Gentex Corporation (GNTX) Q3 2015 Earnings Report, Transcript and Summary

Please standby. Good morning, ladies and gentlemen. Welcome to the Gentex Third Quarter 2015 Earnings Conference Call. Today's call is being recorded. And I'd now like to turn the meeting over to Mr. Josh O'Berski, with Gentex's Investor Relations Manager. Please go ahead, sir. Josh O'Berski - Head-Investor & Media Relations: Good morning and welcome to the Gentex Corporation Third Quarter 2015 Earnings Release Conference Call. I'm Josh O'Berski, Gentex Investor Relations Manager, and I'm joined by Steve Downing, Senior Vice President and Chief Financial Officer; and Kevin Nash, Vice President and Chief Accounting Officer; and Neil Boehm, Vice President of Engineering. This call is live on the Internet by way of an icon on the Gentex website at www.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's Safe Harbor statement included in the Gentex Reports Third Quarter 2015 Financial Results and Additional Share Repurchase Authorization press release from earlier this morning, and as always, shown on the Gentex website. Your participation in this conference call implies consent to these terms. Now, I will turn the call over to Steve Downing, who will give the third quarter 2015 financial summary. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thank you, Josh. For the third quarter of 2015, the company is pleased to report net sales of $389.8 million, which was an 11% increase compared to net sales of $350.9 million in the third quarter of 2014. On a quarter-over-quarter basis, foreign currency fluctuations accounted for approximately 1% of revenue headwind. The gross profit margin in the third quarter of 2015 was 39% compared with a gross profit margin of 39.5% in the third quarter of 2014. On a quarter-over-quarter basis, foreign currency fluctuations accounted for the majority of the reduction in gross profit margin, while annual customer price reductions were essentially offset by purchasing cost reductions. Sequentially, from the second quarter of 2015, the gross margin improved from 38.4%, primarily due to increased purchasing cost reductions and improvements in product mix. Operating income for the third quarter of 2015 increased 13% to $116.3 million when compared to operating income of $103.2 million for the third quarter of 2014. Other income decreased to a loss of $0.2 million in the third quarter of 2015 compared with other income of $0.8 million in the third quarter of 2014, primarily due to increased interest expense as a result of the company's newly implemented interest rate swap, combined with lower realized gains on the sale of equity investments. Net income for the third quarter of 2015 increased 8% to $78.3 million compared with net income of $72.3 million in the third quarter of 2014. Earnings per diluted share in the third quarter of 2015 increased 8% to $0.27 compared with earnings per diluted share of $0.25 in the third quarter of 2014, which reflects the December 31, 2014 stock split which was effected in the form of 100% stock dividend. During the third quarter of 2015, the company repurchased 2.1 million shares of its common stock, and through nine months ended September 30, 2015, the company has repurchased 4.9 million shares. The company's board of directors has also recently authorized the repurchase of up to an additional 5 million shares of the company's outstanding common stock under the existing terms of the most recently announced share repurchase plan. As of September 30, 2015, the company has approximately 6.3 million shares remaining available for repurchase in the plan, including the most recent share authorization. The company intends to continue to repurchase additional shares of its common stock in the future, depending on macroeconomic issues, market trends, and other factors that the company deems appropriate. During the third quarter of 2015, the company paid down $25 million on its revolver loan in addition to its normally scheduled principal payment on the company's term loan. The company may, at its discretion, pay additional principal toward its loans in the future depending on macroeconomic trends, capital expenditure spending, cash and money market interest rates, the amount of available free cash and other factors that it deems appropriate for timing and amounts of incremental debt repayments. Now to Kevin Nash with third quarter 2015 financial details.

