Stoneridge Inc Q1 FY2020 Earnings Call

Ladies and gentlemen, welcome to Stoneridge First Quarter 2020 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to hand the conference over to your host, Mr. Matt Horvath. Sir, you may begin.

Great. Thank you. Good morning everyone, and thank you for joining us to discuss our first quarter results. The release and accompanying presentation was filed with the SEC yesterday evening and is posted on our website at stoneridge.com in the Investors Section under Webcasts and Presentations. Joining me on today's call are Jon DeGaynor, our President and Chief Executive Officer; and Bob Krakowiak, our Chief Financial Officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q, which has been filed with the Securities and Exchange Commission under the heading Forward-Looking Statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jon and Bob have finished their formal remarks, we will then open up the call to questions. I would ask that you keep your question to a single follow-up. With that I will turn the call over to Jon.

Thanks, Matt and good morning everyone. Let me begin on page 3. During our fourth quarter call, I outlined several operating initiatives aimed at improving profitability in 2020, and more specifically reducing material costs and improving operating efficiency and manufacturing processes to reduce overhead and labor costs. During the first quarter, we executed on those initiatives and the results of the efforts were evident in the performance in the quarter. Our first quarter sales of $183 million resulted in an adjusted gross margin of 25%, translating to an adjusted operating margin of 3.3%. Adjusted EPS for the quarter was $0.20. This is inclusive of the COVID-19 impact. Based on estimated customer orders and operating performance prior to the COVID-19 impact, we estimate that the global response to the pandemic impacted quarterly sales by approximately $16 million and impacted adjusted operating income by approximately $4.7 million or 210 basis points. We have taken several actions to temporarily reduce costs in response to the virus to drive financial performance and preserve cash, as we adjust to reduce customer demand and federal state and local laws impacting our global facilities. Additionally, we took actions to reduce our structural costs based on our longer-term market outlook to ensure our resources are aligned with future growth opportunities. The future of Stoneridge has its foundation in talent and technology, and on April 1, we announced that Jim Zizelman joined Stoneridge to lead our control devices business. Jim will be responsible for driving business performance, product development, innovation strategy, and technical vision for the segment. Jim had previously been consulting for Stoneridge after a lengthy career with Delphi and Aptiv, where he was most recently the Vice President of Engineering and Program Management. Last week, we were awarded a 2020 Automotive News PACE award for MirrorEye. Since 1994, the PACE awards have celebrated superior innovation, technological advancements, and business performance among suppliers. This prestigious award is recognized globally as the industry benchmark for innovation and acknowledges those suppliers that develop a viable solution for future mobility needs and bring it to market. MirrorEye was evaluated by independent PACE award judges and excelled in innovation, customer acceptance, competitive impact, performance measures, and environmental impact. We are honored to be recognized for the impact MirrorEye will have on the industry. Finally, due to the continued uncertainty regarding the expected impact of the pandemic, on March 30, we withdrew our 2020 guidance. We will revisit our 2020 guidance once we have the ability to more clearly define and quantify the expected impact of Stoneridge. Bob will provide additional details on our expectations for the remainder of the year, including an update on our balance sheet, strength, and leverage position later in the call. Turning to page 4. Page four provides additional detail on our quarter-to-quarter progression on both sales and operating income, highlighting the management team's focus on continuous improvement while managing through the current environment. Revenue in the first quarter was approximately flat compared to the prior quarter. Revenue growth in Control Devices, primarily related to our actuation and emissions sensor product lines, was offset by declines in the aftermarket and mass retail business within Stoneridge Brazil. Based on customer orders, prior to the global actions taken to combat the virus, we estimate that the impact of COVID-19 on sales was approximately $16 million in the first quarter. Quarter-to-quarter adjusted operating margin increased by 50 basis points. We estimate the impact of COVID-19 on adjusted operating