Gentex Corp: Form 10-Q for the period ended Mar 31, 2025

FIRST QUARTER 2025 VERSUS FIRST QUARTER 2024

Net Sales. Net sales for the first quarter of 2025 decreased by $13.5 million or 2%, when compared with the first quarter of 2024.

Automotive net sales for the first quarter of 2025 were $563.9 million, a 2% decrease when compared with automotive net sales of $577.6 million in the first quarter of 2024. The 7% decrease in automotive mirror unit shipments in the first quarter of 2025 to 11.5 million units, compared with 12.5 million units in the first quarter of 2024, was driven by a 5% quarter over quarter decrease in interior auto-dimming mirror unit shipments, and an 11% quarter over quarter decrease in exterior auto-dimming mirror unit shipments.

The below table represents the Company's auto-dimming mirror unit shipments for the three months ended March 31, 2025, and 2024 (in thousands):

Note: Percent change and amounts may not total due to rounding.

Other net sales were $12.9 million in the first quarter of 2025, compared to $12.6 million in the first quarter of 2024, an increase of 2%. Other net sales for the first quarter of 2025 included biometric product sales of $0.9 million generated from the Company's GalvanEyes subsidiary (acquired in the fourth quarter of 2024), which owned 50% of BioCenturion in the first quarter of 2025, as well as $0.4 million in sales of medical devices from the previously acquired eSight Go product line, which as previously announced, began shipments during the third quarter of 2024. Fire protection sales were $6.7 million in the first quarter of 2025, compared to $6.8 million in the same quarter of last year. Dimmable aircraft sales decreased during the first quarter of 2025 to $4.9 million, compared to $5.8 million in the same quarter of last year.

Cost of Goods Sold. As a percentage of net sales, cost of goods sold increased to 66.8% for the first quarter of 2025, versus 65.7% in the same quarter last year. The quarter over quarter decrease in the gross profit margin primarily resulted from lower net sales levels, new tariff costs that became effective in the first quarter of 2025, and unfavorable product mix. Purchasing and overhead cost increases, which include tariff costs, had a negative impact on gross margin on a quarter over quarter basis of approximately 210 basis points.

Operating Expenses. Total operating expenses were $78.7 million in the first quarter of 2025, an increase of 8% quarter over quarter or $5.9 million, compared to $72.9 million in the first quarter of 2024. Total operating expenses for the first quarter of 2025 were impacted by severance expense of $2.9 million, as no comparable severance charges were incurred by the Company in the first quarter of 2024.

Engineering, research and development expenses for the first quarter of 2025 increased by $3.7 million, when compared with the first quarter of 2024, primarily due to staffing and engineering related professional fees.

Selling, general and administrative ("S, G & A") expenses decreased by 3% or $0.8 million for the first quarter of 2025, compared to the first quarter of 2024, primarily due to decreased staffing. S, G & A expenses were approximately 5% of net sales in both of the first quarters of 2025 and 2024.

Total Other Income. Total other income for the first quarter of 2025 increased by $2.3 million, when compared with the first quarter of 2024, driven by increased investment income for the first quarter of 2025, offset by reduced losses on other investments.

Provision for Income Taxes. The effective tax rate was 16.5% for, and an income tax expense of $18.8 million was recorded in, the first quarter of 2025, compared to an effective tax rate of 15.2% for, and an income tax expense of $19.4 million recorded in, the same quarter of 2024. The quarter over quarter change in the effective tax rate was driven by lower tax benefits on stock-based compensation compared to the first quarter of 2024.

Net Income. Net income for the first quarter of 2025 was $94.9 million, down from a net income of $108.2 million in the first quarter of 2024. The decrease in net income for the first quarter of 2025 was driven by lower net sales and income from operations quarter over quarter.

Earnings Per Share. The Company had earnings per diluted share for the first quarter of 2025 of $0.42, which compared to earnings per diluted share of $0.47 for the first quarter of 2024.

