Good day, and thank you for standing by. Welcome to the Gentex reports third 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 the session, you will need to press star one one on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Josh O'Berski. Please go ahead. Thank you. Good morning, and welcome to the Gentex Corporation third quarter 2022 earnings release conference call. I'm Josh O'Berski, 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 Reports third 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. Thank you, Josh. For the third quarter of 2022, the company reported net sales of $493.6 million compared to net sales of $399.6 million in the third quarter of last year, which was a 24% increase quarter-over-quarter. For the third quarter, global light vehicle production in North America, Europe, Japan, Korea, and China increased approximately 26% when compared to the third quarter of last year. Light vehicle production in the company's primary markets of North America, Europe, and Japan, Korea was up 22% on a quarter-over-quarter basis. Some of the supply chain issues that plagued the industry in the third quarter of last year have improved, and overall light vehicle production growth contributed to the company's quarter-over-quarter revenue growth. However, product mix for the third quarter and overall sales levels were still impacted by customer order adjustments, supply chain challenges, and labor availability issues. Together, these headwinds resulted in unit shipments being approximately 750,000 units lower than our original forecast at the beginning of the quarter, which resulted in a revenue shortfall of about $35 million-$40 million. While there appears to be some improved stability in the light vehicle production environment and the overall supply chain, the company continues to experience significant customer order fluctuations on a week-to-week basis and difficulty in sourcing advanced electronic components for our most complex products. For the third quarter, the gross margin was 29.8% compared to a gross margin of 35.3% for the third quarter of last year. Gross margin was impacted on a quarter-over-quarter basis by raw material cost increases, unfavorable product mix and labor cost increases, and prior commitments to annual customer price reductions. The continuation of cost increases in raw materials as well as unfavorable product mix had the most significant impact on our margin profile during the third quarter. Additionally, while the overall improvement in sales levels helped offset fixed overhead costs during the third quarter, the increase in labor costs more than offset the gains in overhead absorption to create additional margin pressure. During the third quarter, product mix issues driven by component shortages in our advanced feature mirrors and lower sales to our tier two customers contributed about 150 basis points of margin headwind that we believe will improve during the fourth quarter. The company is also making progress on cost escalation conversations with our customers, and we expect relief to begin during the fourth quarter, which should provide improvement in our margin profile as we move through 2023 and into 2024. Operating expenses during the third quarter increased by 15% to $60.4 million compared to operating expenses of $52.7 million in the third quarter of last year. Operating expenses increased during the third quarter primarily due to staffing, professional fees, increased outbound freight expenses, and travel-related expenses. Our operating expense growth for the third quarter continues to support our product development strategy as well as previously sourced new program launches, product redesigns in support of component supply issues, and our ongoing commitment to new technology areas. The increase in operating expenses was in line with our plan and represents the level of development needed to achieve the forecasted growth rate for the rest of this year and into 2023. Income from operations for the third quarter was $86.8 million compared to income from operations of $88.2 million for the third quarter of last year. During the third quarter, the company had an effective tax rate of 15.7%, which was primarily driven by the benefit of the foreign-derived intangible income deduction. Net income was $72.7 million for the third quarter compared to net income of $76.7 million for the third quarter of last year. The change in net income was primarily the result of the quarter-over-quarter changes in gross margins and operating profits. Earnings per diluted share for the third quarter were $0.31 compared to earnings per diluted share of $0.32 for the third quarter of 2021. I will now hand the call over to Kevin for third quarter financial details. Thanks, Steve. Automotive net sales in the third quarter of 2022 were $480.9 million, a 23% increase when compared to $391.3 million in the third quarter of 2021. Auto dimming mirror unit shipments increased 17% during the quarter compared to the third quarter of 2021. Other net sales in the third quarter of 2022, which includes dimmable aircraft windows and fire protection products, were $12.7 million, compared to other net sales of $8.3 million in the third quarter of last year. Fire protection sales increased by 78% for the third quarter of 2022 compared to the third quarter of 2021, and dimmable aircraft window sales decreased by 7% for the third quarter of 2022 compared to the third 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 third quarter, the company repurchased 0.9 million shares of its common stock at an average price of $26 per