01—Abstract
Summary
Summary of the 10-K filed February 19, 2020. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported strong financial performance in its fiscal year ending December 28, 2019, with net sales increasing by 12% year-over-year to $3.76 billiona.
This growth was driven by robust performance across its Fitness, Outdoor, Aviation, and Marine segments, with Fitness becoming the largest revenue contributor at 28% of total sales. The company also saw a significant 21% increase in total operating income, reaching $945.6 millionb, reflecting improved operational leverage and higher gross margins. The company continues to invest in research and development, with R&D expenses representing 16% of net sales, underscoring its commitment to innovation in its diverse product lines.
Garmin's diversified business model across multiple market segments provides resilience, although the auto segment experienced a 14% decline in revenue, primarily due to the ongoing contraction in the Personal Navigation Device (PND) market. Despite this, strategic investments in the Automotive OEM sector are ongoing. Garmin maintains a healthy financial position, with approximately $2.6 billionc in cash, cash equivalents, and marketable securities as of year-end 2019.
The company also returned value to shareholders through dividends, with declared dividends per share increasing consistently. Management expresses confidence in the company's ability to fund future operations, capital expenditures, and strategic initiatives through operating cash flow and existing cash balances.
02—Key points
Key Highlights
- Net sales grew 12% to $3.76 billion in fiscal year 2019, driven by strong performance in Fitness, Outdoor, Aviation, and Marine segments.
- Fitness segment became the largest contributor to revenue, accounting for 28% of total sales.
- Total operating income increased by 21% to $945.6 million, with operating income as a percentage of net sales improving to 25%.
- Research and Development (R&D) expenses were $605.4 million, representing 16% of net sales, indicating a strong focus on innovation.
- The Auto segment experienced a 14% decline in net sales, attributed to the shrinking PND market, though OEM investments are ongoing.
- The company ended fiscal year 2019 with substantial liquidity, holding $2.6 billion in cash, cash equivalents, and marketable securities.
- Garmin declared dividends per share increased to $2.28 in 2019, demonstrating a commitment to returning value to shareholders.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Garmin Ltd kept $0.25.
- Revenue$3.76B100.0%
- Cost of revenue−$1.52B40.5%
- Gross profit$2.23B59.5%
- Operating costs−$1.29B34.3%
- Operating income$945.6M25.2%
- Interest, other & tax$6.9M0.2%
- Net income$952.5M25.3%
Where FY2019 revenue went
$3.76B- Cost of revenue: $1.52B, 41% of revenue
- Operating income: $945.6M, 25% of revenue
- R&D: $605.4M, 16% of revenue
- SG&A: $518.6M, 14% of revenue
- Other operating costs: $164.5M, 4.4% of revenue
Kept 25% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 19, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $3.76B$3.35B | +12.2% |
| Cost of Revenue | $1.52B$1.37B | +11.4% |
| Gross Profit | $2.23B$1.98B | +12.8% |
| R&D Expenses | $605.37M$567.80M | +6.6% |
| SG&A Expenses | $518.57M$478.18M | +8.4% |
| Operating Expenses | $1.29B$1.20B | +7.2% |
| Operating Income | $945.59M$778.34M | +21.5% |
| Net Income | $952.49M$694.08M | +37.2% |
| EPS (Basic) | $5.01$3.68 | +36.1% |
| EPS (Diluted) | $4.99$3.66 | +36.3% |
| Shares Outstanding (Basic) | 189.93M188.63M | +0.7% |
| Shares Outstanding (Diluted) | 190.90M189.73M | +0.6% |
05—Questions
Frequently Asked Questions
What were the main drivers of Garmin's revenue growth in 2019?
Garmin's revenue growth in 2019 was primarily driven by strong performance in its Fitness segment (up 22%), fueled by wearables and Tacx indoor trainers, as well as significant growth in the Outdoor (up 13%), Aviation (up 22%), and Marine (up 15%) segments. The acquisition of Tacx also contributed to the Fitness segment's revenue increase.
How is Garmin's Auto segment performing, and what is the outlook?
The Auto segment's net sales decreased by 14% in 2019. This decline is attributed to the ongoing contraction of the Personal Navigation Device (PND) market due to increased competition from smartphones and integrated vehicle systems. However, Garmin is making significant investments in its Automotive Original Equipment Manufacturer (OEM) solutions, which is a strategic focus for future growth.
What is Garmin's financial health and liquidity position?
Garmin maintains a strong financial position. As of December 28, 2019, the company had approximately $2.6 billion in cash, cash equivalents, and marketable securities. This robust liquidity supports ongoing operations, capital expenditures, dividend payments, and strategic acquisitions.
How much did Garmin invest in research and development in 2019?
Garmin invested $605.4 million in research and development in 2019, which represented 16% of its net sales. This significant investment highlights the company's ongoing commitment to product innovation and technological advancement across its various business segments.
06—Continue