Thanks, Steve. Automotive net sales in the third quarter of 2015 were $379.9 million, an increase of 11% compared with automotive net sales of $341.8 million in the third quarter of 2014, primarily due to a 15% increase in auto-dimming mirror unit shipments quarter-over-quarter. Other net sales, which included dimmable aircraft windows and fire protection products, were $9.9 million, an increase of 9% in the third quarter compared with $9.1 million in the third quarter of 2014. ER&D expenses in the third quarter were $21.5 million, which was a 1% decrease versus $21.7 million in the third quarter of 2014 as a result of increased staffing and benefits, which were offset by reimbursables and foreign currency fluctuations. SG&A expenses during the third quarter were $14.1 million, which was a 3% increase versus $13.7 million during the third quarter of 2014. Increased marketing and advertising was also offset by favorable foreign currency fluctuations. The tax rate during the third quarter was 32.5%, which varied from the statutory rate of 35%, primarily due to domestic manufacturing deduction. The tax rate increased from the third quarter of 2014, which was 30.4%, primarily as a result of incremental research and development tax credit for calendar year 2013 of $1.8 million that was recognized during the third quarter of 2014. Excluding the impact of the incremental credit in 2014, the tax rate would have been 32.2% during the third quarter of 2014. Based on the company's forecast and current legislation, the company continues to expect its tax rate to be approximately 31.5% to 32% for the calendar year 2015. Now, for some balance sheet items. Cash and cash equivalents were $564.5 million, up from $497.4 million as of December 31, 2014, primarily due to cash flow from operations. Accounts receivable was $208.2 million, up from $168 million as of December 31, 2014, primarily due to the higher sequential sales level, as well as the timing of sales within the quarter. Inventories were $164.6 million, up from $141.8 million as of December 31, primarily due to increases in raw materials in support of the increased sales levels and business activity. Long-term investments were $94.4 million versus $114.6 million as of December 31, 2014, primarily due to reductions in unrealized gains on equity investments and the realized gains throughout the calendar year that were not reinvested. Accounts payable was $83.9 million versus $71.5 million as of December 31, primarily due to increased inventory levels and capital expenditures. Accrued liabilities were $97.7 million versus $62 million as of December 31, primarily due to the timing of certain tax and wage payments. As Steve mentioned previously, long-term debt declined to $227.5 million versus $258.1 million as of December 31, driven by the company's repayment of $25 million in principal during the third quarter. Unrealized gains on equity investments declined from $10.9 million as of December 31 to $875,000 as of the end of the third quarter as a result of lower realized – as a result of realized gains and the current market conditions. Some cash flow highlights. The cash flow from operations for the third quarter increased to $91.3 million from $85.3 million in the third quarter of 2014, primarily due to increased net income. In year-to-date, cash flow from operations increased to $283.2 million from $227.5 million, primarily due to increases in net income and fluctuations in working capital. Capital expenditures for the third quarter were $28.7 million compared with $19.7 million in the third quarter of 2014. And year-to-date, CapEx was $62.3 million compared with $50 million through nine months in 2014. Based on current progress of the company's current and planned capital expenditure projects, the company is maintaining its capital expenditure guidance range in the $95 million to $105 million range for the balance of the year. Depreciation and amortization expense for the third quarter was $21.2 million and year-to-date was $63.7 million. And the company continues to estimate the depreciation and amortization for calendar year 2015 will be between $85 million and $90 million. And lastly, on August 31, the company announced that its board of directors declared an $0.085 per share dividend, which was paid on October 16 to shareholders of record of the common stock at the close of business on October 7. And now back to Steve Downing for the product and business development update and our remainder of the year guidance. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thank you, Kevin. Gentex has been growing at one of the fastest rates in company history when compared to the overall automotive production. This growth is being driven by continued penetration of our core electrochromic technology on many vehicles that are new applications for our products. As an example, when we study the growth rate of inside and outside electrochromic mirrors, as measured in new vehicle launches, the company has produced a solid history of new vehicle launches over the last three years. In 2013, the company had 37 new launches of its inside and outside electrochromic mirrors. In 2014, there were 43 new launches of inside and outside EC mirrors. And in 2015, through nine months, the company has had 54 new vehicle launches. The company also continues to grow the number of applications with our advanced features. Approximately one-half of our revenue growth is currently being driven by improvements in styling and design through our new frameless mirror executions and through electronic content from SmartBeam, HomeLink, compass, RCD, lighting technology, telematics and beginning now with our full display mirror that begins production in the fourth quarter. One very important new product launch began on the third quarter. Gentex began shipping our SmartBeam product on A and B segment vehicles in the Japan market. This specific launch is of significance not only because of the incremental revenue generated from this launch, but also because the addition of SmartBeam was to an existing RCD mirror. One of the product combinations now available from Gentex on these vehicles in the Japan market is a SmartBeam RCD mirror. This is, to-date, the most content-rich mirror the company has ever sold for use in the Japan market and it is being deployed on A and B segment vehicles. Additionally, the company is very excited for its first production launch of our new full display mirror in the fourth quarter on the Cadillac CT6, which will be available to consumers in early 2016. Our guidance for calendar year 2015 is based on the mid-October 2015 IHS production forecast for the fourth quarter of calendar year 2015. The current IHS production forecast for our major markets is expected to be flat versus the fourth quarter of calendar year 2014 and the company now estimates that net sales for calendar year 2015 will be between $1.52 billion and $1.54 billion. We have slightly reduced the top end of our guidance to reflect the nine months of actual results and the three-month to forecast that remain. The company continues to see strong orders and book business despite flat vehicle production in our primary markets and demand concerns surrounding one of our OEM customers. Given the well-balanced sales and penetration across all OEMs and the fact that there continues to be strong demand for autos across our major regions, the company does not expect a major long-term impact from this issue. Based on the actual results for the first nine months' forecasted sales and product mix, the company continues to estimate that the gross profit margin will be between 38.5% and 39% for calendar year 2015. Based on actual expenses for the first nine months of the year and current foreign exchange rates, the company is lowering its estimate of operating expenses to be between $145 million and $147 million for calendar year 2015. That's the finish of our prepared comments, and we can now proceed with questions.