share for a total of $22.3 million. For the nine-month period ended September 30, the company repurchased 3.3 million shares of its common stock for a total of $93.5 million. As of September 30, 2022, the company has approximately 21.5 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 lingering impacts of the COVID-19 pandemic and supply constraints, market trends, and other factors the company deems appropriate. Shifting over to the balance sheet. The items mentioned today are valued as of September 30, 2022, and are compared to December 31, 2021, unless otherwise noted. Cash and cash equivalents were $222.9 million, down from $262.3 million, primarily due to capital expenditures and cash flow from operations. Short-term and long-term investments combined were $170.5 million, down from $213.1 million. This is primarily due to splitting out equity method investments of $39.7 million, which were previously reported under long-term investments. Accounts receivable was $292.4 million, up from $249.8 million due to the timing of sales within the quarter. Inventories were $418.3 million, which increased from $316.3 million, primarily in raw materials. The company has continued to be proactive related to raw materials inventory. With ongoing supply chain issues, component shortage issues, in addition to significant customer order volatility, as well as our forecasted growth in the next 12 to 18 months, the company has taken on additional components of certain medium and long lead time items to help manage risk and meet customer demand. As previously mentioned, when supply chain constraints start to alleviate and the component shortages begin to decline, the company will evaluate the proper levels of inventory at each commodity level. Accounts payable increased to $171.4 million, up from $98.3 million, primarily due to increased inventory purchases and capital expenditures. Let's take a look at preliminary cash flow items for the quarter. Third quarter 2022 cash flow from operations was $47.1 million, which was the same as operating cash flow in the third quarter of 2021. In year-to-date, cash flow from operations was $236.4 million compared to $299.4 million in operating cash flow for year-to-date 2021, which was driven primarily by the year-to-date change in net income. Capital expenditures for the third quarter were $50.5 million, compared with $13 million for the third quarter of 2021, and year-to-date capital expenditures were $108.5 million, compared to $44.4 million for year-to-date CapEx in 2021. Lastly, depreciation and amortization for the third quarter was $23.2 million, compared with $23.6 million for the third quarter of last year. Year-to-date depreciation and amortization was $73.3 million, compared with $75.1 million for calendar year 2021. I'll now hand the call over to Neil for a product update. Thank you, Kevin. For the third quarter of 2022, we experienced our highest total launch rate we've seen in the past 3 years. During the quarter, we had 50 launches of our interior and exterior auto-dimming mirrors and electronic features. Over 50% of the launches for the quarter were advanced feature launches, with HomeLink, Full Display Mirror, and our Digital Video Recorder Mirror leading the way. Now for some updates on Full Display Mirror. We're excited to announce that during the third quarter, we began shipping our Full Display Mirror product to our 14th OEM, Hyundai, on the new Palisade. Hyundai has been a great customer to work with on this exciting product, and it's great to see this technology in their vehicle. In addition to the Hyundai Palisade, we began shipping Full Display Mirror on 3 other vehicle nameplates, the Cadillac Lyriq, the Mercedes-Benz Metris, and the Subaru Outback. With these 4 new nameplates this quarter, we have now announced 79 nameplates that Full Display Mirror has been launched on. This technology continues to have growing interest and growth potential. We're excited to see how well this product's being received by our OEM customers and the end consumers. Also in the third quarter of 2022, we began shipping a base auto-dimming mirror containing a digital video recorder on both the Toyota Yaris and the Yaris Cross for the Japanese market. These are our first launches of a base auto-dimming mirror with this DVR capability, and we believe this product has great potential to expand into other platforms as well as regions. This product is also the first Gentex DVR product that has an app available to allow the consumer to pull recorded information from the mirror to their phone, which creates a more consumer-friendly user experience. The teams at Gentex have been doing an outstanding job executing the high volume and extremely complex new launches that have been driving our new business growth. All while managing through the product redesigns that have been necessary due to the component shortages that our industry has been facing. As we look forward, our launch rates continue to look strong. As we continue and come out of this redesign cycle due to the component shortages, I'm excited about our ability to refocus all of our development efforts to new products and technologies. I'll now hand the call back over to Steve for guidance and closing remarks. Thanks, Neil. The company's current forecast for light vehicle production for the fourth quarter of 2022 and full years 2022 and 2023 are based on the mid-October 2022 S&P Global Mobility forecast for light vehicle production in North America, Europe, Japan, Korea and China. Light vehicle production in these markets is expected to increase 3% for the fourth