Garmin announces first quarter 2024 results

Rhea-AI Summary

Garmin announced record first-quarter results for 2024, with consolidated revenue reaching $1.38 billion, a 20% increase from the previous year. The company reported strong growth in all segments, with gross margin and operating margins expanding significantly. Operating income grew by 51%, reaching $298 million. Garmin achieved GAAP EPS of $1.43 and pro forma EPS of $1.42, showcasing a 39% growth in pro forma EPS year-over-year. The company was named the 2024 Supplier of the Year by Independent Boat Builders, Inc. Garmin also highlighted the importance of its Garmin inReach devices in remote communications and emergency response coordination.

Positive

• Record first-quarter revenue of $1.38 billion, a 20% increase year-over-year.

• Gross margin and operating margins expanded to 58.1% and 21.6%, respectively.

• Operating income increased by 51% to $298 million compared to the prior year quarter.

• GAAP EPS of $1.43 and pro forma EPS of $1.42, showing a 39% growth in pro forma EPS.

• Achieved Supplier of the Year by Independent Boat Builders, Inc.

• Published the 2023 Garmin inReach SOS Year in Review, highlighting the role of inReach devices in remote communications.

Negative

• Operating expenses increased by 11% in the first quarter.

• Operating loss of $16 million in the auto OEM segment.

• Effective tax rate increased to 15.6% compared to 8.8% in the prior year quarter.

• The company paid a quarterly dividend of approximately $140 million.

Insights

Financial Analyst

Garmin's announcement of a 20% year-over-year increase in revenue to $1.38 billion is a robust indicator of the company's growth, significantly outpacing industry averages for consumer electronics. The expansion in gross margin to 58.1% suggests improved operational efficiency or a shift towards higher-margin products. Further evaluation of their supply chain management and cost of goods sold should reveal the sustainability of these margins. The 51% rise in operating income is impressive, yet it warrants scrutiny into the scalability of expenses, considering the 11% rise in operating expenses. Garmin's pronounced growth in its Fitness and Auto OEM segments, 40% and 58% respectively, reflects successful product introductions and increased demand. However, the Auto OEM segment's operating loss raises questions about the profitability of new contracts and market penetration costs. Their effective tax rate has gone up, reflecting changes in global tax regulations. Such increases may pressure future net income. Moreover, the company’s significant cash reserves at $3.3 billion and strong free cash flow of $402 million offer strategic flexibility for investments, R&D and shareholder returns. Yet, the management’s decision to not revise annual guidance despite a strong Q1 could suggest conservativeness or potential concerns about sustaining momentum.

Market Research Analyst

The fitness wearables market has been experiencing exponential growth and Garmin’s 40% increase in fitness segment revenue showcases their competitive product positioning. The Forerunner® 165 Series launch aligns with the consumer trend of seeking affordable, high-quality health tracking devices. Garmin’s health research initiatives indicate an investment in consumer health trends, potentially increasing brand loyalty and market share. Their outdoor segment, with an 11% increase in revenue, demonstrates resilience against competitive threats, but the revenue growth is modest compared to the fitness segment. This could indicate market saturation or the need for innovation. The marine segment's 17% increase, supported by acquisitions and product launches like the GPSMAP® 16x3, reflects strategic diversification, boosting investor confidence in Garmin's ability to penetrate new markets. However, the relatively low gross margin in the marine segment compared to their other sectors might signal a need for cost optimization. Garmin's strategic partnerships in the aviation sector and new product offerings like the avionics program for Cessna Citation CJ2 are incremental improvements but the segment’s slow growth could be a point of concern for scalability and future investments.

Tech Industry Expert

Garmin's technological advancements in their aviation product suite such as the GWX™ 8000 StormOptix™ Weather Radar and avionics for the Cessna Citation CJ2 reflect a commitment to innovation in a highly specialized market. These developments not only fortify Garmin's position in the aviation technology segment but also hint at potential long-term contracts and industry partnerships that could provide a steady revenue stream. Yet, the modest 2% increase in aviation revenue calls for a deeper look at the market adoption rates and competition within the field. With the Auto OEM segment, despite the substantial increase in revenue, the segment's operating loss and low gross margin are key points of interest. The growth in this segment, largely attributed to domain controllers shipped to BMW, indicates significant market opportunities in automotive tech. However, this needs to be balanced against the high costs of R&D and market entry. Investors should monitor how Garmin's strategic moves in technology, such as investments in infotainment systems and digital clusters, will translate into profitable growth and not just revenue growth.

