GENTEX CORP

Previous wording

Net Sales. Net sales for the second quarter of 2024 decreased by $10.5 million or 2%, when compared with the second quarter of 2023.

Current wording

Net Sales. Net sales for the third quarter of 2024 increased by $32.7 million or 6%, when compared with the third quarter of 2023.

Previous wording

Automotive net sales for the second quarter of 2024 were $559.3 million, a 3% decrease when compared with automotive net sales of $574.1 million in the second quarter of 2023. The 6% decrease in automotive mirror unit shipments in the second quarter of 2024 to 12.2 million units, compared with 12.9 million units in the second quarter of 2023, was driven by a 6% quarter over quarter decrease in interior auto-dimming mirror unit shipments, and a 5% quarter over quarter decrease in exterior auto-dimming mirror unit shipments.

Current wording

Automotive net sales for the third quarter of 2024 were $596.5 million, a 6% increase when compared with automotive net sales of $564.5 million in the third quarter of 2023. The 3% decrease in automotive mirror unit shipments in the third quarter of 2024 to 12.2 million units, compared with 12.6 million units in the third quarter of 2023, was driven by a 3% quarter over quarter decrease in interior auto-dimming mirror unit shipments, and a 4% quarter over quarter decrease in exterior auto-dimming mirror unit shipments.

Previous wording

The below table represents the Company's auto-dimming mirror unit shipments for the three and six months ended June 30, 2024, and 2023(in thousands):

Current wording

The below table represents the Company's auto-dimming mirror unit shipments for the three and nine months ended September 30, 2024, and 2023(in thousands):

Previous wording

Other net sales were $13.6 million in the second quarter of 2024, compared to $9.4 million in the second quarter of 2023. Fire protection sales increased to $7.4 million for the second quarter of 2024, compared to $6.0 million in the same quarter of last year. Dimmable aircraft sales increased during the second quarter of 2024 to $6.3 million, compared to $3.3 million in the same quarter of last year.

Current wording

Other net sales were $12.0 million in the third quarter of 2024, compared to $11.3 million in the third quarter of 2023. Fire protection sales increased to $6.9 million in the third quarter of 2024, compared to $5.2 million in the same quarter of last year. Dimmable aircraft sales decreased during the third quarter of 2024 to $4.3 million, compared to $6.2 million in the same quarter of last year. Additionally, in the third quarter of 2024, the Company recorded its first official sales of medical devices of $0.8 million from shipments of the previously acquired e-Sight Go product.

Previous wording

Cost of Goods Sold. As a percentage of net sales, cost of goods sold increased to 67.1% for the second quarter of 2024, versus 66.9% in the same quarter last year. The quarter over quarter decrease in the gross profit margin was primarily impacted by lower sales levels and unfavorable product mix due to lower than expected shipments of full display mirrors and exterior auto-dimming rearview mirrors. On a quarter over quarter basis, product mix had a negative impact on gross margin of approximately 100-125 basis points. Purchasing cost reductions had a positive impact on gross margin on a quarter over quarter basis of approximately 150-200 basis points.

Current wording

Cost of Goods Sold. As a percentage of net sales, cost of goods sold decreased to 66.5% for the third quarter of 2024, versus 66.8% in the same quarter last year. The quarter over quarter increase in the gross profit margin was primarily impacted by higher net sales levels and purchasing cost reductions, which were partially offset by unfavorable product mix. Purchasing cost reductions had a positive impact on gross margin on a quarter over quarter basis of approximately 200-250 basis points. On a quarter over quarter basis, product mix had a negative impact on gross margin of approximately 100-150 basis points.

Previous wording

Operating Expenses. Engineering, research and development ("E,R&D") expenses for the second quarter of 2024 increased by $6.0 million, when compared with the second quarter of 2023, primarily due to staffing and engineering related professional fees.

Current wording

Operating Expenses. Engineering, research and development ("E,R&D") expenses for the third quarter of 2024 increased by $8.0 million, when compared with the third quarter of 2023, primarily due to staffing and engineering related professional fees.