quarter as compared to light vehicle production for the fourth quarter of last year. For calendar year 2022, light vehicle production in these markets is forecasted to increase 5% when compared to calendar year 2021. The company believes 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, labor shortages, and overall economic uncertainty. Based on the updated light vehicle production forecast as well as year-to-date financials, the company is updating certain guidance estimates for calendar year 2022 to the following. Revenue for the year is expected to be between $1.9 billion and $1.95 billion. Gross margins for the year are expected to be between 32% and 33%. Operating expenses are expected to be between $235 million and $240 million. Our estimated annual tax rate, which assumes no changes to the statutory rate, is forecasted to be between 14% and 15%. Capital expenditures are expected to be between $140 million and $150 million, and depreciation and amortization is forecasted to be between $100 million and $105 million. Additionally, based on the company's current forecast for light vehicle production for calendar year 2023, the company still expects calendar year 2023 revenue growth of approximately 15%-20% above the new 2022 revenue guidance of $1.9-$1.95 billion. Overall, the third quarter was impacted by the perfect storm of component supply issues that included both scarcity and cost increases, product mix issues, labor shortages, and customer order volatility. While we are disappointed with this quarter's financial performance, we are confident in our ability to work through these issues and improve the gross margin profile as we move through the fourth quarter and into next year. Beginning in the fourth quarter, we expect to see improvements to margins that will be driven by the benefit of the company's first rounds of cost escalation negotiations with customers to address ongoing commodity, freight, and labor pricing pressure. These improvements should continue throughout next year and into 2024 as we work to offset cost increases with updated pricing. The plan we have developed and are executing to address these issues is consistent with our patient approach that we described previously and seeks to balance the need for pricing increases with our desire to continue to grow the business through new technology deployment at our customers. As the fourth quarter begins and we transition into 2023, we remain confident in our ability to grow the business and improve margins while at the same time expanding our technology portfolio. As we work to accomplish these objectives, we will continue to take a balanced long-term approach to these challenges and believe that this plan will get us back to our targeted margin profile by the end of 2024. That completes our prepared comments for today. Thank you for your time, and we can now proceed to questions. As a reminder, to ask a question, please press star one one on your telephone. Please stand by while we compile the Q&A roster. Our first question comes from Luke Junk with Baird. Your line is now open. Okay, great. Thank you. Appreciate you taking the questions. I wanna ask both a near-term and a bigger picture question. First, in the near term, just wondering if you can help us unpack your sequential gross margin expectations as we go into the fourth quarter, as implied by the updated full year guidance. Specifically, are the initial cost recoveries that you're contemplating already agreed to and in the P&L sitting here in October? And conversely, what lessons should we take away from the third quarter in terms of things that could still pressure the margin sequentially? Right now there's the current financials that are running through to start the fourth quarter do not include the benefit of those price increases. Those are going to get finalized here in the next couple of months, but should take effect in the quarter for the quarter. Second part of your question is kind of what lessons were left in Q3 that may leave a lingering effect. Part of that, I think the biggest issue there that would be more than the bill of material increases, the part that's the unknown piece that could potentially go into Q4, would be the mix issues. What happened in Q3, that reason why we referenced the 150 basis points due to mix, we had some significant component issues on FDM during the quarter that caused us to miss a lot more units in the quarter than what we were expecting. That mix, typically when that happens, goes to base auto-dimming mirrors at a much lower margin profile. With some of the launches we had and some of the business growth that we saw both really in all the markets, but especially some strong growth in the China market, what you saw was some margin pressure from base auto-dimming mirrors exceeding the percentage of business that we were expecting. Yep. Thanks for that, Steve. My follow-on actually flows right from that, and it's the impact of component shortages on FDM. Maybe either you or Neil could comment on this. Just wondering the impact if we zoom out and look at FDM shipments for this year, if there's any way to quantify that. More importantly, as we roll to 2023, just wondering if it's possible that you'll see a catch-up effect on FDM shipments next year if the components you need are more readily available. In other words, where do you envision the take rates next year versus your current level of FDM shipments? Thank you. I'll start kind of with the number side, and I'm sure Neil will have some comments on kind of what's happening behind the scenes on availability of components