Good evening and thank you for standing by. Welcome to Gentex Fourth Quarter and Year End 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Josh O'Berski, Director of Investor Relations. Please go ahead, sir.

Thank you. Good morning and welcome to the Gentex Corporation fourth quarter 2021 earnings release conference call. I am Josh O'Berski, Gentex Director of Investor Relations and I am 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 Fourth Quarter and Year End 2021 Financial Results 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'll turn the call over to Steve Downing, who will get us started today.

Thanks Josh. For the fourth quarter of 2021, the company reported net sales of $419.8 million compared to net sales of $529.9 million for the fourth quarter of 2020. The company's revenue during the quarter was impacted by a 20% quarter-over-quarter reduction in light vehicle production in the company's primary markets of North America, Europe, Japan, and Korea. The industry-wide electronics component shortages further impacted the company's revenue negatively during the fourth quarter of 2021. During the quarter, the electronics component shortages primarily impacted the company's ability to meet customer demands for Full Display Mirrors, Integrated Toll Modules, and other advanced feature unit shipments Up until the fourth quarter of 2021, the combination of the company's conservative inventory position, along with significant efforts to redesign affected products allowed us to avoid having any meaningful shipment issues stemming from the industry-wide electronics component shortages. But in the fourth quarter, the shortages began to impact our customer shipments as well. During the fourth quarter, the company -- during the fourth quarter, the company estimates that customer order changes, driven by lower light vehicle production and electronic component shortages, resulted in under shipments of about $85 million in revenue for the quarter. Obviously, impacting our customers by not being able to fully meet their demand is extremely disappointing. However, the team did a remarkable job of completing complicated redesigns in record time to avoid more significant customer shortages. Looking into 2022, we are forecasting growth in FDM based on pent-up demand, as well as several new FDM program launches, which we expect to accelerate our growth into 2020 to 2023. The gross margin in the fourth quarter of 2021 was 34.3% compared with near record gross margins of 40.9% in the fourth quarter of 2020. The gross margin was primarily impacted by the…

Thanks Steve. Automotive net sales during the fourth quarter of 2021 were $409.6 million, which compared to $521.6 million in the fourth quarter of 2020. The 20% quarter-over-quarter reduction in light vehicle production in the company's primary markets led to an 18% reduction in quarter-over-quarter mirror unit shipments. For calendar year 2021, automotive net sales were $1.69 billion which was a 3% increase over 2020 and was driven by auto-dimming mirror unit shipment growth of 9% despite light vehicle production in the company's primary markets decreased by approximately 3% during the same period. This overall growth was highlighted by the company's auto-dimming exterior unit shipment growth of 21% year-over-year. Other net sales in the fourth quarter, which includes dimmable aircraft windows and fire protection products were $10.2 million, an increase of 23% compared to $8.3 million in the fourth quarter of 2018. And fire protection sales increased by 32% for the fourth quarter of 2021 when compared to the fourth quarter of 2020. Other net sales for calendar year 2021 were $33.9 million compared to $40 million in calendar year 2021. And fire protection sales increased by 10% year-over-year, while dimmable aircraft windows were down 48% in 2021 compared to calendar year 2020. The company expects that dimmable aircraft window sales will continue to be impacted until there is a more meaningful recovery of the aerospace industry and the Boeing 787 production levels. Share repurchases, the company repurchased 0.6 million shares of its common stock during the fourth quarter of 2021 at an average price of $34.18 per share. For the year ended December 31, the company repurchase 9.6 million shares of its common stock at an average price of $33.83 per share, for a total of $324.6 million. As of December 31, 2021, the company has 24.8 million shares…

