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GENTEX CORP (GNTX)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 underperformed internal forecasts due to weaker OEM builds and mix, with revenue $541.6M, gross margin 32.5%, and diluted EPS $0.39; management quantified a $45–$50M in-quarter revenue shortfall largely from lower Full Display Mirror (FDM) shipments .
  • Management guided 2025 revenue to $2.40–$2.45B and gross margin 33.5–34.5%; 2026 revenue view set at $2.55–$2.65B; guidance excludes pending VOXX acquisition impact .
  • The quarter’s pressure was primarily market-driven (inventory normalization at OEMs and weaker high-content vehicle mix); approximately half of the shortfall traced to FDM shipments, with tax rate of 10.3% aiding net income .
  • Strategic narrative remains intact: FDM adoption, driver/cabin monitoring program ramps, and cost actions underpin margin recovery toward ~35% by end of 2025; the team reiterated capacity to outgrow shrinking primary markets (~7% outgrowth at 2025 guidance midpoint) .

What Went Well and What Went Wrong

What Went Well

  • FDM continues to scale: CY2024 FDM shipments reached 2.96M (+21% YoY), with new launches including Renault Master and VW Transporter; total nameplates reached 133 by Q4 .
  • Cost actions progressed: purchasing cost reductions aided gross margin throughout 2024; margin plan remains targeted to ~35% by end of 2025 despite Q4 mix/volume headwinds .
  • Capital return sustained: $206.1M buybacks in 2024 (6.4M shares) and $110.4M dividends; 603k shares repurchased in Q4 at $30.54/share .
  • “We are forecasting revenue growth in 2025…mid-point…suggests a 7% outgrowth versus our primary markets…This growth can only be accomplished by launches of new products and technology.” – Steve Downing (CEO) .

What Went Wrong

  • Significant in-quarter volume/mix weakness: light vehicle production declined and OEMs emphasized lower-content builds, driving an ~$45–$50M revenue shortfall; roughly half due to lower-than-expected FDM shipments .
  • Gross margin fell to 32.5% (vs 34.5% LY) on lower sales levels, weaker mix, and reduced overhead leverage; OpEx rose 22% including an $8.9M intangible impairment .
  • Geographic and customer-specific pressures: China softness and certain OEM underperformance (including Tesla OEC volumes) weighed on shipments and mix in Q4 .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$572.9 $608.5 $541.6
Diluted EPS ($USD)$0.37 $0.53 $0.39
Gross Margin (%)32.9% 33.5% 32.5%
Income from Operations ($USD Millions)$114.9 $125.7 $89.8
Net Income ($USD Millions)$86.0 $122.5 $87.7
Effective Tax Rate (%)15.1% 15.7% 10.3%
Q4 2024 Consensus (S&P Global)Unavailable (SPGI retrieval limit)——

Note: S&P Global consensus estimates were unavailable at time of request due to retrieval limits; comparisons to consensus are therefore not included.

Segment sales

SegmentQ2 2024Q3 2024Q4 2024
Automotive Net Sales ($USD Millions)$559.3 $596.5 $531.3
Other Net Sales ($USD Millions)$13.6 $12.0 $10.3

KPIs and operating metrics

KPIQ2 2024Q3 2024Q4 2024
Total Auto-Dimming Mirror Units (000s)12,184 12,221 10,777
Cash from Operations ($USD Millions)$129.3 $84.7 $154.4
Capital Expenditure ($USD Millions)$31.8 $39.3 $41.7
Depreciation & Amortization ($USD Millions)$24.0 $22.9 $23.8
Share Repurchases (# Shares)1.4M 3.2M 603k
Cash Dividends Declared per Share ($)$0.12 $0.12 $0.12

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Billions)CY 2025$2.45 – $2.55 $2.40 – $2.45 Lowered
Gross Margin (%)CY 2025—33.5% – 34.5% Introduced
Operating Expenses ($USD Millions)CY 2025—$310 – $320 Introduced
Estimated Annual Tax Rate (%)CY 2025—15% – 17% Introduced
Capital Expenditures ($USD Millions)CY 2025—$125 – $150 Introduced
Depreciation & Amortization ($USD Millions)CY 2025—$85 – $90 Introduced
Revenue ($USD Billions)CY 2026—$2.55 – $2.65 Introduced
Revenue ($USD Billions)CY 2024$2.40 – $2.50 (7/26) $2.35 – $2.40 (10/25) Lowered
Gross Margin (%)CY 202434.0 – 34.5 (7/26) 33.5 – 34.0 (10/25) Lowered
Dividend per Share ($)Q4 2024—$0.12 (declared 11/26/24) Maintained