and what that trend is. This year we're probably, by the time Q4 wraps up, if we don't have any more significant issues, I would say this year's gonna end up about 150-200,000 units light of where it would have been if we hadn't had the component issues. We're putting up obviously record numbers on FDM shipments this year, and that growth has been pretty astounding. It would have been even better if we had availability of components. That'll kind of help you understand what the impact has been throughout the year and what we're expecting throughout Q4 in terms of FDM shipment availability due to component issues. Neil, you wanna jump in on that? Yeah. I think from a component side, you know, the team's been doing an outstanding job of finding parts, trying to get the replacements built in and or design new components into the product. When we see next year, I think we're gonna be a little bit of a challenge on a few parts. As we get into the, probably the second quarter of next year, I think that's gonna start to alleviate, and we'll have less pressure on getting and the availability of some of the parts that we've been struggling with. I think as we go into next year, our ability to produce at the rate needed, especially the second half of next year, I think will actually be quite positive. Luke, I'm sorry, I did forget to answer one part of your question. The question is, heading into next year, what do we expect for volumes? We do think there will be some catch up from parts that we missed this year. One thing we did experience throughout this year was we had several launch customers call and ask to increase demand versus their original forecast. Unfortunately, given the component issues, we weren't able to support those higher volumes. If component issues were to improve, we do think there's some tailwind, based on the desire for that product that could happen into next year. Thank you for all the color. I'll leave it there. Thanks. Thanks, Luke. Thanks, Luke. Please stand by for our next question. The next question comes from John Murphy with Bank of America. Your line is now open. Good morning, guys. Can you hear me? Yep. Yes, sir. Okay. Yes. On the revenue guide, I mean, you know, at the midpoint of the range, it's basically, you know, largely, you know, unchanged. It's tightened, you know, you tightened it up here. You know, you had this miss, you know, that you've alluded to of 700,000 units in the third quarter. You just mentioned, you know, FDM, you're still gonna be 100,000 units light relative to what you were expecting before. I mean, you know, it seems like despite the pressure in the third quarter and these other issues, your dimension on mix, you haven't really taken the revenue number down that much. I'm just, I mean, obviously, you know, costs are inflating, and you're taking those up, so I understand that. There's not much change in the revenue midpoint. What makes you believe that you're gonna make this up in the fourth quarter? Is there something else going on here where you're following the IHS schedules and there may be just some risk in these numbers? Yeah. If you look at what we're expecting and what we're seeing. I'm sorry, I keep saying IHS, but it's S&P Global Mobility. Yeah. We all do that. Yeah. Josh is sitting me. Yes. It's gonna take me at least 5 years before I get it right. We'll say IHS, right? That's. Yeah, but that's a different story. Exactly. Definitely doesn't roll off the tongue the same way. One of the things that we're looking at when we look at the data heading into Q4, we do think there's some additional risk, especially on the component side for us. We also believe on the vehicle volume side, there's gonna be tough for the industry to keep up with that level of production in Q4. We know around the end of the year, especially between Thanksgiving and the holidays, that things start to lighten up a little bit. Usually, that's especially common when you have a very strained production environment like what we've seen in the last year. In other words, OEMs, just like the supply base, have been working incredibly hard, trying to hit these levels of production. We think there's gonna be at least a little bit of a pause at the end of the year to give people a rest. Okay. Then the second thing on the component shortages, obviously this is persistent. You've been running through these issues and so has the whole industry for a while. I mean, as you're going through these redesigns, you know, how are you kind of ensuring supply going forward as you're working through the redesigns? Even, you know, if this chip shortage in aggregate, you know, continues into next year, which it sounds like it's going to, do you have the ability to kind of sidestep it with these redesigns and maybe get back on track with, you know, new chip supply, you know, elsewhere or redesigns that allow you to to thwart it? I'll go first, and Neil will correct any misstatements of mine. I think the one advantage of the redesigns is it's really hard to get guaranteed commitments. I mean, when we're redesigning the new components, the team works really hard to try to get those commitments from the supply base. What we've experienced for the last 18 months has made us a little more jaded in terms of whether or not we actually believe those commitments will play out in reality. The one advantage of having multiple designs, I mean, for instance, let's say we have an FDM and we've maybe redesigned it once or at least twice, in particular a part number. We now have several different bill of materials that are approved and validated at an