Good day, and thank you for standing by. Welcome to the Gentex First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star, then zero. I would now like to hand the conference over to your host today, Josh O'Bersky, Director of Investor Relations. Please go ahead, sir. Thank you. Good morning, and welcome to the Gentex Corporation First Quarter 2022 Earnings Release Conference Call. I'm Josh O'Bersky, Gentex Director of Investor Relations, and I'm joined by Steve Downing, President and CEO, Neil Boehm, Vice President of Engineering and CTO, and Kevin Nash, Vice President of Finance and CFO. This call is live on the Internet and can be reached by going to the Gentex website and at ir.gentex.com. All contents of this conference call are the property of Gentex Corporation and may not be copied, published, reproduced, rebroadcast, retransmitted, transcribed, or otherwise redistributed. Gentex Corporation will hold responsible and liable any party for any damages incurred by Gentex Corporation with respect to any unauthorized use of the contents of this conference call. This conference call contains forward-looking information within the meaning of the Gentex Safe Harbor statement included in the Gentex report's first quarter 2022 financial results press release from earlier this morning and is always shown on the Gentex website. Your participation in this conference call implies consent to these terms. Now I'll turn the call over to Steve Downing, who will get us started today. Steve? Thank you, Josh. For the first quarter of 2022, the company reported net sales of $468.3 million compared to net sales of $483.7 million in the first quarter of 2021. For the first quarter of 2022, global light vehicle production decreased approximately 5% when compared to the first quarter of 2021. Additionally, light vehicle production in the company's primary markets of North America, Europe, and Japan/Korea declined by 11% on a quarter-over-quarter basis. These declines were primarily a result of the ongoing industry-wide component shortages and global supply chain constraints. The company has been dealing with the impacts of component shortages and supply chain constraints since the beginning of 2021, which is why our forecast for the beginning of this year was more conservative than the original IHS Markit estimates for light vehicle production. During the first quarter of 2022, we saw estimated light vehicle production decline by over 4% versus the beginning of the quarter. While the effects of the electronic component shortages improved slightly during the first quarter of this year, our concerns about the lingering impact on light vehicle production were well-founded. Our first quarter 2022 sales improved sequentially from the fourth quarter of 2021, but were still below the level suggested at the beginning of the quarter based on IHS Markit estimates and the release data from our customers. Despite the lower-than-planned sales levels in the first quarter, the industry backdrop and the underproduction of light vehicles over the last year should create the opportunity for an improving sales environment as we move throughout the rest of 2022. For the first quarter of 2022, the gross margin was 34.3% compared to a gross margin of 37.9% for the first quarter of 2021. Gross margins were impacted in the quarter by raw material cost increases, elevated freight expenses, labor cost increases in response to a tight labor market, lower-than-expected sales levels, and ongoing customer order volatility. Considering the inflationary pressures in our business right now, the gross margin was within 70 basis points of our annual guidance range for gross margin performance, despite the fact that sales for the first quarter are expected to be at the lowest level of the year. The company is in active discussions with our customers about the inflationary aspects of our business and how to best formulate long-term collaborative relationships that provide the opportunity to minimize the impact of these inflationary pressures on our business model while preserving the ability to grow through the introduction of new innovative products. We fully expect that these discussions will extend throughout calendar year 2022 and even into 2023. Operating expenses during the first quarter of 2022 increased by 15% to $57.1 million compared to operating expenses of $49.6 million in the first quarter of 2021. ER&D expenses during the first quarter of 2022 increased 16% compared to the first quarter of 2021, primarily due to additional staffing and professional fees related to new product development and the ongoing product redesigns necessary to mitigate electronics part shortages. On a quarter-over-quarter basis, SG&A expenses were up primarily due to increases in outbound freight expense and the return of in-person customer meetings and trade show-related expenses. Income from operations for the first quarter of 2022 was $103.3 million compared to income from operations of $133.7 million for the first quarter of 2021. During the first quarter of 2022, the company had an effective tax rate of 15.3%, which was primarily driven by the benefit of the foreign derived intangible income deduction and discrete benefits from stock-based compensation. Net income was $87.5 million for the first quarter of 2022 compared to a net income of $113.5 million for the first quarter of 2021. The change in net income was primarily the result of the quarter-over-quarter changes in sales, gross margins, and operating profits. Earnings per diluted share for the first quarter of 2022 were $0.37 compared to earnings per diluted share of $0.46 for the first quarter of 2021. I will now hand the call over to Kevin for the first quarter financial details. Thank you, Steve. Automotive net sales in the first quarter of 2022 were $458 million, compared with $475.6 million in the first quarter of 2021, and auto-dimming mirror unit shipments decreased 7% during the quarter compared to the first quarter of 2021. Other net sales in the first quarter of 2022, which includes dimmable aircraft windows and fire protection products, was $10.3 million, compared to other net sales of $8.1 million in the first quarter of 2021. Fire protection sales increased by 46% for the first quarter of 2022 compared to the first quarter of 2021. Dimmable aircraft window sales decreased by 20% for the first quarter of 2022 compared to the first quarter of 2021. The company continues to expect that dimmable aircraft windows sales will be negatively impacted until there is a more meaningful recovery of the aerospace industry and the Boeing 787 aircraft production levels improve. Share repurchases. During the first quarter of 2022, the company repurchased 2.44 million shares of its common stock at an average price of $29 per share for a total of $71.3 million. As of March 31st, 2022, the company has 22.4 million shares remaining available for repurchase pursuant to its previously announced share repurchase plan. The company intends to continue to repurchase additional shares of its common stock in the future in support of the previously disclosed capital allocation strategy, but share repurchases may vary from time- to- time and will take into account macroeconomic issues, including