Gentex Corp (NASDAQ: GNTX) reported Q1 EPS of $0.36, in-line with the analyst estimate of $0.36. Revenue for the quarter came in at $453.76 million versus the consensus estimate of $438.66 million.

1st Quarter 2020 Summary

• Net Sales decline of 3% quarter over quarter versus a 24% quarter over quarter reduction in global light vehicle production volumes
• Novel coronavirus pandemic (COVID-19) negatively impacted first quarter net sales by approximately 9%
• Gross margin of 34.5% for the first quarter
• 7.0 million shares repurchased during the quarter

"For the first two months of the first quarter, top-line revenue growth was progressing in line with our forecasts, with modest negative impacts coming from reductions in China as a result of the pandemic," said President and CEO, Steve Downing. "By mid-March, the pandemic was negatively affecting European OEM’s more significantly and then the North American production environment was brought to a grinding halt. The vast majority of the $40 million dollar shortfall in sales occurred during the last 2 weeks of March."

For the first quarter of 2020, the gross margin was 34.5%, compared to a gross margin of 36.2% for the first quarter of 2019. On a quarter-over-quarter basis, the gross margin was impacted primarily by lost sales due to the pandemic and annual customer price reductions. When compared to the first quarter of 2019, product mix improved which partially offset some of the sales losses and price reductions. The improvement in product mix was primarily driven by Full Display Mirror® and exterior mirror growth.

"The gross margin for the quarter held up well when considering the significance of the lost sales and how quickly and unexpectedly the demand from our customers changed," said Downing. “In fact, through the first two months of the quarter our gross margin performance was on pace to position the Company to be in the range of our original annual guidance for gross margin."

Operating expenses during the first quarter of 2020 were up 7% to $51.6 million when compared to operating expenses of $48.0 million in the first quarter of 2019. "The quarter over quarter increase in operating expenses continues to be driven by headcount and other resources focused on new product launches, as well as research and development of new products. CES 2020 created significant interest in our existing and new technologies, and we continue to believe in the long-term value that our new product offerings and technologies will create for our customers and the resultant trajectory that this can create for our business. It is important to note that the operating expense growth rate in the quarter was in-line with our original guidance for operating expenses for the year, which were planned to increase at approximately the same rate as sales for the year," concluded Downing.

GUIDANCE:

Gentex Corp sees FY2020 revenue of $1.58-1.67 billion, versus the consensus of $1.69 billion.

Based on the difficulty and uncertainty of global light vehicle production data for 2021, the Company is withdrawing its revenue guidance for 2021 until better data becomes available. Despite the fact that the Company is withdrawing guidance for 2021, the Company remains confident in its ability to continue to outperform the underlying market.

"Over the last several weeks, COVID-19 has created unprecedented circumstances for our industries, which include massive changes to production levels at our customers. Our industries have also been significantly influenced by federal, state and local governments in each of the countries where our customers operate. Unfortunately, many of these changes have come with little or no advanced warning, which makes it very difficult to forecast sales or build a sustainable operating model. Our focus over the last few weeks was directed at protecting our employees, while still supporting our global customer base from our centralized manufacturing footprint. Over the coming months we will continue to work to ensure that our cost structure accurately reflects industry production changes and new business realities. Our overall commitment to new product research and development will remain one of our top priorities for investment even as we look to optimize our cost structure. We remain optimistic that we can continue to provide above market returns for our shareholders by leveraging our current product strategy and through the execution of our lean organizational structure, which provides the speed and agility necessary to respond quickly to and manage through this new business environment,” concluded Downing.

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