Previous wording

Selling, general and administrative ("S, G & A") expenses increased by 7% or $1.9 million for the second quarter of 2024, compared to the second quarter of 2023, primarily due to increased staffing. S, G & A expenses remained at approximately 5% of net sales in the second quarters of 2024 and 2023.

Current wording

Selling, general and administrative ("S, G & A") expenses increased by 4% or $1.3 million for the third quarter of 2024, compared to the third quarter of 2023, primarily due to increased staffing. S, G & A expenses remained at approximately 5% of net sales in each of the third quarters of 2024 and 2023.

Previous wording

Total operating expenses were $73.7 million in the second quarter of 2024, an increase of 12% quarter over quarter or $7.9 million, compared to $65.8 million in the second quarter of 2023.

Current wording

Total operating expenses were $78.3 million in the third quarter of 2024, an increase of 13% quarter over quarter or $9.3 million, compared to $69.0 million in the third quarter of 2023.

Previous wording

Provision for Income Taxes. The effective tax rate was 15.1% for, and an income tax expense of $15.3 million was recorded in, the second quarter of 2024, compared to an effective tax rate of 15.1% for, and an income tax expense of $19.4 million recorded in, the same quarter of 2023. Typically, effective tax rates for the Company differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, research and development tax credits and the foreign-derived intangible income tax deduction.

Current wording

Provision for Income Taxes. The effective tax rate was 15.7% for, and an income tax expense of $22.9 million was recorded in, the third quarter of 2024, compared to an effective tax rate of 15.9% for, and an income tax expense of $19.8 million recorded in, the same quarter of 2023. Typically, effective tax rates for the Company differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, research and development tax credits and the foreign-derived intangible income tax deduction.

Previous wording

Net Income. Net income for the second quarter of 2024 was $86.0 million, down from a net income of $109.2 million in the second quarter of 2023. The change in net income was driven by the lower net sales and income from operations.

Current wording

Net Income. Net income for the third quarter of 2024 was $122.5 million, up from a net income of $104.7 million in the third quarter of 2023. The increase in net income for the third quarter of 2024 was driven by the increased net sales, income from operations, and other income in the most recently completed quarter.

Previous wording

Earnings Per Share. The Company had earnings per diluted share for the second quarter of 2024 of $0.37, which compared to earnings per diluted share of $0.47 for the second quarter of 2023.

Current wording

Earnings Per Share. The Company had earnings per diluted share for the third quarter of 2024 of $0.53, which compared to earnings per diluted share of $0.45 for the third quarter of 2023.

Previous wording

Net Sales. Net Sales for the six months ended June 30, 2024 increased by $28.9 million or 3%, when compared with the same period in 2023.

Current wording

Net Sales. Net Sales for the nine months ended September 30, 2024 increased by $61.6 million or 4%, when compared with the same period in 2023.

Previous wording

Automotive net sales for the first six months of 2024 were $1.1 billion, up 2.3% compared with automotive net sales of $1.1 billion for the first six months of 2023. Domestic automotive mirror shipments in the six months ended June 30, 2024 decreased 4% to 7.9 million units, compared with 8.2 million units in the same period in 2023. International automotive mirror shipments in the six months ended June 30, 2024 decreased 4% to 16.7 million units, compared with 17.4 million units in the same period in 2023.

Current wording

Automotive net sales for the first nine months of 2024 were $1.73 billion, up 3% compared with automotive net sales of $1.68 billion for the first nine months of 2023. Domestic automotive mirror shipments in the nine months ended September 30, 2024 decreased 4% to 11.8 million units, compared with 12.2 million units in the same period in 2023. International automotive mirror shipments in the nine months ended September 30, 2024 decreased 3% to 25.1 million units, compared with 26.0 million units in the same period in 2023.

Previous wording

Other net sales were $26.3 million for the first six months of 2024, compared to $22.7 million for the same period last year. This increase is primarily due to the 63.3% increase in dimmable window aircraft sales for the first six months of 2024 to $12.1 million, from $7.4 million for the same period in 2023. Fire protection sales decreased by 7.4% to $14.2 million for the first six months of 2024, compared to $15.3 million in the same period of 2023.