FINANCIAL CONDITION:

The Company's cash and cash equivalents as of March 31, 2025 were $286.6 million, an increase of $53.2 million, compared to $233.3 million as of December 31, 2024. The increase was primarily due to cash flows from operations and proceeds from the sale of investments, which was partially offset by share repurchases, capital expenditures, dividend payments, and investment purchases during the three months ended March 31, 2025.

Short-term investments as of March 31, 2025 were $20.5 million, down from $22.3 million as of December 31, 2024, and long-term investments were $300.6 million as of March 31, 2025, down from $339.6 million as of December 31, 2024.

Accounts receivable as of March 31, 2025 increased approximately $35.3 million compared to December 31, 2024, primarily due to the sequential increase in sales, as well as the timing of customer payments during the three months ended March 31, 2025.

Inventories as of March 31, 2025 were $408.9 million, compared to $436.5 million as of December 31, 2024, primarily due to decreases in raw materials and finished goods.

Accounts payable as of March 31, 2025 decreased approximately $5.4 million to $162.9 million, compared to December 31, 2024, primarily driven by timing of payments within the quarter.

Accrued liabilities as of March 31, 2025 increased approximately $19.4 million compared to December 31, 2024, primarily due to increases in accrued salaries and wages and accrued royalties payable.

Cash flow from operating activities for the three months ended March 31, 2025 increased $18.6 million to $148.5 million, compared with $129.9 million during the same three-month period last year, primarily due to changes in working capital.

Capital expenditures for the three months ended March 31, 2025 were approximately $36.7 million, compared with approximately $31.9 million for the same quarter last year. The increase was primarily due to timing of payments and an increase in expenditures related to building and facility construction projects beginning during the second half of 2024, as further described below.

The Company believes its existing and planned facilities are currently suitable, adequate, and have the capacity required for current and near-term planned business. Nevertheless, the Company continues to evaluate longer term facility needs. During the fourth quarter of 2024, the Company completed construction on two building expansions. The Company expanded its current distribution center by an additional 300,000 square feet, at a total cost of approximately $40 million. The Company also expanded one of its manufacturing facilities by an additional 60,000 square feet, with a total cost of approximately $20 million. Both of these expansion projects were funded with cash and cash equivalents on hand. The Company also entered into a multi-year lease for 32,000 square feet of manufacturing space at a location approximately 20 miles from its main campus that began operations during the second quarter of 2023.

During 2023, the Company began the design and initial build phase of the previously announced Gentex Discovery Preschool, an on-site daycare and preschool designed to provide Company employees with convenient, cost-effective access to quality childcare. As previously disclosed, construction began in the third quarter of 2024, with an expected completion date in 2025. The total cost of the building project is expected to be $15 - $20 million, which will also be funded with cash and cash equivalents on hand.

The Company estimates that it currently has building capacity to manufacture approximately 42 - 45 million interior mirror units annually and approximately 19 - 22 million exterior mirror units annually, based on current product mix. The Company also evaluates equipment capacity on an ongoing basis and adds equipment as needed.

Management considers the current working capital and long-term investments, in addition to internally generated cash flow, its Credit Agreement, and credit worthiness, to be sufficient to cover anticipated cash needs for the foreseeable future considering its contractual obligations and commitments.

The following is a summary of working capital and long-term investments:

The Company has a previously announced share repurchase plan under which the Board of Directors has authorized the repurchase of shares of the Company's common stock, which remains a part of the broader publicly disclosed capital allocation strategy. Future share repurchases may vary from time to time and will take into account macroeconomic events, market trends, and other factors the Company deems appropriate (including, but not limited to, the market price of the stock, anti-dilutive effect of repurchases, and available cash). During the three months ended March 31, 2025, the Company repurchased 3,100,351 shares. The Company has 6,349,047 shares remaining under the plan as of March 31, 2025, as is further detailed in Part II, Item 2 of this Form 10-Q.

