01—Abstract
Summary
Summary of the 10-K filed February 20, 2019. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported solid performance in its 2018 fiscal year, with total revenue reaching $3.35 billiona, a 7% increase year-over-year.
This growth was driven by strong contributions from its Outdoor, Fitness, Marine, and Aviation segments, which collectively saw revenue climb. The company highlighted advancements in its wearable technology and expanded offerings in its marine and aviation product lines. Conversely, the Auto segment experienced a significant 19%b revenue decline, attributed to the ongoing market shift towards mobile navigation and integrated in-car systems, a trend the company anticipates will continue.
Garmin's robust R&D investment of $567.8 millionc underscores its commitment to innovation across its diverse product portfolio. The company maintained healthy operating income of $778.3 million, reflecting effective cost management and strong gross margins, particularly in the higher-growth segments. Despite the challenges in the Auto segment, Garmin's diversified business model, strong brand recognition, and continuous product innovation position it well for future growth.
The company's strategic focus on high-margin, expanding markets like outdoor and fitness, coupled with its significant presence in the stable aviation sector, provides a balanced revenue stream. Investors should monitor the company's ability to adapt to evolving technological landscapes and maintain its competitive edge in its core markets.
02—Key points
Key Highlights
- Total revenue increased by 7% to $3.35 billion in 2018, driven by growth across most segments.
- The Outdoor, Fitness, Marine, and Aviation segments showed year-over-year revenue growth, indicating strength in diversified markets.
- The Auto segment experienced a notable revenue decline of 19%, primarily due to the continued shift away from Personal Navigation Devices (PNDs).
- Research and Development expenses increased by 11% to $567.8 million, reflecting a commitment to innovation and new product development.
- Operating income grew by 14% to $778.3 million, demonstrating effective operational management and cost control.
- Gross margin improved by 150 basis points to 59%, driven by favorable segment and product mix, especially in Outdoor and Marine.
- The company delivered 14.9 million products in 2018, marking a milestone in its business history.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Garmin Ltd kept $0.21.
- Revenue$3.35B100.0%
- Cost of revenue−$1.37B40.9%
- Gross profit$1.98B59.1%
- Operating costs−$1.20B35.9%
- Operating income$778.3M23.3%
- Interest, other & tax−$84.3M2.5%
- Net income$694.1M20.7%
Where FY2018 revenue went
$3.35B- Cost of revenue: $1.37B, 41% of revenue
- Net income: $694.1M, 21% of revenue
- R&D: $567.8M, 17% of revenue
- SG&A: $478.2M, 14% of revenue
- Other operating costs: $155.4M, 4.6% of revenue
- Interest, other & tax: $84.3M, 2.5% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 20, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $3.35B$3.09B | +8.4% |
| Cost of Revenue | $1.37B$1.32B | +3.3% |
| Gross Profit | $1.98B$1.80B | +10.1% |
| R&D Expenses | $567.80M$511.63M | +11.0% |
| SG&A Expenses | $478.18M$437.98M | +9.2% |
| Operating Expenses | $1.20B$1.11B | +7.8% |
| Operating Income | $778.34M$683.64M | +13.9% |
| Net Income | $694.08M$709.01M | −2.1% |
| EPS (Basic) | $3.68$3.77 | −2.4% |
| EPS (Diluted) | $3.66$3.76 | −2.7% |
| Shares Outstanding (Basic) | 188.63M187.83M | +0.4% |
| Shares Outstanding (Diluted) | 189.73M188.73M | +0.5% |
05—Questions
Frequently Asked Questions
What were the main drivers of Garmin's revenue growth in 2018?
Garmin's revenue growth in 2018 was primarily driven by its Outdoor, Fitness, Marine, and Aviation segments. These segments saw increased sales due to new product introductions, expansion of wearable technology offerings, and growth in both OEM and aftermarket aviation categories. The company also noted contributions from recent acquisitions in the Marine segment.
Why did the Auto segment's revenue decline?
The Auto segment's revenue decreased by 19% due to the ongoing decline in the Personal Navigation Device (PND) market. This decline is largely attributed to the increasing availability of navigation technologies on mobile devices and the widespread integration of factory-installed navigation systems in new vehicles.
How is Garmin investing in future growth?
Garmin is investing significantly in research and development, with R&D expenses increasing by 11% to $567.8 million in 2018. This investment is focused on product development, enhancing existing software capabilities, and exploring new product categories, particularly in areas like wearables and advanced aviation systems.
What is Garmin's outlook for its different business segments?
Garmin anticipates continued strength in its Outdoor, Fitness, Marine, and Aviation segments. However, the company expects the Auto segment, particularly PNDs, to continue facing headwinds due to market shifts towards mobile and integrated solutions. The company's strategy involves leveraging its diversified portfolio to offset declines in one segment with growth in others.
06—Continue