GENTEX CORP (GNTX)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS:

SECOND QUARTER 2026 VERSUS SECOND QUARTER 2025

Net Sales. Consolidated net sales for the second quarter of 2026 decreased by $6.6 million or 1%, when compared with the second quarter of 2025.

Automotive net sales for the second quarter of 2026 were $560.2 million, a decrease compared with automotive net sales of $578.1 million in the second quarter of 2025. This reflects lower global light vehicle production and a 10% decrease in total mirror unit shipments in the second quarter of 2026, compared to the second quarter of 2025.

The below table represents the Company's auto-dimming mirror unit shipments for the three months ended June 30, 2026, and 2025 (in thousands):

Premium Audio Product net sales increased during the second quarter of 2026 to $51.7 million compared to $44.5 million in the second quarter of 2025.

Other net sales were $39.4 million in the second quarter of 2026, compared to $35.2 million in the second quarter of 2025, an increase of 12%. Other net sales for the second quarter of 2026 included security and access control sales of $2.7 million, an increase of $2.5 million over the second quarter of 2025, primarily generated from the Company's BioConnect subsidiary acquired on July 1, 2025. Dimmable aircraft window sales increased during the second quarter of 2026 to $6.5 million, compared to $4.0 million in the same quarter of last year. Fire protection sales were $8.3 million in the second quarter of 2026, compared to $8.1 million in the same quarter of last year.

Cost of Goods Sold. For the second quarter of 2026, the Company's consolidated gross margin was 37.0% compared to 34.2% in the same quarter last year. The quarter over quarter increase in the gross margin resulted primarily from approximately $18 million of IEEPA tariff reimbursements received during the quarter, that reduced cost of goods sold as well as favorable product mix, which was partially offset by commodity price increases and the reduction in overall sales levels compared to the second quarter of last year. The Company recognized refunds of tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") during the second quarter of 2026. As of June 30, 2026, the Company had received approximately $38 million of IEEPA tariff reimbursements, of which approximately $18 million was recorded as a reduction of cost of goods sold. Since the inception of the IEEPA tariffs, the Company has directly paid approximately $42 million of such tariffs, excluding amounts incurred indirectly through suppliers, which was partially offset by approximately $5 million of recoveries from customers. The Company continues to evaluate and pursue tariff refund opportunities where appropriate; however, the availability, amount, and timing of any additional refunds remain uncertain and are subject to ongoing legal, regulatory, and administrative developments.

Operating Expenses. Consolidated operating expenses were $99.7 million in the second quarter of 2026, compared to $106.8 million in the second quarter of 2025. The quarter over quarter decrease was primarily due to prior year severance costs. On a non-GAAP basis, adjusted operating expenses were $99.3 million in the second quarter of 2026,

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compared to $97.5 million in the second quarter of 2025, when excluding the impact of acquisition related costs, severance costs, and purchase price step-up charges in each of the quarters, for comparability.

Engineering, research and development expenses ("E, R&D") for the second quarter of 2026 decreased by $2.2 million, when compared with the second quarter of 2025, primarily due to lower engineering related professional fees.

Selling, general and administrative expenses ("S, G & A") increased by $1.5 million for the second quarter of 2026, compared to the second quarter of 2025. S, G & A was approximately 8% of net sales in the second quarter of 2026, compared to 7% in the second quarter of 2025.

Other (Loss) Income, Net. Total Other loss, net for the second quarter of 2026 was $4.5 million, when compared with total Other loss, net, of $3.0 million for the second quarter of 2025. The quarter over quarter increase in Other loss was driven by an impairment charge of $9.4 million related to one of the Company's technology investments and an increase in credit loss reserves related to loans receivable of $2.9 million each, during the second quarter of 2026 partially offset by higher investment income and gains on asset sales.

Provision for Income Taxes. The effective tax rate was 16.5% for, and an income tax expense of $22.6 million was recorded in, the second quarter of 2026, compared to an effective tax rate of 17.2% for, and an income tax expense of $19.8 million recorded in, the same quarter of 2025. Generally, effective tax rates for the Company differ from statutory federal income tax rates due to provisions for state and local income taxes, the FDDEI deduction, and research and development tax credits.