the impact of the COVID-19 pandemic and supply constraints, market trends, and other factors the company deems appropriate. Let's take a look at a few key balance sheet items. The balance sheet items mentioned today are valued as of March 31st, 2022 and are compared to December 31st, 2021, unless otherwise noted. Cash and cash equivalents were $279.7 million, up from $262.3 million, primarily due to cash flow from operations and investment sales, which were partially offset by share repurchases, dividend payments, and capital expenditures. Short-term and long-term investments combined were $182.7 million, down from $213.1 million. Accounts receivable was $281.5 million, up from $249.8 million due to the sequential increase in sales. Inventories were $362.7 million, which increased from $316.3 million. The majority of this change is in raw materials. The company continues to take a conservative position related to raw materials inventory. With ongoing supply chain issues, component shortage issues, in addition to customer order volatility, the company has taken on additional components of certain medium and long lead time items to help manage risk. When the supply chain constraints start to alleviate and the component shortages begin to abate, the company will evaluate the proper levels of inventory at each commodity level. Lastly, accounts payable increased to $140.9 million, up from $98.3 million, primarily due to increased inventory purchases and capital expenditures. Let's take a quick look at the cash flow statement for the quarter. First quarter of 2022 cash flow from operations was $106.9 million, compared with $190.8 million in the first quarter of 2021. Operating cash flow was impacted by the lower net income quarter- over- quarter, as well as increases in receivables and inventory. Capital expenditures for the first quarter of 2022 were $17.2 million, compared with $12.6 million for the first quarter of 2021. Lastly, depreciation and amortization for the first quarter was $24.7 million, compared with $25.6 million for the first quarter of 2021. I'll now hand the call over to Neil for a product update. Thank you, Kevin. In the first quarter of 2022, there were 21 net new nameplate launches of our interior and exterior auto-dimming mirrors and electronic features net of previously disclosed feature headwinds. There was a significant growth in launches of base interior auto-dimming mirrors for the quarter, with approximately 60% of these base mirrors launching in the China market. As we've talked about before, launching base auto-dimming mirrors is extremely important for our growth of features. They enable us to grow the content and scale across platforms. Now for an update on our Full Display Mirror product. At the completion of the first quarter of 2022, we started shipping Full Display Mirror on five additional nameplates, and we're excited to announce that in the first quarter of 2022, we began shipping Full Display Mirror to our 12th OEM, Ferrari, and our 13th OEM, Ford. With Ferrari, we began shipping Full Display Mirror on the 812 and the SF90 Stradale. For Ford, we started shipments for the Ford Transit Custom. Also in the quarter, we started to ship Full Display Mirror for the Aston Martin Valkyrie and for Land Rover on the new Range Rover. As of the end of Q1 2022, we are shipping Full Display Mirror on 70 vehicle nameplates. Here's a comprehensive list of the OEMs and the number of nameplates where we are currently shipping FDM. General Motors, our initial launch customer, has 25 nameplates shipping. For Toyota, we're now shipping on 16 nameplates. At Jaguar Land Rover, we are currently shipping on 8 nameplates. We are shipping FDM on five nameplates for Jeep and RAM. Both Subaru and Nissan are currently shipping FDM on three nameplates. Aston Martin, Mitsubishi, and Ferrari are all shipping FDM on two nameplates. Ford, Mercedes, Fiat, and Maserati all have FDM shipping on one nameplate. As we look forward to the second quarter and the balance of the calendar year, we realize that many of our customers' expected launches of new vehicles may be affected by the current shortages. However, based on the demand for Full Display Mirrors, we anticipate we will have approximately 10 additional nameplate launches and an additional OEM to announce over the remainder of 2022. In summary, even with the current challenges our industry is facing, our launches and product rollouts are strong, and we believe we are positioning the company with the technology and product portfolio that will drive growth into the future. I'll now hand the call back over to Steve for guidance and closing remarks. Thank you, Neil. The company's current forecast for light vehicle production for the second quarter of 2022 and full years 2022 and 2023 are based on the mid-April 2022 IHS Markit forecast for light vehicle production in North America, Europe, Japan, Korea, and China. Light vehicle production in these markets is expected to be flat for the second quarter of 2022 versus light vehicle production for the second quarter of 2021. For calendar year 2022, our press release had a formula error this morning that showed European light vehicle production with the incorrect volume for calendar year 2021 as 13.02 million vehicles instead of the correct volume of 15.89 million vehicles. Based on this updated volume for the last year, the forecast for light vehicle production in our primary markets of Europe, North America, Japan, Korea, and China is forecasted to increase 4% when compared to calendar year 2021. The company continues to expect that revenue will remain difficult to forecast for the remainder of the year as a result of high levels of volatility in customer orders and vehicle production volumes, electronic supply chain constraints, the Ukraine-Russia conflict, labor shortages, and overall economic uncertainty. Based on the previously mentioned light vehicle production forecast, the company is making no changes to its previously provided guidance for calendar year 2022, as shown in today's press release and is as follows. Revenue for 2022 is expected to be between $1.87 billion and $2.02 billion. Gross margins for the year are expected to be between 35%-36%. Operating expenses are currently forecasted to be approximately $230 million-$240 million. Our estimated annual tax rate, which assumes no changes to the statutory rate, is forecasted to be between 15%-17%. Capital expenditures for 2022 are expected to be between $150 million-$175 million, and depreciation and amortization is forecasted to be between $100 million-$110 million. Additionally, based on the company's forecast for light vehicle production for calendar year 2023, the company still expects calendar year 2023 revenue growth of approximately 15%-20% above the 2022 revenue guidance. While we are optimistic given the sales level achieved during the first quarter and what we expect to be increased revenue levels throughout the remainder of the year, we have also seen increased levels of volatility in customer orders in recent weeks, stemming from the electronic supply chain shortages and OEM shutdowns. The company has devoted significant resources to product reengineering that has allowed us to maintain consistent supply to our