income to be approximately $4.7 million or 210 basis points. The improvement in operating margin versus the prior quarter was primarily the result of improved gross margin of 170 basis points, led by reduced material and overhead costs of 80 basis points and 90 basis points respectively. Quarter-to-quarter tariff expenses were reduced by approximately $600,000 and electronic component related costs were reduced by approximately $700,000. During the fourth quarter, we outlined a plan to improve adjusted gross margin in 2020 by approximately 130 basis points by reducing material costs, improving manufacturing and delivery processes, and improving operating efficiency. During the first quarter, we delivered on those commitments and improved profitability in our facilities. While we expect reductions in volume for the remainder of the year, we also expect that our facilities will continue to execute at a high level and limit controllable costs where possible. On page 5, as it relates to reduced production volume expectations, the most recent IHS and LMC information for our OEM and end markets quarterly and for the full year are covered. Given the significant amount of downtime for most of our global customers during the second quarter, IHS and LMC are forecasting declines of approximately 50% in our weighted average end markets in the second quarter, followed by approximately 16% in the third quarter and 14% in the fourth. For the year, our weighted average end markets are forecasted to decline by approximately 23% relative to our previously provided guidance. We expect similar disruption in our aftermarket and non-OEM markets, which primarily consist of Orlaco and Stoneridge Brazil. Turning to slide 6. As a result of both the reduction in customer production levels and federal state and local mandates, each of our production facilities around the world has been impacted to some degree, varying from reduced utilization to full plant idling. As we return to production, we will take the necessary steps to ensure our employees remain safe while we continue to support our global customers. In North America, our facility in Lexington, Ohio, which produces Control Devices products, has adjusted operations to satisfy ongoing customer demand. The plant has been operating at approximately 40% of typical utilization since late March. Based on conversations with our customers, we expect production schedules to begin to ramp up in the middle of May. Our Juarez, Mexico facility, which supplies both our Electronics and Control Devices segments, has been closed since April 9 in response to local government regulations. Based on ongoing discussions with our customers and with the local government, we expect production to begin in Juarez in mid to late May with the ramp-up period in advance of flow production. In Europe, each of our facilities primarily support the electronics business. Our facility in Orebro, Sweden has been operating at approximately 40% of typical utilization since the beginning of April. Commercial vehicle customers generally restarted production in late April, and we expect a ramp up to follow their demand over the next several weeks. Similarly, in Tallinn, Estonia, our facility was idle since the beginning of April and began ramping back up this week. At Stoneridge Orlaco in Barneveld, Netherlands, our facility has been running at a reduced schedule since the beginning of April due to reduced customer demand from both our on and off-road customers. We are expecting the ramp-up of production over the summer as our global customers restart and ramp up their production. In Brazil, our facility in Manaus was closed for three weeks in early April and restarted in late April on a reduced production schedule in line with customer demand. We continue to monitor the local market and will adjust our production schedules to ensure employee safety and to align with customer demand. In Asia, we are seeing continued ramp-up in our facility in Suzhou, China after we restarted our operations on February 10. We are currently operating at approximately 80% of capacity as local customers are back online following similar shutdowns. We continue to experience reduced demand for exported products to Europe and India and expect to see a ramp-up as those customers resume production. Finally, our joint venture facility in Pune, India is currently idled and is expected to restart in mid to late May. Where production has been limited by customer demand rather than regulation or employee safety concerns, we are taking advantage of downtime to make cost-saving progress in some areas that were not possible while we were running at full production. We are optimizing our inventory levels, including the balance between finished goods and raw materials in each facility to better prepare for customer ramp-ups and schedule variation. We have