Thank you, Kevin. Earlier this month, Gentex participated in-person at the 2022 Consumer Electronics Show. It was great to be back at the show and be able to demonstrate our product-driven strategies with some of our new products and technologies. This was our largest presence at CES yet and we displayed new products and concepts from all of our various technology areas. But for the call today, I'm going to focus on three primary areas of our booth, the Driver Monitoring Demonstrator, the Cadillac Escalade, and the Innovation Lab. The first item I'll go over is the Driver Monitoring Demonstrator. This incredible tool was developed by the Gentex team in order to demonstrate the power and capability of our driver monitoring solutions, which are based on the Guardian acquisition. In the demonstrator, we were able to show two different camera implementations. One was a driver-only focus camera that was located behind the mirror glass. The other solution was a cabin-based camera system that was mounted above the mirror in the overhead counsel area. In both of these camera implementations, we were able to demonstrate the operations of our AI-based algorithms used to determine the state or condition of the driver, their overall attentiveness, direction of eye gaze, head location, and the readiness to take over control of the vehicle. The systems are also able to identify if the person was holding objects like a phone, and how many people were seated. In addition to these to these features, we were able to show how a depth map can be created by using structured light. This depth capability allows for the expansion of features and provides more accurate information in regards to where things are physically located in the vehicle, their distance from the sensing system, and provides estimates on mass…

Thanks Neil. The company's current forecasts for light vehicle production for 2022 and 2023 is based on the mid-January 2022 IHS market forecasts for light vehicle production in North America, Europe, Japan, Korea, and China. Based on this information, light vehicle production in these markets is expected to increase approximately 8% over the 2021 calendar year volumes. For calendar year 2023, light vehicle production for these markets is forecasted to increase by another 10% over the 2022 estimated volumes. Based on these light vehicle production forecasts, we are providing guidance estimates for calendar year 2022 for each of the following areas. Revenue for 2022 is expected to be between $1.87 billion and $2.0 2 billion. Gross margins for the year are expected to be between 35% and 36%. Operating expenses are currently forecasted to be approximately $230 million to $240 million. Our estimated annual tax rate which assumes no change to the statutory rate is forecasted to be between 15% and 17%. Capital expenditures for 2022 are expected to be between $150 million and $175 million and depreciation and amortization is forecasted to be between $100 million and $10 million. Additionally, based on the company's forecasts for light vehicle production for calendar year 2023, the company currently expects calendar 2023 revenue growth of approximately 15% to 20% above the 2022 revenue guidance. At the end of 2020, we talked about being cautiously optimistic about 2021 due to instability in our in markets, potential supply issues, international trade concerns, and the potential long-term negative economic impacts from the pandemic. Unfortunately, many of these issues impacted the expected recovery of the global automotive industry and especially our primary markets in 2021. We come into 2022. anticipating that at least the first half of the year, we'll continue to see headwinds from supply and labor shortages that we believe will prevent light vehicle production from reaching the IHS estimates we discussed. We also anticipate that these headwinds will continue to cause some margin compression for 2022 due to higher material, transportation, and labor costs. Despite these challenges, we remain optimistic that 2022 will provide a more predictable operating environment where we can begin to focus on cost containment, and hope that the tailwinds created by improved light vehicle production levels over the next few years will combine with our improved product portfolio to create record sales levels for the company. That completes our prepared comments for today. Thank you for your time and we can now proceed to questions.

[Operator Instructions] Our first question comes from the line of Luke Junk from Baird. You may begin.

Good morning. Thank you for taking the questions. First question I had is Steve, wondering if you could expand on what's informing your view that IHS is too aggressive in the first half of the year? What are you hearing from customers in terms of build schedules? Or maybe more importantly, what are you seeing right now, in terms of production costs relative to what -- clearly, there was a lot of variability in the second half of 2021?

Yes, I think, our opinion on production is really driven by what we saw on the second half of the year. We think that instability, we know that a lot of the supply base is struggling not only with materials, but also with labor, availability of labor. And so we think there's going to be a lot of unannounced OEM issues over the next couple of months that are going to drive production that not quite hit what OEMs would like it to be. And so we think the first half is going to be a lot more choppy than the back half of the year.