customers and clear the path for better revenue levels throughout 2022 and 2023. While the inflationary aspects of our business will continue to be a challenge over the next several quarters, we believe our recipe of outgrowth versus the underlying vehicle production market will create record sales levels that will allow us to leverage our overhead to help offset some of the cost increases we have seen recently. We believe that this combination of record level sales, when combined with our consistent and disciplined capital allocation philosophy, will result in excellent shareholder returns over the next several years. That completes our prepared comments for today. Thank you for your time, and we can now proceed to questions. Thank you. If you have a question at this time, please press star then one on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, please press the pound key. Our first question comes from the line of Luke Junk with Baird. Your line is open. Please go ahead. Good morning, and thanks for taking the questions. First question from me this morning to start. Wondering if you could help us unpack flat sequential gross margins this quarter. Typically, you'd be looking at gross margin compression in the first quarter due to the timing of annual price downs, which was not the case this quarter. Higher sales obviously helps, but what other strings were you able to pull to operationally drive that result? Thank you. If you- Go ahead. Go ahead, Kev. Yeah. Sequentially, the real improvement was in sales levels. We did have some price downs from customers, which is typical, but our fixed overhead levels improved from the fourth quarter to the first quarter. We were able to offset. We did have a little bit better performance on the freight and tariff situation from Q4 to Q1. Not a ton, but that helped offset some of the pricing reductions that we did have. It was primarily based on overhead if you go from Q4 to Q1 margin. Okay. Second question. With respect to the Full Display Mirror, specifically, assuming that eventually we do see improvements in chip supplies begin to materialize in the second half, as everyone in the auto industry, of course, is hoping, just wondering how or if that changes your strategic approach here? Are you able to play a little more offense in the nearer term? Are there any cost considerations that could come into account in terms of streamlining production or whatnot? Just trying to capture all the relevant variables as it relates to chips and the FDM. Thanks. Yeah, I think right now the only thing suppressing FDM demand is our ability to get components. If indeed this does start to get better in the second half of this year, which we hope so, then you would see some positive pressure on FDM volumes in the back half of the year. We've had incidences already throughout this last couple quarters, you know, where we've had to tell OEMs that we can't increase volumes to the level they would like because there's just not availability of components. As we've been struggling just to make sure we hit the current shipments, obviously the concept of growing that more than what we'd already been planned is very difficult. That would be one of the positive aspects. Obviously, on the negative side, what goes with the shortages is the cost containment issues. If you look on a year-over-year basis, the gross margin decline, a good portion of that's driven by cost increases that we've seen, and a lot of that's come on the electronic supply side. As we move forward out of this year and into next year, we think there's some positive momentum on the product side. We hope that that will carry over, you know, obviously in out years and continue to be positive demand from our customer and consumer base for that product. What we have to work on obviously is the cost containment side to make sure that we get the costs in line with where OEMs expected us to be at this time and at these volumes. Thanks for that. If I can just squeeze one more question in this morning, a cost-related question. As I look at over the broader industrial landscape, folks that follow the freight market closely are starting to warn of a potential downturn there, which could result in falling spot rates, better availability, et cetera. Given that your production is concentrated in Zeeland, to what extent would any loosening in the freight market help the company? Both, wondering if you could comment in terms of quantitative terms, dollar costs currently in the P&L, and then qualitatively in terms of your day-to-day operations as well. Thank you. Well, if you look at there's two distinct aspects of freight that have caused us pain really over the last two years. The first is on the incoming freight side, and that obviously is reflected in the gross margin calculation. Kevin, I would say there's probably a good at total over the last two to three years, at least $3 million-$4 million increase in freight costs on the incoming side. That, if things were to reverse and go back to where they were pre-COVID, we'd see obviously a tailwind there. On the sales expense side is where we see a lot of freight expense that goes to finished goods to our customers. I would say that's probably another good $4 million-$5 million on outgoing freight that we've incurred over the last two years, and that's on an annual basis. If indeed that does happen, which we truly hope so, I mean, obviously that would help provide some offset to some of the cost increases that we've seen recently. Great. I'll go ahead and leave it there. Thank you. Thanks, Luke. Thank you. Our next question comes from the line of David Whiston with Morningstar. Your line is open. Please go ahead. Thanks. Good morning. I guess first on, in the press release, you called out some increase in headcounts around hiring for R&D. I was just curious, what talent are you looking for there that caused you to need to hire? The vast majority of what we were referencing there was really in Neil's team. Specifically, we've seen increased expenses on the software and on electronics design side. That's really been, in the last two years, a lot of Neil's group's resources have been towards product redesigns. We have a firmed up, you know, schematic for an FDM product, for instance. Then what happens is we find out that there's two or three components that are constrained. Even though the product's hardened, fully validated in production, his team goes back and then has to do what historically we've had happen very rarely, which is go back and redesign the entire schematic to get around the two, three, four, five components that are in short supply. The problem with this is that it not only is that happening, but it's happening multiple times on the same products because it is a, I hate to use the terminology, but it's somewhat of a rolling brownout on the component supply side, where you hear about three or four components, you redesign, you revalidate, you're back into production, and then three months later, you find out that there's different components that are now constrained and you have to go redesign again. That's been driving a portion of the increase in headcount. The other one is quite frankly, the positive side of that story, which is looking at