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

John Murphy: Okay. And one — just last one. How many mirrors are you shipping into China right now on a maybe quarterly or annual basis?

Kevin Nash: Well, on a revenue basis, it’s about 9% of our total book of revenue. So I mean, it’s a little higher from a unit perspective because it’s more base mirrors, but it still remains under 10% of our total revenue for the company.

Operator: Our next question comes from the line of David Whiston with Morningstar.

David Whiston: Can you hear me?

Steven Downing: Yes.

David Whiston: Just curious with a really nice upward recovery in which I know you’ve been waiting for volume to come back for a long time, and it finally has, and that’s great. But was there also any kind of more just like nonrecurring things that benefited this quarter that probably won’t be as strong there at all rest of the year?

Steven Downing: No. I mean on the margin side, you had 50 to 60 basis points of nonrecurring price recoveries, so onetime in nature, retroactive to help offset some of the costs that we incurred over the last 18 months. But other than that, everything else in the quarter should be recurring. There wasn’t any onetime pickups on sales, for instance, or any abnormal sales activity.

David Whiston: Okay. And are there any geographies recovering faster or slower than the others? And in particular, I’m wondering if Japan really bounced back hard upward in the upper direction this quarter?

Steven Downing: Yes. Well, if you look at overall production, I mean, our primary markets being North America, Europe, Japan, Korea, all those were actually very strong. And heading into Q3, global light vehicle production is going to be down 3%. But the reason why we’re still optimistic about the back half of the year is that most of that impact on the negative side is coming from the China market in Q3. We continue to see quite a bit of recovery in the Japan, Korea markets, really, we think, not only in Q2 but through the rest of the year.

Operator: [Operator Instructions]. Our next question comes from the line of Charlie Sloan with Oak Family Advisors.

Charles Sloan: And I have a question for Steve first, which is with the OEMs after the big adjustment with all the supply chain issues, has that relationship changed more durably to be more of a partnership if it wasn’t before or not?

Steven Downing: That’s a great question. Every OEMs actually handle this very differently. And I would say in certain situations with OEMs, that’s absolutely the case where we’ve gotten more collaborative. One thing we’re trying to do as a supplier is talk more candidly with OEMs about our future processing platforms and who our preferred partners are from a micro standpoint, maybe it was an industry challenge and mistakes that we’ve all made together as we’re working on new technology. But historically, most suppliers have gone off, picked their own platforms, kind of started to engineer design, build proof of concepts, really without sharing much of that until they had a product ready. We’re trying to be more proactive and make sure we’re sharing that information with OEMs to make sure we’re not designing around a platform that an OEM — that’s not part of an OEM strategy, especially if there are certain micro platforms that they prefer to stay with or to move away from.

So I think every OEM’s handling that differently. Certain of our relationships were maturing as a supplier to try to be more proactive in that area. So we don’t end up in the situation again.

Charles Sloan: Okay. And then so we should expect still kind of cost reductions in the first quarter or price reductions in the first quarter of future years?