Thank you. And we'll take the first question today from David Leiker with Baird. Please go ahead. David Leiker - Robert W. Baird & Co., Inc. (Broker): Good morning, everyone.

Hey, David. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Good morning, David. David Leiker - Robert W. Baird & Co., Inc. (Broker): First of all, thanks for the additional detail in terms of the launches. You gave – I think the number you gave for 2015 was a year-to-date number. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: That's correct. David Leiker - Robert W. Baird & Co., Inc. (Broker): Do you have any sense where that number might end up at the end of the year, calendar year? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: I don't have it with me. Yeah, we do have it. We would expect it to be not quite as high as it is year-to-date on the run rate, just because the end of the year tends to have fewer launches, but there are some incremental launches in the fourth quarter. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. And then, as you look at what your bookings are, what do you think – either two ways, what do you think the pace of those launches are in 2016, 2017 or looking at it another way, you're growing your revenues right now about 10% organically faster than what global vehicle production is growing. How far out do you think that rate of growth is sustainable? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: What we've talked about before is that we looked out over the next couple of years, we continue to see that kind of high-single to low-double-digit growth rate for the company. And if we compare that to what we see from a production standpoint, 2016 production data for our primary markets doesn't – it looks fairly flat right now into 2016. If you look out into 2017, it shows a little organic growth in production, but it's hard to predict whether or not that'll actually pan out. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. And then has there been any change in the pace of new contract booking activities as you look to launches that might be coming in 2018, 2019, and 2020 with – obviously, with some of the concerns about cameras? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: No. Actually, if you – and that's one of the reasons why we want to talk about the new electrochromic launches in terms of what we're seeing right now. We're launching a new program right now. We're going to average between three and six years of production on those programs that we've been awarded and have launched this year. And so when you extrapolate that out and you look forward at what the sourcings that are taking place and the bookings that are happening, we don't see anything that suggests that there's any change in our core electrochromic business. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. Great. And then the last item here for me is if we – as I found your comments on Japan interesting for two perspectives. One, I believe that's the end market that historically has had the lowest penetration of developed markets for auto-dimming mirrors. So what's shifting there? Then, and secondly, particularly if you go to the A and the B class with that rich of content, is that something that the Japanese manufacturers might take into the other parts of the world? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Dave, can you repeat the first part? The second part I picked up, but... David Leiker - Robert W. Baird & Co., Inc. (Broker): Yeah. I think, historically, Japan has been one of the markets in the developed world that had the lowest penetration of auto-dimming mirrors. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yes. David Leiker - Robert W. Baird & Co., Inc. (Broker): And this would indicate that, that's starting to change, if you can give some color on that. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Sure. I mean, you're absolutely right. It's one of the – been one of the harder markets to penetrate from an overall EC standpoint. And that – and when we say that, when we talk about production in Japan, that's not the case, because as it relates to cars that are exported from Japan, we have very good content there. As it relates to the cars that stay in the Japan market, historically, it has been a struggle. When you start to see the changes that we're talking about, there is a sign of life in terms of seeing that the EC content itself is being more widely accepted in the Japan market. And not only just the base auto-dimming technology but also the advanced features that we're selling. And one of the exciting parts is when you start talking about an EC mirror or SmartBeam and with RCD, you're talking about a very high ASP on a very inexpensive vehicle in the Japan market. David Leiker - Robert W. Baird & Co., Inc. (Broker): And that market, I think, is – I mean, I haven't seen the number in a while, but it looks like 10% to 15% type penetrated for interior auto-dimming mirrors. Is that still in the ballpark? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yeah. That's still the ballpark. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. Great. Thank you much. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thank you.