Net Income Attributable to Gentex Corporation. Net income attributable to Gentex for the second quarter of 2026 was $114.7 million, an increase of 19% compared to net income attributable to Gentex of $96.0 million in the second quarter of 2025. Non-GAAP consolidated net income attributable to Gentex was $122.9 million in the second quarter of 2026, compared to $110.9 million in the second quarter of 2025, when adjusting for the impact of impairment charges, acquisition related costs, severance costs, and inventory purchase price step-up charges in each of the quarters, for comparability.

Earnings Per Share Attributable to Gentex Corporation. The Company had earnings per diluted share attributable to Gentex for the second quarter of 2026 of $0.54, which compared to earnings per diluted share attributable to Gentex of $0.43 for the second quarter of 2025. Quarter over quarter earnings per diluted share attributable to Gentex were also positively impacted by the increase in sales and improved profitability of the Company, partially offset by other losses incurred in the second quarter of 2026. On a non-GAAP basis, adjusted earnings per diluted share were $0.58 for the second quarter of 2026, compared to $0.50 for the second quarter of 2025, excluding the impact of impairment charges, acquisition related costs, severance costs, and inventory purchase price step-up charges in each of the quarters, for comparability.

SIX MONTHS ENDED JUNE 30, 2026 VERSUS SIX MONTHS ENDED JUNE 30, 2025

On April 1, 2025, the Company completed its acquisition of VOXX. As such VOXX results were only consolidated with the Company's for the last three months of the six months ended June 30, 2025. During the six months ended June 30, 2026, VOXX's results have been included for the entire period.

Net Sales. Net sales for the six months ended June 30, 2026, increased by $92.1 million or 7%, when compared with the same period in 2025, despite light vehicle production that declined 2% in the Company's primary markets period over period. The increase was primarily driven by the inclusion of VOXX results for the full six-month period in 2026, compared to only three months in the comparable 2025 period.

Automotive net sales declined $1.0 million or 0.1%, when comparing the six months ended June 30, 2026 to the same period in 2025. Sales during the six months ended June 30, 2026, were negatively impacted by lower sales into the China market, as well as lower sales in Europe due to vehicle mix and certain customer-specific product challenges. There was an 8% decrease in automotive mirror unit shipments in the six months ended June 30, 2026, to 21.3 million units, compared with 23.1 million units in the same period in 2025, which was driven by a 12% period over period decrease in interior auto-dimming mirror unit shipments. VOXX automotive net sales contributed $27.8 million as a result of being included in the consolidated Company results for the full year to date period.

Premium Audio Product net sales increased to $103.6 million for the six months ended June 30, 2026, from $44.5 million for the six months ended June 30, 2025. This increase was primarily attributable to the timing of the VOXX acquisition, which occurred on April 1, 2025. Accordingly, the six months ended June 30, 2025 included Premium Audio Product net sales only for the period from April 1, 2025 through June 30, 2025, and did not include comparable sales for the three months ended March 31, 2025. Premium Audio Products also generated positive operating income during the six months ended June 30, 2026, reflecting the continued benefits of integration activities, operating improvements, and cost management initiatives implemented following the VOXX acquisition.

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Other net sales were $82.2 million for the six months ended June 30, 2026, compared to $48.1 million in the same period of 2025, an increase of 71% (due in part to the inclusion of VOXX sales for the entire six month period, compared to only three months being included in the same prior year period). Other net sales for the six months ended June 30, 2026, included biometric product sales of $5.7 million, primarily generated from the Company's BioConnect subsidiary acquired on July 1, 2025. Fire protection sales were $17.1 million in the six months ended June 30, 2026, compared to $14.8 million in the same period of last year. Dimmable aircraft window sales increased during the six months ended June 30, 2026 to $14.9 million, compared to $8.9 million in the same period of last year.

Cost of Goods Sold. As a percentage of net sales, cost of goods sold decreased to 64.6% for the six months ended June 30, 2026, versus 66.2% in the same period last year. The improvement in the gross margin for the six months ended June 30, 2026 was driven by tariff refunds, purchasing cost reductions, improved product mix, and operational efficiencies. The Company recognized refunds of tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") during the second quarter of 2026. As of June 30, 2026, the Company had received approximately $38 million of IEEPA tariff reimbursements, of which approximately $18 million was recorded as a reduction of cost of goods sold. Since the inception of the IEEPA tariffs, the Company has directly paid approximately $42 million of such tariffs, excluding amounts incurred indirectly through suppliers, which was partially offset by approximately $5 million of recoveries from customers. The Company continues to evaluate and pursue tariff refund opportunities where appropriate; however, the availability, amount, and timing of any additional refunds

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations

The following table sets forth for the periods indicated certain items from the Company’s Consolidated Statements of Income expressed as a percentage of net sales and the percentage change in the dollar amount of each such item from that in the indicated previous year.