BUSINESS UPDATE

For the first quarter of 2025, the Company reported net sales of $576.8 million, compared to net sales of $590.2 million in the first quarter of 2024, a 2% decrease quarter over quarter. For the first quarter of 2025, global light vehicle production in North America, Europe, and Japan/Korea decreased approximately 5%, when compared to the first quarter of 2024.

In the first quarter of 2025, the Company had 21 net new nameplate launches of interior and exterior auto-dimming mirrors and electronic features, with advanced feature launches representing 60% of the net launches in the quarter.

Also during the first quarter of 2025, the Company proactively halted production and sales of product for the China market until customer agreements can be reached with respect to tariff costs as further explained below.

PRODUCT UPDATE

Mirror Systems

In 2023, The People's Republic of China newly issued GB15084 and the related procedures, which allow for the Company's frameless inside mirrors to be used on vehicles in the China domestic market.

The United Nations Economic Commission (UN ECE) recently established a working group (Task Force Glare Protection) on the subject of glare in road traffic. The Task Force Glare Protection will investigate the burden and danger of road glare from vehicle headlamps and initiate necessary measures. The Company believes its auto-dimming mirror products can be a solution for necessary measures initiated by this UN ECE task force.

Camera Systems

Full Display Mirror® began production in 2015. Current automotive design trends are yielding vehicles with small rear windows that are often further obstructed by headrests, passengers, and roof support pillars, which can significantly hinder the mirror’s rearward view. The Company's Full Display Mirror® is an intelligent rear vision system that uses a custom, internally or externally mounted video camera and mirror-integrated video display to optimize a vehicle driver’s rearward view. This rear vision system consists of a hybrid Full Display Mirror® that offers bi-modal functionality. In mirror mode, the product functions as an auto-dimming rearview mirror which means that during nighttime driving, digital light sensors talk to one another via a microprocessor to automatically darken the mirror when glare is detected. With the flip of a switch, the mirror enters display mode, and a clear, bright display appears through the mirror’s reflective surface, providing a wide, unobstructed rearward view. The bi-modality of the Full Display Mirror® is essential, because in the event of any failure of the camera or display, the product is able to function as a mirror, which meets long-standing safety requirements in the automotive industry. In addition, the driver has the ability to switch between modes to accommodate usage preferences for various weather conditions, lighting conditions, and driving tasks.

As of the first quarter of 2025, the Company is shipping production Full Display Mirrors® to eighteen different automaker customers and 148 vehicle nameplates. For more information regarding the full display mirror please go to https://www.fulldisplaymirror.com/. The Company remains confident that ongoing discussions with other customers may cause such customers to consider more fully adding the Full Display Mirror® into their product roadmap for future vehicles.

To enhance capability and usability of the Company's Full Display Mirror®, the Company previously introduced its three-camera rear vision system that streams rear video in multiple composite views to its Full Display Mirror®. The Company believes it is the industry’s first practical and comprehensive rear vision solution designed to meet automaker, driver, safety, and regulatory requirements. The Company's rear vision system, known generally as a camera monitoring system ("CMS"), uses three cameras to provide a comprehensive view of the sides and rear of the vehicle. The side-view cameras are discretely housed in downsized, automatic-dimming exterior mirrors. Their video feeds are combined with that of a roof-mounted or rear window based camera and stitched together into multiple composite views, which are streamed to the driver using the Full Display Mirror®. The system’s modular nature lets the automaker customize functionality while offering it as an affordable, optional feature thereby enhancing safety by allowing the system to fail safe. During any failures due to weather conditions or otherwise that disrupt the digital view, drivers can still safely use the interior and exterior mirrors. The system also supports user preference by permitting drivers to use standard mirror views, camera views, or both. The system can also be tuned to meet the various regulatory field-of-view requirements around the world by using different types of flat and curved glass, combined with simple alterations to the video viewing modes. Downsized exterior mirrors provide automakers with significant weight savings and fuel efficiency improvements. To further enhance safety, the Company's CMS solution can also work in conjunction with a vehicle’s side blind zone warning system. When a trailing vehicle enters a side blind zone, a warning indicator illuminates in both the interior and exterior mirrors, while the corresponding side-view video feed appears in the display until the vehicle passes.