The next question comes from Rich Kwas with Wells Fargo.

Hi. Good morning, everyone. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Good morning, Rich.

Good morning, Rich.

So in terms of the – just the outlook for the balance of the year, VW, looks like there's been some cuts here to fourth quarter production in Europe. So is that part of the adjustment, at least, at the top end, or is that meaningful at all to the... Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: No. Really, the majority of the adjustment for the end of the year was just based on Q3 actuals.

Okay. All right. So no real – there's no real change on VW in terms of materiality for the balance of the year? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: No, not at all. And one of the things we were trying to comment in our prepared remarks was when you look at overall global demand, and we see what – when we see what our releases look like for that customer in particular, we don't see anything that looks like it's changing in the near term. And we don't expect anything in the long term to change strategically about how they're positioned or how we're positioned with the other OEMs.

Okay. All right. And then ER&D and SG&A, so the growth numbers, at least, year-over-year, very modest, as we think about modeling out longer term, I think you've targeted those growth rates to be kind of relatively consistent with your sales growth. Do we – with the benefits on FX this year in terms of helping on the cost side, do we look at that next year as potential reversion of the mean where you get greater than normal increase on those line items next year or is – how should we think about that?

Yeah, I think we're continuing to invest in staffing and people to support our product launches. But yeah, on a same-for-same basis, if the currency rates stay consistent, we would expect to get closer to that sales growth rate at least on the ER&D side and most likely also on the SG&A side.

Okay. And then, Steve, in terms of the launches, in terms of the full display rearview mirror, how do we think about that over the next couple of years in terms of the cadence? I know you've discussed with GM, there's more programs and kind of alluded to other opportunities. But how does that play out and how do we think about frameless in the context of trying to model outgrowth versus underlying production over the next two years or so? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Sure. Well, full display mirror, it's going to be a fairly modest impact to revenue in 2015 – in Q4 2015 and then 2016, really start to see the cadence in increase or the importance of the revenue from that product start to improve in 2017 and really in 2018 gets – it starts to become significant to the company. In terms of frameless, that's a different story. We've already pretty heavily into rollouts and executions of frameless technology. And really over the next three years, we would estimate that probably 25% to 30% of our mirrors will convert to some type of frameless in the next three years to four years. So, that one – and based on the kind of price points we've discussed previously regarding frameless, you can get a pretty good idea of what impact that'll have over the next few years.

Okay. And then last one in terms of gross margin for the quarter, any launch cost headwind for this quarter? I know you had in the first half. Was that pretty much done in the third quarter? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yeah, it was minimal. With our leveraging of our fixed overhead costs, that pretty much covered up any inefficiencies we had. But they are minimizing throughout the years. The teams continue to focus on it.

Okay. Great. I'll pass it on. Thanks so much.

Next is John Murphy with Bank of America.

John.

Good morning, guys. This is actually Aileen Smith on for John. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Hi, Aileen.

How is it going? So, I – first question being, if we look at revenue premier in the third quarter, it was down again on a year-over-year basis. And I think this is pretty similar to some of the prior quarters we've seen excluding last quarter in 2Q. As we look ahead, are there any levers that you can pull to slow or potentially reverse the revenue premier erosion to some degree? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Well, one of the things we like to talk about, this is why a couple of years ago we started not focusing on this as a statistic. And the reason for that was because, if you look at the orders, you'll see that outside mirrors outpaced inside mirrors in terms of growth rate, almost double. And so when you look at the price points of those, outside mirrors are always going to be far less than inside mirrors. And so it's a great business. It's a great margin profile product. However, it is well below the ASP of the company, currently. And so that is really what's creating the negative on the ASP side. It's not a negative for the business, in fact, quite the opposite. And that's why we try to look at more of a content-type equation than an ASP conversation, because it's not really indicative of the success or health of the business.