Okay, and then follow-up question is on gross margins. So, in your prepared remarks, your belief that you will be able to offset you think some of the impacts to gross margin as we move through the year, thinking about this from a modeling standpoint, in the very near-term, should we expect gross margins to decline sequentially? Obviously, first quarter is usually a little weaker seasonally. And then as we move through the year, I don't know if you could put a finer point on where you think we might be able to exit the year relative to the full year range that you've provided? Thank you.

Yes, I don't think it'll decline too much from Q4 into Q1, there's usually a little bit of APR, obviously, headwinds created on January 1, so that that definitely may impact it slightly in Q1 and Q2. But really what we're -- reason why we think that second half will be better as revenue should grow throughout the year. And based on our estimate and understanding that we think IHS is going to be a little overstated in the first half, we would think sales levels in general in the first half will be a little lower than the second half of the year. And so that incremental revenue that we're expecting to see in the second half should help stabilize the margin profile and obviously, create some of the efficiencies that we need on the manufacturing side.

Great, I'll leave it there. Thank you.

Thanks Luke.

Our next question comes from the line of David Kelley - Jefferies. You may begin.

Hey, good morning, guys. Thanks for taking my question. Maybe starting with the supply shortages and the under shipments in the quarter you noted, just hoping you could provide a bit more color on the drivers of that impact, was it broad base? Was it isolated to a subset of your supply chain? And then as we think about the cadence throughout the quarter, did procurement visibility deteriorate by quarter end? Just trying to get a sense of what you're seeing into 2022 here?

Yes, so I mean, the vast majority of the revenue shortfall came from OEM changes in terms of their lower levels of production, especially in our primary market. So, if you look at our highest dollar content markets being North America in the European market, those were very significantly impacted on a year-over-year basis by production declines. Beyond that the stuff that impacted us directly was to say, we're looking at $90 million to $100 million revenue difference versus what we're expecting 80% of that came from the OEM side, about 20% of it came from supply issues. Inside for Gentex, when we've had -- we've had a lot of problems over the last year with supply issues. We're historically -- we've -- over the last year, at least, been able to fight through almost all of those and figure out solutions. Really we're down to a handful of suppliers that are impacting us on the electronic side right now. The problem with that is, is we don't see that ending anytime in the next six months or so. So, Neil's team has been working very, very hard on trying to make sure that there's availability of components and that we if -- there are different components that we can use to redo those designs to be able to incorporate the more available components. But that's been a non-stop treadmill really for about 18 months. And so we continue to look at areas that we think are concern and then try to make sure we derisk the business by finding alternatives.

Okay, that's helpful. And maybe a quick follow-up on that last point. How are you thinking about some of the electronics cost inflation into this year and understanding that your timeline of negotiations with customers and potential pass throughs are still around the corner here. But we've heard about semi-cost inflation, pricing pass-throughs, kind of, further down the supply chain. So, just curious how you're thinking about impact on -- or what's maybe baked into the guidance here?

Yes, so if you look at our guidance, I mean, on a year-over-year basis, from a material cost perspective, we're looking at about a 250 to 300 basis point headwind, because of the cost increases we've experienced kind of starting in the fourth quarter, but then really taking in earnest full -- in full year 2022. And then on the revenue side, we kind of have baked in headwinds as well of about 100, 150 basis points. That's what kind of what really bridges you from what a normal margin would be to what we're seeing in 2022. And as we've talked before, like conversations with OEMs, are just now starting to happen. We expect some of those to elongate throughout the year because it's a different conversation than we've had historically about reductions. So, we expect that that headwind is going to last this year, and hopefully, we'll have some positive results, but it's going to be OEM-by-OEM.

Okay, that's super helpful. And maybe last one, if I can squeeze it in and then happy to pass it along. Any impact from labor shortages in the quarter? Or do you expect that to be more of a 2022 event? And just any color on labor -- or wage inflation would be helpful as well?

