Gentex (GNTX) Q4 2025 Earnings Call Transcript

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DATE

Friday, January 30, 2026 at 9:30 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Steve Downing
• Chief Financial Officer — Kevin Nash
• Chief Technology Officer — Neil Boehm
• Director of Investor Relations — Josh O'Berski

TAKEAWAYS

• Consolidated Q4 Net Sales -- $644.4 million, up 19% with $103.4 million from VOXX and core Gentex sales at $541 million, flat year over year.
• Primary Market Outperformance -- Revenue in core Gentex’s primary regions rose approximately 3% compared to a 2% decline in light vehicle production, creating a five-point outperformance gap.
• China Sales Decline -- Q4 sales in China totaled $34.5 million, down 33% driven by higher tariffs.
• Q4 Consolidated Gross Margin -- 34.8%, up from 32.5% (with VOXX held separate); core Gentex gross margin reached 35.5%, the highest since 2021, rising 300 basis points.
• Tariff Impact on Gross Margin -- Tariff-related costs reduced gross margin by approximately 150 basis points year over year in the quarter.
• Q4 Operating Expenses -- $104.4 million, driven by a $24.6 million increase from VOXX and $800,000 in Gentex severance costs.
• Q4 Income from Operations -- $120.1 million consolidated; core Gentex at $112.5 million, up 25.3%.
• Q4 Other Loss -- $8.7 million, versus $8 million other income last year related to a fair value VOXX investment adjustment.
• Effective Tax Rate (Q4) -- 16.3%, compared to 10.3% the previous year due to lower stock-based compensation tax benefits and reduced FDII deduction.
• Q4 Net Income -- $93 million, up from $87.7 million; diluted EPS was $0.43 versus $0.39.
• Full-Year 2025 Sales -- Consolidated net sales were $2.53 billion, up 10% with nine months of VOXX; core Gentex sales were $2.27 billion, down 2%, due to lower China demand.
• Full-Year Gross Margin -- 34.2% consolidated, up from 33.3%; core Gentex gross margin was 34.7%, 140 basis points higher.
• Full-Year Operating Expenses -- $392.8 million consolidated; core Gentex OpEx at $318.5 million (up from $311.4 million), including $10.4 million in Gentex-specific severance; VOXX OpEx was $74.3 million.
• Full-Year Other Loss -- $12.9 million, compared to $12.5 million other income prior year.
• Full-Year Effective Tax Rate -- 16.6%, up from 14.3% last year.
• Full-Year Net Income and EPS -- Net income was $384.8 million, down from $404.5 million; diluted EPS was $1.74, versus $1.76.
• Gentex Automotive Full-Year Sales -- $2.22 billion, down from $2.26 billion, as auto-dimming mirror shipments fell 6%.
• Other Segment Sales -- Fourth quarter net sales of $13.3 million, up from $10.3 million; full year $51.1 million (versus $48.6 million).
• Share Repurchases -- 3.8 million shares repurchased in Q4 ($23.43 average); 13.6 million shares for the year ($23.48 average), totaling $319 million.
• Cash Position and Investments -- Cash/cash equivalents at $145.6 million (down from $233.3 million); investments totaled $278.3 million (down from $361.9 million); declines primarily due to acquisition and buybacks.
• Q4 Operating Cash Flow -- $125.7 million compared to $154.4 million, primarily due to working capital changes.
• Full-Year Operating Cash Flow -- $587.3 million, up from $498.2 million, with higher levels attributed to working capital changes.
• Full-Year Capital Expenditures -- $126 million, down from $141.4 million the previous year.
• Dimmable Visor Product Update -- First customer launch secured, initial shipment targeted for 2027.
• Full Display Mirror (FDM) Volume -- 3.19 million units shipped, 8% increase from 2.96 million units; projected 200,000-400,000 unit increase in 2026.
• Guidance for 2026 -- Revenue expected at $2.6 billion to $2.7 billion, gross margin at 34% to 35%, operating expenses excluding severance at $410 million to $420 million, tax rate at 16% to 18%, capex at $125 million to $140 million, depreciation/amortization at $100 million to $110 million.
• 2027 Revenue Outlook -- Company expects revenue between $2.75 billion and $2.85 billion, with growth driven by core Gentex new product launches, DMS ramp, FDM growth, and initial dimmable visor sales.

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RISKS

• Steve Downing stated, "The risk factor is obviously what's going on in the China market, and does that deterioration continue to happen?" indicating ongoing uncertainty due to China export tariffs.
• Downing also noted, "The two biggest challenges you have going into 2026…are commodity pricing, especially as it relates to precious metals…The other big one is tariffs…those two in particular represent probably $45 or $50 million of headwinds when we start the beginning of the year."
• Gentex Q4 China sales fell 33%, attributed to tariff impacts, and full-year core Gentex sales declined 2%—management stated further China market headwinds are expected.
• Downing confirmed, "as OEM struggle on their cost side, that's one of the things they do look at is feature elimination to try to save money," regarding OEM decontenting, particularly of outside auto-dimming mirrors in Europe.