Okay. Yeah, that's very helpful to understand that. The second question we are sort of thinking of in light of the news that some of the major auto makers are going to start making automatic breaking technology a standard feature in their vehicles. Can you just talk a little bit about what potential opportunities might be for Gentex in that type of scenario. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Sure. So one of the things we like to discuss is, really, in terms of AAB, (00:24:22) it's not in the core of what we're focused on in terms of our driver assist technology. It doesn't mean we're not capable of doing it, per se, but we believe that, strategically, longer term, that's going to be a better fit for other suppliers, primarily suppliers who supply breaking systems for instance or steering systems, or suppliers that are going to be able to bring a full system to bear on the marketplace that we won't have or won't be able to offer. Like I said, it's not a core product of ours or what we're focused on the forward-facing camera side. It doesn't mean we're not capable, it just means, strategically, we don't want to invest in that area if we feel like, longer term, it's not going to be – we're not going to be able to be a dominant player in the space.

Okay. Great. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: That being...

And... Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: All that being said though, one thing that is exciting is, there is a lot of interest in alternative technologies. Because the announcement from OEMs is interesting as they said they want to have it as a standard feature or, at least, be available as a standard feature. And so we got to be careful with the wording that we assume. Standard means that it's on every car versus just available on every car.

Okay. Got it. It's great. And then the final question, if we look at R&D as a percent of sales, it's been going down pretty significantly from quarter-to-quarter and even year-to-year. How do we – how should we think about that going forward? I mean, why is that trending down and should we expect that to continue?

Specifically, on the quarter or year-over-year perspective, a lot of our engineers sit in our foreign offices, we have a significant amount there. So, the costs are denominated in euro. So, you're seeing some benefits there. And specifically, within the quarter, we had some reimbursable projects that we closed out that would have – that helped that. And on last year's, we didn't. So, that's more of a commercial business item. So, going forward, we continue to add head count to support launches that are going on right now in development. So, we would continue to estimate that, on a going-forward basis, we're going to be in that – just at or just below the growth in the sales on the R&D side.

Okay. Great. That's very helpful. Thank you very much. I'll pass it along. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thank you.

We'll now go to Ryan Brinkman with JPMorgan.

Hi. This is Samik on for Ryan Brinkman. The first question I had was primarily on gross margins looking into 4Q and related to 3Q when I think (00:26:46) probably would likely benefit from – sequentially from higher cost reductions. And hence, I was thinking like if you are sort of looking at sequentially where the margin is going into 4Q, is that a fair statement? And then, does that allow you to have the high end of your guidance or range for the full year on gross margins? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Well, really, if you look at Q3 is the first quarter of the year where we get the full benefit of cost reductions from the supply base. So, we wouldn't expect that to be a positive influence on Q4 at all. Really, we're looking at Q4 as probably roughly in line with what we performed in Q3 would probably be a good indicator of what we're expecting for fourth quarter.

Okay. Great. Then, on shipments in North America, your dealer mirror shipments were up 9%, whereas production was up 5%. So, if you can help me sort of split that up between how much of that was just getting your mirrors on new platforms and having new launches versus are you seeing more – higher take rates on your current platforms that you're on? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yeah. I mean, if you look at it, it's probably roughly split in half there, I mean, we probably – of the 5% increase in production, we probably picked up half of those and we got volume out of that increase. But the rest of it is kind of more organic growth in terms of penetration on the new vehicles or higher take rates on existing vehicles?

Okay. Got it. The last question on the driver-assist products, if you can just go back to that. What is – if you can give us an update of what's sort of your bidding activity looking like there and your current association with Mobileye. Are you still working in collaboration with them, because I think, there was some talk that they might not look now to work with competitors. So, are you still bidding for – sell those products as the lower end product with Mobileye supplying the higher-end products, does that still an ongoing (00:28:49)? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yes. So Ford, Jaguar and Land Rover, we continue to work with Mobileye. And really over the next two to three years, that business will continue to grow with those OEMs where we're the driver-assist supplier of the Mobileye product. Below that, on all those OEMs, we still supply our SmartBeam system as kind of the lower-end option for those same vehicles. And on a go-forward basis, though, we've chosen not to work with Mobileye on new launches at other OEMs, primarily due to the fact that we wanted to invest in our own technology and try to advance that in the marketplace. So, we continue to see interest, like we mentioned, in Japan market, as an example, for successes of our SmartBeam product to start to penetrate a new market in the lower-segment markets that haven't used forward-facing cameras historically.

