 20% and net income increased 34% year-over-year - For the first nine months of 2023, net sales increased **20% YoY to $1.7 billion**, driven by a **15% increase** in automotive mirror unit shipments[91](index=91&type=chunk)[92](index=92&type=chunk) - Gross margin for the nine-month period improved to **32.7%** from 32.0% in the prior year, benefiting from improved fixed overhead leverage and lower freight expenses[94](index=94&type=chunk) - Net income for the nine months increased **34% to $311.5 million**, or $1.33 per diluted share, compared to $232.6 million, or $0.99 per diluted share, in the same period last year[98](index=98&type=chunk) [Financial Condition and Liquidity](index=30&type=section&id=FINANCIAL%20CONDITION) The company's liquidity remains strong with increased cash reserves, ongoing capital expenditures for expansion, and continued share repurchases - Cash and cash equivalents increased by **$45.9 million to $260.6 million** as of September 30, 2023, compared to year-end 2022[99](index=99&type=chunk) - Capital expenditures for the first nine months of 2023 were **$121.4 million**, up from $108.5 million in the prior year, mainly for facility construction[104](index=104&type=chunk) - The company is expanding its manufacturing capacity with new facilities in Michigan, expected to cost **$140-$165 million**, funded by cash on hand[105](index=105&type=chunk) - During the first nine months of 2023, the company repurchased **2.74 million shares**, with **18.0 million shares remaining** available for repurchase under the current plan[108](index=108&type=chunk)[130](index=130&type=chunk) [Business and Product Update](index=31&type=section&id=BUSINESS%20UPDATE) The company highlights growing shipments for its Full Display Mirror® and Integrated Toll Module®, along with expansion in aerospace and medical technology - The company is shipping its Full Display Mirror® to **fifteen different automakers**, including General Motors, Toyota, Mercedes, and Ford[111](index=111&type=chunk) - The Integrated Toll Module (ITM®) is currently shipping on **11 Audi platforms** and to Mercedes, with further launches expected[118](index=118&type=chunk) - In the aerospace segment, the company supplies dimmable windows for the **Boeing 787 and 777X**, and began production for Airbus in 2021[119](index=119&type=chunk) - Subsequent to the quarter, the company acquired technology assets from eSight Corporation for **low-vision smart glasses**, expanding its presence in medical technology[122](index=122&type=chunk) [Outlook](index=37&type=section&id=OUTLOOK) The company provides updated 2023 full-year guidance and an initial 2024 revenue forecast, while noting ongoing market uncertainties Updated 2023 Full-Year Guidance | Metric | Guidance | | :--- | :--- | | Revenue | $2.2 - $2.3 billion | | Gross Margin | 32.5% - 33.0% | | Operating Expenses | $260 - $270 million | | Capital Expenditures | $200 - $215 million | | Annual Tax Rate | 15.0% - 15.5% | - The company expects calendar year 2024 revenue to be approximately **$2.45 to $2.55 billion**[131](index=131&type=chunk) - The outlook is subject to ongoing volatility from **labor union strikes, supply chain constraints, and overall economic uncertainty**[129](index=129&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign exchange, interest rates, economic uncertainty, and potential labor strikes - The company is subject to market risks from **foreign exchange rates, interest rates, and general economic conditions** affecting the automotive industry[134](index=134&type=chunk)[135](index=135&type=chunk) - Potential work stoppages from automaker or union **labor strikes are highlighted as a material risk**[134](index=134&type=chunk) [Controls and Procedures](index=38&type=section&id=Item%204.%20Controls%20and%20Procedures) Management confirmed the effectiveness of disclosure controls and procedures with no material changes to internal controls - As of September 30, 2023, the company's disclosure controls and procedures were **deemed effective** by management[136](index=136&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[137](index=137&type=chunk) [Part II - Other Information](index=41&type=section&id=Part%20II%20-%20Other%20Information) This section covers updates to risk factors, details of equity repurchases, and a list of filed exhibits [Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors are reported beyond those disclosed in the 2022 Form 10-K and this report - **No material changes** to risk factors were reported from the company's 2022 Form 10-K, except as described within this 10-Q report[142](index=142&type=chunk) [Issuer Purchases of Equity Securities](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company details its Q3 2023 share repurchase activity and the remaining authorization under its current plan Share Repurchases in Q3 2023 | Period | Total Shares Purchased | Weighted Average Price Paid Per Share | | :--- | :--- | :--- | | July 2023 | — | — | | August 2023 | 210,525 | $32.51 | | September 2023 | 565,963 | $32.38 | | **Q3 2023 Total** | **776,488** | **$32.41** | - As of September 30, 2023, **18.0 million shares remained available for repurchase** under the company's publicly announced plan[144](index=144&type=chunk)[145](index=145&type=chunk) [Exhibits](index=42&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including SOX certifications and XBRL data files - The Exhibit Index lists required filings, including **Sarbanes-Oxley certifications** (Exhibits 31.1, 31.2, 32) and **Inline XBRL documents** (Exhibit 101 series)[150](index=150&type=chunk)

Financial Data and Key Metrics Changes - For Q3 2023, the company reported net sales of $575.8 million, a 17% increase from $493.6 million in Q3 2022 [6][9] - Gross margin improved to 33.2% from 29.8% in Q3 2022, reflecting a 340 basis point increase quarter over quarter [7][9] - Net income for Q3 2023 was $104.7 million, a 44% increase compared to $72.7 million in Q3 2022 [9] - Earnings per diluted share rose to $0.45, a 45% increase from $0.31 in Q3 2022 [9] Business Line Data and Key Metrics Changes - Automotive net sales reached $564.5 million, a 17% increase from $480.9 million in Q3 2022 [18] - Dimming mirror unit shipments increased by 10% compared to Q3 2022 [18] - Other net sales, including dual aircraft windows and fire protection products, decreased to $11.3 million from $12.7 million in Q3 2022 [18] Market Data and Key Metrics Changes - Global light vehicle production in key markets increased approximately 5% compared to Q3 2022 [6] - The company expects light vehicle production to increase by 1% in 2024 compared to 2023 [16] Company Strategy and Development Direction - The company aims to achieve gross margins of 35% to 36% by the end of 2024, focusing on material costs and supply chain expenses [8][16] - A significant focus will be on redesigning products to optimize costs and improve margins [14][43] - The company is actively working on partnerships with suppliers to enhance cost efficiency [14] Management's Comments on Operating Environment and Future Outlook - Management noted that the ongoing UAW strikes could impact revenue and margins in Q4 2023, but they remain confident in revenue growth [16][56] - The company has seen significant improvements in supply chain constraints, which have positively affected gross margins [57] - Management expressed optimism about achieving revenue targets despite potential headwinds from strikes [56] Other Important Information - The company repurchased 0.8 million shares at an average price of $32.41 per share during Q3 2023 [12] - Cash and cash equivalents increased to $260.6 million from $214.8 million as of December 31, 2022 [19] Q&A Session Summary Question: Impact of UAW strikes on guidance - Management indicated that the UAW strikes have had a modest impact in Q3, with potential losses of $2 million to $2.5 million per week in Q4 if the situation does not improve [56] Question: Drivers for margin improvement - Management emphasized that achieving margin targets will require both internal improvements and external market conditions to align favorably [30] Question: Penetration rates for auto dimming mirrors - Management reported strong growth in penetration rates for both interior and exterior auto dimming mirrors, particularly in emerging markets like China [34] Question: Pricing dynamics and cost recovery - Management stated that they have made significant progress in negotiating cost recoveries with OEMs, but further engineering efforts will be needed to optimize costs [43] Question: Regional production schedules - Management noted that European production trends are similar to North America, while the Chinese market remains volatile with concerns about OEM profitability [46] Question: Rising raw material costs - Management acknowledged ongoing increases in raw material costs, particularly in semiconductor pricing, and emphasized the need for redesign efforts to mitigate these costs [49][51]