Current wording

Other net sales were $38.3 million for the first nine months of 2024, compared to $34.0 million for the same period last year. This increase is primarily due to the 20% increase in dimmable window aircraft sales for the first nine months of 2024 to $16.3 million, from $13.6 million for the same period in 2023. Fire protection sales increased by 3% to $21.1 million for the first nine months of 2024, compared to $20.5 million in the same period of 2023. As previously mentioned, the Company also recorded its first official sales of medical devices in the nine months ended September 30, 2024, of $0.8 million from shipments of the previously acquired e-Sight Go product.

Previous wording

Cost of Goods Sold. As a percentage of net sales, cost of goods sold decreased to 66.4% for the first six months of 2024, versus 67.6% in the same period last year. The period over period increase in the gross profit margin was primarily the result of reductions in material costs, improved fixed overhead leverage, freight expense decreases and tariff cost reductions, which were partially offset by customer price reductions.

Current wording

Cost of Goods Sold. As a percentage of net sales, cost of goods sold decreased to 66.4% for the first nine months of 2024, versus 67.3% in the same period last year. The period over period increase in the gross profit margin was primarily the result of purchasing cost reductions, improved fixed overhead leverage, and tariff cost reductions, which were partially offset by product mix and customer price reductions. Purchasing cost reductions had a positive impact on gross margin on a period over period basis of approximately 200-250 basis points, and fixed overhead leverage and tariff cost reductions each had a positive impact on the gross margin on a period over period basis of approximately 50-100 basis points. On a period over period basis, product mix had a negative impact on gross margin of approximately 150-200 basis points and customer price reductions had a negative impact on gross margin of approximately 50-100 basis points.

Previous wording

Operating Expenses. E, R & D expenses for the six months ended June 30, 2024 were $86.2 million, compared with $72.6 million for the same period last year. The 19% increase in E, R & D expenses, in the first six months of 2024 compared to the same period in 2023, was primarily due to additional staffing, professional fees, and new product development.

Current wording

Operating Expenses. E, R & D expenses for the nine months ended September 30, 2024 were $134.4 million, compared with $112.8 million for the same period last year. The 19% increase in E, R & D expenses, in the first nine months of 2024 compared to the same period in 2023, was primarily due to additional staffing, professional fees, and new product development.

Previous wording

S, G & A expenses for the first six months of 2024 increased $5.7 million to $60.4 million, when compared to $54.7 million for the same period in 2023. S, G & A expenses were approximately 5% of net sales in the first six months of 2024 and approximately 5% of net sales in the same period in 2023. S, G, & A expenses increased on a year over year basis primarily due to increased staffing.

Current wording

S, G & A expenses for the first nine months of 2024 increased $7.0 million to $90.5 million, when compared to $83.5 million for the same period in 2023. S, G & A expenses were approximately 5% of net sales in the first nine months of 2024 and approximately 5% of net sales in the same period in 2023. S, G, & A expenses increased on a year over year basis primarily due to increased staffing.

Previous wording

Total Other (Loss) Income. Total other (loss) income for the six months ended June 30, 2024 was $15.3 million, compared with a total other income of $4.1 million for the same period last year.

Current wording

Total Other Income. Total other income for the nine months ended September 30, 2024 was $4.5 million, compared with a total other income of $6.1 million for the same period last year.

Previous wording

Provision for Income Taxes. The effective tax rate was 15.2% for the six months ended June 30, 2024, compared to 15.5% for the same period of 2023. Generally, effective tax rates for the Company differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, the foreign-derived intangible income tax deduction, and research and development tax credits.

Current wording

Provision for Income Taxes. The effective tax rate was 15.4% for the nine months ended September 30, 2024, compared to 15.6% for the same period of 2023. Generally, effective tax rates for the Company differ from statutory federal income tax rates, due to provisions for state and local income taxes, permanent tax differences, the foreign-derived intangible income tax deduction, and research and development tax credits.

Previous wording

Net Income. Net income for the six months ended June 30, 2024 decreased by $12.5 million or 6% to $194.3 million, compared to $206.7 million in the same period last year. The decrease in net income for the six months ended June 30, 2024 was primarily the result of the lower net sales and income from operations compared to the first six months of 2023.