Great. Thank you. Thanks for taking my questions. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thank you.

And at this time, there's one name remaining in the roster. And we'll now go Jason Rodgers with Great Lakes Review. Please go ahead.

Hello, guys.

Hi, Jason.

Would you give us what the foreign currency impact on operating profit was for the quarter? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: About $0.5 million in the total expenses. So, a little over 1%.

All right. And I don't know if you gave this out, but the realized gains on the sales equity investments in the quarter and whatever unrealized gains remaining.

Yeah. There's about $875,000 of unrealized gains as of September 30 and then the realized gains are about $2 million for the quarter.

And the share repurchase in the quarter, would you give the total amount spent or the average price paid?

The average price was $50.99 for the quarter.

Okay. And finally, looking at the full-display mirror, you talked about your revenue over the next few years. Is that based on multiple OEMs that have already committed to the full-display mirror or is it more a function of you're still selling to the OEMs and you expect some to commit? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: It's a function of two things. One of them is the already announced OEMs who's good at buying the product and what their rollout plans look like. And then secondly, as the addition of more OEMs who are going to buying that product over the next several years.

And finally looking at SmartBeam, the additional products, lane departure, graphic sign recognition, and so forth, when would – should we expect those to be available? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Well, from our perspective, I mean, we have some of the features developed and ready to go. It's a function of when an OEM wants to add this to a product mix and we have this opportunity to launch that product and validate it on their vehicle. And so typically, you're talking two year to three year out development window before you'll see something like that either in the marketplace or on the road. And so that's kind of a realistic time period of when you would expect to see that type of product hit (32:06) the market.

Thank you. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thanks, Jason.

We'll now go to David Leiker with Baird. David Leiker - Robert W. Baird & Co., Inc. (Broker): Hey. I just want to follow up on that last question. If we look at your ADAS capability, have you booked any new business using your proprietary capabilities? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: So, define – I mean, like we announced – we continue to have SmartBeam awards and SmartBeam products continue to merge closer to this type of products you're referring to. In other words, we're constantly adding technology and ability to that system that becomes very similar to what you're describing as some of the traditional or publicly defined ADAS-type feature suite. So it's not a line – it's not a "line in the sand." It's kind of – it's a merger of technologies more than anything. David Leiker - Robert W. Baird & Co., Inc. (Broker): Yeah. I think everything you've booked so far though using your – using SmartBeam is headlamp control. Have you gone – have you booked any feature sets beyond headlamp control using SmartBeam? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Well, that's the primary function that we're selling, but... David Leiker - Robert W. Baird & Co., Inc. (Broker): Right. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: ...several of those, when we talk about like the new gen camera that we launched with certain OEMs. It has lane detection capability inside of those and we're doing that to help assist with the headlamp control but also providing that information to the vehicle. So, that's why I'm saying it's not hard line saying, hey, we were technically like doing LDW or lane-keep assist, but we are doing those functionalities and provide information to OEMs on some of the applications. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. Understand. And then on the GM display mirror, are you at a point at all that you can talk a little bit more about how that rolls out over the next couple of years and how broadly that's going to go across the GM lineup? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Unfortunately, not yet. GM is still working on their plans for communication of what vehicles are going to be included in that product lineup and how they're going to release that information. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. And then the last thing, as we look out over the next several years, is there some thoughts you can give us in terms of the pace of the capital spending. It can be a lumpy from time to time as you go through different expansions. But do you have any thoughts you can share in terms of what that looks like? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yeah. I mean, just – yeah, a quick peek in the next year, for instance, I mean we don't expect our CapEx to change much from what it was this year. I mean, it might be slightly higher, but we wouldn't expect it to be that much higher than – not significantly higher than this year's CapEx spend. And that's what that new production facility coming online next year and knowing that we need to put some additional equipment in that building. But we're still going to try to manage that at a reasonable level above this year's. David Leiker - Robert W. Baird & Co., Inc. (Broker): So if you look at what your capacity expansion is doing, what – is there a way you can characterize in terms of units how much more volume you're able to do?