SUMMARY

Gentex (NASDAQ:GNTX) reported robust consolidated net sales growth for the quarter, largely due to the VOXX acquisition, while core Gentex sales remained flat amidst regional outperformances and a significant China decline. Gross margin expansion was realized from operational efficiencies and product mix, though tariffs and commodity costs emerged as substantial headwinds heading into 2026. Management executed disciplined capital deployment with substantial share repurchases, reduced net cash, and ongoing integration of VOXX, while announcing advanced new product launches and first-to-market technologies with production timelines into 2027.

• Gentex leadership indicated 2026 sales guidance includes no incremental revenue from dimmable glass products, with material contribution expected post-2027 following first customer visors.
• Product launches into Volvo, Polestar, and Rivian for driver monitoring systems laid groundwork for multi-year DMS revenue ramp, with two additional OEMs expected in 2026.
• On the VOXX acquisition, management targets approximately $40 million in annualized positive cash flow synergies, noting the business has transitioned to positive profitability since the deal; integration remains on track.
• DRAM and precious metal inflation are expected to increase input costs, with management actively negotiating recoveries with OEMs as component pricing remains elevated, particularly for driver monitoring and FDM technologies.
• Large-area dimmable device commercialization advances with in-house film production capability to begin in early Q2, allowing Gentex greater self-sufficiency and customer demonstration.
• Downing confirmed the current headcount is near optimal, with only market-driven adjustments expected if external conditions substantially worsen.
• Gentex stated there is no near-term revenue tailwind from onshoring, but acknowledged that global production complexity is increasing and that onshoring benefits may emerge over the next two to three years.

INDUSTRY GLOSSARY

• Electrochromic: Glass technology enabling variable tinting or dimming using an electrical charge, central to Gentex’s rearview mirrors and dimmable visors.
• DMS (Driver Monitoring System): In-vehicle systems employing cameras and sensors, integrated into mirrors, to monitor driver state and enhance safety.
• FDM (Full Display Mirror): A digital rearview mirror that provides expanded camera-based visibility and enhanced safety features for vehicles.
• VOXX: Acquired business unit specializing in consumer and automotive electronics, contributing materially to Gentex’s consolidated sales and OpEx.
• FDII (Foreign-Derived Intangible Income): U.S. tax deduction favoring income generated through the sale of certain goods or services to foreign markets; referenced in Gentex’s effective tax rate discussion.
• Decontenting: OEM practice of removing components or features, such as auto-dimming mirrors, to reduce manufacturing costs.

Full Conference Call Transcript

Steve Downing for our prepared remarks. Thank you, Josh. For 2025, the company reported

Steve Downing: consolidated net sales of $644.4 million, an increase of 19% compared to net sales of $541.6 million for the fourth quarter of last year. VOXX contributed $103.4 million of revenue during the fourth quarter, and the core Gentex revenue was $541 million. While core Gentex revenue was essentially flat compared to the fourth quarter of last year, our performance within our primary markets was notably stronger. Revenue in these regions grew approximately 3% compared to a 2% decline in light vehicle production, representing a five-point outperformance relative to the underlying market. Sales into China totaled $34.5 million for the quarter, down 33% from last year due to the impact of tariffs.

The consolidated gross margin in 2025 was 34.8% compared with a gross margin of 32.5% in the fourth quarter of last year, which did not include VOXX. The core Gentex gross margin was 35.5%, representing a 300 basis point increase compared to last year, and is the highest gross margin since 2021. The increase in gross margin was the result of favorable product mix, operational efficiencies, and purchasing cost reductions partially offset by tariff-related costs. The steady improvement in gross margin reflects the company's disciplined focus on cost control, productivity, and execution.

Over the last two years, we established and announced a target of getting back to the 35% to 36% gross margin range, and the team has accomplished this goal through unbelievable grit and determination despite the external headwinds. It is also interesting to note that the gross margin improvement was partially offset by incremental tariff-related costs, which reduced gross margin by approximately 150 basis points versus last year. Consolidated operating expenses during the fourth quarter were $104.4 million compared to operating expenses of $86.5 million in the fourth quarter of last year. The increase was primarily due to the VOXX acquisition, which accounted for $24.6 million of the increase. The core Gentex operating expenses included $800,000 in Gentex-specific severance expenses.

Over the last year and a half, the company has been focused on expanding the gross margin as well as improving our operating cost structure. This effort included early retirement programs aimed at decreasing headcount and reduced third-party spend to lower ongoing operating expenses while making sure our key technology and product initiatives continue to move forward. Consolidated income from operations for the fourth quarter was $120.1 million compared to income from operations of $89.8 million last year, which did not include VOXX. Core Gentex income from operations was $112.5 million, a 25.3% increase versus the fourth quarter of last year. Total other loss was $8.7 million during the fourth quarter compared to other income of $8 million last year.

Last year's gain was from a fair value adjustment of our original investment in VOXX. During the fourth quarter, the company had an effective tax rate of 16.3% compared to an effective tax rate of 10.3% last year. The increase was driven by lower tax benefits related to stock-based compensation, as well as a reduced benefit from the foreign-derived intangible income deduction. Consolidated net income was $93 million, compared to $87.7 million in the fourth quarter of last year. Earnings per diluted share in the fourth quarter were $0.43 compared with earnings per diluted share of $0.39 last year, which did not include VOXX.