completed preventive and required maintenance that could have otherwise required downtime in the plants. Finally, we have completed training programs for our employees, who would not typically have had the opportunity to complete those programs when we were running at full production. We are focused on controlling the factors that we can control and putting ourselves in the best possible position to efficiently ramp up production around the world. We are committed to ensuring the safety of our employees and complying with all regulations and suggested guidelines while serving our global customers, who may in many cases be essential businesses or support essential businesses. We will continue to adjust our production schedules and operations as required while limiting the impact on our employees where possible. Turning to slide 7. Our leadership team, cost focus, and conservative balance sheet have prepared us for the current market turbulence. That said, we have taken additional actions to reduce costs in order to both preserve financial performance in 2020 and continue our focus on driving profitable long-term growth. As a result of the expected impact of COVID-19, we have delayed hiring certain open positions and reduced discretionary expenditures such as travel, consulting, and merit increases across most of our salary workforce. We expect that these actions will be temporary and that the cost savings, which we estimate to be approximately $4 million to $4.5 million will be primarily recognized in 2020. In addition to these temporary cost reductions, earlier this week we reduced our global salaried workforce by approximately 5%. A portion of these reductions were planned as part of our continuous transformation of the business to ensure our resources and cost structure remained aligned with the best opportunities for the company moving forward. However, as a result of the expected impact of COVID-19 in some functions, we expanded our planned reductions to adjust for our revised market outlook. I want to be clear, these reductions were not simply evenly spread throughout the organization and were strategically focused to align resources with opportunities and to drive future profitability and growth. These reductions will not impact our ability to launch the programs that comprise our substantial backlog or preclude us from investing in the technologies that are the future of the company. We expect that these and more permanent actions will result in $3.5 million to $4 million of savings this year with an annualized impact of approximately $5 million to $6 million beyond 2020. Given that the cost reductions occurred primarily in the second quarter, we do not expect to recognize the full impact of these reductions during the second quarter. However, we should see the full impact in the second half of the year. As a result, we expect that our second quarter decremental contribution margin will be on the high end of previously discussed two-and-a-half to three times EBITDA margin range. Finally, although we were well-positioned for a downturn and our balance sheet remains strong, we have taken additional actions to preserve cash flow in the short term and optimize our working capital position as we ramp back up to normal production levels. Turning to page 8. We recently welcomed Jim Zizelman to the team as President of the Control Devices business. Jim's background aligns well with our strategic plan as he brings experience in both vehicle components and system development, as well as overall technology strategy. Jim has deep experience developing products for global customers, growing profitable businesses, and creating high-performance organizations. Jim is responsible for driving business performance, commercial relationships, product development, our innovation strategy, and technical vision within the segment. Jim will also be a valuable addition to the Stoneridge leadership team. Prior to taking the role, Jim was a consultant for Stoneridge and prior to that Jim spent more than 20 years with Delphi and Aptiv, where most recently he was the Vice President of Engineering and Program Management. Turning to page 9. In summary in the first quarter, we delivered on our operational goals driving reduced material and overhead costs through very specific operational initiatives, resulting in improved gross margin quarter-to-quarter. We took decisive actions to respond to reduced customer demands in our facilities and right-sized our cost structure with a focus on 2020 and beyond. We will continue to execute on the things that we can control and respond effectively and efficiently to the changing macroeconomic environment. Our long-term strategy remains robust, and we remain well-positioned to outperform our underlying markets. With that, I'll turn it over to Bob to discuss our financial results in more detail.

