Gentex Corp (NASDAQ: GNTX) reported Q2 EPS of ($0.02), $0.14 worse than the analyst estimate of $0.12. Revenue for the quarter came in at $229.9 million versus the consensus estimate of $258.6 million.

2nd Quarter 2020 Summary

• Net Sales decline of 51% quarter over quarter despite a 69% and 62% quarter over quarter decline in light vehicle production in North America and Europe, respectively.
• Severance related costs of $8.8 million recognized during the quarter in order to achieve an estimated $35 million in annualized savings.
• Positive cash flow from operations of $39.2 million despite the significantly lower sales levels.
• Balance Sheet remains strong with total cash and investments of $585 million and debt of only $75 million.

"The impact of COVID-19, government enacted shutdowns in certain countries and states, and the resultant economic impact led to the most severe change in demand in a very short period of time that Gentex has ever experienced. In fact, our forecast in early March for the second quarter of 2020 was estimating a 6% growth rate for the Company," said President and CEO Steve Downing. “A deeper dive into the global vehicle production environment provides compelling information about what happened in the quarter. For instance, while the China market expanded by 9% in the second quarter, our historical revenue from China has been less than 10% of sales, so this provided very little help to offset the losses in our primary markets. The Company’s primary markets include North America, Europe, Japan and Korea and together these regions were down approximately 59% for the second quarter of 2020. While these production numbers are incredibly sobering, the silver lining is that we are continuing to find ways to significantly outperform our primary underlying markets."

Based on uncertainty regarding the COVID-19 pandemic, overall economic conditions globally, vehicle production trends, and consumer demand for vehicles, the Company is withholding revenue guidance for 2021 until better data becomes available. Despite the fact that the Company is withholding guidance for 2021, the Company remains confident in its ability to continue to outperform its primary underlying markets.

"With the onset of COVID-19, government driven shutdowns, and the obvious change in demand we estimated that we would be facing in the second quarter, the Company began to look at cost optimization concepts very early in the second quarter. This led to the lower estimates for operating expenses, capital expenditures and depreciation and amortization levels that we provided in our first quarter conference call. However, as the quarter progressed, we quickly realized that those changes would not be sufficient given the drastic shift in demand we were experiencing. Our updated estimates for the second half of 2020, from above, represent the planning, idea generation, and fast but thorough execution of many cost containment initiatives we have made to adjust the Company to our new levels of revenue,” said Downing. “Despite the fact that the second half of 2020 revenue will be lower than we were expecting at the beginning of this year, we are optimistic that the forecasted improvements in light vehicle production throughout the second half of the year, in addition to our significant cost initiatives achieved during the second quarter, will allow the Company to return to more normalized gross and operating margins during the second half of the year. Our cost containment efforts were all undertaken with the very clear objective that we need to protect the most critical resources necessary to continue our launch of sold programs and to support the team that leads our research and development as they are imperative to the future growth of the Company. We believe that this strategy of creating cost savings while protecting our future growth opportunities 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.