Yes, no, there's for sure wage inflation that's definitely impacting gross margin profile and operating margins as well. One of the things we're struggling with right now is overall availability of labor. And what that creates is obviously the inefficiencies we talked about in the conference call comments. Really what happens is because you're -- and it's driven by labor -- when I say labor shortages, that's really driven by two factors. One is fewer people participating in the workforce right now. And then number two is the amount of people out due to contact tracing or COVID positive testing. So, right now the stability inside and inability to plan is very difficult because of the quarantine periods associated with people who are contact traced or test positive. And so that's been the real difficulty right now is you're averaging upwards of 10% more of the general workforce that aren't available on a daily basis than what we're normally used to. And so that's been the most difficult part of it. In our size, you're talking to hundreds of people that aren't available every day, the way you would like them to be or that you would plan around.

Okay, got it. Thanks Steve and thanks Kevin. Appreciate it.

Thank you.

Our next question comes from the line of Josh Nichols from B. Riley. You may begin.

Yes, thanks for taking my question. I'm just curious, your thoughts, I mean, you have exposure to all the different auto OEMs, obviously. Do you think that we've kind of passed through the trough here when you look at the second half of 2021? And just thinking about the revenue cadence? Is that expected to kind of build as we move throughout the year? Or is it going to be a little bit more disproportionately, second half weighted whenever things start to ease up as you kind of mentioned it a commentary?

I think your statement that it will probably build throughout the years, kind of, what we're expecting right now. If we look at customer call offs in Q1, it looks like it's a step-up over Q4 in terms of revenue, we're just a little more pessimistic about the industry's ability to handle that type of increase in overall volumes in a short period of time. The underlying issues that exist for the supply base and for OEMs, quite frankly, doesn't change on January 1. So, we think it's going to take a little longer for the industry to get back to those higher levels of production. Yes, a second part of that, too, Josh, and I'm --. Okay, did I answer that question for you, Josh? I thought you had a second part of that question?

No, I think you got it.

Okay.

Just because you mentioned it earlier, I mean, some supply constraints for the first time hitting FDM, but -- I mean, the company has obviously had a ton of success when you look at all the nameplate that you've been adding. Could you highlight a little bit about what's the pipeline look like for 2022 and 2023 in terms of being able to add significant new nameplates for that offering? And if you can provide a little bit of color on the expectations as far as like unit growth that you're expecting for 2022 in that area given that high margin contribution that it has?

Yes, well, Neil will touch on 2022. I'll kind of hit 2021 retrospectively. We were -- if you look at those final volumes for FDM this year, they were significantly lower than what we were expecting. And that was really driven by both the industry and the OEM side, but also on our inability to get the components we needed to meet demand. So, I would guess that we are 150,000, 200,000 units short of FDM this year of what we were -- what we believe demand was coming into the year. So, we don't see that overall demand changing as we go forward in the 2022 and 2023. So, we think we're going to go back to that growth rate. Assuming we can get the components we need, we know the OEM interest and consumer interest is there. So, we think we're going to get back to that faster growth rate on FDM even though 2021 was definitely impacted by component shortages. Neil do you want to add?

Yes. And for 2022, we're -- there's a lot of variables, like Steve said one volumes, but also in getting components and then customers if they continue to stay with our build date of vehicles. When looking at the users, we would see between -- probably between 10 and 15 new nameplates launch in 2022. And there's -- I think we announced it last quarter, we have additional OEMs, I think we're up to 14 now that we've talked about that have awarded this business, we said that numbers of 12, 13, and 14 would be in the next two and a half years. I anticipate one of those will for sure launch this year, potentially two of those. So, a lot of that's going to be dependent timing in the last half of the year, but we expect a couple new customers to be publicly announced and then somewhere between 10 and 15 new nameplates.