Company reports record first quarter revenue and operating income

SCHAFFHAUSEN, Switzerland, May 1, 2024 /PRNewswire/ -- Garmin^® Ltd. (NYSE: GRMN), today announced results for the first quarter ended March 30, 2024.

Highlights for first quarter 2024 include:

• Consolidated revenue of $1.38 billion, a 20% increase compared to the prior year quarter
• Achieved record first quarter revenue in four segments
• Gross margin and operating margins expanded to 58.1% and 21.6%, respectively, compared to the prior year quarter
• Operating income of $298 million, a 51% increase compared to the prior year quarter
• GAAP EPS of $1.43 and pro forma EPS⁽¹⁾ of $1.42, representing 39% growth in pro forma EPS over the prior year quarter
• Named 2024 Supplier of the Year by Independent Boat Builders, Inc.
• Published our 2023 Garmin inReach^® SOS Year in Review, highlighting the important role served by inReach devices in remote communications and emergency response coordination around the globe

 

(In thousands, except per share information)		13-Weeks Ended
		March 30,				April 1,				YoY
		2024				2023				Change
Net sales		$	1,381,649			$	1,147,424			20 %
Fitness			342,892				244,721			40 %
Outdoor			366,193				328,662			11 %
Aviation			216,855				213,582			2 %
Marine			326,736				278,975			17 %
Auto OEM			128,973				81,484			58 %
Gross margin %			58.1	%			56.9	%
Operating income %			21.6	%			17.2	%
GAAP diluted EPS		$	1.43			$	1.05			36 %
Pro forma diluted EPS(1)		$	1.42			$	1.02			39 %

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma diluted EPS

Executive Overview from Cliff Pemble, President and Chief Executive Officer:

"We delivered outstanding performance in the first quarter with double-digit percentage growth in revenue and operating income. We attribute these noteworthy results to our strong product portfolio and the robust demand trends that we have been experiencing. We are pleased with our results and look forward to the opportunities ahead as the year continues to unfold." - Cliff Pemble, President and Chief Executive Officer of Garmin Ltd.

Fitness:

Revenue from the fitness segment increased 40% in the first quarter with growth across all categories, led by strong demand for advanced wearables. Gross and operating margins were 57% and 20%, respectively, resulting in $68 million of operating income. During the quarter, we launched the Forerunner^® 165 Series, providing athletes of all skill levels an affordable running smartwatch with a vibrant AMOLED display and compelling health, fitness and connected features. Also during the quarter, we published a new edition of the Garmin Health Research Glimpse, which focused on sleep research initiatives. The health metrics collected through Garmin smartwatches and fitness trackers coupled with Garmin Health software development kit and the Garmin Connect™ Developer Program, provides researchers with a wealth of information contributing to a deeper understanding of the intricate interplay between sleep and overall well-being.

Outdoor:

Revenue from the outdoor segment increased 11% in the first quarter primarily driven by growth in wearables. Gross and operating margins were 66% and 29%, respectively, resulting in $107 million of operating income. During the quarter, we released our annual inReach SOS Year in Review highlighting the importance of Garmin Response℠, our emergency response coordination center, which coordinates emergency response services in more than 200 countries and territories, and supports rescue efforts in more than 210 languages. We also produced and launched an original docuseries, 7 Days Out, which follows two ordinary people on their trek through Nepal's Langtang Circuit and the power of friendship, perseverance, and Garmin smartwatches.

Aviation:

Revenue from the aviation segment increased 2% in the first quarter driven by growth in OEM product categories. Gross and operating margins were 75% and 24%, respectively, resulting in $52 million of operating income. During the quarter, we unveiled our complete avionics modernization program for the highly popular Cessna Citation CJ2 business jet that offers new technologies and features designed to reduce pilot workload and improve safety. Also during the quarter, we added display options for our GWX™ 8000 StormOptix™ Weather Radar which expands the availability of this advanced radar system to aircraft equipped with our highly popular GTN™ and TXi™ displays.