Note: 2025 guidance excludes any impact from the pending VOXX acquisition .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
FDM adoption and launchesTargeting +500k incremental FDM units in CY2024; 115 nameplates; 3 new OEMs in Q2 124 nameplates; strong GM FDM volumes 2.96M CY2024 FDM units (+21% YoY); new OEM launches (Renault, VW); 133 nameplates Broadening OEM/segment; continued growth
Driver/Cabin Monitoring (DMS/CMS)First OEM launch in CY2024; pipeline into 2025–2026 Programs ramping; timing pushed toward 2025 for margin build Four unique OEM executions launching over next 12–18 months Ramping programs; revenue contribution grows 2025–2026
Gross margin recovery planCost reductions contributing; mix/volume offset; plan intact Sequential improvement to 33.5%; recovery target pushed into 2025 32.5% on lower volumes/mix; 2025 target ~35% reiterated Recovery delayed but achievable with cost actions
OEM production volatility and mixUnexpected June declines across major OEMs; inventory normalization Forecast conservatism vs S&P; Q4 modeled similar to Q3 Q4 shortfall from inventory/mix; weak high-end vehicle mix Persisting volatility; cautious near-term posture
Tariffs/macro——Potential Mexico tariff risk ($5–10M worst-case); minor 1/1 tariff already in guidance New headwind risk to monitor
VOXX acquisitionStrategic stake/MTM drove Other Income volatility in Q2/Q3 Strategic rationale (distribution, biometrics, auto tech) Excluded from guidance; cost synergies targeted $40–50M over 18–24 months; closing targeted end of Q1’25 Integration outlook; potential synergy upside later

Management Commentary

  • “Approximately one half of our revenue shortfall in the fourth quarter came from lower-than-expected full display mirror unit shipments…these changes all occurred within the quarter causing a significant variance from our beginning of quarter forecast.” – Steve Downing (CEO) .
  • “Despite the many headwinds…we…provide the roadmap and plan to achieve a target of approximately 35% gross margin by the end of 2025.” – Steve Downing (CEO) .
  • “We are forecasting revenue growth in 2025…mid-point…suggests a 7% outgrowth versus our primary markets. This growth can only be accomplished by launches of new products and technology.” – Steve Downing (CEO) .
  • CES highlights: Next-gen HomeLink integration, large-area dimming films, Solis wireless power/data demo; momentum in DMS programs across four OEMs .
  • OpEx elevated by engineering ramp and an $8.9M intangible impairment; plan for much lower OpEx growth in 2025 as engineering baseline normalizes .

Q&A Highlights

  • Mix and inventory normalization: Management diagnosed ~half the Q4 miss as inventory adjustments not expected to linger, with conservatism baked into Q1 on product mix; high-end vehicle ASP mix weakened in Q4 .
  • FDM outlook: Planning ~300k incremental FDM units in 2025; broadening across OEMs reduces dependence on any single OEM or luxury segments .
  • Margin bridge: Customer pricing headwinds (100–150 bps) expected to be more than offset by supplier cost reductions starting in Q2; operational efficiencies and BOM reductions prioritized .
  • VOXX integration: Closing targeted end of Q1’25; cost savings of $40–50M expected over 18–24 months via duplicate cost removal, leveraged electronics spend, and selective in-house manufacturing .
  • Tariff sensitivity: Minor 1/1 tariff included in guidance; potential Mexico tariff could be a $5–10M worst-case headwind if implemented .

Estimates Context

  • S&P Global consensus estimates for Q4 2024 were unavailable due to retrieval limits at the time of request; as such, beat/miss versus Street consensus cannot be formally assessed. Management’s qualitative comments imply Q4 results fell below internal forecasts primarily due to production and mix shifts within the quarter .

Key Takeaways for Investors

  • Near-term setup: Q4 weakness was largely in-quarter and mix-driven; management expects sequential improvement in Q1 on higher revenue, with margin recovery ramping from Q2 as supplier cost reductions flow through .
  • 2025 guidance reset: Revenue lowered to $2.40–$2.45B (from $2.45–$2.55B), but outgrowth target (~7% vs primary markets) maintained via FDM and new tech launches; monitor OEM mix and regional demand .
  • Margin trajectory: Plan to exit 2025 near ~35% gross margin relies on cost-downs, BOM efficiencies, and product ramp; Q4’s 32.5% underscores sensitivity to volume/mix .
  • FDM diversification is strategic: Continued OEM additions and broadened platform coverage should mitigate single-customer risk and support content-led growth amid flattish-to-down LVP in core regions .
  • VOXX optionality: Excluded from guidance; successful integration could add cost synergies ($40–$50M) and open biometrics/aftermarket channels, enhancing capital return capacity post-close .
  • Macro watch items: Tariff risk (Mexico), European softness, and continued OEM inventory balancing remain key variables for H1’25 cadence .
  • Capital allocation: Company remained active on buybacks in 2024 and views pullbacks as opportunities, balanced against VOXX funding needs .