OEM. Meaning if even if the new components were to fall short, we're still securing, and you see part of this evidence in our inventory levels, where we're still securing parts under both designs because they have corporate common uses. It also gives us more flexibility to be able to help an OEM by having multiple part numbers and multiple circuit designs that we can revert back to if other components become a problem. Okay. It's helpful. Then just lastly on Forex, I mean, I gotta imagine it's a benefit both on translation, but probably even on an economic basis. Can you kind of, you know, elucidate what maybe you saw in the third quarter and what you expect going forward? Actually, it was a slight negative on the top line, probably 25-30 basis points. Most of our stuff is denominated in the US, but we do have some in RMB and Euro. There was a slight negative on the top line and on the purchasing side as well, but it was probably 25-50 basis points on that. Meaning the purchases on the cost side offset the theoretical benefit on the revenue side for a net negative. Is that a fair way to characterize it? Yes. Yep. Okay. All right. Thank you very much, guys. Thanks, David Kelley. Please stand by for our next question. Our next question is from David Kelley with Jefferies. Your line is now open. Hi, everyone. This is Gavin Kennedy on for David Kelley. Just starting with the gross margin drivers in the quarter, you noted 150 basis points of mix and tier two headwinds. Can you walk us through the other impacts that you were seeing this quarter and the other moving parts there for the margins? Yeah. The biggest one that we've been talking about all year really is the raw material cost increases. That was about 300 basis points of headwind. In addition to that, the labor headwinds of about 100 basis points. When you combine all that together, that's about the main driver. There were some puts and takes inside of that, but those are the biggest ones that are moving it down versus last year. All right. That makes sense. As a follow-up, the guidance implies a meaningful ramp up into Q4. Do you expect to fully offset input cost headwinds in the quarter via passthroughs? Are there any retroactive recoveries that might provide a one-time benefit in Q4? Yeah. I mean, there is I mean, part of that implication is that there will be some one-time benefit from the recoveries that Steve talked about earlier. We're looking at both some of that applies to 2022, but into 2023 and 2024 as pricing changes going out. And so that would positively impact the Q4 margin specifically. We do see, yeah, the sales levels supporting some of that offset. As we talked about, the mix was pretty weak towards base mirrors in the quarter, really driven by growth in China outpacing the rest of the market and then weakness in FDM. I mean, we would expect that some of that would alleviate as well in Q4. If you look at our year-to-date gross margin performance, the full-year range is very similar to where our year-to-date is. It's not a meaningful step up in Q4 that helps us get to that full year guidance. In other words, if we hit Q4 inside of that full year guidance range, that's what it takes to hit that for the full year. Got it. Thanks, team. Thank you. Thanks, David. Please stand by for our next question. Our next question is from Ryan Brinkman with J.P. Morgan. Your line is now open. Hi. Thanks for taking my questions. Wanted to ask first on raw materials. I saw in the release you discussed a quarter over quarter increase in raw material prices. It seemed to be in the context of comparing to the third quarter of 2021 and so maybe year- over- year and not sequentially. You know, a basket of automotive commodities that we look at is down 42% versus 3Q last year. It's down 27% versus 2Q this year. I think our index is, you know, heavily weighted towards steel, which you don't really buy and doesn't take into account some of your more esoteric PGM or coding exposures or whatnot. Still sort of surprised that you're still experiencing the higher commodities. Maybe you can talk a little bit about what your exposures are there that are hurting your margin, or if maybe the spot prices have started to move in the right direction already, but there's some kind of lag factor or hedging in place that might be offsetting the impact on the P&L as of now. Then, you know, based upon what you know today, what is your expectation for how raw materials may impact the margin going forward? Yeah, it's a great question. This really heralds back to the last nine months, and our approach has been much more of a patient wait and see approach to understand the underlying supply base and materials market. What we were concerned about was going to OEMs too quickly with not a complete picture of the cost scenario. Given our income statement and our balance sheet and ability to wait a little longer, we wanted to wait till we felt like we were 80% of the way through the cost increases. That way, we could portray a more accurate depiction to our customers and not have to go back four, five or six times with this conversation. We feel like as we got about halfway through Q3, we felt like we understood the scenario fairly well. Like I mentioned, we feel like we're about 80% of the way through those cost increases. We began engaging really in Q3 and with heavy focus on trying to get most of these situations resolved in Q4 to set us up really partially for Q4, but then also moving into 2023. There's been a lot of catch-up data that we had to provide to OEMs, and there's obviously a lot of conversations that go around on