Results of Operations: 2025 to 2024

Net Sales In 2025, the Company's consolidated net sales increased by $221.0 million, or 10% compared to the prior year. The Company completed its acquisition of VOXX on April 1, 2025 and included VOXX's results in the Company's financial statements beginning at the start of the second quarter of calendar year 2025. Core Gentex sales were $2.27 billion for calendar year 2025, a 2% decline versus calendar year 2024, primarily driven by tariff and counter-tariff actions and resulting reduction in demand for exports of the Company's products into the China market. In the Company's primary regions of North America, Europe, and Japan/Korea, automotive revenues increased approximately 1% year-over-year for calendar year 2025, despite a 1% decline in light‑vehicle production in those same markets compared to 2024.

For calendar year 2025, Gentex Automotive net sales without VOXX were $2.22 billion, which was a 2% decrease compared to $2.26 billion in 2024, and compared with a year-over-year decline in auto-dimming mirror shipments of 6%. Gentex Other net sales (not including VOXX) for calendar year 2025, which includes dimmable aircraft windows, fire protection products, medical products, and biometric products were $51.1 million, compared to Other net sales of $48.6 million in calendar year 2024. BioConnect, which operates in the Biometrics segment and was acquired on July 1, 2025, contributed total sales of $4.5 million to Gentex Other net sales for calendar year 2025. VOXX, which operates in the Automotive, Premium Audio and Other segments, contributed total net sales of $267.2 million for calendar year 2025.

Cost of Goods Sold As a percentage of net sales, cost of goods sold decreased from 66.7% in 2024 to 65.8% in 2025. The year over year improvement in the gross margin was primarily the result of purchasing cost reductions, operational efficiencies, and favorable product mix, partially offset by tariff related costs that were not reimbursed during the year. On a year over year basis, improved labor costs and operational efficiencies had a positive impact of approximately 110 basis points and product mix had a positive impact of approximately 80 basis points on gross margin on a year over year basis. These improvements were partially offset by incremental tariff‑related costs, which reduced gross margin in 2025 by approximately 110 basis points, net of recoveries, compared to calendar year 2024.

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Operating Expenses Engineering, research and development expenses ("E, R & D") increased by $21.8 million or 12% from 2024 to 2025, and was 8% of net sales in both 2025 and 2024. E, R & D increased year over year primarily due to the VOXX acquisition, which contributed $18.0 million to E, R, & D.

Selling, general and administrative expenses ("S, G & A") increased by $56.8 million or 47% from 2024 to 2025, representing 7% of net sales. The primary reason for the year over year increase in S, G & A from 2024 to 2025 was the addition of VOXX, which contributed $55.1 million to S, G & A in 2025.

The Company also recorded total severance expense of $11.6 million during calendar year 2025, which was not present in the prior calendar year, related primarily to early‑retirement programs offered to certain Company employees in order to reduce ongoing operating expenses. In calendar year 2024, the Company recorded impairment charges of $8.9 million for Goodwill and in-process research and development ("IPR&D"), as previously disclosed, which did not recur in 2025.

Total Other (Loss) Income Investment (loss) income, net, decreased $14.7 million to a net loss of $1.3 million for 2025, compared to net income of $13.4 million for 2024. During calendar year 2025, this net loss included impairments of $14.1 million related to certain of the Company's equity investments. Other, net decreased $10.7 million in 2025 versus 2024, primarily due to credit loss reserves of $7.4 million recorded in 2025 related to certain loans receivable.

Taxes The effective tax rate was 16.6% for the year ended December 31, 2025, compared to 14.3% for the prior year. The effective tax rate in 2025 differed from the statutory federal income tax rate, primarily due to tax benefits related to stock-based compensation, as well as a lower benefit from the Foreign-Derived Intangible Income deduction ("FDII"). In 2024, the effective tax rate differed from the statutory federal income tax rate primarily due to FDII and R&D tax credits.

On July 4, 2025, the One Big Beautiful Bill Act was enacted into law. The legislation included certain potentially taxpayer-favorable provisions applicable to the 2025 tax year and future periods, including the restoration of depreciation and amortization in adjusted taxable income for purposes of the Section 163(j) interest limitation, the reinstatement of immediate deductibility of domestic research and development expenditures, and the permanent extension of 100% bonus depreciation for qualifying property. In accordance with ASC 740, Income Taxes, the Company recognized the effects of the enacted tax law changes in its income tax provision for the year ended December 31, 2025. Nevertheless, the potentially taxpayer-favorable provisions of the One Big Beautiful Bill did not have a material impact on our effective tax rate.