For calendar year 2025, the company's consolidated net sales were $2.53 billion, an increase of 10% compared to net sales of $2.31 billion in calendar year 2024. The consolidated revenue includes nine months of VOXX-related revenue. Core Gentex sales were $2.27 billion for the year, a 2% decline versus last year, primarily driven by lower demand for the company's exports into the China market due to tariffs. In the company's primary regions, revenue increased by approximately 1% despite a 1% decline in light vehicle production. For calendar year 2025, the consolidated gross margin was 34.2% compared to a gross margin of 33.3% last year, which did not include VOXX.

The core Gentex gross margin was 34.7%, a 140 basis point increase compared to last year. Gross margin improvements were the result of purchasing cost reductions, operational efficiencies, and favorable product mix, which were partially offset by tariff costs that were not reimbursed during the year. The gross margin expansion was exceptional, especially when considering that the 140 basis point gain was achieved despite lower sales and new tariff-related headwinds that were not fully offset during the year. For the year, consolidated operating expenses were $392.8 million. Core Gentex operating expenses were $318.5 million in comparison to $311.4 million last year. Core Gentex's operating expenses this year also included $10.4 million in Gentex-specific severance expenses.

VOXX operating expenses were $74.3 million from April through year-end. Total other loss was $12.9 million for 2025, compared to other income of $12.5 million last year. For calendar year 2025, the company's effective tax rate was 16.6% compared to an effective tax rate of 14.3% last year. The rate increase was driven by reduced tax benefits related to stock-based compensation as well as a lower benefit from the FDII deduction. Consolidated net income for calendar year 2025 was $384.8 million compared to income of $404.5 million last year. Earnings per diluted share this year was $1.74, compared to earnings per diluted share of $1.76 last year. I will now hand the call over to Kevin for further financial details.

Thanks, Steve.

Kevin Nash: Gentex Automotive generated $527 million in net sales during 2025, compared to $531.3 million in 2024. Despite a 3% quarter-over-quarter decline in auto-dimming mirror shipments. For the full year 2025, Gentex Automotive delivered $2.22 billion in net sales, compared with $2.26 billion in 2024, even as auto-dimming mirror shipments declined 6% year-over-year. This performance highlights the company's ability to sustain strong revenue levels driven by ongoing content expansion. In our other category, which includes dimmable aircraft windows, fire protection products, medical products, and biometrics, fourth-quarter net sales were $13.3 million, up from $10.3 million in the prior year. And for the full year, other net sales were $51.1 million compared to $48.6 million in 2024.

VOXX contributed $103.4 million in net sales during 2025, $267.2 million for the nine-month period from April 1 through December 31. The fourth quarter reflected expected seasonal and sequential increase tied to holiday period demand. And post-acquisition integration remains on track.

Steve Downing: With product strategies aligning

Kevin Nash: customer engagement strengthening, and operational synergy efforts progressing across the combined businesses. Turning to capital allocation. We repurchased 3.8 million shares in the fourth quarter at an average price of $23.43. And for the full year, we repurchased 13.6 million shares at an average price of $23.48.

Steve Downing: Totaling $319 million. We entered the year ended

Kevin Nash: ended the year with 35.9 million shares remaining under our repurchase authorization. Turning to the balance sheet. Our comparisons today are based on 12/31/2025, versus 12/31/2024. Starting with liquidity, cash and cash equivalents were $145.6 million, down from $233.3 million at year-end 2024. This decline was primarily driven by the acquisition and share repurchases partially offset by operating cash flow. Short-term and long-term investments totaled $278.3 million compared to $361.9 million at the end of 2024. Accounts receivable, at $368.5 million compared to $295.3 million at year-end 2024. Of that, $390.6 million was

Operator: attributable to Gentex.

Steve Downing: And $77.9 million to

Kevin Nash: Inventories totaled $516.3 million, which $392.2 million represented core Gentex inventory. Down from $436.5 million at year-end 2024. Largely due to reductions in raw material inventory. The remaining $124 million reflects VOXX inventory. Consolidated accounts payable was $249 million compared to $168.3 million at year-end 2024. Including $159.3 million for Gentex and $89.6 million for VOXX. Preliminary cash flow from operations for the fourth quarter was $125.7 million compared to $154.4 million in the same period last year, primarily due to changes in working capital. And operating cash flow for the calendar year 2025 reached $587.3 million, up from $498.2 million in 2024. Also driven by changes in working capital.

In the fourth quarter, net capital expenditures were $17.5 million compared to $38 million in the fourth quarter of last year. And for the full year, net capital expenditures were $126 million compared to $141.4 million in the prior year. And lastly, depreciation and amortization expense for the fourth quarter was $25.2 million, compared to $23.8 million in Q4 last year. And on a year-to-date basis, depreciation and amortization totaled $104 million, up from $94.7 million in the prior year. I'll now hand the call over to Neil for a product update. Thank you, Kevin.

Neil Boehm: 2025 was another strong launch quarter. In the quarter, over 85% of the launches were advanced interior and exterior auto-dimming mirrors and electronic features. Driver monitoring, HomeLink, and full display mirror were the products driving the greatest growth of the advanced feature launches for the quarter. We're excited to announce that in 2025, we began shipping driver monitoring systems to both Volvo and Polestar. It's an exceptional accomplishment for the Gentex team in that these driver monitoring mirrors contain the full system of cameras, LED emitters, processing, and Gentex-developed software to perform the required features. This was a great achievement, and the team did an outstanding job getting the product to market.