the impact of these verification of the cost impact, and then how do you set up contracts that reflect what we need to at least offset some of those costs. We were a little bit behind some of the supply base in terms of asking for this money. That was done deliberately. Now that we're in this stage, we feel pretty confident and comfortable with the data presentation and where we're at, and feel very comfortable that, you know, we're gonna reach success over the next 18 months in getting these issues resolved. Okay. I think when we first started talking about this, like probably on the 3Q 2021 call, I think you'd seen yourselves as maybe having the luxury to wait, right? You don't have any. You're not levered, you're investment grade. You've got, you know, an embarrassment of riches on the margin line versus, you know, Adient or others. You know, they're levered, they're junk-rated. They only have, you know, mid-single digit margin. So, you know, if people are being asked to deliver 1%-2% annual customer price reductions in a 2% CPI world, you can offset that with 3%-4% productivity. In a 9% CPI world, you know, those suppliers had an emergency, whereas you guys could sort of wait. I'm just curious if looking back, you know, you still think maybe that was the correct approach or if you can make up for it. I mean, I heard Ford earlier this week, they sounded like the most understanding that they'd ever been. They're like, "Yeah, first we wanted to push back, and then we're like, yeah, these suppliers, they actually do have a point, and then they pony it up like to $1 billion." Is that still gonna be on the come, and you're gonna be as compensated as the others who went earlier? Or are maybe automaker ears less sympathetic for an investment grade, non-levered supplier with 30% gross margin relative to a junk-rated one that they have to help out or, you know, things could go wrong? I think, you know, I would tell you, there's a lot of questions there, so I'll start working through them in order. I think number one is, yeah, we still believe our strategy was the right one, and only time will tell. What I can tell you is, the fact that we took our time, we have not been met with the resistance that you would expect if you were gonna be told flat out no. One other thing is we are in a constrained environment. Most OEMs do realize that you have to at least negotiate some type of a favorable deal in order to guarantee the supply. This is the same issue we've seen with our supply base. It's not like we're gonna get all the parts we want. OEMs have been able to get all the parts that they want from the supply base either. There's a certain natural inclination towards making sure that we set up deals that are favorable for both the supplier and for the OEM, and that's still our focus. That includes not only reprieve on bill of material increases, but also long-term sourcing and contracts. The different approach that we take isn't just focused on 100% getting our cost covered so that we can move on. It's about how do we balance the short-term return to profitability that we need for our shareholders and balancing that with how do we make sure we're getting the product awards that can help drive growth over the next 3 to 5 years. We're not taking a very short-sighted approach to that. For OEMs, we sit down and try to be very open about we have significant cost issues that have to be addressed today, but at the same time, we're open to the concepts over the next 3 to 4 years of certain awards that could help us grow the business and produce some offset to cost issues through volume and through growth opportunities. Right now I would tell you that we still think this is the most holistic approach and the right one for us, for who we are. There's no doubt if you're, you know, if you're teetering on the brink of insolvency, that OEMs are very, very motivated to get you cash right away to make sure that doesn't happen. It is something that we're gonna continue to work on, and we believe this is not gonna be over in Q4. This is gonna be a recurring theme for us throughout all of calendar year 2023. Got it. Thank you. Very helpful. Thanks, Ryan. Thanks, Ryan. Please stand by for our next question. Our next question comes from Josh Nichols with B. Riley. Your line is now open. Yeah, thanks for taking my question. Just to touch on the margin point again, the full year guidance kind of implies a pretty healthy step-up in gross margins for 4Q of, like, 300 basis points plus. One, how much of that is coming from price increases versus mix? And then second part of the question is just how much of the customer base is gonna have these increases that come through in 4Q versus how much may be remaining for early part of 2023 that could result in a potential further step-up for next year? Yeah. As Steve mentioned, right, we have a couple different pronged approach. One of them is approaching them about the cost inflation that we've seen to date from really the start of this last year through now, and we would expect some of that to hit the fourth quarter. I'll call it 150 basis points maybe, in that range. The rest of it, as we talked about, mix was a little bit weak, so the rest of it's gonna come through mix and if sales improve, hopefully offsetting that with our normal leverage cadence to get to that sequential improvement in margin. As Steve's mentioned, our year-to-date gross margin is in that 32% range already. We just have to have that sequential improvement from the overall product portfolio and a little bit from the recovery side. As you head into 2023, again, this