Marine:

Revenue from the marine segment increased 17% in the first quarter primarily driven by the acquisition of JL Audio^®. Gross and operating margins were 55% and 27%, respectively, resulting in $88 million of operating income. During the quarter, we launched the GPSMAP^® 16x3 chartplotters adding larger touchscreen options for greater clarity, connectivity, and control at the helm. Also during the quarter, we launched the Panoptix™ PS70, our first deep water live sonar, allowing anglers real-time views at depths up to 1,000 feet. Garmin sponsored angler, Justin Hamner, claimed the championship title at the recent Bassmaster Classic on a boat exclusively equipped with our ECHOMAP™ Ultra 2 chartplotters, Force^® trolling motor, and LiveScope™ Plus sonar system.

Auto OEM:

Revenue from the auto OEM segment increased 58% during the first quarter primarily due to increased shipments of domain controllers to BMW. Gross margin was 18% and we recorded an operating loss of $16 million. During the quarter, we were awarded new business for digital instrument clusters in 2-wheel vehicles, as well as infotainment systems for trucks.

Additional Financial Information:

Total operating expenses in the first quarter were $504 million, an 11% increase over the prior year. Research and development increased 10% primarily due to engineering personnel costs. Selling, general and administrative expenses increased 11% driven primarily by personnel related costs, including the impact of the acquisition of JL Audio.

The effective tax rate in the first quarter was 15.6% compared to 8.8% in the prior year quarter. The year-over-year increase in the effective tax rate is primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to global minimum tax requirements.  

In the first quarter of 2024, we generated operating cash flows of $435 million and free cash flow⁽¹⁾ of $402 million. We paid a quarterly dividend of approximately $140 million. We ended the quarter with cash and marketable securities of approximately $3.3 billion.

(1)	See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including free cash flow.

2024 Fiscal Year Guidance:

Consistent with prior years, and as the first quarter historically represents the lowest seasonal quarter of our financial year, we are not updating our 2024 guidance for revenue of approximately $5.75 billion and pro forma EPS of $5.40 (see attached discussion on Forward-looking Financial Measures).

Dividend Recommendation:

As announced in February, the Board will recommend to the shareholders for approval at the annual meeting to be held on June 7, 2024, a cash dividend in the total amount of $3.00 per share payable in four equal quarterly installments. 

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.'s earnings call is as follows:

When:	Wednesday, May 1, 2024 at 10:30 a.m. Eastern
Where:	Join a live stream of the call at the following link
	https://www.garmin.com/en-US/investors/events/

An archive of the live webcast will be available until April 30, 2025 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as "anticipates," "would," "may," "expects," "estimates," "plans," "intends," "projects," and other words or phrases with similar meanings. Any statements regarding the Company's expected fiscal 2024 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company's expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, share repurchase programs, currency movements, expenses, pricing, new product launches, market reach, statements relating to possible future dividends, and the Company's plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 30, 2023 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin's 2023 Form 10-K can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of March 30, 2024. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo, the Garmin delta, Forerunner, GPSMAP, Force, inReach and JL Audio are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. ECHOMAP, Garmin Connect, GTN, GWX, LiveScope, Panoptix, StormOptix and TXi are trademarks, and Garmin Response is a service mark, of Garmin Ltd. or its subsidiaries.  All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Investor Relations Contact:	Media Relations Contact:
Teri Seck	Krista Klaus
913/397-8200	913/397-8200
investor.relations@garmin.com	media.relations@garmin.com

Change in Operating Expense Presentation

Certain prior period information presented here has been recast to conform to the current period presentation. In the first quarter of 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general, and administrative expenses on the Company's condensed consolidated statements of income, which management believes to be a more meaningful presentation. This change in presentation had no effect on the Company's consolidated operating or net income.

Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
		13-Weeks Ended
		March 30,				April 1,
		2024				2023
Net sales		$	1,381,649			$	1,147,424
Cost of goods sold			579,510				494,630
Gross profit			802,139				652,794
Research and development expense			242,535				221,485
Selling, general and administrative expenses			261,194				234,327
Total operating expense			503,729				455,812
Operating income			298,410				196,982
Other income (expense):
Interest income			25,027				15,899
Foreign currency gains			2,282				7,688
Other income			1,321				1,203
Total other income (expense)			28,630				24,790
Income before income taxes			327,040				221,772
Income tax provision			51,079				19,445
Net income		$	275,961			$	202,327
Net income per share:
Basic		$	1.44			$	1.06
Diluted		$	1.43			$	1.05
Weighted average common shares outstanding:
Basic			191,890				191,498
Diluted			192,698				191,886