Thanks. Thanks for clarifying that. And then last question for me and then I'll pass the baton. You've been right to kind of fade the IHS numbers right and be a little bit more conservative. But I'm curious about what you're seeing that gives you some more confidence that the second half is really going to be kind of a key inflection point. Is there specific supply that’s coming online from some of the chip manufacturers? Or what are you hearing when have you talked to OEMs that gives you the confidence that we're going to see this inflection spec map for this year?

Yes, you definitely you definitely have some additional capacity from -- especially on electronic side that we believe will start to -- positively impact the supply side in the second half. That's why early last year, we were talking about the fact that we thought this was a full 2021 and probably early 2022 problem. And we still kind of hold on to that timing. It's not going to fix all the issues. I think the thing that gives us a little more confidence, especially on our side is that there are different components that are available that aren't as constrained. And so it's really about us moving into those new components, getting those full redesigns done and then broadening our supply base to make sure we can meet the customer demand side. So, we know we've -- definitely left some revenue on the table because we couldn't meet the demand of the customers and obviously the industry had its bigger challenges. We definitely have seen the ability at the end of Q4 for the industry to pick up the pace was pretty noticeable. I just don't think it's quite as aggressive as what I just think for the first half.

Thanks guys. That's it for me.

Thank you.

Thank you.

Our next question comes from the line of David Whiston from Morningstar. You may begin.

Thanks. Good morning guys.

Good morning David.

Good morning.

First question is on the recently signed infrastructure bill in the U.S. I've read that that requires headlights and very similar to your DFL tech to be approved in two years. I was just curious what kind of potential [indiscernible] Gentex could DFL be in the U.S. because of this legislation?

Yes, I think in regards to where our product has been going over the last few years with the standalone smart beam product, it's gradually been getting replaced as we've talked about, I think, for a couple years now. So, it is exciting that that technology is finally coming to the market since it's been available in Europe for multiple years. To see it actually come here is great, but I don't see that it's going to have a great impact on us at this point.

Yes, unfortunately, it's about 10 years too late.

It's too bad. And then on the new cabin monitoring tech you showed at CES, I was just curious across your customer base, someone, for example, like GM, would they perhaps not be very interested in this tech because they already have some monitoring technology as part of their Super Cruise package?

So, I think what's interesting about the tech and what we were showing is what they have in Super Cruise is similar on the base system that Neil described in his tech conversation. But what we showed on the advanced side is very different than what anyone is doing right now. And so, even though there is always some resistance when you have an embedded product currently, the upside is all OEMs are looking for what the future in this area can look like. And we believe we're showed something very compelling, both from a geography standpoint, which is different than what GM is executing in Super Cruise. But also on the advanced features that we can offer by do a full cabin monitoring, not just driver monitoring.

Okay. And on chips, I mean, we actually in the press see some articles from time-to-time about how there's actually going to be a big supply glut in a few years and everyone's adding capacity. I guess my question to you is that really a bad thing for autos? Doesn't sound bad to me, but I was curious on your reaction.

No, in fact -- I mean, honestly, what we're -- the reason why the material cost increases that everyone's seeing is because of the shortage. So, there's a new watermark being created by the supply side on what the values of electronic components are. Once you're over capacitized or once there's available capacity, that's when the balance of power sources shift into the buyers of those components versus what we're seeing right now. So, I agree with you completely, I mean, gives you more design, flexibility, and certainly the ability to plan better. More importantly, it does start to change the overall economics of the value of a component.

Okay, thanks, guys.

Thank you.

Our next question will come from the line of John Murphy from Bank of America. You may begin.

Good morning, guys. How are you?

Good John.

First question on the CapEx outlook. It's more than double year-over-year versus 2021 and just curious what's going on there?