Thanks, Jon. Turning to slide 11, sales in the first quarter were $183 million, a decrease of less than $1 million relative to the prior quarter. We estimate that COVID-19 impacted sales by approximately $15 million. Adjusted operating income was $6 million, or 3.3% of sales, which was an increase of 50 basis points versus the prior quarter. We estimate that adjusted operating income was impacted by $4.7 million, or 210 basis points as a result of the pandemic. I will provide additional details on second performance, including our estimates of the impact of COVID-19 on each segment during the quarter in the subsequent slides. On March 30, we reviewed our 2020 guidance due to the continued uncertainty surrounding the COVID-19 pandemic. Based upon the latest LMC and IHS projections, our weighted average end markets are expected to decline by 23% relative to our previously provided midpoint sales guidance of $760 million. As we have discussed previously, we expect incremental and decremental contribution margins on volume changes to be approximately 2.5 times to three times our EBITDA margins or approximately 25% to 30%. As a result of the $8 million of cost reduction actions Jon outlined for 2020, we expect the detrimental impact to be on the low end of that range. Our balance sheet and liquidity remain strong, as we currently have over $320 million in cash and undrawn commitments on our current revolver with no significant debt maturities in the near future. I'll provide additional color on our liquidity position and available capital later in the call. Page 12 summarizes our key financial metrics specific to Control Devices as well as our estimate of the impact of COVID-19 on the segment during the quarter. Control Devices sales of $98.2 million increased by 5% relative to the fourth quarter of 2019. This was driven primarily by our actuation and emissions sensing product lines. We estimate that the COVID-19 pandemic reduced Control Devices sales by approximately $10.9 million during the quarter. We estimate that Control Devices operating income was negatively impacted by $3.3 million or approximately 200 basis points during the quarter as a result of COVID-19. As discussed in our fourth quarter call, we remain focused on improving operational performance and reducing tariff-related expenses. During the quarter, this resulted in a 100 basis point improvement in overhead Control Devices and savings of approximately $600,000 in tariff expenses relative to the prior quarter. As Jon outlined previously, we expect our primary Control Devices end markets to decline by approximately 25% relative to previously provided guidance in 2020. Building on the operational improvements implemented in the first quarter, we expect continued progress on controllable operational factors despite reductions in overall segment volumes. Page 13 summarizes our key financial metrics specific to electronics as well as our estimate of the impact of COVID-19 on the segment during the quarter. Electronics sales of $79.8 million were approximately flat relative to the fourth quarter of 2019. We estimate that the COVID-19 pandemic reduced electronic sales by approximately $4.5 million during the quarter. Although reported sales were flat relative to the prior quarter, adjusted operating income improved by $1.9 million, resulting in adjusted operating margin improvement of 230 basis points. This improvement was driven primarily by reduced material costs of 90 basis points and improved overhead costs of 140 basis points during the quarter, leading to gross margin improvement of 240 basis points. We estimate that Electronics adjusted operating income was negatively impacted by $1.3 million or 140 basis points during the quarter as a result of COVID-19. In addition to the improvement in overhead, we remain focused on reducing electronic-component related expenses. During the quarter, this resulted in a reduction of approximately $700,000 relative to the prior quarter. As Jon outlined previously, we expect our primary electronics end markets to decline by 30% to 40% relative to previously provided guidance for the year. Despite improving gross margin, we expect these significant reductions in forecasted volumes to create downward pressure on fixed cost leverage and segment operating margin for the remainder of the year. Page 14 summarizes our key financial metrics specific to Stoneridge Brazil as well as our estimate of the impact of COVID-19 on the segment during the quarter, which was relatively limited. Stoneridge Brazil sales of $14.6 million declined relative to the fourth quarter despite significant growth in our OEM product lines in Brazil. OEM growth was offset by reduced demand for our aftermarket advanced retail products relative to the fourth quarter of last year, due in part to seasonality surrounding the holidays. The fourth quarter is typically the strongest revenue quarter for Stoneridge Brazil. Foreign currency reduced sales during the quarter by $700,000 or almost 1%. Currency exchange rates continue to have a negative impact in Brazil and we expect continued pressure due to continued unfavorable currency movements during the second quarter. Although Stoneridge to Brazil had limited impact from COVID-19 during the first quarter, we expect it will become more impactful during the second quarter and for the remainder of the year. Despite reduced sales relative to the prior quarter, adjusted operating income remained flat, resulting in adjusted operating margin improvement of 50 basis points. This improvement was driven primarily by improved material costs, leading to gross margin improvement of 470 basis points. The improvement in gross margin was partially offset by reduced leverage on SG&A and design and development costs resulting in a 50 basis point improvement in the adjusted operating margin. Turning to Page 15. At the end of 2019, we had net debt of approximately $60 million or approximately 0.7 times our trailing 12-month adjusted EBITDA. During the fourth quarter, in order to support operations in response to the expected disruption caused by the global COVID-19 pandemic, we drew an additional $25 million on our existing credit facility. As of the end of the quarter, we had net debt of approximately $82.5 million or 1.1 times trailing 12-month adjusted EBITDA and cash of approximately $81.3 million. We had approximately $239 million of undrawn commitments resulting in over $320 million of liquidity at the end of the first quarter. During the first quarter, we also completed a share repurchase program on March 6, resulting in the company buying back almost 243,000 shares for approximately $5 million. The company is temporarily suspending the previously announced share repurchase program in response to uncertainty surrounding the duration and magnitude of the COVID-19 pandemic. Our credit facility includes a net debt to EBITDA covenant of 3.5 times, which includes restrictions on foreign cash and EBITDA adjustments in the calculation for compliance purposes. Including those restrictions, our current net debt compliance ratio is approximately 1.6 times trailing 12-month EBITDA. Based on current IHS and LMC estimates and our expectations for future cash flow, we do not expect to exceed our compliance ratio in 2020 despite our expectations for significantly reduced EBITDA relative to our prior guidance. We will continue to take the appropriate actions to ensure that our cost structure is right-sized for our current outlook and to ensure we effectively manage our cash position as we navigate through this unprecedented event. Stoneridge remains well-positioned with relatively low leverage and significant available capital to withstand this downturn. Moving to slide 16. In closing, I would like to reiterate that we are pleased with the operational improvements we drove during the first quarter and expect that the actions we have taken will reduce the impact of COVID-19 for the company as we ramp our production levels back up over the course of the year. That said, we expect continued and significant headwinds related to the global impact of the virus and we'll continue to respond decisively as the macroeconomic environment evolves. Stoneridge is committed to driving shareholder value and that focus remains at the forefront of all of our strategic initiatives. With that, I will open up the call for questions.