 

Garmin Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
		March 30, 2024				December 30, 2023
Assets
Current assets:
Cash and cash equivalents		$	1,921,782			$	1,693,452
Marketable securities			274,579				274,618
Accounts receivable, net			694,690				815,243
Inventories			1,302,230				1,345,955
Deferred costs			18,329				16,316
Prepaid expenses and other current assets			305,674				318,556
Total current assets			4,517,284				4,464,140
Property and equipment, net			1,206,401				1,224,097
Operating lease right-of-use assets			136,285				143,724
Noncurrent marketable securities			1,133,958				1,125,191
Deferred income tax assets			763,083				754,635
Noncurrent deferred costs			10,480				11,057
Goodwill			601,618				608,474
Other intangible assets, net			176,647				186,601
Other noncurrent assets			88,124				85,650
Total assets		$	8,633,880			$	8,603,569
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	243,087			$	253,790
Salaries and benefits payable			192,832				190,014
Accrued warranty costs			55,219				55,738
Accrued sales program costs			77,592				98,610
Other accrued expenses			191,474				245,874
Deferred revenue			100,740				101,189
Income taxes payable			256,442				225,475
Dividend payable			—				139,997
Total current liabilities			1,117,386				1,310,687
Deferred income tax liabilities			113,932				114,682
Noncurrent income taxes payable			16,128				16,521
Noncurrent deferred revenue			33,928				36,148
Noncurrent operating lease liabilities			105,859				113,035
Other noncurrent liabilities			550				436
Stockholders' equity:
Common shares (194,901 and 195,880 shares authorized and issued;     192,079 and 191,777 shares outstanding)			19,490				19,588
Additional paid-in capital			2,135,384				2,125,467
Treasury shares (2,822 and 4,103 shares)			(226,921)				(330,909)
Retained earnings			5,440,200				5,263,528
Accumulated other comprehensive income (loss)			(122,056)				(65,614)
Total stockholders' equity			7,246,097				7,012,060
Total liabilities and stockholders' equity		$	8,633,880			$	8,603,569

 

Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
		13-Weeks Ended
		March 30, 2024				April 1, 2023
Operating Activities:
Net income		$	275,961			$	202,327
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation			33,892				31,952
Amortization			10,933				11,463
Gain on sale or disposal of property and equipment			(12)				(129)
Unrealized foreign currency losses (gains)			2,974				(867)
Deferred income taxes			(9,611)				(15,713)
Stock compensation expense			30,719				20,732
Realized loss on marketable securities			—				20
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts			108,453				46,873
Inventories			16,545				43,712
Other current and noncurrent assets			2,117				4,780
Accounts payable			(1,281)				(4,202)
Other current and noncurrent liabilities			(64,699)				(67,405)
Deferred revenue			(2,549)				(1,876)
Deferred costs			(1,451)				622
Income taxes			33,314				6,921
Net cash provided by operating activities			435,305				279,210
Investing activities:
Purchases of property and equipment			(33,168)				(46,814)
Purchase of marketable securities			(85,626)				(18,684)
Redemption of marketable securities			77,131				57,789
Net cash from (payments for) acquisitions			5,011				—
Other investing activities, net			(223)				(190)
Net cash used in investing activities			(36,875)				(7,899)
Financing activities:
Dividends			(140,212)				(139,847)
Purchase of treasury shares related to equity awards			(15,987)				(9,169)
Purchase of treasury shares under share repurchase plan			—				(43,273)
Net cash used in financing activities			(156,199)				(192,289)
Effect of exchange rate changes on cash and cash equivalents			(13,913)				3,387
Net increase in cash, cash equivalents, and restricted cash			228,318				82,409
Cash, cash equivalents, and restricted cash at beginning of period			1,694,156				1,279,912
Cash, cash equivalents, and restricted cash at end of period		$	1,922,474			$	1,362,321

 