the new products and new features and the launches and the launch cadence increasing. It's just the normal work that comes with growth in our business. I know one new market for you is nanosensing. Do you have adequate talent there from the acquisitions you made, or do you need to add more people in that area? No. The team both on the nanosensing side and with our team in Israel have both been looking at additional talent acquisition. There have been some increases in headcount in both of those locations to help us expedite the development of both of those technologies. For the most part, Neil's team is pretty adequate and staffed in Zeeland to help support those and the launch of those when they're ready for production. On unit volume this quarter, the international side outside North America got hit a lot harder. I was just curious, is that primarily due to the German plant shutdowns from no wire harnesses from Ukraine, or was it just other things like the chip shortage more? It was the European impact was definitely heavily impacted by the wire harness issues from Ukraine. The rest, Japan, Korea got hit really hard. That was more about other underlying economic issues and component issues. Obviously less for the Asian customers on the Ukraine wire harness issue and more about just systematic problems in the industry, especially on the electronic supply side. Okay, thanks. Thank you. Thank you. Our next question comes from the line of James Picariello with BNP Paribas Exane. Your line is open. Please go ahead. Hey, good morning, guys. Morning. Morning, James. Congrats on the solid start to the year. Can we just confirm what's baked into the full year guide? It was my understanding last quarter, IHS was at +8%. You guys were thinking about a range, I think closer to up 5%-6%, you know, correct me if I'm wrong there. Then, you know, now IHS is +4%. Is this in line with your view? You know, where does the company's internal range fall out? I think, you know, one of the clear conclusions to draw is that your product and content mix is starting to recover, you know, after a tough year specific to Gentex last year. You know, would, of course, be curious to get your take on that. No, you're exactly right. I mean, one of the reasons why we called out our pessimism about the IHS volume coming into the year was that, you know, we didn't see the market conditions able to support that level of volume. Even though demand was there, the supply base wasn't gonna be able to keep up, and we think that the IHS numbers that are now kind of moved down closer to what we were estimating, and even a little lower than what we thought light vehicle production would be, is more than we expected this quickly in the year. We thought it would take a little longer in the year for that, those estimates to kind of get closer to ours. The good news is that, you know, if you look at our range of revenue growth or total revenue for the year, it still puts us well inside of that range that we provided previously. You know, we feel like our conservative approach coming in and our guide were well aligned around some continuing problems that we expected this year, and there's nothing that happened in the first quarter that takes us outside of that guidance range. We feel, you know, like that our conservative approach has really set us up well to be able to hit those numbers. Got it. Just to clarify then, your LVP assumption, your internal assumption would be closer to where IHS is now, and then the positive offset would be better mix. Yeah, correct. Like we mentioned in Q1, we actually did a little better than we thought. We knew we had customer orders and releases that showed that level of sales. Historically, what we had seen is a lot of order volatility. January and February were really solid. OEMs basically gave us their releases, and they came very close to those. March got a little more volatile once the conflict picked up and some other things happened. For the most part, Q1 was very close to what our beginning of year estimates were. Got it. I think, you know, the second quarter here from an LVP standpoint should trend down sequentially, but you guys are calling for, you know, the first quarter to be the low-water mark for the year. I just wanna kind of get your take on, you know, what, you know, how you're thinking about the first half, second half split cadence for the year, you know, in terms of the top line and margins. Yeah, we think, you know, if you look at Q2, typically, if you look at our year and I know it's always difficult to look at historical cadence of a vehicle cycle and then compare it to what's happened in the last two years or so. If you look at normally for us, Q3 tends to be one of our biggest quarters. You know, right now, our internal forecast would tell you that Q3, you know, should, you know, the year should continue to build up to Q3, and then you usually see a little bit of a tail off in Q4 just due to holidays and less shipping days towards the end of the year, you know, given the amount of holidays and shutdowns that happen. That's currently what our forecast is still showing. Kind of a return to normal cadence this year. We truly believe that Q1 will be the smallest quarter, assuming that the rest of this, the light vehicle production forecast that we're looking at holds up even remotely close to reality. Great. Just one last one. Has your assumption in terms of the net impact for, you know, inflationary costs versus your recovery seems like a very fluid dynamic, right, in terms of the negotiations. Has your net assumption changed at all versus last quarter's guide? You mean our overall gross margin assumption or ASP? Just in, you know, the inflationary costs are going up, right? Yeah. You mentioned that in your prepared remarks. Just wondering in terms of the recovery, are you offsetting that? Has the net impact, the cost versus your recovery, has that changed in this guidance versus last quarter's guidance? No, it hasn't changed in the guidance. What I would say, there's been underlying all that, there's been a couple changes. The cost increase side has been worse than we initially anticipated, but we've been able to come up, to Kevin's point, of some operational efficiencies that have helped offset some of that. Obviously, you know, labor cost is more expensive now than it was before, and that's escalating quicker than we had assumed, you know, kinda at the end of last year. But overall, we've come up with some cost savings initiatives that will allow us to offset some of those. Obviously, they're still negatively impacting overall gross margins on a year-over-year basis, and so you know, we've got a lot of work to do to try to keep that from getting any worse than it is currently. We feel like we're doing all the right things, and by that, I mean, not just addressing the cost structure to try to minimize the impact, but not necessarily cutting off our ability to continue to grow with our customers. There's a, you know, there's a healthy conversation that has to have about inflationary costs and what does that mean to not only our customers, but the consumer. You're trying to make sure that you're not cutting off that relationship and limiting your ability to sell longer