In July 2016, a revision to UN-ECE Regulation 46 was published with an effective date of June 18, 2016, which allows for camera monitoring systems to replace mirrors in Japan and European countries. Since January 2017, camera monitoring systems are also permitted as an alternative to replace mirrors in the Korea market. As noted, China released an updated version of its GB15084, effective in 2023, which allows for camera monitoring systems, frameless mirrors and aspheric (free form) glass surfaces. Notwithstanding the foregoing, the Company continues to believe rearview mirrors provide a robust, simple and cost-effective means to view the surrounding areas of a vehicle and remain a primary safety function for rear vision today. Cameras, when used as the primary rear vision delivery mechanism, have some inherent limitations, such as: electrical failure; cameras being blocked or obstructed; depth perception challenges; and viewing angles of the camera. Nonetheless, the Company continues designing and manufacturing not only rearview mirrors, but CMOS imagers and video displays as well. The Company believes that combining video displays with mirrors may well provide a more robust product by addressing all driving conditions in a single solution that can be controlled by the driver. The Company has also previously announced that it continues development in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning. The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there is increased competition.

The Company began shipping Full Display Mirror® with Digital Video Recording ("DVR") capability in 2020. This mirror and system launched in the Japan market and combines the superior functionality of the Full Display Mirror® with the added capability to record video from the rearward facing and forward-facing cameras simultaneously. The data is stored to an SD storage card as requested by the customer. This integrated solution provides consumers with the features they want, while allowing the OEM to control the integration and execution in the vehicle. In the first quarter of 2025, the Company launched the Gentex ReVu app, which allows a user to connect to the mirror and download the images or recordings from the DVR to the app on the user's phone. Shipments to customers of this Full Display Mirror® with DVR to be used with the app are underway.

The Company's HomeLink® products are the auto industry's most widely used and trusted car-to-home communication system, with an estimated 50 million units on the road. The system consists of two or three in-vehicle buttons that can be programmed to operate garage doors, security gates, home lighting, and other radio-frequency-controlled devices. In 2017, the Company demonstrated the next generation of HomeLink®, commonly referred to as HomeLink app, which uses both RF and wireless cloud-based connectivity to deliver complete vehicle-to-home automation. With the HomeLink app, a HomeLink® button press communicates with the HomeLink app on the user’s smartphone. The app contains predefined, user-programmed actions, from single device operations to entire home automation scenes. The app, in turn, communicates to the home’s smart hub over the cloud activating the appropriate devices, including security systems, door locks, thermostats, lighting, and other home automation devices, providing comprehensive vehicle-to-home automation. The ability to prepare the home for arrival or departure can occur with one button press. For automakers, this functionality allows them to offer customizable, yet proven solutions without the engineering efforts or security concerns associated with integrating third party software into the vehicle’s computer network. The Company also continues work on providing HomeLink® applications for alternative automobile and vehicle types which include, but are not limited to, motorcycles, mopeds, snowmobiles, tractors, combines, lawn mowers, loaders, bulldozers, road-graders, backhoes, and golf carts. In 2021, the Company announced Volkswagen as the first automaker to offer Bluetooth® enabled mirror for home automation that works in conjunction with the HomeLink app®.

In 2016, the Company announced a partnership with TransCore to provide automobile manufacturers with a vehicle-integrated tolling solution that enables motorists to drive on nearly all U.S. toll roads without a traditional toll tag on the windshield. Currently more than 75 percent of new car registrations are in states with toll roads with over 50 million drivers accessing these roads each year. The interior mirror is the optimal location for a vehicle-integrated toll transponder, and it eliminates the need to affix multiple toll tags to the windshield and helps automakers seamlessly integrate toll collection into the car. Since the Integrated Toll Module® or ITM® enables travel across almost all United States toll roads, and others in North America, motorists would no longer need multiple toll tags for different regions of the country or to manage multiple toll accounts. The Company's vehicle-integrated solution simplifies and expedites local, regional, and national travel. ITM® provides transportation agencies with an interoperability solution without costly infrastructure changes to the thousands of miles of toll lanes throughout North America. The Company believes that this product can still represent another growth opportunity over the next several years.