Garmin Ltd. and Subsidiaries Net Sales, Gross Profit and Operating Income by Segment (Unaudited) (In thousands)
		Fitness				Outdoor				Aviation				Marine				Auto OEM				Total
13-Weeks Ended March 30, 2024
Net sales		$	342,892			$	366,193			$	216,855			$	326,736			$	128,973			$	1,381,649
Gross profit			194,802				242,739				162,626				179,252				22,720				802,139
Operating income (loss)			68,133				106,950				52,134				87,692				(16,499)				298,410
13-Weeks Ended April 1, 2023
Net sales		$	244,721			$	328,662			$	213,582			$	278,975			$	81,484			$	1,147,424
Gross profit			120,910				204,948				154,454				149,631				22,851				652,794
Operating income (loss)			10,578				76,743				57,695				71,908				(19,942)				196,982

 

Garmin Ltd. and Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
		13-Weeks Ended
		March 30,				April 1,				YoY
		2024				2023				Change
Net sales		$	1,381,649			$	1,147,424			20 %
Americas			716,116				611,704			17 %
EMEA			463,384				355,853			30 %
APAC			202,149				179,867			12 %
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent

Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below. 

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company's income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the first quarter 2024 and 2023 there were no such discrete tax items identified.

Pro forma net income (earnings) per share

Management believes net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure to permit a consistent comparison of the Company's performance between periods.

(In thousands, except per share information)		13-Weeks Ended
		March 30,				April 1,
		2024				2023
GAAP net income		$	275,961			$	202,327
Foreign currency gains(1)			(2,282)				(7,688)
Tax effect of foreign currency gains(2)			356				674
Pro forma net income		$	274,035			$	195,313
GAAP net income per share:
Basic		$	1.44			$	1.06
Diluted		$	1.43			$	1.05
Pro forma net income per share:
Basic		$	1.43			$	1.02
Diluted		$	1.42			$	1.02
Weighted average common shares outstanding:
Basic			191,890				191,498
Diluted			192,698				191,886

(1) Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at a given legal entity.  However, there is minimal cash impact from such foreign currency gains and losses.
(2) The tax effect of foreign currency gains was calculated using the effective tax rate of 15.6% for the 13-weeks ended March 30, 2024 and 8.8% for the 13-weeks ended April 1, 2023.

Free cash flow

Management believes free cash flow is an important liquidity measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flows less capital expenditures for property and equipment. Management believes excluding purchases of property and equipment provides a better understanding of the underlying trends in the Company's operations and allows more accurate comparisons of the Company's results between periods. This metric may also be useful to investors but should not be considered in isolation as it is not a measure of cash flow available for discretionary expenditures. The most comparable GAAP measure is net cash provided by operating activities.

(In thousands)		13-Weeks Ended
		March 30,				April 1,
		2024				2023
Net cash provided by operating activities		$	435,305			$	279,210
Less: purchases of property and equipment			(33,168)				(46,814)
Free Cash Flow		$	402,137			$	232,396

Forward-looking Financial Measures

The forward-looking financial measures in our 2024 guidance provided above do not consider the potential future net effect of foreign currency exchange gains and losses, certain discrete tax items and any other impacts that may be identified as pro forma adjustments in calculating the non-GAAP measures described above. 

The estimated impact of foreign currency gains and losses cannot be reasonably estimated on a forward-looking basis due to the high variability and low visibility with respect to non-operating foreign currency exchange gains and losses and the related tax effects of such gains and losses. The impact on diluted net income per share of foreign currency gains and losses, net of tax effects, was $0.01 per share for the 13-weeks ended March 30, 2024.

At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2024, estimate the impact of any such items, or anticipate the impact of any other events that may be considered in the calculation of non-GAAP financial measures.

 

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SOURCE Garmin Ltd.

FAQ

What was Garmin's consolidated revenue for the first quarter of 2024?

Garmin reported consolidated revenue of $1.38 billion for the first quarter of 2024, a 20% increase year-over-year.

What was the growth rate in revenue for the fitness segment in the first quarter of 2024?

The fitness segment saw a 40% increase in revenue in the first quarter of 2024.

What were Garmin's GAAP and pro forma EPS for the first quarter of 2024?

Garmin achieved GAAP EPS of $1.43 and pro forma EPS of $1.42 in the first quarter of 2024.

What was the operating income for Garmin in the first quarter of 2024?

Garmin reported operating income of $298 million in the first quarter of 2024, a 51% increase from the prior year quarter.

What was the effective tax rate for Garmin in the first quarter of 2024?

The effective tax rate for Garmin in the first quarter of 2024 was 15.6%, up from 8.8% in the prior year quarter.