Thank you, sir. Your first question will come from the line of Mr. Justin Long from Stephens. Sir please proceed, your line is now live.

Thanks and good morning everyone.

Good morning Justin.

So, I wanted to start by looking at the balance sheet and Bob, maybe going to some of your commentary at the end. I was curious based on what you laid out in terms of end market expectations and decremental margins what you're expecting from a cash flow or cash burn perspective over the remainder of the year as you make that comment that you feel like you'll remain in compliance with your covenant.

Sure Justin. And thank you so much for the question. So first of all, where I'd like to start with is, if you look at the assumptions that we have and we talk about them in the presentation, so if you look at our primary end markets, if you look at North America, pass car for this year if you look at the data it's forecast to be down about 25%, commercial vehicle down about 44%. And if you look at Europe, for this year, it's the same, it's about down about 25% as well for pass car and commercial vehicle; Europe is down about 38%. If you look at the IHS, the LMC, and the AEC assumptions on commercial vehicle and passenger car for the rest of the year and you flow them through, we're forecasting about a $15 million to $20 million burn rate in the second quarter and then about, I would say, less than $20 million for the second half based upon the current IHS, LMC, and AEC assumptions.

Okay, that's helpful. I want to focus on the structural cost reductions you mentioned, Jon. How should we consider the sustainability of those cost reductions? You're indicating that in 2021, you don't expect the end markets to recover significantly. So, will these costs continue to be removed from the business? I'm trying to understand if, when we return to growth mode at some point, these headcount reductions will need to be reinstated to support that, or if these structural cost reductions are meant to last for the next three or more years.

Thank you for the question, Justin. The answer is both. As we’ve mentioned in previous calls, we adjust our costs in response to changes in sales, which we have shown over the past five years in various situations. You can think of it this way: our direct and indirect labor costs, as well as our plant-based SG&A, fluctuate with sales. However, certain areas like engineering and other structural costs are less flexible, and changes in these areas tend to be more permanent. As you've observed, Stoneridge continues to refine its structure and transform the business in terms of our operational footprint, product portfolio, and team. We have aligned the business according to our projections for both commercial vehicle and passenger car volumes. This has allowed us to establish the appropriate organizational structure needed to support our growth and capitalize on future opportunities, while continuously improving. Therefore, I don't see a need to increase those more fixed costs as revenue rises; instead, we view this as a chance to streamline further.