term, new features, new content. Yeah. Appreciate it. Thanks, guys. Thank you. Thanks, James. Thank you. Our next question comes from the line of David Kelley with Jefferies. Your line is open. Please go ahead. Hey, good morning, guys. Good morning. Good morning. I believe you noted some slight improvements in electronic availability in the first quarter. Are you seeing those constraints continue to ease? Albeit it's early here in the second quarter? We were curious if you're seeing any incremental tightness in recent weeks related to some of the COVID restrictions we're seeing in China? I'll start with the electronics one, and then I'll kind of kick it to Neil quickly. How I would describe the electronics component shortages is if you back up into mid last year, you know, maybe at times we were 50-100 different components you were dealing with concerns around. Some of those weren't immediate unavailability of the products, but they were things that were definitely constrained that you knew you had to do something about in order to either the supplier had to come up with a mitigation plan or we had to redesign. The number of components we're dealing with on a daily basis right now isn't as high. The issue, though, is that when they do happen, they're more severe and more immediate. Mm-hmm. You're getting less lead time about how much, you know, forewarning you get before you need to make and address the issue. That's been the difficult part. Yes, it's eased in the sense that there's not as many components that you're watching all at one time. The difficulty is that you have less time, and they tend to be more severe when they do happen. Neil, if you wanna comment, feel free. But Yeah. No, I think the only part of that would be, right, it's they're not as frequent, right? When they do happen, it's the lead time, the amount of effort to convert that product. There's never a drop-in replacement for the ones now, so the amount of effort to convert that new problem part is significantly higher than what we had seen before. The last part of your question was on the China situation. As it relates to Gentex in the China market, there has been some constraints as it relates to our ability to, one, be in the plant working. You know, they have different levels of shutdowns, and we've had to have people at home for the last couple weeks, and they're just starting to open that back up to be able to start producing customer orders. But it has caused a little bit of a disruption. You know, I guess any benefit is that it's a smaller part of our business right now. But I would expect the broader industry to have an impact. Well- As a result of the last few weeks. Yeah. That's an awesome lead in, too, David. One thing we should call out is we have team members in our China facility. You may have read an article about Tesla talking about people staying at the factory. A few weeks ago, we had this happen in Shanghai. We had a bunch of employees who volunteered to stay at our plant, stay there for days, to be able to continue to meet shipments for our customers. This last shutdown, that's not been as effective in terms of the options weren't necessarily there to allow that to happen. However, we have been able to make some shipments and keep up with our JV OEMs by shipping directly from Zeeland into the China market, so that our parts that are in our Shanghai facility could stay there but not shut down OEMs. We've been able to mitigate as many of these as possible, due to the very strong shutdowns that are happening in the Shanghai area currently. Okay. Got it. Thank you. That's helpful. Maybe just to follow up on the FDM discussion, and Neil really appreciates kind of the color on the OEM shipments. Can you remind us of your total FDM unit volume in 2021 and how you've been thinking about the ramp into 2022 here? Let's go back to 2020. It was about 1.2 million units. 2021 was 1.44 million units. What we've always talked about is, you know, somewhere in the 200,000-300,000 units a year, 200,000 units a year of FDM that we see continued growth with. Obviously, the component shortage and the stuff Steve talked about customers wanting more and not being able to supply it can have an impact on that number. That's about what we've been using as our guidance. Like Neil mentioned, demand would actually be higher than that if the component availability wasn't as big of a factor. Okay. Got it. Are you seeing any meaningful shift in Full Display ASPs just in light of some of the new launches and new customers coming down the pipe? Yeah. We have seen actually a lot of volatility. If you look at the first couple years of FDM, we are basically launching the same type of product for most OEMs. In other words, it had the same types of graphics processing, similar sized LCDs, a lot of the same backbone and structure and content. Over the years that we've been launching this for multiple OEMs, every OEM comes with a different perspective of what kind of product they're looking for. What you'll see is a much wider variation in average selling price. Some of these are designed around lower cost models. In other words, less graphics processing, less software running in them, less capability of the FDM itself and how much manipulation of the information on the camera feed is going to happen. What we've been able to do is actually attack some of the lower end portions of the vehicle market with more cost-effective solutions but still have high-end, slightly more elegant, more complex designs for luxury vehicles. Just to clarify, Neil's number on FDM, we reported 1.123 million units. Anytime he has numbers, we can't trust him. Speak it from the guy who had the LVT. Error. On LVT. We would expect the growth to come from that 1.12 million units we reported for 2021. Okay. Perfect. Thanks, guys. I'll pass it along. Thank you. Thank you. Thank you. Our next question comes from the line of John Murphy with Bank of America. Your line is open. Please go ahead. Good morning, guys. Morning, John. I just wanted to follow up on the outlook. I mean, you know, I understand you guys were more conservative with your initial outlook. You know, a lot has changed in the world, right? Ukraine was invaded, and there's rolling shutdowns in China on COVID, rates are spiking, inflation is going up. I mean, there's a lot of things that, you know, even the most pessimistic person you know wouldn't have necessarily anticipated that explicitly. It just seems like something is on a micro basis and on your product side must be going much better than you initially anticipated. I mean, is there something else going on here, you know, other than just the general conservatism to start the year? Yeah, I think, yeah, you're absolutely right. I mean, you know, we tended to be conservative because of a number of things, you know, going on in the background that just always gives us pause as automotive suppliers. I think on the product side, what's really pulling us strongly into the next couple years is FDM growth and OEC growth. If you look at our outside auto-dimming mirror numbers, they have been absolutely growing very quickly over the last couple years. Even if you take kind of the COVID shutdowns and that out of it, if you just kind of flatline that