Current wording

Net Income. Net income for the nine months ended September 30, 2024 increased by $5.4 million or 2% to $316.8 million, compared to $311.5 million in the same period last year. The increase in net income for the nine months ended September 30, 2024 was primarily the result of the increased net sales and income from operations, compared to the first nine months of 2023.

Previous wording

Earnings Per Share. The Company had earnings per diluted share for the six months ended June 30, 2024 of $0.84, compared to earnings per diluted share of $0.88 for the six months ended June 30, 2023.

Current wording

Earnings Per Share. The Company had earnings per diluted share for the nine months ended September 30, 2024 of $1.38, compared to earnings per diluted share of $1.33 for the nine months ended September 30, 2023.

Previous wording

The Company's cash and cash equivalents as of June 30, 2024 were $260.2 million, an increase of $33.8 million, compared to $226.4 million as of December 31, 2023. The increase was primarily due to cash flows from operations, which were partially offset by capital expenditures, investment purchases, dividend payments, and share repurchases during the six months ended June 30, 2024.

Current wording

The Company's cash and cash equivalents as of September 30, 2024 were $179.6 million, a decrease of $46.8 million, compared to $226.4 million as of December 31, 2023. The decrease was primarily due to share repurchases, capital expenditures, investment purchases, and dividend payments during the nine months ended September 30, 2024, which was partially offset by cash flows from operations.

Previous wording

Short-term investments as of June 30, 2024 were $15.5 million, up from $14.4 million as of December 31, 2023, and long-term investments were $308.1 million as of June 30, 2024, up from $299.1 million as of December 31, 2023.

Current wording

Short-term investments as of September 30, 2024 were $20.5 million, up from $14.4 million as of December 31, 2023, and long-term investments were $325.6 million as of September 30, 2024, up from $299.1 million as of December 31, 2023.

Previous wording

Accounts receivable as of June 30, 2024 decreased approximately $15.2 million compared to December 31, 2023, primarily due to the decrease in sales and timing thereof during the six months ended June 30, 2024.

Current wording

Accounts receivable as of September 30, 2024 increased approximately $34.5 million compared to December 31, 2023, primarily due to the increase in sales and timing thereof during the nine months ended September 30, 2024.

Previous wording

Inventories as of June 30, 2024 were $463.5 million, compared to $402.5 million as of December 31, 2023, primarily due to increases in raw materials and finished goods.

Current wording

Inventories as of September 30, 2024 were $449.3 million, compared to $402.5 million as of December 31, 2023, primarily due to increases in raw materials and finished goods.

Previous wording

Accounts payable as of June 30, 2024 increased approximately $21.6 million to $206.0 million, when compared to December 31, 2023, primarily driven by supplier payment terms and increased inventory purchases.

Current wording

Accounts payable as of September 30, 2024 decreased approximately $1.8 million to $182.6 million, when compared to December 31, 2023, primarily driven by timing of payments within the quarter.

Previous wording

Accrued liabilities as of June 30, 2024 increased approximately $11.5 million compared to December 31, 2023, primarily due to an increase in accrued salaries and wages.

Current wording

Accrued liabilities as of September 30, 2024 increased approximately $13.3 million compared to December 31, 2023, primarily due to increases in accrued salaries and wages.

Previous wording

Cash flow from operating activities for the six months ended June 30, 2024 increased $17.4 million to $259.1 million, compared with $241.8 million during the same six month period last year, primarily due to changes in working capital.

Current wording

Cash flow from operating activities for the nine months ended September 30, 2024 decreased $23.9 million to $343.8 million, compared with $367.7 million during the same nine month period last year, primarily due to changes in working capital.

Previous wording

Capital expenditures for the six months ended June 30, 2024 were approximately $63.6 million, compared with approximately $90.3 million for the same period last year. The decrease was primarily due to timing of payments and a decrease in expenditures related to building and facility construction projects previously disclosed as certain manufacturing facility construction was completed, as further described below.