conversation is active in one-time recoveries and then piece price changes as we move into 2023 and even beyond, potentially. We're gonna balance that as we said, right? We're looking for growth longer term and not just, you know, satisfying our needs today. I think that our teams have been working through that and balancing that approach to help maintain that long-term philosophy. Thanks. Yeah, I mean, just fair to assume that, right, there's not gonna be any price cuts that you typically see in the first quarter given what's going on with the supply chain and component price increases. Just thinking about next year. That's correct. That's correct. Yeah. Yep. Thinking about next year, you reaffirmed, right, the growth outlook again, much higher than the market. I'm just curious, given that there's so much that's going on with the slowing economy, rising fuel prices, interest rates, but juxtaposing that is inventory levels that remain, you know, well below historical levels that would probably support or prevent any big slowdown that you might have previously with price cuts and inventory issues. I'm just curious your thoughts about, you know, how you handicap that going into the next year and the puts and takes to the risk and opportunities to the top-line guide for next year. You're exactly right. This is very interesting. I joke internally a lot that if it weren't real, it would be very, very fascinating from an overall macroeconomic standpoint to study this. Unfortunately, it's very real. But you're exactly right. You have a lot of puts and takes going on in the overall light vehicle production space right now, where you have very low inventories, you know, really pretty high demand and, but then you have these looming headwinds and obviously interest rates causing a problem. My best guess is that those negative headwinds really won't play much of a factor until the second half of next year, 'cause it will take us the first half to meet current demand and get inventories back up to where they need to be on dealer lots. Then in the second half is where the biggest risk factor for next year resides around what does sales look like throughout the year. What we're seeing though right now is, yeah, the S&P Global Mobility Forecast has pulled back. Kevin's laughing at me, trying to get that out of my mouth. If we look at their forecast, it's pulled back quite a bit from where it was even, you know, six months ago for 2023. Even at those lower levels of light vehicle production increases for next year, we're still feel comfortable with our forecast. You know, we only need 4%-5% help from the light vehicle production side to hit that 15%-20%, meaning, you know, what we're implying is anywhere from a 10%-12% outperformance to market. If the market goes to a flat market for whatever reason, you'd still expect to see that outperformance, and that's really driven by the strength of our product portfolio. Great. Thanks. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Please stand by for our next question. Our next question comes from David Whiston with Morningstar. Your line is now open. Thanks. Good morning. You've talked a lot about labor shortages today. I was just curious, are those at Gentex? Are they the customer? Are they upstream or everywhere? They're everywhere. They definitely have impacted us as well. It's been a very tight labor market in West Michigan, and honestly, even with the changes in salaries and wages, it's still a very constrained market. Trying to get the team put together in the size we need to support this level of sales. From an operational standpoint, we're running a tremendous amount of overtime right now to hit these sales levels, and obviously, that's been part of the headwind that Kevin described on the labor side, that's impacted margins. For you guys directly, is the labor need more on the hourly side or salary side? It's both, but definitely the hourly side is what is the biggest risk factor in driving the gross margin deterioration. The operating expense side has seen a step-up in terms of higher salaries and wages on operating expenses as well. We're holding together pretty well there, because there's ability to outsource and use contractors to help offset. Obviously, on the manufacturing side, that's not as easy. I've been hearing from dealers this week that they're not really expecting any kind of major recovery in Toyota and Honda inventory until the middle of next year. I'm just curious what you're hearing from them and what you're thinking on that. Yeah, I mean, they're pretty quiet about what they communicate in terms of, you know, how they're gonna get production levels back up to the inventory to meet the inventory needs or at least wants that they have. This is purely us speaking from our gut based on what we're seeing, but I would tend to agree. I don't think you're probably until the summer before you start to see any meaningful recovery in inventory levels. If it does happen, it's because that's bad news on the sales side. You know, from a vehicle sales standpoint. Okay. Your stock rarely gets undervalued, in my opinion, and it seems to be pretty cheap right now. I know there's macro storm clouds to consider too, but at the same time, even if we do have a recession, auto volumes are likely to go up next year because of the chip shortage impact. Is it time to get more aggressive on buybacks? Well, I think a position we've taken for the last 6 months has been just, obviously cash flow has slowed up a little bit as we move to secure inventory and move inventory levels higher. When we look at this price, we would tend to agree with you. If you look at our growth prospects, the revenue, the desire for the products we have, the only negative that you would talk about is the gross margin deterioration. The one thing that we like to remind shareholders of is we've done this before, right? 