The Company previously announced its first OEM award of ITM® with Audi. Currently, the Company is shipping ITM® on 11 Audi platforms, which are: the A4, A5, A6, A7, A8, Q5, Q5 Sportback, Q7, Q8, e-tron, and the e-tron Sportback. The Company expects further ITM® nameplate launches with Audi during 2025. The Company is also shipping ITM® to a second OEM customer, Mercedes, for the EQS model. In 2020, the Company was honored with an Automotive News PACE Award for its ITM® product, which recognizes automotive suppliers for superior innovation, technological advancement, and business performance.

Further, the Company has previously announced an embedded biometric solution for vehicles that leverages iris scanning technology to create a secure environment in the vehicle. There are many use cases for authentication, which range from vehicle security to start functionality to personalization of mirrors, music, seat location, and temperature, to the ability to control transactions not only for the ITM® system, but also the ride sharing car of the future. The Company believes iris recognition is among the most secure forms of biometric identification, with a false acceptance rate as low as one in 10 million, far superior to facial, voice, and other current biometric systems. The Company's future plans include integrating biometric authentication with HomeLink® and HomeLink® app. The biometric system will allow HomeLink® to provide added security and convenience for multiple drivers by activating the unique home automation presets of different authorized users.

In 2021, the Company announced a partnership, in the ordinary course of business, with Simplenight to provide drivers and vehicle occupants with access to enhanced mobile capability for booking personalized entertainment and lifestyle experiences in addition to everyday purchases. Simplenight delivers a customizable and robust platform that enables brands to globally offer real-time book-ability across multiple categories such as dining, accommodations, attractions, events, gas, parking, shopping and more. The platform is unique in that it is designed to seamlessly integrate into automaker infotainment and navigation systems, as well as mobile applications and voice assistants. Simplenight can be integrated into the Company's current and future connected vehicle technologies, including HomeLink®, which, again, is the automotive industry’s leading car-to-home automation system. HomeLink® consists of vehicle-integrated buttons that can be programmed to operate a myriad of home automation devices. Integration of Simplenight into the Company's HomeLink® app is underway and will allow users to program their HomeLink® buttons and control cloud-based devices from their vehicles.

Dimmable Devices

The Company previously announced that it is providing variably dimmable windows for the Boeing 787 Dreamliner series of aircraft. The Company continues to work with other aircraft manufacturers that have an interest in this technology regarding potential additional programs. In 2019, the Company announced that its latest generation of dimmable aircraft windows will be offered as optional content on the new Boeing 777X. In 2019, the first production shipments of variably dimmable windows were made to Boeing for the 777X program. As also previously announced, Airbus is now offering, as optional content, the Company's dimmable aircraft windows on its aircraft, with production having begun in 2021.

Medical

In 2020, the Company unveiled an innovative lighting technology for medical applications that was co-developed with Mayo Clinic. This new lighting concept represents the collaboration of a global, high-technology electronics company with a world leader in health care. The Company's new intelligent lighting system combines ambient room lighting with camera-controlled, adaptive task lighting to optimize illumination for surgical and patient-care environments. The system was developed over an 18-month period of collaboration between Company engineers and Mayo Clinic surgeons, scientists, and operating room staff. The teams researched, designed, and rapidly iterated multiple prototypes in order to develop unique features intended to address major gaps in current surgical lighting solutions. In 2024, the Company continued to further develop and work on the intelligent medical lighting system in order to assess system performance and work toward obtaining any necessary approvals.

In November 2023, in the ordinary course of business, the Company acquired certain technology assets from eSight. The technology acquired provides the most advanced and versatile low-vision smart glasses available for those with visual impairments and is compatible with more than 20 eye conditions including Macular Degeneration, Diabetic Retinopathy, and Stargardt disease. eSight4 is a Class 1 Medical Device that is registered with the FDA, registered with EUDAMED, and inspected by Health Canada. During the third quarter of 2024, the Company recorded its first official sales of medical devices from shipments of the e-Sight Go product.