[PART I — FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%94FINANCIAL%20INFORMATION) This section presents the company's unaudited condensed consolidated financial statements and management's discussion [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements and related notes [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets and shareholders' investment increased, driven by higher cash and accounts receivable balances Condensed Consolidated Balance Sheet Highlights (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | Change | | :-------------------------- | :---------------- | :------------------ | :------- | | Total Assets | $2,487,107,092 | $2,327,229,924 | +$159,877,168 | | Cash and cash equivalents | $237,665,601 | $214,754,638 | +$22,910,963 | | Accounts receivable, net | $350,409,472 | $276,493,752 | +$73,915,720 | | Inventories | $390,026,268 | $404,360,270 | -$14,334,002 | | Long-term investments | $239,621,466 | $202,331,983 | +$37,289,483 | | Total Liabilities | $291,157,766 | $261,437,103 | +$29,720,663 | | Total Shareholders' Investment | $2,195,949,326 | $2,065,792,821 | +$130,156,505 | [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Net sales, gross profit, and net income grew significantly for both quarterly and six-month periods Condensed Consolidated Statements of Income Highlights (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Net Sales | $583,472,846 | $463,423,002 | 26.0% | | Gross profit | $193,083,039 | $148,367,014 | 30.1% | | Income from operations | $127,289,388 | $85,790,969 | 48.4% | | Net Income | $109,155,403 | $72,404,403 | 50.8% | | Basic EPS | $0.47 | $0.31 | 51.6% | | Diluted EPS | $0.47 | $0.31 | 51.6% | Condensed Consolidated Statements of Income Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | | Net Sales | $1,134,234,157 | $931,673,777 | 21.7% | | Gross profit | $367,820,270 | $308,778,973 | 19.1% | | Income from operations | $240,540,035 | $189,096,873 | 27.2% | | Net Income | $206,733,664 | $159,933,028 | 29.3% | | Basic EPS | $0.88 | $0.68 | 29.4% | | Diluted EPS | $0.88 | $0.68 | 29.4% | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income grew substantially, reflecting increased net income and improved other comprehensive income Condensed Consolidated Statements of Comprehensive Income Highlights (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | % Change | | :-------------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $109,155,403 | $72,404,403 | 50.8% | | Other comprehensive (loss) income, net of tax | $(1,018,271) | $(5,828,471) | 82.5% | | Comprehensive income | $108,137,132 | $66,575,932 | 62.4% | Condensed Consolidated Statements of Comprehensive Income Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :-------------------------- | :----------------------------- | :----------------------------- | :------- | | Net income | $206,733,664 | $159,933,028 | 29.3% | | Other comprehensive (loss) income, net of tax | $900,166 | $(12,883,123) | 107.0% | | Comprehensive income | $207,633,830 | $147,049,905 | 41.2% | [Unaudited Condensed Consolidated Statements of Shareholders' Investment](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Investment) Shareholders' investment increased due to net income, partially offset by share repurchases and dividends Shareholders' Investment Changes (Six Months Ended June 30, 2023) | Item | Amount | | :------------------------------------------------ | :------------- | | Balance as of January 1, 2023 | $2,065,792,821 | | Issuance of common stock from stock plan transactions | $13,882,810 | | Repurchases of common stock | $(53,566,122) | | Stock-based compensation expense | $18,264,205 | | Dividends declared ($0.24 per share) | $(56,058,218) | | Net income | $206,733,664 | | Other comprehensive income | $900,166 | | Balance as of June 30, 2023 | $2,195,949,326 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, while investing activities saw a significant rise in cash usage for plant and equipment Condensed Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | % Change | | :------------------------------------------ | :----------------------------- | :----------------------------- | :------- | | Net cash provided by operating activities | $241,766,133 | $189,261,043 | 27.7% | | Net cash used for investing activities | $(126,395,275) | $(63,217,406) | 100.0% | | Net cash used for financing activities | $(96,459,895) | $(118,982,836) | 18.9% | | Net increase in cash and cash equivalents | $18,910,963 | $7,060,801 | 167.8% | | Cash, cash equivalents, and restricted cash, end of period | $237,665,601 | $269,372,471 | -11.7% | - Investing activities saw a significant increase in cash usage, primarily due to **$90.3 million** in plant and equipment additions (up from **$58.0 million**) and increased purchases of available-for-sale securities[23](index=23&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the unaudited consolidated financial statements [(1) Basis of Presentation](index=9&type=section&id=(1)%20Basis%20of%20Presentation) Unaudited financial statements are prepared under SEC rules and GAAP, with management confirming all necessary adjustments - Financial statements are unaudited and prepared according to SEC rules, condensing certain GAAP disclosures[24](index=24&type=chunk) - Management confirms the statements include all necessary normal and recurring adjustments for fair presentation[24](index=24&type=chunk) [(2) Goodwill and Other Intangible Assets](index=9&type=section&id=(2)%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill remained stable at **$313.6 million** with no impairment, and intangible asset amortization expenses are decreasing Goodwill Carrying Amount (June 30, 2023 vs. December 31, 2022) | Metric | Amount | | :-------------------------- | :------------- | | Balance as of December 31, 2022 | $313,807,494 | | Other | $(160,226) | | Balance as of June 30, 2023 | $313,647,268 | - No interim impairment testing was needed for goodwill or other intangible assets despite considering component shortages, supply chain constraints, inflation, and labor shortages[25](index=25&type=chunk) Estimated Amortization Expense for Patents and Intangible Assets | Year Ending December 31, | Estimated Amortization Expense | | :----------------------- | :----------------------------- | | 2023 | ~$20 million | | 2024 | ~$16 million | | 2025 | ~$13 million | | 2026 | ~$5 million | | 2027 | ~$5 million | [(3) Investments](index=11&type=section&id=(3)%20Investments) Technology investments increased to **$94.0 million**, including a **$21.5 million** stake in Adasky, and unrealized losses decreased to **$10.0 million** - Technology investments in non-consolidated third parties increased to approximately **$94.0 million** as of June 30, 2023, from **$69.5 million** at December 31, 2022[35](index=35&type=chunk) - On March 9, 2023, the Company purchased a **15%** equity investment in Adasky, LTD. for **$21.5 million**, a developer of intelligent thermal sensing technologies[35](index=35&type=chunk) Unrealized Losses on Investments (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | | :-------------------------- | :---------------- | :------------------ | | Aggregate Unrealized Losses | $10,000,656 | $13,034,062 | | Aggregate Fair Value of Investments | $151,587,132 | $154,344,732 | [(4) Inventories](index=15&type=section&id=(4)%20Inventories) Total inventories decreased to **$390.0 million**, primarily due to reduced raw materials, partially offset by increased finished goods Inventory Composition (June 30, 2023 vs. December 31, 2022) | Category | June 30, 2023 | December 31, 2022 | | :--------------- | :---------------- | :------------------ | | Raw materials | $280,764,776 | $304,184,004 | | Work-in-process | $44,861,244 | $45,512,275 | | Finished goods | $64,400,248 | $54,663,991 | | Total Inventory | $390,026,268 | $404,360,270 | [(5) Earnings Per Share](index=15&type=section&id=(5)%20Earnings%20Per%20Share) Basic and diluted earnings per share increased significantly for both periods, reflecting higher net income Basic and Diluted EPS (Q2 2023 vs. Q2 2022) | Metric | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | | :-------------------------- | :------------------------------- | :------------------------------- | | Basic EPS | $0.47 | $0.31 | | Diluted EPS | $0.47 | $0.31 | Basic and Diluted EPS (Six Months Ended June 30, 2023 vs. 2022) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :-------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.88 | $0.68 | | Diluted EPS | $0.88 | $0.68 | [(6) Stock-Based Compensation Plans](index=16&type=section&id=(6)%20Stock-Based%20Compensation%20Plans) Stock-based compensation expense increased, with **9.4 million** share awards and **$75.9 million** in unearned compensation costs Stock-Based Compensation Expense (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Period | 2023 | 2022 | | :-------------------------- | :------------- | :------------- | | Three Months Ended June 30, | $9,744,670 | $8,573,230 | | Six Months Ended June 30, | $18,264,205 | $15,361,567 | - As of June 30, 2023, **9,445,055** share awards have been made under the 2019 Omnibus Plan, utilizing **23,954,574** shares out of **45,000,000** available[49](index=49&type=chunk) - Unearned compensation costs include **$8.8 million** for stock options, **$47.0 million** for restricted shares, and **$20.1 million** for performance shares as of June 30, 2023[51](index=51&type=chunk)[56](index=56&type=chunk)[58](index=58&type=chunk) [(7) Comprehensive Income (Loss)](index=20&type=section&id=(7)%20Comprehensive%20Income%20(Loss)) Accumulated other comprehensive loss decreased to **$(13.2) million**, driven by improved unrealized gains on debt securities Accumulated Other Comprehensive Loss (June 30, 2023 vs. December 31, 2022) | Component | June 30, 2023 | December 31, 2022 | | :------------------------------------------ | :---------------- | :------------------ | | Foreign currency translation adjustments | $(5,609,783) | $(4,032,239) | | Unrealized (losses) gains on available-for-sale debt securities | $(7,632,985) | $(10,110,695) | | Accumulated other comprehensive loss, end of period | $(13,242,768) | $(14,142,934) | [(8) Debt and Financing Arrangements](index=21&type=section&id=(8)%20Debt%20and%20Financing%20Arrangements) A new **$250.0 million** unsecured revolving credit facility was established, with no outstanding balance and all covenants met - New three-year unsecured revolving credit facility of up to **$250.0 million** established, maturing February 21, 2026[65](index=65&type=chunk) - No outstanding balance on the Revolver as of June 30, 2023, and the Company is in compliance with all covenants[65](index=65&type=chunk)[66](index=66&type=chunk) [(9) Equity](index=21&type=section&id=(9)%20Equity) Common shares outstanding decreased by **0.7 million** due to repurchases and issuances, and a **$0.120** per share cash dividend was declared - Net decrease of **0.7 million** common shares outstanding due to **2.0 million** repurchases offset by **1.2 million** issuances from stock plans[67](index=67&type=chunk) - Cash dividend of **$0.120** per share declared in Q2 2023, totaling **$28.0 million**[68](index=68&type=chunk) [(10) Contingencies](index=21&type=section&id=(10)%20Contingencies) The company is involved in routine legal proceedings but anticipates no material adverse effects on its financial position or results - The Company is involved in routine legal proceedings but does not anticipate any material adverse effects on its financial position or future results[69](index=69&type=chunk) [(11) Segment Reporting](index=21&type=section&id=(11)%20Segment%20Reporting) The automotive segment remains the primary revenue driver, showing significant increases in revenue and income from operations Revenue by Segment (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | Automotive Products | $574,109,748 | $452,951,028 | $1,111,532,736 | $910,903,581 | | Other | $9,363,098 | $10,471,974 | $22,701,421 | $20,770,196 | | Total | $583,472,846 | $463,423,002 | $1,134,234,157 | $931,673,777 | Income (Loss) from Operations by Segment (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Segment | Q2 2023 Income (Loss) | Q2 2022 Income (Loss) | 6M 2023 Income (Loss) | 6M 2022 Income (Loss) | | :------------------ | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Automotive Products | $128,729,058 | $86,908,119 | $240,168,856 | $190,383,628 | | Other | $(1,439,670) | $(1,117,150) | $371,179 | $(1,286,755) | | Total | $127,289,388 | $85,790,969 | $240,540,035 | $189,096,873 | [(12) Income Taxes](index=22&type=section&id=(12)%20Income%20Taxes) The effective tax rate for the six months ended June 30, 2023, was **15.5%**, influenced by state/local taxes and R&D credits - Effective tax rate for the six months ended June 30, 2023, was **15.5%**, up from **15.0%** in the prior year[72](index=72&type=chunk) - Tax rate differences from federal statutory rates are due to state/local taxes, permanent tax differences, foreign-derived intangible income deduction, and R&D tax credits[72](index=72&type=chunk) [(13) Revenue](index=22&type=section&id=(13)%20Revenue) Automotive revenue significantly increased across all major regions, while the 'Other Products' segment showed mixed results Automotive Revenue by Geography (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Region | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :------------------ | :-------------- | :-------------- | :-------------- | :-------------- | | U.S. | $177,940,475 | $145,818,259 | $348,722,079 | $288,012,229 | | Germany | $73,990,846 | $71,580,008 | $154,570,311 | $139,145,328 | | Japan | $84,178,567 | $46,655,756 | $156,334,551 | $101,418,244 | | Mexico | $36,803,254 | $29,792,178 | $71,090,798 | $61,927,257 | | Other | $201,196,606 | $159,104,827 | $380,814,997 | $320,400,523 | | Total Automotive Products | $574,109,748 | $452,951,028 | $1,111,532,736 | $910,903,581 | Other Segment Revenue by Major Source (Q2 & Six Months Ended June 30, 2023 vs. 2022) | Source | Q2 2023 Revenue | Q2 2022 Revenue | 6M 2023 Revenue | 6M 2022 Revenue | | :---------------------- | :-------------- | :-------------- | :-------------- | :-------------- | | Fire Protection Products | $6,018,930 | $9,645,549 | $15,320,083 | $18,093,236 | | Aerospace Products | $3,344,168 | $826,425 | $7,381,338 | $2,676,960 | | Total Other | $9,363,098 | $10,471,974 | $22,701,421 | $20,770,196 | [(14) Leases](index=23&type=section&id=(14)%20Leases) Operating leases for offices, vehicles, and equipment have remaining terms of 1 to 5 years, with total future payments of **$3.9 million** - Operating leases for sales/engineering offices, vehicles, and equipment have remaining terms of 1 to 5 years[75](index=75&type=chunk) Future Minimum Lease Payments for Operating Leases (as of June 30, 2023) | Year ending December 31, | Amount | | :------------------------------------------ | :------------- | | 2023 (excluding the six months ended June 30, 2023) | $1,051,018 | | 2024 | $1,285,724 | | 2025 | $882,673 | | 2026 | $452,055 | | 2027 | $215,760 | | Total future minimum lease payments | $3,887,230 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, condition, business updates, outlook, and critical accounting policies [SECOND QUARTER 2023 VERSUS SECOND QUARTER 2022](index=24&type=section&id=SECOND%20QUARTER%202023%20VERSUS%20SECOND%20QUARTER%202022) Q2 2023 achieved record net sales and substantial growth in net income and EPS, driven by strong automotive demand [Net Sales](index=24&type=section&id=Net%20Sales_Q2) Q2 2023 net sales reached a record **$583.5 million**, a **26%** increase, driven by a **27%** rise in automotive sales - Net sales for Q2 2023 increased by **$120.0 million** (**26%**) to **$583.5 million**, a new quarterly sales record[77](index=77&type=chunk)[105](index=105&type=chunk) - Automotive net sales increased **27%** to **$574.1 million**, driven by a **21%** increase in automotive mirror unit shipments to **12.9 million** units[78](index=78&type=chunk) Auto-Dimming Mirror Unit Shipments (Q2 2023 vs. Q2 2022) | Metric | Q2 2023 (thousands) | Q2 2022 (thousands) | % Change | | :-------------------------- | :------------------ | :------------------ | :------- | | Total Interior Mirrors | 8,019 | 7,036 | 14% | | Total Exterior Mirrors | 4,902 | 3,656 | 34% | | Total Auto-Dimming Mirror Units | 12,921 | 10,692 | 21% | [Cost of Goods Sold](index=24&type=section&id=Cost%20of%20Goods%20Sold_Q2) Gross profit margin improved to **33.1%** in Q2 2023 due to reduced freight and improved fixed overhead leverage - Gross profit margin improved due to decreases in freight expense (**150-200 bps** impact), improved fixed overhead leverage (**150-200 bps** impact), and customer cost recoveries/product mix (**50-100 bps** impact each)[81](index=81&type=chunk) - Raw material increases and annual customer price reductions each had a negative impact of **100-150 bps** on gross margin, while labor cost increases had a negative impact of **50-100 bps**[81](index=81&type=chunk) [Operating Expenses](index=24&type=section&id=Operating%20Expenses_Q2) Total operating expenses increased **5%** to **$65.8 million** in Q2 2023, with R&D rising and SG&A decreasing - Engineering, research and development expenses increased by **$5.1 million** in Q2 2023[82](index=82&type=chunk) - Selling, general & administrative (SG&A) expenses decreased by **$1.9 million** (**6%**) in Q2 2023, primarily due to a decrease in expense related to a prior SEC settlement[83](index=83&type=chunk) [Total Other Income (Loss)](index=25&type=section&id=Total%20Other%20Income%20(Loss)_Q2) Total other income for Q2 2023 increased by **$2.3 million** compared to the prior year - Total other income increased by **$2.3 million** in Q2 2023 compared to Q2 2022[84](index=84&type=chunk) [Provision for Income Taxes](index=25&type=section&id=Provision%20for%20Income%20Taxes_Q2) The effective tax rate for Q2 2023 was **15.1%**, resulting in an income tax expense of **$19.4 million** - Effective tax rate was **15.1%** in Q2 2023, up from **14.6%** in Q2 2022[85](index=85&type=chunk) - Income tax expense for Q2 2023 was **$19.4 million**[85](index=85&type=chunk) [Net Income](index=25&type=section&id=Net%20Income_Q2) Net