Current wording

Capital expenditures for the nine months ended September 30, 2024 were approximately $103.0 million, compared with approximately $121.4 million for the same period last year. The decrease was primarily due to timing of payments and a decrease in expenditures related to building and facility construction projects previously disclosed as certain manufacturing facility construction was completed, as further described below.

Previous wording

During 2023, the Company began the design and initial build phase of the previously announced Gentex Discovery Preschool, an on-site daycare and preschool designed to provide Company employees with convenient, cost-effective access to quality childcare. Construction is expected to begin in 2024, with an expected completion date in 2025. The total cost of the building project is expected to be $12 - $15 million, which will also be funded with cash and cash equivalents on hand.

Current wording

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

Previous wording

The Company has a previously announced share repurchase plan under which the Board of Directors has authorized the repurchase of shares of the Company's common stock, which remains a part of the broader publicly disclosed capital allocation strategy. Future share repurchases may vary from time to time and will take into account macroeconomic events, market trends, and other factors the Company deems appropriate (including, but not limited to, the market price of the stock, anti-dilutive effect of repurchases, and available cash). During the three and six months ended June 30, 2024, the Company repurchased 1,402,667 and 2,603,570 shares respectively. The Company has 13,247,609 shares remaining under the plan as of June 30, 2024, as is further detailed in Part II, Item 2 of this Form 10-Q.

Current wording

The Company has a previously announced share repurchase plan under which the Board of Directors has authorized the repurchase of shares of the Company's common stock, which remains a part of the broader publicly disclosed capital allocation strategy. Future share repurchases may vary from time to time and will take into account macroeconomic events, market trends, and other factors the Company deems appropriate (including, but not limited to, the market price of the stock, anti-dilutive effect of repurchases, and available cash). During the three and nine months ended September 30, 2024, the Company repurchased 3,194,815 and 5,798,385 shares respectively. The Company has 10,052,794 shares remaining under the plan as of September 30, 2024, as is further detailed in Part II, Item 2 of this Form 10-Q.

Previous wording

For the second quarter of 2024, the Company reported net sales of $572.9 million, compared to net sales of $583.5 million in the second quarter of 2023, a 2% decrease quarter over quarter. For the second quarter of 2024, global light vehicle production in North America, Europe, and Japan/Korea decreased approximately 3%, when compared to the second quarter of 2023.

Current wording

For the third quarter of 2024, the Company reported net sales of $608.5 million, compared to net sales of $575.8 million in the third quarter of 2023, a 6% increase quarter over quarter. For the third quarter of 2024, global light vehicle production in North America, Europe, and Japan/Korea decreased approximately 6%, when compared to the third quarter of 2023.

Previous wording

In the second quarter of 2024, the Company had 32 net new launches of interior and exterior auto-dimming mirrors and electronic features. Over 65% of the launches in the second quarter of 2024 were advanced feature launches, with HomeLink®, Full Display Mirror®, and outside auto-dimming mirrors being the bulk of such launches.

Current wording

In the third quarter of 2024, the Company had 25 net new launches of interior and exterior auto-dimming mirrors and electronic features.

Previous wording

As of the second quarter of 2024, the Company is shipping production Full Display Mirrors® to nineteen different automaker customers. The Company remains confident that ongoing discussions with certain other customers may in the future cause such customers to consider adding the Full Display Mirror® into their product road-map for future vehicles.

Current wording

As of the third quarter of 2024, the Company is shipping production Full Display Mirrors® to nineteen different automaker customers and 124 vehicle nameplates. For more information regarding the full display mirror please go to https://www.fulldisplaymirror.com/. The Company remains confident that ongoing discussions with other customers may cause such customers to consider more fully adding the Full Display Mirror® into their product road-map for future vehicles.