Yes, well, first 2021 ended about $25 million less than what our plan was. And really it's kind of crazy, but it was also about availability of even equipment. We just we had placed orders, honestly couldn't take delivery of some of the CapEx that we had planned for this year, just due to shortages. So, part of that is just $25 million or so moving from 2021 into 2022. And the other thing I think it's important to look at is the last three years, given the issues, we've really been very careful on our CapEx spend. And so historically, if you go back over, let's say, a 10-year period, you would say we averaged around $100 million a year in CapEx on a much smaller business. Back then we've been very focused on being disciplined over the last few years, but now with the growth rates into 2022 and into 2023, we have some capacity issues that we want to address through some buildings, but then also there's levels of automation that will help with the efficiency, and obviously, some of the labor challenges. And then more importantly, just building that capacity. And obviously, with some of the new products and the new product portfolio, those require CapEx to get those ready for operations as well.

So, how should we think about sort of run rate CapEx, after sort of this this catch up in 2022? I mean, we're talking something $125 million, $150 million?

Yes, I'd say no, we're probably more like after 2022, if you look at 2023 and beyond, we'll probably be more in the $120 million to $130 million range.

Got it. Okay. Super helpful. Next just on the IHS schedules that is sort of a -- beating a dead horse here. But I mean when we look at the light vehicle production schedules that the 17% increase in North America and 18% in Europe that you expected, is that where you see the most risk? Just trying to understand --

Yes, exactly right. That's where -- that's why when we look at those, especially towards those large markets, they haven't supported those levels of production in a long time. And so we think there's going to be a lot of challenges trying to get back to that level on a short period.

Would you govern those really as something sort of closer to 10% increases and where you're hair cutting those two, it seems like that -- like supporting a 10% plus increase in the chip industry right now is not in the cards. So, what do you kind of haircut that to your thought process?

Yes, if you look at like the overall -- I'll just kind of talk about our primary markets and the overall IHS data being around 8% to 9% growth rate for 2022. We think that's more like 5% to 6%.

With the bulk coming out of North America and Europe?

Most of it coming out of North America and Europe. A little bit Japan and Korea.

Okay, got it. Driver Monitoring Systems -- cabin monitoring system, there's a lot of players out there, you sit in a unique position where you are in the vehicle, which is a good vantage point. Just curious how many competitors are there? And I mean, sort of what's the unique position that you think you have? I mean in the mirror, you're in a very, very unique position with real [ph] technology that's protected. I mean when you get into this new pool, I mean is it just a much wider pool of competition? How do you think about that for that part of the business going forward?

No, that's a great question. I mean one of the things when we decided that make the Guardian acquisition and then look at what our competitive advantage would be in the space, we looked at the availability. The base version of a system that's just a camera anywhere in the car looking at only the driver, there are going to be a lot of players in that space. That's not really where we wanting to compete. Where we want to compete is in the higher end system both from a geography standpoint to your point of concealing the camera and the emitters -- IR emitters and a mirror location or in an overhead. But then also looking at the advanced feature side. So, what Neil was walking through on that -- on the advance -- on the advancements, the ability to see -- look at a rearward-facing car seat and pick up micro vibrations is really the secret sauce of the system of what Guardian was working on. So, it's literally doing structured light to look at it, it's picking up very, very small, micro vibrations in and around the cabin of the vehicle. And with that comes the ability to do a lot of feature sets that just a vision system alone would not be able to do. And so we're going to compete not only from our geography and location and ability to conceal cameras and emitters, but also with a higher end feature set.

And then just lastly, on the raw mats [ph] discussions. I mean -- obviously, these are -- it's a little bit opaque on hedging pass-throughs, all this kind of stuff that impact you're sharing with the automaker on the on the raw mats [ph] hikes and hopefully at some point normalization coming back down. But has anything changed? Any discussions? I mean, my understanding is that prior -- done for a long time, prior to 2008 and 2009, the bulk of the raw mats [ph] were sort of at-risk more on the supplier side, on your side, 2008, 2009, the automaker switch to take you over a bit more? And now it seems like it's switching -- they're pushing back a little bit because they're so -- I mean, there's so much going on with AVs and EVs, they need help on both the CapEx or the capital and the cost side. So, it just seems like they're going to push back a little bit more on this raw mats [ph] increase? I'm just curious if that's changing or if it's just more of the same in these discussions?