income for Q2 2023 increased **50.8%** to **$109.2 million**, driven by higher net sales and operating profits - Net income for Q2 2023 was **$109.2 million**, a **50.8%** increase from **$72.4 million** in Q2 2022[86](index=86&type=chunk) [Earnings Per Share](index=25&type=section&id=Earnings%20Per%20Share_Q2) Diluted EPS for Q2 2023 was **$0.47**, a substantial increase from **$0.31** in the prior year - Diluted EPS for Q2 2023 was **$0.47**, compared to **$0.31** in Q2 2022[86](index=86&type=chunk) [SIX MONTHS ENDED JUNE 30, 2023 VERSUS SIX MONTHS ENDED JUNE 30, 2022](index=25&type=section&id=SIX%20MONTHS%20ENDED%20JUNE%2030,%202023%20VERSUS%20SIX%20MONTHS%20ENDED%20JUNE%2030,%202022) The first six months of 2023 saw a **22%** increase in net sales and a **29%** rise in net income [Net Sales](index=25&type=section&id=Net%20Sales_6M) Net sales for the first six months of 2023 increased **22%** to **$1.13 billion**, driven by automotive sales and dimmable aircraft sales - Net sales for the first six months of 2023 increased by **$202.6 million** (**22%**) to **$1.13 billion**[87](index=87&type=chunk) - Automotive net sales increased **22%** to **$1.1 billion**, driven by an **18%** increase in automotive mirror unit shipments[88](index=88&type=chunk) - Dimmable aircraft sales increased **176%** to **$7.4 million**, while fire protection sales decreased **15%** to **$15.3 million** for the first six months of 2023[89](index=89&type=chunk) [Cost of Goods Sold](index=25&type=section&id=Cost%20of%20Goods%20Sold_6M) Gross profit margin slightly decreased to **32.4%** for the first six months of 2023, due to raw material costs and price reductions - Gross profit margin decreased due to raw material increases and annual customer price reductions (each **100-150 bps** negative impact)[90](index=90&type=chunk) - Freight expense (**100-150 bps** positive impact) and fixed overhead leverage (**50-100 bps** positive impact) partially offset the margin decrease[90](index=90&type=chunk) [Operating Expenses](index=25&type=section&id=Operating%20Expenses_6M) E, R & D expenses increased **12%** to **$72.6 million** for the first six months of 2023, while SG&A remained stable - E, R & D expenses increased **12%** to **$72.6 million**, primarily due to additional staffing, professional fees, and new product development[91](index=91&type=chunk) - S, G & A expenses remained stable at **$54.7 million**, representing **5%** of net sales[92](index=92&type=chunk) [Total Other Income (Loss)](index=26&type=section&id=Total%20Other%20Income%20(Loss)_6M) Total other income for the first six months of 2023 was **$4.1 million**, a significant improvement from a prior year loss - Total other income for the first six months of 2023 was **$4.1 million**, compared to a **$1.0 million** loss in the prior year[92](index=92&type=chunk) [Provision for Income Taxes](index=26&type=section&id=Provision%20for%20Income%20Taxes_6M) The effective tax rate for the first six months of 2023 was **15.5%**, slightly higher than the prior year - Effective tax rate for the first six months of 2023 was **15.5%**, compared to **15.0%** in the same period of 2022[93](index=93&type=chunk) [Net Income](index=26&type=section&id=Net%20Income_6M) Net income for the first six months of 2023 increased **29%** to **$206.7 million**, driven by higher net sales - Net income increased by **$46.8 million** (**29%**) to **$206.7 million** for the first six months of 2023[94](index=94&type=chunk) [Earnings Per Share](index=26&type=section&id=Earnings%20Per%20Share_6M) Diluted EPS for the first six months of 2023 was **$0.88**, an increase from **$0.68** in the prior year - Diluted EPS for the first six months of 2023 was **$0.88**, compared to **$0.68** in the prior year[94](index=94&type=chunk) [FINANCIAL CONDITION](index=27&type=section&id=FINANCIAL%20CONDITION) Financial condition improved with increased cash, investments, and working capital, with capital expenditures rising for facility construction - Cash and cash equivalents increased by **$22.9 million** to **$237.7 million** as of June 30, 2023, primarily from operations[95](index=95&type=chunk) - Long-term investments increased to **$239.6 million**, including a **$21.5 million** investment in Adasky, LTD[96](index=96&type=chunk) - Capital expenditures for the six months ended June 30, 2023, were **$90.3 million**, up from **$58.0 million**, driven by building and facility construction projects[100](index=100&type=chunk) - Construction of a new **350,000 sq-ft** manufacturing facility (**$80-90 million**) and two expansions (distribution center and manufacturing facility) are underway, expected to be operational in Q4 2023[101](index=101&type=chunk) Working Capital and Long-Term Investments (June 30, 2023 vs. December 31, 2022) | Metric | June 30, 2023 | December 31, 2022 | | :------------------ | :---------------- | :------------------ | | Working Capital | $749,244,410 | $698,099,624 | | Long-Term Investments | $239,621,466 | $202,331,983 | | Total | $988,865,876 | $900,431,607 | [BUSINESS UPDATE](index=28&type=section&id=BUSINESS%20UPDATE) The company achieved record Q2 net sales of **$583.5 million**, a **26%** increase, outpacing light vehicle production and launching **35** new features - Q2 2023 net sales reached a new quarterly record of **$583.5 million**, a **26%** increase YoY[105](index=105&type=chunk) - Global light vehicle production in North America, Europe, Japan/Korea, and China increased approximately **18%** in Q2 2023[105](index=105&type=chunk) - The company launched **35** new interior and exterior auto-dimming mirrors and electronic features in Q2 2023, with over **60%** being advanced features like HomeLink® and Full Display Mirror®[106](index=106&type=chunk) [PRODUCT UPDATE](index=28&type=section&id=PRODUCT%20UPDATE) The company continues product innovation, with new frameless mirror approvals, expanded Full Display Mirror® adoption, and advancements in connected car and dimmable technologies [Mirror Systems](index=28&type=section&id=Mirror%20Systems) China's new GB15084 procedures now permit the use of the company's frameless inside mirrors in the domestic market - China's new GB15084 procedures allow for the use of the company's frameless inside mirrors in the China domestic market[106](index=106&type=chunk) [Camera Systems](index=28&type=section&id=Camera%20Systems) The Full Display Mirror® (FDM) system is shipping to **fifteen** automakers, complemented by a three-camera rear vision system and advanced SmartBeam® control - Full Display Mirror® (FDM) is shipping to **fifteen** automaker customers, including General Motors, Subaru, Toyota, Nissan, and Ford[107](index=107&type=chunk)[110](index=110&type=chunk) - The company's three-camera rear vision system (CMS) provides comprehensive side and rear views, integrating with FDM and offering fail-safe functionality with traditional mirrors[108](index=108&type=chunk)[109](index=109&type=chunk) - SmartBeam® Generation 4 offers advanced features like high beam assist, dynamic forward lighting, and specific detection applications, leveraging a custom CMOS imager[110](index=110&type=chunk) [Connected Car](index=31&type=section&id=Connected%20Car) HomeLink® Connect offers cloud-based vehicle-to-home automation, ITM® is shipping on **11** Audi platforms, and biometric solutions are under development - HomeLink® Connect uses RF and cloud-based connectivity for comprehensive vehicle-to-home automation, with Volkswagen being the first automaker to offer a Bluetooth-enabled mirror for HomeLink Connect[112](index=112&type=chunk) - Integrated Toll Module (ITM®) is shipping on **11** Audi platforms and the Mercedes EQS model, enabling travel across nearly all U.S. toll roads without a traditional toll tag[113](index=113&type=chunk) - The company is developing an embedded biometric solution leveraging ActiveIRIS® iris scanning technology for secure in-vehicle authentication and personalization, with future plans to integrate with HomeLink®[113](index=113&type=chunk) [Dimmable Devices](index=32&type=section&id=Dimmable%20Devices) The company provides variably dimmable windows for Boeing 787 Dreamliner and 777X aircraft, with Airbus production starting in 2021 - Variably dimmable windows are provided for Boeing 787 Dreamliner and 777X aircraft, and production for Airbus aircraft began in 2021[114](index=114&type=chunk) [Medical](index=32&type=section&id=Medical) The company is developing an intelligent medical lighting system with Mayo Clinic to optimize illumination in surgical and patient-care settings - The company is developing an intelligent medical lighting system, co-developed with Mayo Clinic, to optimize illumination in surgical and patient-care environments[115](index=115&type=chunk)[116](index=116&type=chunk) [OTHER](index=33&type=section&id=OTHER) Automotive products account for **97-99%** of revenue, facing pricing pressure and rising costs, with patents providing a competitive advantage - Automotive revenues represent approximately **97-99%** of the Company's total revenue[117](index=117&type=chunk) - The