Gentex Corp (GNTX) Tops Q3 EPS by 8c, Revenues Beat; Raises 2H20 Guidance, Projects FY21 Revenue Guidance Estimates 15-20% Above FY20 Revenues

Gentex Corp (NASDAQ: GNTX) reported Q3 EPS of $0.48, $0.08 better than the analyst estimate of $0.40. Revenue for the quarter came in at $474.6 million versus the consensus estimate of $451.25 million.

3rd Quarter 2020 Summary

• Net Sales of $474.6 million, which is the second highest sales quarter in Company history
• Gross margin of 39.7%, which represents a 200 basis point improvement over the third quarter of 2019
• Earnings per Diluted Share of $0.48; a 9% increase when compared to the third quarter of 2019
• Cash flow from Operations of $138.6 million in the quarter
• 1.2 million shares repurchased during the quarter
• Cash and Investments increased to $612 million after $50 million of debt paid down during the quarter

"The third quarter began with a slow start as orders in July were far behind prior year actual results but as the quarter progressed our customer orders continued to grow and ultimately ended at the highest sales levels of the year,” said President and CEO Steve Downing. “The change in sales volumes from the second quarter to the third quarter created numerous difficulties from an operations and planning perspective, but once again our team met the challenge, and is doing an unbelievable job to meet our customer order requirements with a very high level of operational efficiency. In fact, during the third quarter volumes increased so quickly that it became very difficult for our operations team to keep up, but in typical Gentex fashion, the team pulled together, with many salaried employees volunteering to help build parts to ensure we were able to meet our customers' orders," noted Downing.

For the third quarter of 2020, the gross margin was 39.7%, compared to a gross margin of 37.7% for the third quarter of 2019. Gross margin improved significantly on a quarter over quarter basis, which was driven by the strength in orders during the quarter and the previously announced $35 million in annualized structural cost reductions that took place in the second quarter of 2020. Gross margin was also positively impacted by purchasing cost reductions and improvements in tariff related costs, which together were able to offset the impact caused by annual customer price reductions. "The cost savings actions that we took during the second quarter had a sizable and direct impact on the results reported today. These efforts have reset profitability of the Company for the second half of 2020 and set the stage for what we believe will be strong margin performance as we head into 2021 and beyond. The third quarter of 2020 margin performance was the result of quick decision making and flawless execution by the entire Gentex team. We believe we are poised for future success based on our operational strength, as well as our current product portfolio," said Downing.

Outlook

Based on this light vehicle production forecast and the structural changes that the Company has made over the last several months, the Company is updating previously provided guidance estimates for the second half of 2020. Given the magnitude of changes this year, the Company continues to believe that providing updated second half guidance will provide a more accurate representation of the new cost structure and financial performance for the remainder of 2020. The Company's updated estimate is that net sales for the second half of 2020 will be between $940 million and $960 million.

Based on the mid-October 2020 light vehicle production estimates for 2021, the Company is re-introducing revenue guidance for 2021, despite the fact that there continues to be significant uncertainty regarding macroeconomic conditions, underlying overall consumer demand for light vehicles worldwide, and the continued impact from the COVID-19 pandemic. The Company currently estimates that revenue for calendar year 2021 will be approximately 15 - 20% higher than estimated revenue in calendar year 2020.

"While the COVID-19 pandemic continues to create significant uncertainty, the very rapid recovery in light vehicle production over the last several months leaves us cautiously optimistic about the trends in the economy heading into 2021. We adapted very quickly in the second quarter to the COVID-19 pandemic to adjust our cost structure because we were estimating that global light vehicle production, and therefore our total addressable market, was likely to be much smaller over the next few years than it was in calendar years 2017 to 2019. We remain focused on further developing and adding to our product strategy and launch execution to help us maintain our history of growth that outperforms the underlying market. We expect that our focus on both cost control and new product innovation will provide above market returns for our shareholders over the next several years,” concluded Downing.

For earnings history and earnings-related data on Gentex Corp (GNTX) click here.

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