No, it's definitely. I would say it's definitely changing. I mean, we're -- we've engaged -- just since the last call, we started to engage with OEMs on this very discussion. And honestly, in 20 years at Gentex, I've rarely had this type of a conversation. And so it's definitely new waters and a lot of ways for us as a company. But OEMs are beginning to stake their positions on what are they going to deal with supply base. Obviously, in terms of Tier 1 suppliers, there's a lot of companies that are going to struggle to eat these types of raw material increases and labor increase -- labor and cost increases, without support from an OEM. And so it's going to be very interesting to see which OEMs are supportive, tried to help the supply base and which push back harder. In a constrained environment, it's going to become interesting. Those OEMs who work with the suppliers better are probably going to be in a position to get more access to inventory and to components. So I think every OEM is going to make a decision on what their position is and we're beginning to have those discussions about the fact that we can't eat all these costs increases alone, without help from an OEM.

Just one follow-up on that. I mean have you ever envisioned a contract that would be set up what ultimately gets passed through to the end consumer? I mean the automakers are at that point where, theoretically, they can raise prices to potentially offset this, but you're kind of stuck in the sandwich where you're not. You don't have that flexibility. I mean is there any kind of discussion on indexing to ultimate sell-through pricing to the consumer? I mean that's where -- I mean that would be sort of the Holy Grail of trying to get up the food chain where it gets passed on to the consumer, but that's complicated. But any input any discussions around that?

I wouldn't say discussions. Yes, there's been a ton of speculation and ideas thrown out. And obviously, as a supplier, there's a lot of discussions that we have with OEMs about, hey, we're willing to get creative with you to try to solve this problem. So, I mean, there's been -- I wouldn't call it any tangible conversation around an idea like that. Right now, everyone's kind of in the idea generation phase, where you're trying to find a way that it doesn't become combative, but you're trying to find a way that it can work for both us and an OEM to make sure that we're getting there. It is interesting, OEMs I feel like through this last 18 months, have gotten better, with the consumer saying, hey, there's a little bit more pricing power there than probably OEMs even believed in the past, and especially with the fact that you can't build as many vehicles right now, so you got to try to maximize profitability on a per vehicle basis. And OEMs have seemingly done a really good job of changing their mindset as relates to what is the price of a vehicle and how do they maximize that value from a consumer.

Yes, let's just hope that sticks with them.

Exactly.

Well, thank you so much guys. Take care.

Thank you.

Thank you. Our next question comes from the line of Mark Delaney from Goldman Sachs. You may begin.

Yes. Good morning and thanks very much for taking the questions. First, I want to ask them the sunroof, you spoke about it as part of your comments about the CES tradeshow. Could you go into more depth and when you could see that being used in the market for production vehicles?

Sure, absolutely. So, yes the evolution of the product has happened over the last three years through -- three or four years now through CES, as we've demonstrated different levels of dimming devices, and we've grown that into sunroofs from the aerospace window side. From market and activity, there's still a lot of work to do from a vehicle side, integration, working with customers, I would say that within the next three -- maybe three to four years, is when you would anticipate seeing that from us in the marketplace. It's a great evolution, I think the thing that's really coming along well, with the technology is the consumer side, seeing the need and the want for it. The ability to choose individual control over the different seating locations, for the consumer to have it be clear or dark or different, different levels, and between the two states is extremely advantageous and really positive results.

Yes, that’s helpful. Thanks. And then in terms of cash flow for this year, could you talk about use of cash and how you think about maybe balancing that, I mean we spoke already on your CapEx plans? But in terms of using free cash flow, how do you think about things like buybacks versus M&A? And are there more tuck-ins that - or are even larger acquisitions, maybe considering the ampersand Guardian, you augmenting the product portfolio so interested in? What the outlook for a potential acquisition is going to be? Thanks.