and look at where it would've been on a compounded growth basis, the numbers we're seeing right now are the fastest growth rates we've seen in OEC in a long time. Okay. All right. I mean, it sounds like your product and based on vehicle mix and wins is running much stronger. I mean, were there any sort of notable wins? I know you mentioned a lot of your launches in China in the quarter. Were there, I mean, are there any, you know, big wins in the quarter that were rolling on, you know, significantly that we should be thinking about that would continue? I mean, obviously you're high in FDM and OEC, but I mean, just. Yep. Trying to see if- Yeah, I think the one on the OEC side that stands out. I mean, FDM has really been growing with all of our customers. I mean Yep If you look at, I mean, that one's kind of broad-based, and you can see the nameplates, and you see the interest that that product's getting in the field. The one that's a little quieter but has been growing a lot is our business relationship with Tesla, especially on outside auto dimming mirrors, has really been benefiting our outside mirror business. We're doing very well with them as a customer. They package the product very well and it's led to a lot of growth for us in the last 18 months. That's, I mean, it's not just glass, but I mean, that's more on the glass side. They're doing the final assembly, right, on the exterior itself, right? Well, we have a Tier 1. Yeah, we have Tier 1s that we sell to for Tesla, so we're doing just the outside auto-dimming element, and then the Tier 1s take care of the shell and the housing. Yep. Yep. Oh, okay. You didn't, I don't think you mentioned them in the FDM list. Is there potential there for the, with them? We hope so. I mean, right now we don't have, you know, we don't have anything that we're shipping to Tesla currently. Obviously, with the growth that Tesla has put up, honestly, they've handled the component shortages better than they've been able to, you know, handle that a lot better than many others. We would love to have, obviously, work on increased business with them and more technology with them. Okay. Second question just on the discussions with OEMs. It sounds like there's just a greater receptivity to collaborate on the pressures the industry, you know, is facing and it's, you know, hitting you guys harder than it is them because they can pass through pricing. What's changing there? We're hearing this from other suppliers as well. It just seems like there's just greater receptivity to, you know, help out on raws and, you know, expedited freight and ocean freight and, you know, extra costs from volatility. I mean, what's really changing there? Well, I honestly think part of it is, and I hate to say it because it sounds negative, but you know, desperation has caused everyone in the industry to look at things differently than what we would have before and say, you know, the normal ways of attacking problems probably aren't gonna get the results that we would like. OEMs now know that there's plenty of consumers. Like you mentioned, they do have some pricing power right now with their consumers, and so the ability to get a car produced, that's something you know a consumer wants is the utmost objective right now. I think you know it's been fun to watch OEMs adjust to the changing market conditions quicker than probably the industry would have years ago. That's created some opportunities. Hopefully, those changes are lasting in that once the component shortages aren't the primary focus, how do we react to consumers on the desire for technology and content and make sure that we're getting consumers what they want? 'Cause one thing we know for sure is that, you know, ASPs have held up very, very well in this industry, you know, on a vehicle price to a consumer and there's been some pretty significant increases over the last couple years. There's definitely a desire for a good portion of this market to have technology, and then how do we collaborate on bringing that right technology to the consumer faster and in a form factor that they appreciate. Just lastly, I mean, usually these disastrous periods in the industry lead to a lot of lessons learned on a micro basis, and it leads to much better margins on the other side as the volumes ultimately come back. I mean, you know, can you kinda highlight what you think the key lessons are, you know, that you learned here? If we, you know, without giving, you know, 2023 and 2024, you know, margin guidance or out year guidance, but, I mean, do you think that there is the potential for potentially higher margins, at least for a while as you finally get the operating leverage that might come from volume increases late this year, but probably more in 2023 and 2024? Yeah, I think it's probably more in that 24 range 'cause you got a couple years here of price increases that, you know, the capacity on the electronic side needs to increase significantly before you start to get to a deflationary, you know, pricing model for electronics. So that'll take some time. However, you're right. At the higher growth rates, there's obviously some operational efficiencies that can be gained through the higher sales levels. So those do start to help and hopefully in the shorter term, that's where you'll see us be able to stabilize margins, is really on our internal side. So operationally, getting leverage on our R&D, SG&A, and then more importantly, on the pure throughput basis. In other words, as volumes go up, there are operational efficiencies associated with just building more of the same type of part numbers and products. That's what we're focused on right now. We know we can't change the overall commodity space in the short term, so we kinda have to weather that storm and then pick the right partners. In terms of life lessons and what we've learned, I usually just joke that there's nothing to be learned other than love pain. In all- That's called endurance. Yeah, in all sincerity, I think the harsh reality is that how suppliers have handled this is gonna dictate who partners with who in the future. This will take years to pick those partners and relationships. You know, on the electronics component side, you know, certain suppliers have done better than others at communicating early to allow you to adjust, and OEMs are starting to pick preferred partners on the electronic side as well. As a supplier, our objective has to be to get to know who each OEM wants in their product designs. The way the industry's worked for a long time is, you know, we'll design something, kinda show up with a black box. We've already got... Neil's team's already got a good schematic of this, our processing platform we wanna use. Well, if you show up to an OEM who's been overly impacted by that supplier on the, on a tier II or tier III side, they may look at it and say, "Hey, you gotta redesign this whole thing if you wanna sell to us." We have to do a better job of understanding those relationships early and making sure we have a more flexible design platform to be able to change it quickly to address, you know, OEM's preferences for micro platforms. Okay. Great. Thank you very much. I appreciate it. Thank you. Thanks, John. Thank you. Our next question comes from the line of Josh Nichols with B. Riley. Your line is open. Please go ahead. Yeah, thanks. I mean, great to see the company reaffirm, right, given that all the developments, global macro headwinds have kind of come about over the last few months. Clearly, you're right to kind of fade the initial IHS forecast. But I did wanna ask, what are your thoughts about the 9% light vehicle production growth forecast that is out there for next year, given that, you know, you have high fuel prices, interest rate risk and things like that? What are the puts and takes for next year when you think about light vehicle production? 