At the start of 2026, we once again exhibited at the Consumer Electronics Show in Las Vegas. The show floor provides an excellent format for meeting with our customers, suppliers, investors, and consumers, all while demonstrating our latest technologies and capabilities. This was our eleventh year at the show and by far our biggest. With four distinct booths, we were able to showcase our eSight medical product, our connected smoke detection system, Place, the new technologies and audio from Klipsch and Onkyo, and the evolution of our technologies and strategies of our core automotive business.

At our combined VOXX and Premium Audio Company booth, Klipsch celebrated its eightieth anniversary by debuting the next generation of its iconic fives, sevens, and nines powered speakers. Its new Atlas series of Hi-Fi headphones, the newest frontier in Hi-Fi speakers in its reference signature and Apollo series, as well as a preview of the Element outdoor soundbar. Additionally, the team showcased its vision for premium Onkyo AV receivers with a wide assortment of new products on display. Launching this many new products was a heavy lift, but the team did a great job, and these new products received 26 awards from the show.

In the main Gentex booth, the primary products were our next-generation full display mirror, dimmable sun visors, sunroofs, HomeLink six, our Place smart home safety system, and our driver and in-cabin monitoring systems. This year at CES, the product that drove the greatest interest from all groups visiting the main booth was the dimmable visor. Utilizing our core electrochromic technology, our visors reduce sun glare while allowing drivers to still see what's ahead. We showcased multiple integrations of the vanity mirror, including a mirror surface covering the entirety of the visor that could be turned on or off.

OEM interest in our dimmable visor technology has never been higher, and we're pleased to announce that we have our first customer in launch with a target to begin shipping in 2027. We believe this is the first of many customers who will incorporate this technology into their vehicles. Full display mirrors continue to develop with the market. It's the auto industry's leading digital rearview mirror, having shipped on more than 140 different vehicles around the world. At this year's CES, we demonstrated our next-generation full display mirror, which incorporates the company's dynamic view assist. A series of dynamic viewing modes that can enhance driving safety and make using the digital mirror feel more natural.

By utilizing a higher resolution imager, full display mirror can automatically expand the mirror's digital view when the vehicle is moving slowly. It can digitally tilt downwards when the vehicle is in reverse, it can display picture-in-picture functions like showing what's in your blind spots or what's in the cargo bed of your truck. There was a lot of excitement and interest in the next phase of full display mirror, and we're excited to get the launches moving. In 2025, Full Display Mirror continued to expand as a share of our overall business as we shipped 3.19 million units, representing approximately an 8% increase compared to the 2.96 million units shipped in 2024.

Looking ahead to this year, we expect full display mirror to grow by an additional 200,000 to 400,000 units. To help showcase our driver and in-cabin sensing technologies at CES this year, we developed an all-new demonstrator. That was able to show the primary DMS features while also demonstrating our 2D and structured light-based 3D cabin monitoring for detecting passengers, objects, and even the presence of life. Additionally, we demonstrated our latest software suite containing emergent features like cognitive state recognition, impairment detection, vital signs monitoring, and post-crash communications. Our driver monitoring and in-cabin monitoring systems continue to gain traction as they provide a scalable, easy-to-deploy, mirror-integrated platform. In 2025, we announced we were shipping to Rivian.

And we began shipping to Volvo and Polestar in 2025. By 2026, we expect to be in production with two additional OEMs. As we look forward into 2026, it's clear that light vehicle production in our primary markets will remain mostly flat. With this prospect, the Gentex teams will continue to focus on how we can drive greater efficiencies in our processes, improve our pricing with suppliers, and mitigate tariff impacts while we continue to ramp up for the launch and production of complex technologies like large array devices and visors. We have an outstanding team here at Gentex, and I'm confident in our ability to continue to drive improvements while we advance the technology as well.

I'll now hand the call back over to Steve for guidance and closing remarks. Thanks, Neil.

Steve Downing: The company's 2026 and 2027 light vehicle production assumptions reflect the S&P Global Mobility mid-January 2026 forecast for North America, Europe, Japan, Korea, and China and was included in our press release from earlier this morning. Based on the S&P Global Mobility forecast, market conditions in our primary markets, the continued impacts on the China market from tariffs, the expected incremental sales contribution from the VOXX acquisition, the company is providing detailed annual guidance for 2026 and revenue guidance for 2027. Consolidated revenue for 2026, including VOXX, is expected to be between $2.6 billion and $2.7 billion. Consolidated gross margin is anticipated to be between 34% and 35%.

Consolidated operating expenses, excluding severance, are forecasted at $410 million to $420 million. The effective tax rate is expected to be between 16% and 18%. Capital expenditures are projected at $125 million to $140 million, and depreciation and amortization is expected to total $100 million to $110 million. Additionally, based on the current S&P Global Mobility light vehicle production outlook and the company's estimates for VOXX, premium audio, aerospace, medical, fire protection, and consumer electronic products, the company currently expects calendar year 2027 revenue to be between $2.75 billion and $2.85 billion. We came into 2025 with a focus on growth and improving profitability and hoping for a stable end market.