Makes sense. That's helpful and then just lastly there was no mention of MirrorEye and I know there are bigger issues in front of us right now, but I was just wondering if there was any update on MirrorEye some of the discussions that you're having in terms of new contracts. And is there anything that you see out there that's going to impact the timing of those product launches that you've already laid.

Thanks Justin. We would have liked to discuss MirrorEye more, especially considering the PACE Award, but due to the current situation, we felt it wasn't appropriate to focus too much on that. We are still adding more fleets to our trials and receiving strong positive feedback from both fleet owners and drivers. Those in the current trial program are excited about the product and are providing valuable input for additional features and refinements throughout the year. These trial partners have also become important advocates for us with the Original Equipment Manufacturers. Most of them are planning additional deployments in the second half of the year. However, the ongoing COVID situation poses challenges; many of these businesses are essential and some are in the food service sector, which means they prefer to keep external personnel away from their trucks. As a result, some have postponed installations and delivery of new trucks, impacting our rollout. Nevertheless, we continue to have encouraging conversations. One of the initial fleets conducted their own SAE-certified fuel efficiency test and reported a 2.6% to 2.7% improvement in fuel economy. Alongside the safety benefits we've mentioned, we are seeing real-world fuel economy improvements, and our fleet partners remain enthusiastic about our developments and the integration into their vehicles. While we are optimistic, we also acknowledge that there may be delays due to the current situation.

Makes sense. I appreciate the time this morning.

Thank you, Justin.

For sure.

Thank you sir. Your next question will come from the line of Mr. Scott Stember from CL King. Sir your line is now live, please proceed.

Good morning, and thanks for taking my question.

Good morning Scott.

Yes, good morning.

On the topic of backlog and new products. I guess, we were set to have a significant amount of new stuff coming out of backlog I guess with the next few quarters. Aside from MirrorEye, can you maybe talk about some of the other contracts and other launches whether they've been delayed, canceled, or outright, and just the general timing of what we could expect from those coming out?

So Scott, what we have observed is that our customers are sticking to their program schedules. While we can't disclose the exact size of the backlog due to fluctuating volumes, we can confirm that we haven't lost any programs, and importantly, none have been canceled. For all the major programs, including instrument cluster, OE MirrorEye, actuation, and others in both Control Devices and electronics, everything remains on track. We have utilized this time to strengthen our product development and ensure that we are fully prepared in our facilities and engineering efforts for flawless launches. Therefore, we are confident about our backlog and the product programs we are pursuing. We are optimistic about the future. You know that even before the challenges posed by COVID, 2019 and 2020 were years of preparation for launch, and we are still in that same situation.

Yes, Scott. I want to add that although we've withheld guidance for the rest of the year, our new product launches, including MirrorEye, our Park By Wire initiative, and our instrument cluster program, which is one of the largest awards in the company's history, alongside three years of record new business wins, have us very optimistic about what lies ahead. We're currently assessing the overall global market volumes, but when we consider the additional new business and the steps we’re taking to adjust our cost structure, we are very excited about the future.

Got it. There was a very helpful slide about all the different end markets related to production. Can you provide us with your total expectation of production declines for Q2? Also, how closely should we align our sales expectations with these production changes for Stoneridge going forward?

Yes, Scott. Thank you for your question. It's an important one. We mentioned the 23% for the full year, but obviously, the most significant impact of that 23% will be in the second quarter. We are currently forecasting, based on third-party data, that our weighted average end markets will decline by 50% compared to our original guidance for Q2. To give you some context, we've consistently talked about the business in terms of a contribution margin perspective, which typically ranges from 2.5 to 3 times for both incremental and decremental changes. This second quarter is expected to be towards the higher end of that range because we've implemented cost reduction measures during this quarter. However, the full effect of these actions won't be realized until Q3 and Q4. Despite this, you will notice that the second quarter will align more closely with the three times range for our decrementals, and we anticipate improvements as we begin to see the complete benefits of the cost reductions.