company faces ongoing pricing pressure, raw material/labor cost increases, and logistics costs, which negatively impact sales and profit margins[118](index=118&type=chunk) - Patents and trade secrets provide a competitive advantage in dimmable devices, electronics, and other features for automotive, aerospace, and medical industries[120](index=120&type=chunk) [OUTLOOK](index=34&type=section&id=OUTLOOK) The company forecasts **$2.45-2.55 billion** revenue for 2024 and **$2.2-2.3 billion** for 2023, with ongoing share repurchases Light Vehicle Production Forecast (S&P Global Mobility, mid-July 2023) | Region | Q3 2023 Forecast (Millions) | CY 2024 Forecast (Millions) | CY 2023 Forecast (Millions) | CY 2023 vs 2022 % Change | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :----------------------- | | North America | 3.92 | 15.84 | 15.47 | 8% | | Europe | 3.84 | 17.27 | 17.44 | 10% | | Japan and Korea | 2.99 | 11.60 | 12.37 | 11% | | China | 6.27 | 28.09 | 26.55 | 1% | | Total Light Vehicle Production | 17.02 | 72.80 | 71.83 | 6% | Calendar Year 2023 Guidance Update | Metric | Expected Range | | :-------------------------- | :----------------------------- | | Revenue | $2.2 to $2.3 billion | | Gross Margin | 32.5% to 33% | | Operating Expenses | ~$260 to $270 million | | Estimated Annual Tax Rate | 15% to 16% | | Capital Expenditures | $200 to $225 million | | Depreciation and Amortization | $100 to $110 million | - Calendar year 2024 revenue is expected to be approximately **$2.45 to $2.55 billion**[125](index=125&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=35&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) Financial statements rely on management estimates and assumptions, continuously evaluated, with historical results generally aligning - Financial statements rely on management estimates and assumptions, which are evaluated on an ongoing basis[126](index=126&type=chunk) - Historically, actual results have not materially differed from estimates, but future results may vary under different assumptions or conditions[126](index=126&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign exchange and interest rates, with updated risk factors including work stoppages, inflation, and supply chain issues - The Company is exposed to foreign exchange rate risk and interest rate risk, which could impact financial performance and light vehicle demand[128](index=128&type=chunk) - Material changes in risk factors include potential work stoppages from automaker or union labor strikes, and the ongoing impacts of an inflationary environment and global supply chain/labor constraints[128](index=128&type=chunk)[134](index=134&type=chunk) [Item 4. Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of disclosure controls and procedures, with no material changes to internal control [Evaluation of Disclosure Controls and Procedures](index=35&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[130](index=130&type=chunk) [Changes in Internal Control Over Financial Reporting](index=35&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023 - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2023[131](index=131&type=chunk) [PART II — OTHER INFORMATION](index=38&type=section&id=PART%20II%E2%80%94OTHER%20INFORMATION) This section provides additional information not covered in Part I, including updated risk factors and equity sales [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors were reported, except for updates on inflation, work stoppages, and supply chain constraints - No material changes to risk factors from the 2022 Form 10-K, except for updates in Part I – Item 2 and Item 3[136](index=136&type=chunk) - Updated risk factors include impacts of an inflationary environment, potential work stoppages from automaker or union labor strikes, and supply chain and labor constraints[134](index=134&type=chunk)[136](index=136&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=38&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities, with **1.97 million** shares repurchased and **18.8 million** remaining [Issuer Purchase of Equity Securities](index=38&type=section&id=Issuer%20Purchase%20of%20Equity%20Securities) The company repurchased **1.97 million** common shares during the first six months of 2023, with **18.8 million** remaining available - The company repurchased **1,967,300** shares of common stock during the first six months of 2023[139](index=139&type=chunk) - As of June 30, 2023, **18,815,865** shares remain available for repurchase under the plan[138](index=138&type=chunk)[139](index=139&type=chunk) Issuer Purchase of Equity Securities (Six Months Ended June 30, 2023) | Period | Shares Purchased | Weighted Average Price Paid Per Share | Total Shares Purchased As Part of a Publicly Announced Plan | Maximum Shares That May Yet Be Purchased | | :------------- | :--------------- | :---------------------------------- | :---------------------------------------------------------- | :--------------------------------------- | | January 2023 | — | — | — | 20,783,165 | | February 2023 | 46,835 | $28.58 | 46,835 | 20,736,330 | | March 2023 | 1,000,091 | $27.12 | 1,000,091 | 19,736,239 | | April 2023 | — | — | — | 19,736,239 | | May 2023 | 400,062 | $26.78 | 400,062 | 19,336,177 | | June 2023 | 520,312 | $27.64 | 520,312 | 18,815,865 | | **2023 Total** | **1,967,300** | **$27.23** | **1,967,300** | **18,815,865** | [Item 6. Exhibits](index=38&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL documents - Exhibits include CEO and CFO certifications under Sarbanes-Oxley Act Sections 302 and 906[146](index=146&type=chunk) - Inline XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase are filed[146](index=146&type=chunk)

Financial Data and Key Metrics Changes - For Q2 2023, the company reported net sales of $583.5 million, a 26% increase from $463.4 million in Q2 2022, marking a new quarterly sales record [29] - Gross margin improved to 33.1% from 32% in Q2 2022, driven by higher sales levels and manufacturing improvements [8][31] - Net income for Q2 2023 was $109.2 million, a 51% increase compared to $72.4 million in Q2 2022 [33] - Earnings per diluted share rose to $0.47, up 52% from $0.31 in Q2 2022 [11] Business Line Data and Key Metrics Changes - Automotive net sales increased by 27% to $574.1 million in Q2 2023 compared to $452.9 million in Q2 2022 [35] - Fire protection sales decreased by $3.6 million, while dimmable aircraft window sales increased by $2.5 million in Q2 2023 compared to Q2 2022 [12] Market Data and Key Metrics Changes - Global light vehicle production in North America, Europe, Japan, Korea, and China increased approximately 18% year-over-year in Q2 2023 [29] - The company forecasts a 6% increase in light vehicle production for 2023 compared to the previous year [21] Company Strategy and Development Direction - The company aims to achieve a gross margin of 35% to 36% by the end of 2024, with ongoing cost improvement initiatives [9][70] - Focus on expanding the Full Display Mirror product line and enhancing penetration rates of core electrochromic technology [30] - The company is working on optimizing the bill of materials to reduce costs and improve profitability [67][98] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the product portfolio and growth estimates despite potential industry challenges and macroeconomic issues [46] - The company anticipates continued strong demand for its products, particularly in the Full Display Mirror segment [18][46] Other Important Information - The company has approximately 18.8 million shares available for repurchase under its share repurchase plan [13] - Cash flow from operations for Q2 2023 was $120.9 million, up from $73.3 million in Q2 2022 [38] Q&A Session Summary Question: Can you discuss the gross margin improvement and its sustainability? - Management noted that strong revenue growth has allowed for better overhead leverage, contributing to faster-than-expected gross margin improvements [47][72] Question: What is driving the expected outgrowth in 2024? - Continued growth in the Full Display Mirror product portfolio and higher outside mirror volume growth are key drivers [50][82] Question: Are there any nonrecurring benefits in this quarter? - Management confirmed that the quarter's performance was primarily driven by ongoing demand rather than nonrecurring factors [101] Question: How are relationships with OEMs evolving post-supply chain issues? - The company is seeing more collaborative relationships with some OEMs, focusing on proactive communication regarding future processing platforms [103] Question: What are the expectations for pricing recoveries? - Management indicated that they are tracking towards a positive 100 basis points in pricing recoveries by the end of the year [127]