Biometric Products

In November 2024, the Company acquired GalvanEyes, LLC, which is the managing partner and 50% owner of the BioCenturion joint venture with Eyelock, a subsidiary of VOXX. BioCenturion specializes in creating and deploying authentication solutions to help clients secure their worlds, optimize their workloads, and organize their data through customized biometric solutions. BioCenturion's significant IP portfolio, including more than 100 patents granted, patents pending, and proprietary technology enables a high-speed, convenient, touchless, contactless, frictionless, and secure authentication of individuals across different business verticals.

OTHER

Automotive revenues represent approximately 97% - 99% of the Company's total revenue, consisting of interior and exterior electrochromic automatic-dimming rearview mirrors and automotive electronics.

The Company has been, is being, and will continue to be impacted by tariffs, trade regulatory actions, and changes in international trade policies as further explained below.

The Company continues to experience pricing pressure from automotive customers and competitors, in addition to tariff increases, raw material cost increases, labor cost increases, and logistics cost increases, which will continue to cause downward pressure on its sales and profit margins. The Company works continuously to offset these supply chain issues and inflationary pressures with engineering and purchasing cost reductions, productivity improvements, increases in unit sales volume, and negotiations with customers to reduce the impact of the inflationary pressures, but there is no assurance the Company will be able to do so in the future.

Because the Company sells its products throughout the world, and automotive manufacturing is highly dependent on economic conditions, the Company can be affected by uncertain economic conditions that can reduce demand for its products, including the current inflationary environment. The Company has been likewise affected by industry-wide parts shortages and global supply constraints and labor shortages.

The Company believes that its patents and trade secrets provide it with a competitive advantage in dimmable devices, electronics, and other features that it offers for the automotive, aerospace, and medical industry. Claims of patent infringement can be costly and time-consuming to address. To that end, the Company obtains intellectual property rights in the ordinary course of business to strengthen its intellectual property portfolio and to minimize the risk of infringement.

The Company does not have any significant off-balance sheet arrangements or commitments that have not been recorded in its consolidated financial statements.

OUTLOOK

The Company’s current forecasts for light vehicle production for the second quarter of 2025, and full years 2025 and 2026, are based on the mid-April 2025 S&P Global Mobility forecast for light vehicle production in North America, Europe, Japan/Korea, and China. As a result of the current and expected tariff escalation in the China market, the Company has pro-actively halted production of interior and exterior mirrors destined for customers in the China market. Subsequently, many of the Company's customers based in China have canceled or paused orders, while the Company works with these customers to better understand their ability and willingness to pay elevated prices resulting from new tariff rates. Second quarter of 2025, and calendar years 2025 and 2026, forecasted light vehicle production volumes are shown below:

Light Vehicle Production (per S&P Global Mobility mid-April light vehicle production forecast)

(in Millions)

Based on the aforementioned light vehicle production forecast and the actual results for the first three months of 2025, as well as the pro-active decision of the Company to halt production and sales of product intended for the China market until customer agreements can be reached, the Company previously updated certain guidance for calendar year 2025 as shown below. Revenue estimates do not include any revenue from the recently completed merger with VOXX.

• Revenue in the Company's primary markets of North America, Europe and Japan/Korea is expected to be between $2.1 and $2.2 billion
• Revenue in the China market is expected to be between $50 and $120 million
• Gross Margin is expected to be between 33% and 34%
• Operating Expenses are expected to be approximately $300 to $310 million
• Estimated Annual Tax Rate, which assumes no changes to the current statutory rate, is expected to be between 15% and 17%
• Capital Expenditures are expected to be between $100 and $125 million
• Depreciation and Amortization is expected to be between $85 and $90 million