'Cause you've historically done a good job at kind of handicapping that. Yeah. I think you summed up our biggest risk factors. We think as you move into 2023, the component side will become less. It's not that there'll be no story around components still in 2023. There still will be some problems and constraints there, but I think it'll be less of the conversation. Personally, if I had to gamble on this one, I would say the bigger portion of the conversation around total light vehicle production is gonna come down to interest rates, macroeconomic conditions, and what happens to demand. I think the interesting part is if you look at the amount of cash that's been infused in global economies over the last two years, there obviously is a price to pay for that. Everyone experiences it on the inflationary side. Inflation is really just the tip of the iceberg when it comes to long-term economic impacts from you know monetary policy changes. That's probably the one that would keep me up the most at night is saying, "Okay, what does this look like with the interest rate changes that are already being discussed for the next two months?" Those will start to affect availability. I mean, you'll start to see it first in housing, and then usually you'll start to see it in consumer goods after that, at least in our experience. That's what we're gonna keep our eyes on, is saying how high do interest rates go, and what happens to the buying power of the consumer, and does that change overall volume, or does that change the ASP of a vehicle that's sold during that market change? Thanks. Last question for me. I think everyone's kinda touched on FDM there. Clearly, you guys are doing a really good job, seeing a lot of demand there. Hopefully, component availability picks up, so we could see the some tailwinds in the second half. Any updates on some of the other earlier stage ventures that the company is already working on, whether it be like Integrated Toll Module or things like that, or progress the company is making to further push those offerings to become more material pieces of revenue over time? Yeah, I think on the automotive side, there's absolute interest in the new technology. Doing CES in person this year was a great way for us to start to make progress. Obviously, the show wasn't as well attended as it would have been, if it weren't for the spike in COVID that happened. You know, we're, you know, we're starting to get back to a more normalized business development environment. As OEMs start to have their engineering folks back in the office more, and they start to open up that environment to suppliers, that will create, you know, more opportunity for us to showcase our products. The problem with the last 18 months, two years has been, it's been so chaotic. Everyone's in crisis mode. Taking the time to think and plan and discuss what three years from now is gonna look like from a tech platform standpoint hasn't been the highest priority with most OEMs. We're excited for this kind of more normalized environment. We typically do really well in those conditions, right? Where we can show up and talk about three to five years. You know, how do you scale a tech platform? How do we grow off of what we're doing on FDM to create additional features and content? How do we help, you know, broaden that technology base onto more nameplates? From there, you know, there's a lot of other things that we work on on the aerospace side and some of our other markets, even on the fire protection side, that we're pretty excited about some ideas we have there of what that could look like in a, call it, three to five year time period. Great. Thanks. That's all for me. Thank you. Thank you. Our next question comes from the line of Ryan Brinkman with J.P. Morgan. Your line is open. Please go ahead. Hi. Thanks for taking my questions. I wanted to check in on the progress of the commercial negotiations relative to pricing for the cost inflation you saw earlier in the back half of 2021. You know, how has your progress been recovering those higher costs? Did some of that land here in Q1? With the goalpost now having moved again since the Russian invasion of Ukraine, which seems to have increased pressure on non-commodity supply chain costs, such as freight in particular, do you have a new time frame in terms of when you are expecting to recover some of the more recently elevated costs? Is there a percentage of those increased costs that you target recovering? Right now, in Q1, there was no benefit from cost recovery from our customers. This was basically Gentex internal efficiency and cost containment efforts that were all internal that helped with the financial performance. We believe that it's gonna take us throughout most of this year and into next year to negotiate those deals with our customers. The reason why we say it, we talked about this early on in kind of the supply chain crisis. It was impossible to predict exactly the total ramifications of those cost increases. We were trying to take a little more patient approach and say, "Hey, let's wait till we understand the environment a little better before we go in and start that negotiation." Because one thing we know for sure is most customers don't appreciate hearing from a supplier three or four times in a 18-month period about, "Hey, get us to here, and we'll be okay." Then three months later, "Get us to here," and six months later, "Get us to here." Our position was let's take our time. I wouldn't try to clarify what percentage we're looking for. Each situation's unique. With a customer environment, if there's a large award or if there's business growth coming, we might be able to negotiate less of an impact on those in exchange for future business. On the flip side of that, you know, if you have a declining business environment and increasing commodity problems, you might have to push a little harder on those. What we're trying to do is make sure that, you know, we get the recovery that our shareholders expect and that our employees need in order to help justify the work they've put in without compromising our ability to walk in with a brand-new technology and say, "Hey, we have something that we think you'd be interested in." That's a delicate balance to strike, and we know it's gonna take time, and that's why we're taking a more patient approach than some other suppliers probably will or may need to in some certain situations. Okay, that's helpful. Maybe just a follow-up there on the merits of that approach of going to the customers with, you know, less frequent but more comprehensive accounting of inflated costs. We did hear from other suppliers