Part I - Financial Information This section provides the company's unaudited condensed consolidated financial statements and management's discussion and analysis for the first quarter [Item 1. Unaudited Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section presents the company's unaudited condensed consolidated financial statements and detailed notes for Q1 2023 and 2022 [Unaudited Condensed Consolidated Balance Sheets](index=3&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Snapshot of financial position, detailing assets, liabilities, and shareholders' investment for Q1 2023 and Q4 2022 | Metric | March 31, 2023 | December 31, 2022 | | :----------------------------- | :---------------- | :------------------ | | Total Assets | **$2,433,347,835** | **$2,327,229,924** | | Total Liabilities | **$310,092,189** | **$261,437,103** | | Total Shareholders' Investment | **$2,123,255,646** | **$2,065,792,821** | | Accounts receivable, net | **$332,867,128** | **$276,493,752** | | Long-term investments | **$229,398,824** | **$202,331,983** | [Unaudited Condensed Consolidated Statements of Income](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Income) Financial performance, including net sales, gross profit, operating income, and net income for Q1 2023 and 2022 | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Change (YoY) | | :----------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Net Sales | **$550,761,311** | **$468,250,776** | **+18%** | | Gross profit | **$174,737,231** | **$160,411,960** | **+8.9%** | | Income from operations | **$113,250,647** | **$103,305,905** | **+9.6%** | | Net Income | **$97,578,261** | **$87,528,626** | **+11.5%** | | Basic EPS | **$0.42** | **$0.37** | **+13.5%** | | Diluted EPS | **$0.42** | **$0.37** | **+13.5%** | [Unaudited Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income, including net income and other comprehensive income (loss), for Q1 2023 and 2022 | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | **$97,578,261** | **$87,528,626** | | Other comprehensive income (loss), net of tax | **$1,918,437** | **$(7,054,652)** | | Comprehensive income | **$99,496,698** | **$80,473,974** | [Unaudited Condensed Consolidated Statements of Shareholders' Investment](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Shareholders'%20Investment) Changes in shareholders' investment, including stock repurchases, dividends, and net income, for Q1 2023 | Metric | As of March 31, 2023 | As of January 1, 2023 | | :-------------------------------- | :------------------- | :-------------------- | | Total Shareholders' Investment | **$2,123,255,646** | **$2,065,792,821** | | Repurchases of common stock | **$(28,462,632)** | - | | Dividends declared ($0.12 per share) | **$(28,046,798)** | - | | Net income | **$97,578,261** | - | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash inflows and outflows from operating, investing, and financing activities for Q1 2023 and 2022 | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | **$120,914,110** | **$115,958,543** | | Net cash used for investing activities | **$(72,396,645)** | **$(2,044,300)** | | Net cash used for financing activities | **$(47,819,943)** | **$(96,517,500)** | | Net increase in cash and cash equivalents | **$697,522** | **$17,396,743** | | Cash, cash equivalents, and restricted cash, end of period | **$219,452,160** | **$279,708,413** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Detailed explanatory notes to the unaudited condensed consolidated financial statements, covering key accounting policies [Note 1. Basis of Presentation](index=8&type=section&id=Note%201.%20Basis%20of%20Presentation) Explains the basis for preparing financial statements in accordance with SEC rules and regulations - The unaudited condensed consolidated financial statements are prepared by the Company pursuant to SEC rules and regulations, with certain information and footnote disclosures condensed or omitted[23](index=23&type=chunk) - Management believes the disclosures are adequate and contain only normal and recurring adjustments necessary for fair presentation[23](index=23&type=chunk) [Note 2. Goodwill and Other Intangible Assets](index=8&type=section&id=Note%202.%20Goodwill%20and%20Other%20Intangible%20Assets) Details carrying values of goodwill, intangible assets, and amortization expenses for the periods | Metric | March 31, 2023 | December 31, 2022 | | :--------------------- | :---------------- | :------------------ | | Goodwill carrying value | **$313,686,026** | **$313,807,494** | | Intangible assets, net | **$214,535,910** | **$219,360,910** | - Amortization expense on patents and intangible assets **was approximately $5.3 million** for Q1 2023, a **slight decrease from $5.5 million** in Q1 2022[27](index=27&type=chunk) - Estimated amortization expense for the full year 2023 **is approximately $20 million**[28](index=28&type=chunk) [Note 3. Investments](index=10&type=section&id=Note%203.%20Investments) Information on technology investments, unrealized losses, fair value, and fixed income maturities - Technology investments **totaled approximately $86.9 million** as of March 31, 2023, **up from $69.5 million** as of December 31, 2022[33](index=33&type=chunk) - On March 9, 2023, the Company purchased a **15%** equity investment in Adasky, LTD. for **$21.5 million**[33](index=33&type=chunk) | Metric | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :---------------- | :------------------ | | Total Unrealized Losses | **$10,554,281** | **$13,034,062** | | Aggregate Fair Value of Investments | **$153,259,687** | **$154,344,732** | **Fixed Income Securities Maturities (March 31, 2023):** | Maturity Period | Amount | | :---------------------- | :------------- | | Due within one year | **$17,355,612** | | Due between one and five years | **$93,840,749** | | Due over five years | **$50,152,613** | | **Total** | **$161,348,974** | [Note 4. Inventories](index=14&type=section&id=Note%204.%20Inventories) Breakdown of inventory components, including raw materials, work-in-process, and finished goods | Inventory Component | March 31, 2023 | December 31, 2022 | | :------------------ | :---------------- | :------------------ | | Raw materials | **$301,876,129** | **$304,184,004** | | Work-in-process | **$44,534,016** | **$45,512,275** | | Finished goods | **$55,359,831** | **$54,663,991** | | **Total Inventory** | **$401,769,976** | **$404,360,270** | [Note 5. Earnings Per Share](index=14&type=section&id=Note%205.%20Earnings%20Per%20Share) Calculation of basic and diluted EPS, including net income and weighted average shares outstanding | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------------- | :-------------------------------- | :-------------------------------- | | Net Income available to common shareholders - Basic | **$96,121,348** | **$86,168,579** | | Basic weighted average shares outstanding | **230,605,626** | **232,151,296** | | Net Income per share - Basic | **$0.42** | **$0.37** | | Net Income available to common shareholders - Diluted | **$96,122,624** | **$86,171,079** | | Diluted weighted average shares outstanding | **230,895,846** | **232,789,811** | | Net Income per share - Diluted | **$0.42** | **$0.37** | [Note 6. Stock-Based Compensation Plans](index=16&type=section&id=Note%206.%20Stock-Based%20Compensation%20Plans) Total compensation expense for share-based payments and unearned costs for stock grants | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total compensation expense for share-based payments | **$8,519,535** | **$6,788,337** | | Compensation expense from restricted stock grants | **$5,946,054** | **$5,290,805** | - As of March 31, 2023, there **was approximately $8,754,103** of unearned compensation cost associated with stock options[50](index=50&type=chunk) - As of March 31, 2023, the Company had unearned stock-based compensation of **$45,419,558** for restricted stock grants and **$19,418,307** for performance share grants[54](index=54&type=chunk)[57](index=57&type=chunk) [Note 7. Comprehensive Income (Loss)](index=18&type=section&id=Note%207.%20Comprehensive%20Income%20(Loss)) Details accumulated other comprehensive loss and changes in unrealized gains/losses on debt securities | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Accumulated other comprehensive loss, end of period | **$(12,224,497)** | **$(5,127,408)** | | Net current-period change in unrealized (losses) gains on available-for-sale debt securities | **$2,039,604** | **$(6,158,232)** | [Note 8. Debt and Financing Arrangements](index=20&type=section&id=Note%208.%20Debt%20and%20Financing%20Arrangements) Describes credit agreement, revolving credit facility, and compliance with financial covenants - The Company entered into an amended and restated credit agreement providing a three-year unsecured revolving credit facility of **up to $250.0 million**, maturing on February 21, 2026[63](index=63&type=chunk) - As of March 31, 2023, there **was no outstanding balance** on the Revolver, and the Company **was in compliance with its covenants**[63](index=63&type=chunk)[65](index=65&type=chunk) [Note 9. Equity](index=21&type=section&id=Note%209.