Previous wording

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

Current wording

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

Previous wording

In July 2016, a revision to UN-ECE Regulation 46 was published with an effective date of June 18, 2016, which allows for camera monitoring systems to replace mirrors in Japan and European countries. Since January 2017, camera monitoring systems are also permitted as an alternative to replace mirrors in the Korea market. As noted, China released an updated version of its GB15084, effective in 2023, which allows for camera monitoring systems, frameless mirrors and aspheric (free-form) glass surfaces. Notwithstanding the foregoing, the Company continues to believe rearview mirrors provide a robust, simple and cost effective means to view the surrounding areas of a vehicle and remain a primary safety function for rear vision today. Cameras when used as the primary rear vision delivery mechanism have some inherent limitations, such as: electrical failure; cameras being blocked or obstructed; depth perception challenges; and viewing angles of the camera. Nonetheless, the Company continues designing and manufacturing not only rearview mirrors, but CMOS imagers and video displays as well. The Company believes that combining video displays with mirrors may well provide a more robust product by addressing all driving conditions in a single solution that can be controlled by the driver. As noted, the Company has been in production with the Company's Full Display Mirror® since 2015 and has, in the ordinary course of business, been awarded programs with nineteen OEM customers. The Company is currently shipping production Full Display Mirrors® to all nineteen of these automaker customers. The Company's CMS solution uses three cameras to provide a comprehensive view of the sides and rear of the vehicle while still providing the traditional safety of interior and exterior mirrors, which mirrors continue to function when cameras are obstructed or are not functioning. The Company has also previously announced that it continues development in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning. The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there is increased competition.

Current wording

In July 2016, a revision to UN-ECE Regulation 46 was published with an effective date of June 18, 2016, which allows for camera monitoring systems to replace mirrors in Japan and European countries. Since January 2017, camera monitoring systems are also permitted as an alternative to replace mirrors in the Korea market. As noted, China released an updated version of its GB15084, effective in 2023, which allows for camera monitoring systems, frameless mirrors and aspheric (free-form) glass surfaces. Notwithstanding the foregoing, the Company continues to believe rearview mirrors provide a robust, simple and cost effective means to view the surrounding areas of a vehicle and remain a primary safety function for rear vision today. Cameras when used as the primary rear vision delivery mechanism have some inherent limitations, such as: electrical failure; cameras being blocked or obstructed; depth perception challenges; and viewing angles of the camera. Nonetheless, the Company continues designing and manufacturing not only rearview mirrors, but CMOS imagers and video displays as well. The Company believes that combining video displays with mirrors may well provide a more robust product by addressing all driving conditions in a single solution that can be controlled by the driver. As noted, the Company has been in production with the Company's Full Display Mirror® since 2015 and has, in the ordinary course of business, been awarded programs with nineteen OEM customers. The Company is currently shipping production Full Display Mirrors® to all nineteen of these automaker customers on over 124 nameplates globally. The Company's CMS solution uses three cameras to provide a comprehensive view of the sides and rear of the vehicle while still providing the traditional safety of interior and exterior mirrors, which mirrors continue to function when cameras are obstructed or are not functioning. The Company has also previously announced that it continues development in the areas of imager performance, camera dynamic range, lens design, image processing from the camera to the display, and camera lens cleaning. The Company acknowledges that as such technology evolves over time, such as cameras replacing mirrors and/or autonomous driving, there is increased competition.

Previous wording

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

Current wording

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

Previous wording

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

Current wording

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

Previous wording

On November 2, 2023, in the ordinary course of business, the Company acquired certain technology assets from eSight Corporation for approximately $18.9 million in cash, the assumption of a $9.4 million promissory note given in exchange for the 20% equity the Company previously held, as well as an earn out provision over a ten year period. The technology acquired from eSight provides the most advanced and versatile low-vision smart glasses available for those with visual impairments and is compatible with more than 20 eye conditions including Macular Degeneration, Diabetic Retinopathy, and Stargardt disease.

Current wording

On November 2, 2023, in the ordinary course of business, the Company acquired certain technology assets from eSight Corporation for approximately $18.9 million in cash, the assumption of a $9.4 million promissory note given in exchange for the 20% equity the Company previously held, as well as an earn out provision over a ten year period. The technology acquired from eSight provides the most advanced and versatile low-vision smart glasses available for those with visual impairments and is compatible with more than 20 eye conditions including Macular Degeneration, Diabetic Retinopathy, and Stargardt disease. In the third quarter of 2024, the Company recorded its first official sales of medical devices of $0.8 million from shipments of the previously acquired e-Sight Go product.

Previous wording

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

Current wording

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