2008 and 2009, margins deteriorated, we rebuilt them. 2012 and 2013, it happened again, down into the low kind of 32% range. We know how to go to work on the income statement to drive value, and improve margin profile. Yeah, we would agree with you. We look at this and say this is an opportune time to enter the market if you're long Gentex. Okay, thanks. Thanks, David. Please stand by for our next question. Our next question comes from James Picariello with BNP. Your line is now open. Hey, good morning, guys. Hi, James. The bridge to the intact, you know, 15%-20% revenue growth rate for next year, just wanna revisit that. You know, originally, you know, that range was pegged to, you know, LVP growth of, I think 10%. You know, now we're looking at, you know, a 4% industry assumption. Can you kind of unpack, you know, how you're thinking about, you know, what still informs the confidence? I, you know, I imagine recovery pricing, you know, embedded in your net price, certainly helps. You know, better mix from, you know, improved chip supply and your redesign work, it probably adds another layer. Yeah, just wanna get your take on that. Yeah, in addition to the factors you mentioned, I would say the single largest piece that adds confidence to our forecast is the amount of FDM that we had to say that we couldn't ship and produce this year, and how many OEMs we had to say we can't increase take rates because of the constraints on the raw material side. When we look at the LVP forecast, what we're seeing from our take rate standpoint and the things we had to say no to, we feel really good about the desire for our products, especially FDM and OECs as we head into next year. This is, you know, like you mentioned, typically you would see our forecast move a little bit closer to in line with the changes in LVP. I think heading into next year we feel really comfortable with the demand for our products. Got it. I mean, just on the customer recovery, you know, storyline. I mean, your typical price down is, you know, something like 2%-3%. What could your net pricing, you know, be for next year in terms of, you know, how successful these recovery negotiations could trend? You know, what we're modeling right now and what we believe needs to happen to hit the financial performance we're talking about is a net positive 50-100 basis points. Net, net positive $150 to. 50-100. Yep, that's in addition to what we. Got it. Yep, that's in addition to what we pick up in the fourth quarter. You know, we're gonna have some pickup in Q4, and then we expect to see on top of that another 50-100 basis points in positive pricing, and that's not taking in product mix or sales growth. That's looking just at same kind product sales one year to the next. Got it. Just one last one. You know, the implied guidance for the fourth quarter, you know, has a gross margin level, you know, of basically 34%. I imagine that probably has some discrete benefit embedded. You know, how should we be thinking about the gross margin trajectory for next year, through next year? What's the right exit rate for the fourth quarter in 2023? Just kinda, you know, just so the bar is decently set in terms of the progress. Yeah, if you actually look at our Q4, we'd actually be slightly below that in terms of what we think Q4 guidance is. Like Kevin mentioned, we're at 31.9% year-to-date on our current, you know, gross margin profile. To hit the 32%-33%, really anywhere in that 32%-33% range gets you there on a weighted average. If you're looking at the high end, then yes, we would need to be closer to that. We don't think we're gonna get there in Q4 that early. We kinda thought what we're mapping out is really a 2020 Q4, all of 2023, and then through 2024, you know, what is your kinda inventory velocity when you come into 2023, and then what's your exit? When we get through 2023, we're thinking we're gonna finish 20%, you know, by the end of 2023, so let's call it Q4 2023, we better be somewhere in the 33%-34% range if we're going to then by the end of 2024, get back to that 35-36 range. That's kind of the map that we've laid out. That's assuming that there's some headwinds and tailwinds in there and some of the things we've talked about. It's also looking at some of the factors that we know to be. You know, we're not done with the cost escalation scenario from the supply base. It's, you know, we think we're 80% of the way through it, but that implies there's still 20% to go, on the supply base side and costs that we're gonna have to absorb and find a way to either offset or get offset by our customer base. You know, we'd probably be a little below your estimate there for Q4 this year, but then growing and strengthening not only in Q4 but all the way through 2023 and through 2024. That's helpful. Thank you. Thanks, James. At this time, there are no further questions. I would now like to turn the conference back to Josh O'Berski for closing remarks. Thank you, everyone, for your time and questions today. As you may know, we will be at SEMA in Las Vegas next week, and we would welcome investors to join us in our booth. If you're interested in attending, please let me know. That said, this concludes our call. We wish everyone a great weekend. This concludes today's conference call. Thank you for participating. You may now disconnect.