%20Equity) Explains common stock changes from repurchases/issuances and details cash dividends declared - Common stock **decreased by 0.4 million shares** during Q1 2023, **primarily due to 1.0 million share repurchases** partially offset by **0.6 million share issuances** from stock-based compensation plans[66](index=66&type=chunk) - A cash dividend of **$0.120 per share** was recorded in Q1 2023, **consistent with Q1 2022**[67](index=67&type=chunk) [Note 10. Contingencies](index=21&type=section&id=Note%2010.%20Contingencies) Addresses legal proceedings and assessment of their potential material financial impact - The Company is involved in various legal proceedings but does not believe any currently constitute material pending legal proceedings that will have a material adverse effect on its financial position or future results[68](index=68&type=chunk) [Note 11. Segment Reporting](index=21&type=section&id=Note%2011.%20Segment%20Reporting) Breakdown of revenue and income from operations by segment, including Automotive Products and Other **Revenue by Segment:** | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | YoY Change | | :------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Automotive Products | **$537,422,988** | **$457,952,554** | **+17.3%** | | Other | **$13,338,323** | **$10,298,222** | **+29.5%** | | **Total** | **$550,761,311** | **$468,250,776** | **+17.6%** | **Income (Loss) from Operations by Segment:** | Segment | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | YoY Change | | :------------------ | :-------------------------------- | :-------------------------------- | :--------- | | Automotive Products | **$111,439,798** | **$103,475,509** | **+7.7%** | | Other | **$1,810,849** | **$(169,604)** | **Significant Improvement** | | **Total** | **$113,250,647** | **$103,305,905** | **+9.6%** | [Note 12. Income Taxes](index=22&type=section&id=Note%2012.%20Income%20Taxes) Presents the company's effective tax rate for the three months ended March 31, 2023, and 2022 | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | **15.9%** | **15.3%** | [Note 13. Revenue](index=22&type=section&id=Note%2013.%20Revenue) Details revenue by geographic area for automotive products and by major source **Revenue by Geographic Area (Automotive Products):** | Region | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------- | :-------------------------------- | :-------------------------------- | | U.S. | **$170,781,604** | **$142,193,971** | | Germany | **$80,579,465** | **$67,565,320** | | Japan | **$72,155,984** | **$54,762,488** | | Mexico | **$34,287,544** | **$32,135,079** | | Other | **$179,618,391** | **$161,295,696** | | **Total Automotive Products** | **$537,422,988** | **$457,952,554** | **Revenue by Major Source:** | Source | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Automotive Mirrors & Electronics | **$505,731,576** | **$423,626,489** | | HomeLink Modules* | **$31,691,412** | **$34,326,065** | | Fire Protection Products | **$9,301,153** | **$8,447,686** | | Aerospace Products | **$4,037,170** | **$1,850,536** | - Aerospace Products revenue **increased by 118%** year-over-year[73](index=73&type=chunk) [Note 14. Leases](index=23&type=section&id=Note%2014.%20Leases) Information on weighted average remaining lease term and future minimum lease payments for operating leases - The weighted average remaining lease term for operating leases as of March 31, 2023, **was 2 years**, with a weighted average discount rate of **5.8%**[75](index=75&type=chunk) **Future Minimum Lease Payments for Operating Leases (as of March 31, 2023):** | Year ending December 31, | Amount | | :------------------------------------------ | :------------- | | 2023 (excluding Q1 2023) | **$1,291,999** | | 2024 | **$863,358** | | 2025 | **$492,746** | | 2026 | **$84,795** | | 2027 | **$978** | | Thereafter | — | | **Total future minimum lease payments** | **$2,733,876** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2023 financial performance, condition, operational updates, product developments, and future outlook [First Quarter 2023 Versus First Quarter 2022](index=24&type=section&id=FIRST%20QUARTER%202023%20VERSUS%20FIRST%20QUARTER%202022) Compares net sales, automotive sales, mirror unit shipments, gross profit margin, and net income for Q1 2023 vs Q1 2022 - Net sales for Q1 2023 **increased by $82.5 million or 18%** compared to Q1 2022[77](index=77&type=chunk) - Automotive net sales **increased 17% to $537.4 million**, **driven by a 16% increase** in automotive mirror unit shipments to **12.7 million units**[78](index=78&type=chunk) **Auto-Dimming Mirror Unit Shipments (in thousands):** | Category | Q1 2023 | Q1 2022 | % Change | | :------------------------ | :------ | :------ | :------- | | Total Interior Mirrors | **8,197** | **7,248** | **13%** | | Total Exterior Mirrors | **4,519** | **3,755** | **20%** | | **Total Auto-Dimming Mirror Units** | **12,717** | **11,003** | **16%** | - Gross profit margin **decreased due to** raw material cost increases, prior commitments to annual customer price reductions, unfavorable product mix, and labor cost increases, partially offset by decreases in freight expense[81](index=81&type=chunk) - Net income for Q1 2023 **was $97.6 million**, **up from $87.5 million** in Q1 2022, with diluted EPS of **$0.42** compared to **$0.37**[85](index=85&type=chunk) [Financial Condition](index=26&type=section&id=FINANCIAL%20CONDITION) Reviews cash, accounts receivable, operating cash flow, capital expenditures, and share repurchases - Cash and cash equivalents **were $215.5 million** as of March 31, 2023, a **slight increase from $214.8 million** at December 31, 2022[86](index=86&type=chunk) - Accounts receivable **increased by approximately $56.4 million** compared to December 31, 2022, **primarily due to** the timing of sales[88](index=88&type=chunk) - Net cash provided by operating activities **increased by $5.0 million to $120.9 million** in Q1 2023[90](index=90&type=chunk) - Capital expenditures **were approximately $42.8 million** in Q1 2023, **up from $23.9 million** in Q1 2022, **driven by** facility construction projects[91](index=91&type=chunk) - The Company **repurchased 1,046,926 shares** in Q1 2023, with **19.7 million shares remaining under the plan** as of March 31, 2023[95](index=95&type=chunk)[131](index=131&type=chunk)[132](index=132&type=chunk) **Working Capital and Long-Term Investments:** | Metric | March 31, 2023 | December 31, 2022 | | :-------------------- | :---------------- | :------------------ | | Working Capital | **$708,010,461** | **$698,099,624** | | Long-Term Investments | **$229,398,824** | **$202,331,983** | | **Total** | **$937,409,285** | **$900,431,607** | [Business Update](index=27&type=section&id=BUSINESS%20UPDATE) Highlights record quarterly net sales, global light vehicle production trends, and new product launches - The Company reported **record quarterly net sales of $550.8 million** for Q1 2023, an **18% increase** year-over-year[96](index=96&type=chunk) - Global light vehicle production in North America, Europe, Japan/Korea, and China **increased approximately 6%** in Q1 2023 compared to Q1 2022[96](index=96&type=chunk) - In Q1 2023, the Company had **18 net new launches** of interior and exterior auto-dimming mirrors and electronic features, with **over 70%** being advanced feature launches like HomeLink and Full Display Mirror[97](index=97&type=chunk) [Product Update](index=27&type=section&id=PRODUCT%20UPDATE) Updates on Full Display Mirror, rear vision systems, SmartBeam, HomeLink Connect, ITM, biometrics, and aircraft windows - Full Display Mirror (FDM) **is currently shipping to fifteen automaker customers** on **94 nameplates**, offering bi-modal functionality for optimized rearward view[97](index=97&type=chunk) - The Company's three-camera rear vision system (CMS) **provides a comprehensive view**, with side-view cameras in downsized exterior mirrors and a roof/rear window camera, streamed to the FDM[98](index=98&type=chunk) - FDM with Digital Video Recording (DVR) capability **continues to ship** for Toyota Yaris and Yaris Cross in Japan, now with an app for consumer access to recorded information[101](index=101&type=chunk) - SmartBeam Generation 4, the high beam control system, **offers advanced features** like high beam assist and dynamic forward lighting, and **is expected to meet new NHTSA standards**[101](index=101&type=chunk)[103](index=103&type=chunk) - HomeLink Connect **uses RF and cloud-based connectivity** for comprehensive vehicle-to-home automation, with Volkswagen being the **first automaker to offer** Bluetooth-enabled mirrors for HomeLink Connect[103](index=103&type=chunk) - The Integrated Toll Module (ITM) **is shipping to** Audi (**11 platforms**) and Mercedes (EQS model), providing a vehicle-integrated tolling solution[103](index=103&type=chunk) - The Company **is developing an embedded biometric solution** leveraging iris scanning technology for vehicle security and personalization, with **plans to integrate it with HomeLink**[105](index=105&type=chunk) - Dimmable aircraft windows **are provided for** Boeing 787 Dreamliner and 777X, and **are now offered as optional content** on Airbus aircraft[107](index=107&type=chunk) - An intelligent medical lighting system, co-developed with Mayo