Due to ongoing volatility in customer orders and vehicle production volumes, uncertainty related to tariffs, the Ukraine-Russia war, Israel-Hamas war, supply-end labor shortages, and overall economic uncertainty, the Company believes that revenue remains difficult to forecast for the remainder of the year and beyond. Ongoing uncertainties remain, including: prolonged and intensifying trade wars, including the impacts of already in place and potential additional future tariffs, trade restrictions, and retaliatory measures; light vehicle production levels; impacts of regulation changes; automotive plant shutdowns; vehicle sales rates in Europe, Asia and North America; OEM strategies and cost pressures; customer inventory management and the impact of potential automotive customer (including their Tier 1 suppliers) and supplier bankruptcies; etc., all of which are disrupting and could further disrupt shipments to customers, disrupt global capital flows, and heighten market volatility.

The Company has withdrawn revenue guidance for calendar year 2026 due to the significant uncertainty surrounding the China market as a result of the impact of incremental tariffs on Company exports to China, the economic impact of import and export tariffs on the Company's primary markets, and work being done to finalize a more complete financial picture of the recently completed merger with VOXX. The Company anticipates providing updated revenue guidance for calendar year 2026 once there is further clarity in the overall tariff landscape.

In accordance with the previously announced share repurchase plan, the Company will consider the appropriateness of continuing to repurchase additional shares of common stock in the future in support of the capital allocation strategy, but share repurchases will vary from time to time and will take into account macroeconomic events, market trends, and other factors the Company deems appropriate (including the market price of the stock, anti-dilutive effect of repurchases, and available cash). As of March 31, 2025, the Company has 6.3 million shares remaining available for repurchase under the previously announced share repurchase plan.

Merger with VOXX

On April 1, 2025, the Company closed the strategic merger of VOXX, a global supplier of automotive and consumer electronics, as well as premium audio equipment. As of April 1, 2025, the Company expected to add between $325 and $375 million in revenue from the VOXX merger, on an annualized basis, and an expected revenue contribution to calendar year 2025 of approximately $240 to $280 million, before any impact from tariffs. As a result of recent tariff increases, the Company has notified its new customers from the VOXX merger of future price increases that will take effect throughout the balance of calendar year 2025. These price increases may create uncertainty in consumer demand for this year, which is anticipated to affect the expected revenue contribution from the VOXX merger. The Company is also undertaking strategic sourcing decisions that will take place throughout the next 6 - 12 months, which are designed to significantly reduce tariff expenses on incoming products from the China market.

CRITICAL ACCOUNTING POLICIES:

The preparation of the Company’s consolidated condensed financial statements contained in this report, which have been prepared in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and/or on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ from these estimates under different assumptions or conditions.

The Company has identified critical accounting policies used in determining estimates and assumptions in the amounts reported in its Management’s Discussion and Analysis of Financial Condition and Results of Operations herein and in its Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

The Company is subject to market risk exposures of varying correlations and volatilities, including foreign exchange rate risk, interest rate risk, commodity price risk, and tariffs. For the quarter ended March 31, 2025, any material changes in risk factors that were disclosed in the Company's report on Form 10-K for the year ended December 31, 2024 are set forth herein.

Fluctuating interest rates could negatively impact the Company's financial performance due to realized losses on the sale of fixed income investments and/or recognized losses due to an impairment adjustment on investment securities, as well as the impact on demand for light vehicles.

The Company has some assets, liabilities, and operations outside the United States, including euro-denominated and Chinese Yuan Renminbi accounts, which currently are not significant overall to the Company as a whole. Because the Company sells its automotive mirrors throughout the world, and automotive manufacturing is highly dependent on general economic conditions and the global supply chain, the Company has been and will continue to be affected by uncertain economic conditions in North American and foreign markets, including tariffs and inflation, that have reduced, and will continue to reduce, demand for its products, to the extent they persist.