Yeah, approximately 15% to 20% on the top end probably of where our current production is. Depending on the product mix obviously. Certain stuff has more complexities than others. David Leiker - Robert W. Baird & Co., Inc. (Broker): And those are all for contracts that you have booked already, right, correct?

Yes. David Leiker - Robert W. Baird & Co., Inc. (Broker): I'm just saying you're putting that capacity in for contracts you have; you're not building excess capacity?

Yes. We stopped doing the field of dreams (00:35:29) model a few years ago, so, yeah. Needless to say, (00:35:33) forecasting growth. David Leiker - Robert W. Baird & Co., Inc. (Broker): Okay. Perfect. Thank you very much.

And next is Christopher Van Horn with FBR Capital Markets. Christopher Van Horn - FBR Capital Markets & Co.: Hey. Thanks, guys. Thanks for taking my call.

Hi, Chris. Christopher Van Horn - FBR Capital Markets & Co.: Just a quick question on the balance sheet. You've got solid cash flow and then a good cash balance. Could you give us some perspective of – and obviously, announced the additional buyback today – but could you give us perspective over the next kind of 12 months to 18 months, what you're thinking about in terms of use of cash? Are we going to see more debt paydown? Are buybacks still on the table, dividend shifting, just kind of your priorities there? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Sure. So if you look at – first and foremost, I mean, we have a very good history of moving our dividend in line with earnings. And so, our plan is to try to continue that process of moving our dividend payout roughly in line with earnings and so that's one of the primary focus. The second one is obviously on share repurchases and just being consistent with what we're doing there and taking the opportunities when the price we believe is undervalued to make sure we're picking up extra shares at those times like what we did in the last quarter. And then thirdly, we take those two – the first two as a priority and then the third option is if we produce extra cash flow off the business and we've accomplished our other two goals, then we will look at the opportunity to pay down the debt above the current pay-off rates. Christopher Van Horn - FBR Capital Markets & Co.: Got it. Okay. And then, just one follow-up. So are you – is your product set moving to a point where, and I know this would be kind of against the industry standard, but were some of these products can almost be bolt-ons to existing infrastructure? Are we still in the – is it still more than the industry standard where you're going to have to get designed in? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: You have to get design in us. Now, the good news is a lot of OEMs have gone to more common architectures and that helps us with when you create a new feature, you have a new product design. It enables you to roll that across multiple vehicles quicker. But for the most part, you still are a design – a build in, in a two to four-year out kind of design cycle to get a new product onto a vehicle. Christopher Van Horn - FBR Capital Markets & Co.: Okay. Great. Thanks for taking my call. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: I appreciate it. Thank you.

And we'll go back to Rich Kwas with Wells Fargo.

Hi. Two follow-up questions. So, on the ADAS piece, just a question, is the functionality comparable that – if I recall several years ago, SmartBeam, it took a while for the functionality to get engineered into a vehicle. But then the RCD product, there was a lot less engineering. So you could kind of do it or you could do it more quickly. So, how do we think about the other content as it relates to the ADAS functionality with lane departure, et cetera? Can that be engineered quickly into SmartBeam for like a next model year or what type of work has to be done on that from your end with the OEM? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Yeah. Anything on the software side as it relates to either SmartBeam or even as it merges into the driver-assist suite, those are longer term development. So typically, you're in that kind of two- to four-year out window. Because it's not just for us getting it ready, it's also them validating the vehicle and that's a lot of drive collection data we have to do to verify that the performance is what the OEM expects and also what we expect out of the system.

Okay. All right. And then second question on the next generation 777. Any update there in terms of opportunity and where it's positioned for future business with Boeing or others? Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: We're still very active trying to find that next major program with an OEM. So we believe there's a lot of interest in the aerospace industry for this type of product, and we're looking for that next opportunity. I wouldn't limit it to any one program at this standpoint. I mean, literally, we're looking at the major OEMs in trying to find the right business case and the right interest level from those builders to make sure we have, A, the right customer, but, B, a program that justifies the development because it's a lot of work to get these products to market.

Okay. All right. Thank you. Steve R. Downing - Chief Financial Officer, Treasurer & Senior VP: Thanks, Rich.

And as there are no other questions at this time, I'd like to turn it back to Josh O'Berski for any additional or closing remarks. Josh O'Berski - Head-Investor & Media Relations: Thank you for your time, everyone, and thank you for all the great questions. Have a great day.