Yes. So, if you look at the playbook, we've been executing the last couple years to your point, we've been enhancing our R&D portfolio with the small acquisitions that we put in place, we've got teams working on product development for virtualization. But again, that doesn't detract a lot from a free cash flow perspective. So, we plan to stick -- stick right to the plan as we did this year, we're spending $325 million on CapEx cash flow should sales come up, the operating cash flow doesn't change, the matrix doesn't change. CapEx is up a little bit, as Steve already alluded to, but that leaves a significant amount for kind of executing share repurchases on a systematic basis throughout the year. And then if there is an opportunity that presents itself from either a bolt-on or a small technology acquisition, we continue to look and our teams are very focused on that and developed over the last few years. So, the same the same offensive plays as we ran in 2021, we'll apply to 2022.

So, just to clarify quickly, when Kevin said the $300 million to $325 million, he was talking about repurchases, not CapEx/

Understood. Thank you.

[Operator Instructions] Our next question will come from line of Ryan Brinkman from JPMorgan. Your line is open.

Hi. Thanks for taking my question. In the release you've mentioned Full Display and Integrated Toll Module has being more impacted by the chip shortage than your lower feature -- I guess, lower ASP products. I'm curious the degree to which this mix impact maybe the less high feature products, may be factoring into your margin guide for 2022? I get that the overall level of customer production due to the chip shortage will result in less fixed cost leverage. So, arguably, the chip shortage is impacting your margin in more ways than one. But just specifically with regard to the mix of your own products, is that a significant factor in the margin guide? And in when do you think you may no longer be supply limited on some of these higher feature products?

Well, as Steve alluded to, right, the first half of the year with FDM and ITM constraints kind of rolled off Q4 that we see that in the first half of the year, hopefully freeing up in the back half. What we're seeing is great growth in other products, like we did in Q4 with outside mirror growth throughout 2021 into 2022. But when you put all that into the mix calculation, we're seeing about a 50 to 100 basis point headwind from the mix side, if you look at the overall product mix and shipping base mirrors versus the advanced feature stuff.

Okay, that's very helpful. Thank you. And then you mentioned, I think, in response to one of the previous questions that the conversations with customers had already begun with regard to the recovery of these non-commodity supply chain costs that were talked about on the third quarter. Based upon those early discussions, do you have any thoughts on what percentage of that cost increase that you might potentially be able to recover in those discussions?

Yes, it's tough to put it in that regard already. Obviously, with some of these -- as you can imagine, you're having these conversations early with some of the more difficult relationships. So, unfortunately, it's probably not a good indicator of how all of them will go because you're starting obviously, with the ones that are most challenging. It's tough to put it into a percentage of what percent of increase are you seeing because like we mentioned before, we're going to take a long-term approach with this and so we're not going to come in saying this has to be done and has to be done this year and this is what it has to be. It's more about, hey, what does the book of business look like? What does the new opportunities for growth look like? What are our previous commitments? And how do we find something that can work for an OEM and handle this over a multi-year period. And so it's difficult to put into a percentage right now, what I would say is that probably, half of our conversations aren’t overly combative. OEMs are interested in collecting the data and understanding what we're seeing, and having a pretty honest -- it's really an education process at the beginning of us, explaining and helping them understand what we're seeing. And then I think the next two to three months are going to be key in trying to reach some agreement with them on how do we go about this together.

Very helpful. Thank you.

Thanks Ryan.

Thank you. I'm not showing any further questions in the queue. I'll turn it back over to Josh for any closing remarks.

Great. Thank you, everyone, for your time and the questions today. We look forward to meeting with you in 2022 and hope you have a great weekend. This concludes our call.

And this concludes today's conference call. Thank you for participating. You may now disconnect. Everyone, have a great day.