Gentex Corporation (NASDAQ:GNTX) Q2 2023 Earnings Call Transcript

Ronald Jewsikow: Just on ASPs, they really pick out this quarter to the upside. Maybe just a breakout of how much of that, I think it’s almost 5% quarter-over-quarter growth was pricing versus, I think, FDM probably normalizing supply chain to the upside helped as well. But just — it didn’t stick out given the exterior mirror growth this quarter being quite a bit stronger than interior, still seeing big ASP upside.

Steven Downing: Yes. I think most of that — almost all of it is really attributable to advanced features on inside. So really FDM being the strength there. Some of the other mix was also good. Features like HomeLink did really well. So the inside advanced feature. And if you look at the product mix for us, especially being a hair overweight in North America and Europe really does pan out well for us on the product mix and ASP side.

Ronald Jewsikow: Okay. And for pricing, just nothing sticks out on the retro side? I know you called out in the fourth quarter, there was some retroactive pricing, but pretty clean in terms of like ongoing pricing this quarter.

Kevin Nash: That was probably 75 basis points to 100 basis points on the top line from the onetime nature of pricing.

Steven Downing: Well, and recurring.

Kevin Nash: And then recurring.

Ronald Jewsikow: Okay. Unfortunately, but that’s still — okay, it’s recurring, but it came through this quarter. Okay. And just one more quick one, maybe reading between the lines a bit. But Neil’s prepared remarks, it did sound like FDM take rates or OEM demand has been quite a bit stronger than you expected. And maybe just how much of that upside the 500,000 versus the 300,000 prior is light vehicle production versus things like supply chain take rates and customer demand.

Neil Boehm: Yes, great question. So looking at the information, a lot of it — we talked about this actually late last year that last year when we started launching with customers like Hyundai, there was a direction and a want of having a much higher take rate than what we could support due to component availability. So what we’ve seen a great increase in this as component availabilities improve, we’ve been able to actually produce the parts that they wanted and are actually able to catch up to it. So as our increase goes from greater than 300,000 to the 0.5 million roughly for this year, a big portion of that is due to our ability to actually supply the parts that the customers have wanted and that the consumers have asked for.

Steven Downing: I think what’s been very interesting is last year, like Neil mentioned, when we weren’t able to hit the higher volumes they were requesting, the question is, will that demand still be there once capacity has finally come online from the supply base. And the good news is that we didn’t seem to have hampered demand for that product by not being able to deliver last year. So pretty excited to see — and Neil mentioned, there’s been several launches. Ron you’re probably better than anybody at tracking those, probably know some of them before we do. But you noticed there’s some — there’s been some volume brands that have come online with that product, and the execution and take rates have been better than we anticipated.

Operator: Our next question comes from the line of John Murphy with Bank of America.

John Murphy: Just a first question on the grosses. I mean, the back half number kind of implies something roughly 32.5% to 34% on gross potentially, which is kind of a wide range. I’m just curious if you can give us sort of how you’re thinking about the low end and then the high end of the range? And is it really just due to operating leverage if volume is coming through better than expected? Or are there other big factors in there?