Yeah. And just as far as modeling for sales, how closely aligned will you be with these production forecasts with clients?

Close.

Okay. That's all I have right now. Thank you.

Thank you.

Thanks, Scott.

Presenters your next question will come from the line of Mr. Chris Van Horn from B Riley. Sir, please proceed, your line is now live.

Good morning, everyone, and thanks for taking my call and hope everyone is well.

Good morning, Chris.

Good morning, Chris.

And we hope you are well as well. Thank you so much.

I was wondering if you could comment on your supply chain, and if you're seeing any disruption there and how that might impact things going forward?

Yeah, Chris, it's Jon good morning. We monitor the supply chain as well as our operations on a daily basis and we have had a war room set up with sort of critical suppliers and we've monitored where that risk is really since the situation started in China. Our team feels pretty good about the majority of our supply base. We have a couple of that are at risk, but the operations and procurement teams are well on top of it and we believe that we're well positioned to restart and ramp up and follow our customers. It's our goal to make sure that we're able to follow our customers and that we don't become the constraint to their ramp-up. I'm really pleased with the way our organization is working together to be proactive and be ready for the ramp-up.

Could you provide an update on the award activity and its progress, particularly before the disruption in mid-March and if it continued through that time?

Yeah. So, Chris, as you know, the award activity is not linear. It's lumpy and particularly with some of the larger awards, like the most recent MirrorEye awards, they come in big chunks. There wasn't anything that was material in the quarter that would change our backlog or would be that would be worthy of a significant press release or conversation. What we see and as I said to Scott earlier, we have not lost any business. Everything that we have completed for, we felt like we've done very well and we're confident that as our customers come back and recognize that in some situations, our customer shut down, including the procurement organizations, shut down. Some decisions just did not happen during this period of time. We're absolutely confident in the way in which we've worked with our customers, the way in which we reacted, the way in which we've worked with our customers and the way in which we have positioned the organization sets us up very well as they come back that we're better positioned as a partner to them even than we were before the crisis.

And, Chris, I want to add something I believe is important. Jon mentioned the SAE testing and fuel economy. The overall perspective on MirrorEye and the take rates included in our backlog continue to improve. This presents a significant opportunity given the scale of these programs and the potential for take rates to enhance as more fleets adopt our highly attractive value proposition that MirrorEye offers.

Got it. Makes sense. Thank you for that. And then, lastly for me, the OEM sales in Brazil, big increase there. I'm just curious what was driving that. Was it share gains, was it new launches?

So, if you remember, Chris, in the latter part of last year we talked about a series of OEM wins, instrument clusters, connectivity modules, and actually some OE audio. Those things have been in the process of a ramp-up and it's really a transformation with regard to Stoneridge Brazil, from an aftermarket business into much more aligned with Stoneridge's overall business, which has an aftermarket side but also has an OE side. The other thing that isn't as apparent in these quarters is the importance of the technical capabilities in Stoneridge Brazil to help our global product development and help as we launch and accelerate these launches and connectivity with MirrorEye or in other areas we're using the global footprints and the global capabilities there. The Stoneridge Brazil team is doing a fantastic job of transforming itself from a product standpoint and contributing to the global product development side and then I would also say our facility in Manaus from protecting the people in a very challenged place is being recognized for the great things that they're doing to take care of employees there as well.

Great. Thank you so much for the time this morning and stay safe and stay healthy.

Thanks Chris. Appreciate it.

Thank you, sir. And I am showing no further questions at this time. I would now like to turn the conference back to Mr. Jon DeGaynor.

Well, I want to thank all of you for your participation in today's call. In closing, I can assure you that our company is committed to continuing to drive shareholder value through strong operating results, profitable new business, and focused deployment of our available resources. Our management team will respond effectively and efficiently to manage and control variables that we can impact and continue to drive financial performance. We are confident that our actions will result in continued success in 2020 and beyond. Thanks very much.

And again, thank you everyone for participating; this concludes today's conference. You may now disconnect. Stay safe and have a lovely day.