Instead, we were confronted with a dynamic marketplace, including headwinds created by the volatility of tariffs, counter tariffs, weakening production in our primary markets, and cost inflation. Despite these challenges, our team delivered impressive results. In April, we completed the VOXX acquisition and have addressed most of the integration challenges. We are also well on our way to accomplishing our planned cost improvement initiatives that we believe will ultimately yield approximately $40 million per year in positive cash flow from the VOXX business.

In our core business, our teams reduced costs, improved efficiency, and expanded profitability resulting in gross margins at the highest level in several years, and accomplishing our stated goal of returning to 35% to 36% gross margin levels. This year, our sales teams were able to offset a 29% year-over-year sales decline in China through increased sales in our primary markets that outperformed the market by 3% despite the turbulence in those markets. These results reinforce my confidence in our team's ability to persevere through unforeseen and volatile circumstances and to adjust rapidly to changing business conditions and environments. The market conditions in 2025 remind us of one key takeaway: growth must come from innovation.

The team is answering that challenge with focus and determination. Despite the market conditions and the focus on cost alignment, the team has continued to launch and develop our next wave of products that include new driver monitoring systems, our next generation of full display mirrors, large area devices, our first production award for dimmable visors, and a whole new product lineup within the premium audio group, that won numerous awards at the Consumer Electronics Show. Our strategy is to continue to leverage our core to drive above-market growth through existing and new technologies. This growth combined with our cost discipline will allow us to create shareholder value for years to come. That completes our prepared comments for today.

We can now proceed to questions.

Operator: Thank you. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment for questions. Our first question comes from Luke Junk with Baird. You may proceed.

Luke Junk: Good morning. Thanks for taking the questions. Maybe just for starters,

Steve Downing: Steve, if we could just square the downside and upside risk relative to the revenue guidance range, outgrowth as we went through last year, of course. A little uneven on a quarter-by-quarter basis, how you're thinking about some of those impacts that we saw last year, vehicle and true mix. And maybe anything customer-specific that we should keep in mind as well. Thank you.

Steve Downing: Yeah. I think if you look at overall, the yeah. You're absolutely right. First of all, 2025 was definitely lumpy in terms of what was happening, not only regionally, but with our customer base. I think if you look at the upside or kind of the tailwinds behind that forecast, you start to see some stability in the North American market. We you know, there's definitely some upside for that market to improve or be a little better than production estimates. I mean, if you look at where it's been the last few years, it's definitely been towards the lower end of probably what we'd expect to be an economically stable production environment in North America.

If you look at the Western Europe side, that's probably the next biggest opportunity for us to see some improvements. There definitely seems to be some stability there. Definitely not as bad as what probably I thought it was coming into 2025. It definitely performed a little better than I thought. The risk factor is obviously what's going on in the China market, and does that deterioration continue to happen? And then the last one for us is we do have some pretty good exposure to Tesla as a customer. You know, what continues to be the role of Tesla as it relates to EV and the acceptance rate of those vehicles globally.

We've been a long-term partner with them and definitely have some out risk on an OEM basis with Tesla.

Luke Junk: Got it. Maybe switching gears to margins, you know, gross margin for 2025 and

Steve Downing: total.

Luke Junk: If my numbers are ended up being about 30 bps above the high end of your guidance with the 4Q upside. Can we just unpack what was better than expected over the last couple of months of the year the fourth quarter versus where you guided? And then what is sustainable as we walk into 2026? Or is there anything that we should be making sure that we adjust for coming out this quarter?

Steve Downing: Yeah. What I'd say is on the positive sides,

Luke Junk: the product mix

Steve Downing: operational efficiencies, labor yield, all the things internally were really solid, especially in the fourth quarter. PPV and the pricing out of the supply base was solid. If you look on the negative side, obviously, tariff impact in the second half of the year was a lot larger than it was in the first half. A lot of that was not reimbursed in the quarter. And so that was that 150 headwind in Q4 was really pretty significant when you look at overall performance. For us to hit that mid-35s, despite those headwinds was yeah, obviously tells you kinda what the upside could be longer term if we can get the tariff situation completely under control.

Luke Junk: Yeah. DRAM, obviously, getting a lot of headlines in auto. Maybe if you could just comment on what you're seeing in the supply chain right now or relative to pricing trends and any internal efforts that you might be working on from an engineering standpoint? And would I be right in assuming that there's some direct exposure here in terms of the FDM bill of materials, especially?

Neil Boehm: Yeah, Luke. So in regards to the FDM, that uses the DDR3 technology. So it's a little older technology. So we from a supply side, there's not a lot of risk on that. But there is just from a pricing side. Pricing on RAM with these issues that popped up gone through the roof. On pretty much every version of that component. On the DDR4, there is a little bit of exposure in that as well from DMS product, driver monitoring product that we're doing from a supply side. We've got allocation. We've got parts to build and ship. But we are working on ultimate supply sources as well to alleviate that any risk associated with that.

Luke Junk: Got it. I'll leave it there. Thanks, Neil.

Operator: Thanks. Thank you. Our next question comes from Mark Delaney with Goldman Sachs. You may proceed.