Net Income Net income decreased by $19.6 million in 2025, or 5% compared to 2024, in large part due to the year over year changes in Other (loss) income.

Results of Operations: 2024 to 2023

Net Sales In 2024, the Company's net sales increased by $14.1 million, or 1% compared to the prior year, representing the highest annual sales in Company history, despite light vehicle production in 2024 that decreased year-over-year by more than 4% in the Company's primary markets. The Company's revenue outperformance in 2024 versus the underlying market was driven primarily by growth in FDM unit shipments.

Other net sales for calendar year 2024 were $48.6 million, compared to Other net sales of $44.6 million in calendar year 2023. Fire protection sales in 2024 increased 4% year over year, while dimmable aircraft windows increased by 9% in 2024, compared to calendar year 2023. Medical product sales were $1.4 million for calendar 2024.

Cost of Goods Sold As a percentage of net sales, cost of goods sold decreased from 66.8% in 2023 to 66.7% in 2024. The year over year increase in the gross margin was primarily the result of supplier cost reductions and lower freight costs, though these benefits were largely offset by weaker than expected product mix, higher labor costs, and the inability to leverage fixed overhead costs due to the lower than forecasted revenue for the year. On a year over year basis, supplier cost reductions and lower freights costs had a positive impact of approximately 100 - 150 basis points and 50 - 100 basis points on gross margin, respectively. Product mix had a negative impact of approximately 100 - 150 basis points on gross margin on a year over year basis. Labor costs and inability to leverage fixed overhead costs, each had a negative impact of approximately 25 - 50 basis points on gross margin on a year over year basis.

Operating Expenses E, R, & D increased by $27.1 million or 18% from 2023 to 2024, which represents 8% of net sales in 2024, compared to 7% of net sales in 2023. E, R & D increased year over year primarily due to additional

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staffing and engineering related professional fees to assist with the execution of a high number of new product launches, product redesigns to optimize costs, and new product development.

S, G & A expenses increased by $8.5 million or 8% from 2023 to 2024, which remained at 5% of net sales. The primary reason for the year over year increase in S, G & A from 2023 to 2024 was increased staffing expenses.

The Company also recorded impairment charges of $8.9 million for Goodwill and IPR&D related to the Vaporsens technology acquired in 2020, as previously disclosed.

Total Other Income (Loss) Investment income decreased $0.1 million to $13.4 million for 2024 compared to $13.5 million for 2023. Other income – net increased $3.3 million in 2024 versus 2023, primarily due to increased interest income from fixed income investments.

Taxes The effective tax rate was 14.3% for the year ended December 31, 2024, compared to 15.2% for the prior year. The effective tax rates in 2024 and 2023 differed from the statutory federal income tax rate, primarily due to FDII, and R&D tax credits.

Net Income Net income decreased by $23.9 million in 2024, or 6% compared to 2023, primarily due to the year over year changes in operating profits.

NON-GAAP FINANCIAL MEASURES:

Financial information for the year ended December 31, 2025 is provided in accordance with Generally Accepted Accounting Principles ("GAAP"). In addition, the Company believes that it is useful for the years ended December 31, 2025 and 2024 to provide certain non-GAAP measures, including Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Expenses, Adjusted Income from Operations, Adjusted Net Income Attributable to Gentex Corporation, and Adjusted Earnings per Share Attributable to Gentex Corporation, with the adjustments set forth in the tables below. Use of the terms "adjusted" or "excluding," as appropriate, in connection with a financial measure can identify and reflect a non-GAAP financial measure. This non-GAAP financial information allows investors to evaluate recent performance in the Company's core business in relation to historical performance by excluding the impact of certain purchase price adjustments pursuant to ASC 805, Business Combinations, acquisition related costs, severance costs, and certain impairment charges as set forth in the tables below.

The Company believes that the presentation of these non-GAAP financial measures provides insight into the Company's core performance and trends with respect to the same. Management of the Company similarly uses such non-GAAP financial measures in assessing the business internally. A reconciliation of Adjusted Gross Profit, Adjusted Gross Margin, Adjusted Operating Expenses, Adjusted In

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