Clinic, **is under further development and assessment** for necessary approvals[108](index=108&type=chunk)[109](index=109&type=chunk) [Other](index=32&type=section&id=OTHER) Discusses automotive revenue dominance, pricing pressures, cost increases, and mitigation strategies - Automotive revenues **constitute approximately 97% - 99%** of the Company's total revenue[110](index=110&type=chunk) - The Company **faces ongoing pricing pressure** from customers and competitors, raw material cost increases, labor cost increases, and logistics costs, which **exert downward pressure** on sales and profit margins[111](index=111&type=chunk) - **Efforts to offset these pressures include** engineering and purchasing cost reductions, productivity improvements, increases in unit sales volume, and negotiations with customers[111](index=111&type=chunk) - The Company's patents and trade secrets **provide a competitive advantage** in dimmable devices, electronics, and other features for the automotive, aerospace, and medical industries[113](index=113&type=chunk) [Outlook](index=33&type=section&id=OUTLOOK) Presents light vehicle production forecasts and calendar year 2023 guidance, noting forecasting difficulties **Light Vehicle Production Forecast (S&P Global Mobility mid-April 2023):** | Region | Q2 2023 % Change YoY | Calendar Year 2023 % Change YoY | Calendar Year 2024 % Change YoY | | :------------------ | :------------------- | :---------------------- | :---------------------- | | North America | **10%** | **5%** | **3%** | | Europe | **8%** | **7%** | **4%** | | Japan and Korea | **21%** | **8%** | **(3)%** | | China | **19%** | —% | **6%** | | **Total Light Vehicle Production** | **14%** | **4%** | **3%** | **Calendar Year 2023 Guidance (unchanged):** | Metric | Forecast | | :-------------------------- | :---------------------- | | Revenue | **~$2.2 billion** | | Gross Margin | **32% - 33%** | | Operating Expenses | **~$260 - $270 million** | | Estimated Annual Tax Rate | **15% - 17%** | | Capital Expenditures | **~$200 - $225 million** | | Depreciation and Amortization | **~$100 - $110 million** | - The Company expects calendar year 2024 **revenue growth of approximately 10%** above the 2023 revenue guidance[118](index=118&type=chunk) - **Forecasting remains difficult due to** high volatility in customer orders, electronics supply chain constraints, the Ukraine-Russia conflict, labor shortages, and overall economic uncertainty[116](index=116&type=chunk) [Item 3. Quantitative And Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20And%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines market risk exposures, including foreign exchange and interest rate risks, with no material changes reported - The Company **is subject to market risk exposures** including foreign exchange rate risk and interest rate risk[121](index=121&type=chunk) - **No material changes to risk factors were disclosed** in the Company's 2022 Form 10-K, except as described in Part I – Item 2 and Item 3 of this Form 10-Q[121](index=121&type=chunk)[129](index=129&type=chunk) - The Company **is affected by uncertain economic conditions**, including inflation, and global supply chain issues, which can reduce demand for its products[122](index=122&type=chunk) [Item 4. Controls And Procedures](index=34&type=section&id=Item%204.%20Controls%20And%20Procedures) Disclosure controls were effective as of March 31, 2023, with no material changes in internal control over financial reporting - The Company's Chief Executive Officer and Chief Financial Officer **concluded that disclosure controls and procedures were effective** as of March 31, 2023[123](index=123&type=chunk) - There **were no material changes in the Company's internal control** over financial reporting during the quarter ended March 31, 2023[124](index=124&type=chunk) Part II - Other Information This section provides additional information not covered in Part I, including risk factors, equity security sales, and a list of exhibits filed with the report [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section refers to previously disclosed risk factors, noting no new material changes beyond current filing details - **No material changes to the risk factors** previously disclosed in the Company's 2022 Form 10-K, except to the extent described in Part I – Item 2 and Item 3 of this Form 10-Q[129](index=129&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=37&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details of share repurchase activities, including shares bought back and remaining authorization under the existing plan - The Company **repurchased 1,046,926 shares** under its share repurchase plan during the first three months of 2023[130](index=130&type=chunk)[132](index=132&type=chunk) - As of March 31, 2023, **19.7 million shares remained available for repurchase** under the plan[131](index=131&type=chunk)[132](index=132&type=chunk) - Total shares **repurchased** to date under the plan amount to **$2,629,111,108** for **152,263,489 shares**[132](index=132&type=chunk) [Item 6. Exhibits](index=37&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed, including CEO/CFO certifications and various Inline XBRL documents - The exhibits **include certifications from** the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[137](index=137&type=chunk) - **Various Inline XBRL documents**, such as the Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase, are also included[137](index=137&type=chunk)

Gentex Corporation (NASDAQ:GNTX) Q1 2023 Earnings Conference Call April 28, 2023 9:30 AM ET Company Participants Josh O'Berski - Director, Investor Relations Steve Downing - President & Chief Executive Officer Kevin Nash - Vice President of Finance & Chief Financial Officer Neil Boehm - Vice President of Engineering & Chief Technology Officer Conference Call Participants Ron Jewsikow - Guggenheim Partners James Picariello - BNP Paribas Exane Luke Junk - Baird Josh Nichols - B. Riley John Murphy - Bank of Am ...

Financial Performance - Net sales increased by $187.8 million, or 11%, in 2022 compared to 2021, driven by a 6% increase in automatic-dimming mirror shipments from 41.8 million units to 44.2 million units [123]. - Net income decreased by $42.0 million, or 12%, in 2022, primarily due to changes in gross margin and operating profits [131]. - Cash flow from operating activities was $338.2 million in 2022, a decrease of $24.0 million compared to 2021, mainly due to lower net income and changes in working capital [142]. Cost and Expenses - Cost of goods sold as a percentage of net sales rose from 64.2% in 2021 to 68.2% in 2022, leading to a decrease in gross margin by approximately 250-300 basis points due to increased raw material and manufacturing costs [125]. - Engineering, research and development expenses increased by $15.5 million, or 13%, in 2022, primarily due to additional staffing and new product development [126]. - Selling, general and administrative expenses rose by $14.3 million, or 16%, in 2022, representing 6% of net sales compared to 5% in 2021, influenced by staffing and increased freight expenses [127]. - Operating expenses, including R&D and SG&A, are expected to be between $260 million and $270 million for calendar year 2023, driven by investments in growth and new product development [156]. Capital Expenditures and Investments - Capital expenditures increased to $146.4 million in 2022, up by $77.6 million from 2021, primarily for building and facility construction projects [144]. - Capital expenditures for 2023 are anticipated to be between $200 million and $225 million, including $70 million to $90 million for a new manufacturing facility [159]. - Short-term investments increased to $23.0 million as of December 31, 2022, up from $5.4 million in 2021, while long-term investments decreased to $153.9 million [147]. Future Projections - The Company estimates top line revenue for calendar year 2023 to be approximately $2.2 billion, based on light vehicle production forecasts and anticipated product mix [154]. - Gross margin is projected to be between 32% and 33% for calendar year 2023, with historical customer price reductions exerting pressure on margins [155]. - Revenue guidance for calendar year 2024 anticipates a 10% increase over 2023 estimates, reflecting expected growth in light vehicle production [162]. Shareholder Returns and Financial Strategy - Cash flow used for financing activities decreased by $201.1 million to $209.0 million in 2022, primarily due to a reduction in common stock repurchases [145]. - The Company plans to continue its share repurchase program in 2023, contingent on market and economic conditions [161]. - The Company is focused on maintaining a competitive advantage through investments in proprietary technology and product development [158]. Currency and Tax Considerations - Approximately 7-8% of the Company's net sales in 2023 are expected to be invoiced and paid in foreign currencies [165]. - The Company expects a tax rate between 15.0% and 17.0% for calendar year 2023 based on current statutory rates [160].