Mark Delaney: Yes. Thank you very much for taking the questions. I was hoping to also ask a question around gross margin, but with respect to the 2026 guidance and hoping you could walk us from the 2025 level to 2026, which is pretty flattish year over year. You just reported very strong 4Q gross margins. You just spoke a bit about some of the drivers there. But can you talk a bit more on puts and takes for 2026? It sounds like there's more opportunity to go on tariff recoveries. You've also, I think, have some opportunities with VOXX as you work on the integration there.

But then there's been, obviously, some of these challenges like DRAM that you were just referring to. So any more on the puts and takes and bridging to 2026 outlook would be helpful.

Steve Downing: Yeah. Absolutely. So if you look at if you look at the performance exit rate for the last six months of 2025, that's kind of our base case going into 2026. And so we continue to see on the headwind side, obviously, you got customer pricing challenges like we always have. But on the tailwind side, you have supplier pricing that should improve. The two biggest challenges you have going into 2026, however, are one of them are commodity pricing, especially as it relates to precious metals. So our exposure typically runs silver, gold, and ruthenium. Obviously, ruthenium, most people don't follow. But silver and gold are pretty obvious issues.

I'm also expecting a little bit of challenge as it relates to copper and some of the things that are happening in that marketplace, especially their impact on circuit boards and other electronics. The other big one is tariffs. So we'll have a full year of tariff rates, and some of those have changed since the beginning of 2025. And so, if you look at the weighted average, you really only had about six months of the full weighted average of tariffs this year versus a full twelve months next year. So those two in particular represent probably $45 or $50 million of headwinds when we start the beginning of the year.

Mark Delaney: Okay. Understood. My other question was on China, and you've spoken a bit already on what you've seen in the China market directly. Maybe you stick a bit more on what you're expecting for China this year up but then higher level as we're seeing the Chinese OEMs continuing to expand beyond the China market, to what extent do you think Gentex can sell to those OEMs as they're selling into markets like Europe? Thank you.

Steve Downing: Well, I think on the China market, what our primary focus right now and what we're expecting to happen is continued a little bit of headwinds for us exporting into the China market. And that's primarily driven by the fact that the content and the tariff rates just don't support that additional cost on given how high those tariffs are for us to be able to operate under that business model and sell into the China market. At least at the levels we have in the past.

As you look as you start talking about Chinese OEMs and their role in the rest of the world production, I think that's a big function of is it cars produced in China and exported to those markets, or are they cars produced by Chinese OEMs domestically in the markets they're selling? And the reason why I separate the two is if we're shipping into the China market for manufacturing, and then export, that still will be a difficult business model to engage in.

On the flip side of that is Chinese OEMs, if they grow capacity in the Western world or in other parts of Asia, and we can ship into those regions at a better duty rate, then we absolutely have a better chance of being competitive and have and a way for us to sell into those customers.

Mark Delaney: Yeah. And so you just you know, a quick follow-up there. I mean, as you're seeing some of the Chinese OEMs start to set up factories outside of China, are you already getting interest in using your products and making progress? Or is that something you'd still have to accomplish going forward?

Steve Downing: No. There's they most of those customers have worked with us in the past, and as they look to expand footprint into other regions, we're absolutely on their list of suppliers.

Operator: Okay. Thank you.

Mark Delaney: Thanks, Mark.

Operator: Thank you. Our next question comes from Josh Nichols with B. Riley Securities. You may proceed. Yeah. Thanks for taking my question, and great to see the

Josh Nichols: robust margin expansion. That's already been touched on, but I guess between, like, you've been talking a little bit about some new commercialization wins that are gonna be ramping up CMS also and dimmable glass longer term. When you look at, like, the 2027 guidance that you kind of put out there now, I think that implies, like, 6% growth. Like, what's your expectations that are being built into that return in terms of the ramp for BMS, China recovery, and the Google Glass in terms of, like, revenue contribution overall?

Steve Downing: Yeah. So if you look at the 2026 revenue has virtually nothing in it from has nothing in it from dimmable glass. So I mean, other than existing aerospace products.

Operator: But if you look at

Steve Downing: know, the rest of it, we're anticipating continued decline in exports into the China market. You know, no help from dimmable glass. Obviously, revenue in 2026 will start to see some tailwinds from the DMS launches. Right now, they're fairly immaterial between the two OEMs that we're shipping on currently. Once we add those other two, it starts to become material. The real impact of that will be in 2027 and beyond.

Josh Nichols: Got it. And then, in terms of the commercialization timelines, it's great to hear you already have your first customer, like, the Pfizer, but additional larger opportunities like sunroof, side windows, things like that, What's an update on that?

Neil Boehm: Yeah. So the interest in, large obviously, the Pfizer stuff is great. The excitement in that is truly ramped up in the last twelve months and since CES even higher than So we're super excited about that and being able to expand on that from a larger device side. Customer side, customer engagement still is really strong. Interest levels are really strong. In this quarter, I think we announced that last quarter, we were in process of getting capital in place to be able to do our own coding processes on film substrates, which is required for this. That equipment is in house and in process of being assembled and installed.

So we're hoping by the Q1 here that we'll be starting to build off material And on this line, we'll be able to start building material that we can start using with customers to demonstrate production capability.

Steve Downing: Think the key important difference there is, visors that is basically our core chemistry. And so from a timing to market, it can be a quicker go to market because it basically leverages what we've done in mirrors and in aerospace.