such as yourselves that have higher margins and are better capitalized that they were also pursuing that strategy. The companies that are less well capitalized with lower margins and so less buffers were maybe looking for more immediate relief. I think that makes a lot of sense. Does it make more sense though if the costs are increasing and then they're gonna stop increasing? What if we're in some kind of new era where costs kind of perpetually increase? Does that change the dynamic at all? Does it maybe suggest an opportunity for any kind of more sort of formalized cost recovery mechanisms as opposed to ad hoc negotiations? Yeah, I think there's a lot of potential for that. In other words, if you're right, if there is a several-year period of inflated costs, the good news is the industry is prepared for annual negotiations, right? The good news is that the platform already exists for us to have that negotiation. I think right now the biggest issue is saying, you know, how do you understand not all of those cost increases had even gone through our income statement all the way until recently. There were some cost increases, a lot that hit last year, but there were more that started at the beginning of this year and throughout this year. We're still waiting until those have actually hit home, not just the conversation about them and knowing that they're happening, but waiting till they're actually impacting financials before you have that meeting and discussion and negotiation with the customer base. What we've been focused on is saying every supplier has to pick their strategy, a best way of going about this. You know, I'm not here to say that ours is perfect. What I know is this is our culture and how we do business with our customer base, and so it fits really well with that. 'Cause I think the one factor that people forget is, you know, organizations have a cultural relationship with each other as well, and so you have to, you can't change that quickly 'cause it can have repercussions. We're trying to operate in a way that's consistent with the way we've handled our customers in the past. We think this is the best plan and strategy for us to go about these conversations with them. Like I mentioned, I think last quarter, we're open-minded. I mean, if we walk in, sit down with an OEM, we're just gonna start by being full disclosure about the problems we're seeing and what's going on. Then we're gonna talk about, "Hey, how do we work this out so that we keep that relationship open and continue to talk about ways that technology can help us both offset these cost increases," whether that's through additional content or consumer-focused products. Sometimes your best way out of a cost problem is additional revenue and sometimes not. you know, we're gonna be sitting down with each customer, having a very unique conversation based on where we're at with that customer and based on how our relationship is with them. Very helpful. Thank you. Thank you. Thanks, Ryan. Thank you. Again, ladies and gentlemen, if you have a question at this time, please press star then one. Our next question comes from the line of Mark Delaney with Goldman Sachs. Your line is open. Please go ahead. Yes, good morning. Thank you very much for taking the questions. Thank you for all the details on FDM nameplates and the progress there and also the commentary around FDM unit shipments. I was hoping you could also maybe speak to FDM revenue and how much revenue you think FDM can generate, this year. You know, as you think about that 2023 revenue growth target of 15%-20%, do you think FDM grows similarly to that or faster or slower than the corporate average? Yeah, I'd say in general, first on the unit side, yeah, we expect FDM to grow roughly in line with the overall corporate growth rate on a percentage basis. That would put us, you know, if next year, if it were 15%-20%, that'd be a little bit higher even than what our normal growth rate in FDM has been. That'd be closer to 300,000-400,000 units a year, but that's about what it would take for us to hit 15%-20% overall revenue growth above 2022 revenue. Sorry, there was a second part of your question there, Mark, and I blanked out on it, but. Oh, you're speaking to FDM units. I was hoping you could talk to the revenue contribution of FDM this year. Oh, yeah. At those types of revenue, when I talk about FDM here, we're gonna talk about just the mirror itself, not the camera portion. Yeah, there's at those type of volumes, you're gonna be close to, you know, probably $250 million to a little north of just north of $300 million in revenue. Okay. That's helpful. I was also hoping you could speak to the margin contribution of FDM relative to the corporate average. Certainly, it's a premium product, but it's also an area where I think there have been some more cost pressure around some of the electronics. Yeah. If you can help us understand the margin contribution, please. Yeah. Historically, what we said is it's roughly in line with corporate average margin profile for FDM. Given some of the cost constraints, obviously it's trending a little lower than corporate average currently. You know, like we said, as we progress through the next few years, we think with the right design, the right partners, and hopefully a slightly deflationary electronics pricing market, we should be able to get that back towards closer to the corporate average. Okay. One last one for me, if I could, please. You spoke to having more raw material inventory on hand and also making some good progress around new sources of supply in order to de-risk your you know your production outlook. Could you elaborate a little bit more on that to what extent you have what you need and really good line of sight into the components to hit the 22 guidance, maybe between the inventory on hand, you mentioned semiconductors and some of those new sources of supply you've lined up? A lot of the increases have been in areas that are supporting the final assembly. You have glass increases for growth and in element production across our business, inside mirrors, outside mirrors. Electronics is obviously another big area. Circuit board levels have gone up, micros, ASICs, those type of things. You know, to Steve's point earlier, it really doesn't take all but one or two components to cause an issue. I think that's what you see is volatility in customer orders and potential growth into the back half of the year. You have to have everything 100%. And so that's what you see is us being a little bit more conservative. If everything pans out, if the customer orders pan out, you know, that we can have confidence that we can build based on the right level of components or the right type of components. It's really driven around the forecast levels increasing and us being more conservative even than before. Understood. Thank you, and congratulations on the good quarter. Thank you very much. Thank you. Thank you. I'm showing no further questions at this time, and I would like to turn the conference back over to Josh O'Bersky for any further remarks. Thank you, everyone, for the time this morning and for your questions. This concludes our call. Have a great weekend. This concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.