The geopolitical environment between the Unites States and other jurisdictions, most significantly China, continues to cause uncertainty, especially in light of recently imposed incremental tariffs and tariffs threatened to be imposed, in addition to those already existing. One example of the impact on the Company is the proactive decision to halt production and sales of products intended for the China market until customer agreements can be reached. Company input costs are already affected by a variety of factors, including: economic and market conditions; inflation; changes in customer demand; supply shortages, constraints, and disruptions; interest rate changes; foreign currency fluctuations; industry actions; and uncertainties in vehicle production schedules, as well as the aforementioned tariffs, trade regulatory actions, and changes in international trade policies, agreements, and/or regulation and competitor activity. Previously enacted tariffs have already increased the Company's input costs and challenge the Company's competitive position. The Executive Branch of the U.S. federal government has suggested the possibility of even more tariffs and tariff increases. While the Company continues to assess the impact of the current tariff and trade environment, tariffs and trade disputes in the geopolitical environment have interfered with and have disrupted automotive supply chains. While further actions regarding tariffs or trade relations between the U.S. and other governments are impossible to predict, the current trade environment has already negatively impacted Company’s business, financial condition, and results of operations, especially since the Company primarily manufactures and ships from one location. Any continuance of tariffs currently in place and/or escalation of tariffs and trade disputes will have further adverse impact on the Company’s business.

Evaluation of Disclosure Controls and Procedures.

Under the supervision of, and with the participation of management, the Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of March 31, 2025, and have concluded that as of that date, the Company's disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in the Company's internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the quarter ended March 31, 2025 that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

SAFE HARBOR STATEMENT:

This Quarterly Report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The statements contained in this communication that are not purely historical are forward-looking statements. Forward-looking statements give the Company’s current expectations or forecasts of future events. These forward-looking statements generally can be identified by the use of words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “goal,” “guidance,” “hope,” “intend,” "likely", “may,” “opinion,” “optimistic,” “plan,” “poised,” “predict,” “project,” “should,” “strategy,” “target,” “will,” "work to," and variations of such words and similar expressions. Such statements are subject to risks and uncertainties that are often difficult to predict and beyond the Company’s control, and could cause the Company’s results to differ materially from those described. These risks and uncertainties include, without limitation: changes in general industry or regional market conditions, including the impact of inflation; import and export duty and tariff rates with the countries with which we conduct business; changes in consumer and customer preferences for our products (such as cameras replacing mirrors and/or autonomous driving); our ability to be awarded new business; continued uncertainty in pricing negotiations with customers and suppliers; loss of business from increased competition; changes in strategic relationships; customer bankruptcies or divestiture of customer brands; fluctuation in vehicle production schedules (including the impact of customer employee strikes); changes in product mix; raw material and other supply shortages; labor shortages, supply chain constraints and disruptions; our dependence on information systems; higher raw material, fuel, energy and other costs; unfavorable fluctuations in currencies or interest rates in the regions in which we operate; costs or difficulties related to the integration and/or ability to maximize the value of any new or acquired technologies and businesses; changes in regulatory conditions; warranty and recall claims and other litigation and customer reactions thereto; possible adverse results of pending or future litigation or infringement claims; changes in tax laws; negative impact of any governmental investigations and associated litigation, including securities litigation relating to the conduct of our business; and force majeure events. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made.

The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law or the rules of the NASDAQ Global Select Market. Accordingly, any forward-looking statement should be read in conjunction with the additional information about risks and uncertainties identified under the heading “Risk Factors” in the Company’s latest Form 10-K and Form 10-Q filed with the SEC, which risks and uncertainties include tariffs and supply chain constraints that have affected, are affecting, and will continue to affect, general economic and industry conditions, customers, suppliers, and the regulatory environment in which the Company operates. Includes content supplied by S&P Global Mobility Light Vehicle Production Forecast of April 15, 2025 (http://www.gentex.com/forecast-disclaimer).

Information regarding risk factors appears in Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part I – Item 2 of this Form 10-Q and in Part I – Item 1A – Risk Factors of the Company’s report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes to the risk factors previously disclosed in the Company’s report on Form 10-K for the year ended December 31, 2024, except to the extent described in Part I – Item 2 and Item 3 of this Form 10-Q, and otherwise herein.