Josh Nichols: Thanks. Yeah. Interesting to see how that progresses because know, obviously, be a very significant growth driver similar to kind of what that PM was if you go back Last question for me would just be on the VOXX integration path. I know you said you've been targeting this $40 million plus. Like, how much of that work is already done? Is it showing any material profitability, or do you expect a lot of those synergies to kind of be realized by, like, the 2026?

Kevin Nash: Yeah. I think if you look at where we came from, it was the business that was breakeven to lose money. And then if you look at 2026, you know, we're probably about halfway there. We'll we feel like that it will continue to ramp The teams have been hard at work at finding opportunities The PAC team, the Klipsch team is just getting ready to launch some new products kinda midyear into the last part of the year, will help boost sales growth, improve margins. And then everybody's hard at work on kinda trimming up the cost side. So, we feel like we're pretty well halfway to 60% of the way there. In 2026 and then coming into 2027.

Steve Downing: For a run rate at that at that level. Well, if you look at the profitability Q4, if you look at the VOXX standalone financials, you can if you annualize what Q4 was, we're in a pretty good shape already going into 2026 to be basically halfway there. Then it's about trying to get beyond that. During calendar year 2026 and then the 2027.

Josh Nichols: Appreciate it. Thank you. Thanks, Josh. Thank you.

Operator: Our next question comes from Joseph Spak with UBS. You may proceed.

Joseph Spak: Thanks. Good morning, everyone.

Kevin Nash: Couple questions. First, just

Josh Nichols: on 5% grower in calendar

Kevin Nash: if you were to look at a full run rate. Year for 2026. Okay. So then if we think about core Gentex,

Steve Downing: that's

Kevin Nash: pretty flattish, or maybe even down a little bit. Is that is that the right way to think about it? No. GenTex is up about two to three. competitor. We're looking at production down one. Core Gentex was up. Production that's down just as a my as a

Josh Nichols: For the year. Yeah. We're really two for the Primary markets. Primary markets. Yeah.

Steve Downing: Yeah. Okay.

Kevin Nash: The and then the OpEx up year over year, obviously, part of that again, another quarter of VOXX. Anything else to consider in the OpEx outlook? No. Really, that's the one thing is the one quarter of pretty much flat year over year. a combined entity. I mean, if you look at the core Gentex operating expenses, they're

Josh Nichols: Okay.

Luke Junk: Last quarter, you had sort of talked about

Kevin Nash: of the I know this was sort of touched on a little bit with Mark's question with the Chinese into Europe, but you talked about some European content thing. Is there is there any sort of update on what you're seeing from some of your customers there? The revenue in the quarter was actually reversed. So I think some of that was anomaly given some of the shutdowns in Q3 with some of the larger of the European customers. But that's decontent thing is continuing as it relates to some of the ones that we discussed before. But the volume in the quarter was

Steve Downing: actually reversed. And that and that and just to be clear, the decontent primarily focused on outside auto-dimming mirrors. A lot of it is passenger side. Elimination. And so, you know, as OEM struggle on their cost side, that's one of the things they do look at is feature elimination to try to save money.

Joseph Spak: Okay. Thanks. I'll I'll pass it on. Joe. Thank you.

Operator: Our next question comes from James Picariello with BNP Paribas.

James Picariello: Just have a question first on the walk to the 2027 revenue growth. So

Josh Nichols: for this year in 2026, you're pointing to maybe, yeah, 1% core growth against your core markets down 2%. Right? And then for 2027, this influx a bit. Right, in terms of your growth over market. So

Steve Downing: just curious on that bridge. And does

Josh Nichols: VOXX potentially outpace that growth rate, like, more than its

Kevin Nash: know, pro rata share or not necessarily? Thank you.

Steve Downing: No. I well, like Kevin mentioned, a minute ago, I think we would view it as more like two to 3% core Gentex growth, in 2026. And part of the inflection that you see in terms of that performance in 2027 isn't overweight VOXX at all. It's actually, gents core Gentex. And the Gentex portion of that growth is really gonna be driven by some of the full years of the DMS launches that Neil talked about, some continued FDM growth. And then by the end, not that it's material, but at the end, we start looking at, Pfizer sales actually starting to hit the income statement as well.

James Picariello: Got it.

Josh Nichols: Okay. And then apologies if I missed this, but is there an expectation to recover the $19 million or $20 million of net tariff headwind that you incurred this past year in 2025. And then just how are you thinking about free cash flow and buybacks for the So we Thank you. So the yeah. No problem. Thanks, James.

Steve Downing: The on the first on the tariff side, yeah, our intention is to recover as much of that as humanly possible. Now some of that may be like, indirect in terms of how we get it. Some of the customer negotiations are direct, you know, PO to PO you know, price increases to cover the tariff impact. Some of them are, you know, delaying APRs or not giving price downs. In exchange. It's just dollars to us, so we try to just negotiate the best deal for each of our customers that makes sense for them and for us. Sorry. And then, yes, a second question there too, James. Cash flow there. Oh, cash flow. Yeah.

So, obviously, if you look at cash flow, this year, it was at the highest level we've had in a long time. And so our goal is to continue to focus on cash flow. We've done a great job of that, and buybacks are obviously one of the primary uses of cash flow when we're successful on generating it.

