Steve Downing: I don’t think we’ll get above the 36% by the end of the year. I think that’s probably more of a ’25 plan depending on growth rates in ’25. But I’d still say kind of midpoint of that range is absolutely achievable by the end of this year. So to your point, Ron, if you look at where we started Q1 at, it was better than we had initially anticipated given what’s going on despite the $20 million loss in revenue given some of the OEM changes. So we feel really good about where we’re sitting here. And in fact, sequentially the margin actually improved from Q4 if you take out that one time pickups in Q4 of last year. And so and with very little, not a lot of help from the PPV side or from the supplier cost side in Q1, we feel really strongly that we should be sitting in midpoint of that range by the end of this year.
Ronald Jewsikow: Perfect. And if I could just sneak one more in, Steve, you called on the release kind of your ability to move beyond the kind of auto, CPV, light vehicle production model. Can you elaborate on that? And I guess given that it was in the release, should we interpret that as improved line of sight to any of these kind of new technologies?
Steve Downing: Yes, I think — I think there’s two — there’s two major points there. Number one is as we’ve started to invest in new technologies, some of the partnerships that we formed, some of the acquisitions, we’re starting to introduce new technologies into automotive that might have much higher ASPs. That starts to eliminate obviously some of the risk factors associated with total light vehicle production. Obviously, and if you’re an automotive supplier, you’re never going to get away from it completely. But when your average product is a base auto dimming inside mirror at $20, obviously you need to sell a whole lot of those in order to make an impact in the future. So, when you start to invest in total revenue versus when we start talking about certain feature sets that have ASPs in the hundreds of dollar range, you can start to, just like FDM, right?
You can really start to grow even if there’s a negative trend in the industry. And so, one of the focuses we’ve had as a company over the last several years is saying, hey, we really need to focus on making sure we find dollar content that adds value to our customers and also to the consumer to try to eliminate some of that variability that happens. And we know what’s going to happen all the time in automotive light vehicle production. And then beyond that, a lot of the other tech investments have been focused on areas outside of automotive. So, when we look about the place product launching, the eSight acquisition, there’s a lot of other technologies that we’re going to be launching later this year, early next year that we’re excited about because we think there’s some growth opportunities outside of the automotive segment.
Operator: Thanks, Rob. [Operator instructions]. Our next question comes from James Picariello with BNP Paribas. Your line is open.
James Picariello: Good morning, everyone. My first question is just on your chip redesign efforts. To what extent has Gentex already benefited from this and what actions are still to come, potentially, on that effort?
Neil Boehm: Yes, from a chip to, from an overall chip design or redo of a product design, if we back up, there’s a couple different versions, so I want to make sure I’m answering it properly for you. So, the redesigns back to component shortages, all of that activity, that wasn’t about the cost reduction VA/VE pieces. We initiated some of the VA/VE initiative designs early this year at the end of last year, but we won’t really see any pickup of that until we get into more like ’25, late ’25, before you start seeing some of the benefit of that. So, we are in progress of that. We’ve got launches active and we’ll continue to go through that as we evaluate other designs that we can try to pull bomb costs out of as well.
Steve Downing: Yes, there’s a general rule. If you look at the end of ’23 and say everything done before that on the redesign side, it was all about just trying to get components to make sure we can make shipments. Everything that happened really at the end of ’23 and going forward is going to be more focused on VA/VE activity.
James Picariello: Got it. And then as we think about the China opportunity to really tap into that market, just wondering if there’s a high level update on your progress there. And then just on CapEx, my follow on CapEx, you’ve got the range of $225 million to $250 million, the first quarter, $32 million came in pretty light toward that range. Just curious what drove the timing there and what investments look like for the rest of the year toward that range?
Steve Downing: Thanks. Yes, so I would say on the CapEx side, I’ll go in reverse order with you. But if you look at CapEx, Yes, it definitely came in a little lighter than we were anticipating. That’s really a timing issue more than anything. From the time you place the order, you got to actually receive the equipment. Obviously, we got several large building projects underway this year as well. So we think the CapEx will definitely be weighted towards the second half of the year for sure. Plan is to make up that ground and try to get the footprint in place and the capital equipment in place, especially for some of the larger projects we’ve been investing in. If you start looking at some of those technologies, especially large area devices, they are CapEx heavy projects.
And so we know they’re going to draw that engineering effort, prototype effort. All those are going to require some heavy CapEx. So we’re excited for the opportunity in the market because we believe there is a lot of interest in those technologies. And we will be investing in those probably a little more towards the back after this year. On the China front, yes, obviously the market continues to grow. I mean, it’s amazing when you look at total light vehicle production seven years ago. What percentage of that was done in China versus what it is today? Obviously, we know there’s a lot of opportunity there. Right now, our primary focus and where our wins are coming from are base auto-dimming and outside auto-dimming. On the advanced feature side, we do have a couple FDM projects as well there.
The competitive side though is the difficult side in China. Whenever you’re importing a heavy electronic content, especially in a mere form factor, the duties and tariffs that have increased a lot over the last seven years really start to limit our ability to grow at the rate we would like to. So it’s something that we’re continually looking at and trying to make sure we’ve got the right supply chain model built in place to help support and grow inside of that market.
