ZEELAND — With $562 million in cash on its balance sheet, automotive supplier Gentex Corp. continues to be on the hunt for acquisition opportunities that can help bolster its technology portfolio.
In a quarterly call with analysts to discuss the company’s third quarter financial performance, CFO Steve Downing said M&A is “something that we continue to look at very carefully and study” at Gentex (Nasdaq: GNTX), a supplier of auto-dimming rearview mirrors, automotive electronics and other products.
“One of the things that we’re focused on is primarily looking at technologies that dovetail with our product portfolio that help create a growth story longer term,” he said. “Some of those are going to be pure M&A type efforts, some of them are going to be partnerships and license agreements.”
Previous deals have demonstrated that the company also is open to minority equity stakes and partnerships, he said, citing unspecified deals with TransCore for a vehicle-integrated tolling solution and with Delta ID for a vehicle-based biometric identification system.
“What we’re not trying to do is we’re not trying to find growth or subsidize growth purely through M&A, in that we’re not trying to cover up for a lack of growth rate by buying something. What we’re instead focused on is the strategic merits of … how those potential products would work well or dovetail with our portfolio.”
Downing also said Gentex would consider dilutive acquisitions if the target’s technology were compelling enough.
“We’re not opposed to an income statement play” for a startup with the right technology, he said.
“That doesn’t mean you can’t find more expensive acquisitions that may be on the cutting edge that you need to make to help round out the product offering. But our focus more is on early startups, pre-revenue or very early on in their revenue type of targets,” he said.
In the third quarter that ended Sept. 30, international auto-dimming rearview mirror sales buoyed the financial performance for Gentex amid softening light vehicle sales in North America.
The Zeeland-based automotive supplier generated net sales of $438.6 million for the third quarter, up 2 percent from the same period a year ago. The boosted sales were a result of a 12-percent increase in shipments of the company’s auto-dimming mirrors to international customers in Europe, Japan and Korea, where light vehicle production was up 7 percent across the markets.
In North America, shipments for Gentex declined 7 percent, as light vehicle production fell 8 percent compared to last year, about 3 percent off from the company’s previous third quarter estimates.
Quarterly net income declined 2 percent to $90.2 million, or 31 cents per diluted share. Income from operations also declined to $129 million, off 3.8 percent from 2016.
Through the first nine months of the year, Gentex generated net sales in excess of $1.3 billion, up from more than $1.2 billion in 2016. The company reported net income of $276.3 million, or 96 cents per diluted share, up from $258.8 million, or 89 cents per diluted share, through September 2016.
Gentex also slightly lowered its sales outlook for its 2017 fiscal year to a range of $1.78 billion to $1.8 billion, down from guidance of $1.79 billion to $1.83 billion it issued in July. The company also lowered its estimated capital expenditures to the range of $110 million to $120 million, down from expectations of $115 million to $130 million.
During the third quarter, Gentex repaid $8.1 million in debt on a term loan in addition to a normally scheduled $1.9 million payment. The company also repurchased 3.2 million shares of its common stock at an average price of $17.51 per share. It has 14.9 million shares available for repurchase under a previously disclosed buyback plan.
Editor’s note: This story has been updated to correct a typo.