James Picariello: Thank you.

Josh Nichols: Thanks, James.

Operator: Thank you. Our next question comes from Ryan Brinkman with JPMorgan. You may proceed.

Ryan Brinkman: Great. Thanks for taking my question. I wanted to ask on China.

Joseph Spak: When do you see that your sales are softer in that region due to the abnormally high tariff rates you're facing. Are the customers mostly foregoing the use of electrochromic mirrors? Or they maybe turning to domestically produced alternatives, which I think might be lower end, maybe less desirable? But lower cost. I ask because I'm curious what your expectation is. Should the tariff rates eventually normalize lower in terms of your ability to maybe see a rebound in revenue from that market?

Steve Downing: Yeah. If I think if tariff rates drop significantly, then we would be right back in a good position to compete in that space. On the second part of your question about what are the alternatives, I would say it's probably a two-thirds, one-third type scenario, which is two-thirds of the time, domestic Chinese OEM is just dropping the technology. And about a third of the time, they're using a local a local supplier out of the domestic China market to try to replicate the products that we were selling.

Ryan Brinkman: Okay. That's helpful. Thanks. And, then on the DRAM issue discussed earlier, I mean, it sounds like it's not going to really impact vehicle production. Certainly, nothing like the chip shortage. But you did reference some higher costs, and I assume those were higher costs to Gentex, as you acquire, the components. But what is your expectation in terms of the completeness or timing differences in terms of, you know, maybe being compensated by cost customers for those higher memory costs.

Neil Boehm: Yes. I think that's a great question. I think from a memory side, that's one of the items that we still got go back from a customer perspective, just like the tariffs in go some of these DRAM cost points are multiples of where they used to be from a pricing. So they are something we're gonna have to go back to the customer base and negotiate increases in compensation for And a lot of times, like, we did during the other supply shortage is once they became available, we would work with OEMs ahead of time saying, what do you want us to do? Right.

Steve Downing: If a chip is $4 and now it's trading for $40, obviously, the supply base can't eat that on their own. So you know, an OEM has to help us with the determination of are they willing to you know, pay that extra that extra premium to guarantee production. And so we've historically worked with them proactively when we find chips available. Luckily, we've had to do less of that than a lot of the a lot of the supply base unfortunately, had to

Ryan Brinkman: Okay. Very helpful again. Thank you. And then just lastly, is there an update you can provide on the dimmable sun visors? Did I hear you say you're looking to launch that product, I think, before sort of large area dimmable glass and what progress you might have made it

Neil Boehm: Yeah. The dimmable visor, we'll we've got our first customer on board. In launch, and we'll go to production in late 2027.

Ryan Brinkman: And on large area devices,

Neil Boehm: the update was around the equipment we talked about last quarter, getting in the wet coat capability in house so we're not dependent on outside suppliers. For making the films so that the material the that equipment is in house being installed, started last week, and the plan is for that to be up and operational late Q1, early Q2 so we can start producing some of our own films, to give us better film quality to be able to keep that product moving forward.

Ryan Brinkman: Thank you.

Joseph Spak: Welcome.

Kevin Nash: Thanks, Ryan.

Operator: Thank you. And as a reminder, to ask a question, please press Our next question comes from David Whiston with Morningstar. You may proceed.

David Whiston: Hey, guys. On the, headcount reductions,

Luke Junk: sounds like they're the latest ones we hear about are more on the Gentex side. I'm just curious, is that where you want it now, or do you see more file packages needed this year?

Steve Downing: If sales if sales continue on the path that we believe they will, we're really close to the right head count that we need to be. The fundamental change, obviously, would be driven by market conditions. So in other words, if the market continues to soften, then obviously, we'd have to react to that. But as of right now, we've 90% of everything we need to do to be ready to go for 2026.

David Whiston: Okay. And on the core gross margin,

Luke Junk: going beyond 35% to 36%, is that at all realistic to think about is that really just a very best case scenario long term assuming

Josh Nichols: constant tariff environment?

Steve Downing: Yeah. It's a really kind of best case scenario, especially your point, especially regarding what happens with the tariff environment. I mean, if that were to go away overnight, then obviously, I think there's a lot of opportunity. You know, on the upside. But given the what's happening with the pressure metal side right now and with tariff environment, it seems, that 35 that thirty five thirty six seems like a really good spot

David Whiston: And just last question. Any major pickup in business due to automated on shoring some production back into The United States because of tariffs?

Steve Downing: No. There's a lot of conversation. We haven't seen anything drastic yet in terms of tailwinds from that. It does add some it does add some complexity because on the flip side of that conversation is what about on shoring on Europe and other places where those customers are asking for any help they can get to eliminate you know, duty and tariff implications on exports into those regions. So you know, the business is definitely becoming more complex over the next several years. I think most of those tailwinds that are gonna help on the onshoring side are still out two to three years before you'll see any change, in revenue because of that those decisions.

David Whiston: Okay. Thank you. Thanks, David. Thanks, David.

Operator: Thank you. I would now like to turn the call back over to Josh O'Berski for any closing remarks.

Josh O'Berski: Awesome. Thank you, everyone, for your time and questions today. This concludes our call.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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