01—Abstract
Summary
Summary of the 10-K filed February 22, 2023. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported total net sales of $4.86 billiona for the fiscal year ended December 31, 2022, a slight decrease of 2% compared to the prior year, impacted by a 9% decrease in unit sales and the strengthening of the U.S. Dollar.
Despite the revenue dip, the company maintained a stable gross margin of 58%. Operating income saw a more significant decline of 16% year-over-year, totaling $1.03 billionb, primarily due to an increase in operating expenses as a percentage of sales. The Fitness segment experienced a substantial 71% decrease in operating income, while the Auto segment (consumer and OEM combined) continued to operate at a loss, with Auto OEM reporting a loss of $78.7 million.
The company ended the year with a strong balance sheet, holding approximately $2.7 billionc in cash, cash equivalents, and marketable securities. Garmin's diversified business segments showed mixed performance. Outdoor, Aviation, and Marine segments demonstrated resilience with revenue increases or modest declines, driven by adventure watches, aftermarket and OEM aviation products, and sonar technology, respectively.
Conversely, the Fitness segment faced challenges, with sales declining across all product categories. The company continues to invest in Research and Development, with R&D expenses increasing by 7%d year-over-year. Looking ahead, management anticipates persistent challenges from economic headwinds such as inflation and rising interest rates, as well as supply chain constraints.
02—Key points
Key Highlights
- Net sales decreased by 2% to $4.86 billion in FY2022, primarily due to a 9% decline in unit sales and foreign currency headwinds.
- Gross profit remained stable at $2.81 billion, with a consolidated gross margin of 58%, consistent with the prior year.
- Operating income decreased by 16% to $1.03 billion, as operating expenses rose as a percentage of net sales.
- The Fitness segment's operating income dropped significantly by 71%, indicating challenges in this core area.
- The Outdoor segment saw a 17% increase in operating income, driven by strong performance in adventure watches.
- The company ended the year with a robust cash position of $2.7 billion, supporting ongoing operations and potential strategic initiatives.
- Research and Development expenses increased by 7% to $835 million, highlighting continued investment in innovation.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Garmin Ltd kept $0.20.
- Revenue$4.86B100.0%
- Cost of revenue−$2.05B42.3%
- Gross profit$2.81B57.7%
- Operating costs−$1.78B36.6%
- Operating income$1.03B21.1%
- Interest, other & tax−$54.3M1.1%
- Net income$973.6M20.0%
Where FY2022 revenue went
$4.86B- Cost of revenue: $2.05B, 42% of revenue
- Net income: $973.6M, 20% of revenue
- SG&A: $944.0M, 19% of revenue
- R&D: $834.9M, 17% of revenue
- Interest, other & tax: $54.3M, 1.1% of revenue
Kept 20% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 22, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $4.86B$4.98B | −2.5% |
| Cost of Revenue | $2.05B$2.09B | −1.9% |
| Gross Profit | $2.81B$2.89B | −2.9% |
| R&D Expenses | $834.93M$778.75M | +7.2% |
| SG&A Expenses | $944.00M$721.26M | +30.9% |
| Operating Expenses | $1.78B$1.67B | +6.4% |
| Operating Income | $1.03B$1.22B | −15.7% |
| Net Income | $973.59M$1.08B | −10.0% |
| EPS (Basic) | $5.06$5.63 | −10.1% |
| EPS (Diluted) | $5.04$5.61 | −10.2% |
| Shares Outstanding (Basic) | 192.54M192K | +100089.4% |
| Shares Outstanding (Diluted) | 193.04M193K | +99899.5% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Garmin's net sales performance in 2022?
Net sales in 2022 decreased by 2% to $4.86 billion. This was mainly due to a 9% reduction in unit sales and the strengthening of the U.S. Dollar against other major currencies. While the Outdoor segment saw growth driven by adventure watches, and Aviation and Marine segments performed well, the Fitness segment experienced declines across all its product categories.
How did Garmin's profitability fare in 2022, and what were the key factors affecting it?
Garmin's gross profit remained stable at $2.81 billion with a consistent gross margin of 58%. However, operating income decreased by 16% to $1.03 billion. This decline was largely driven by an increase in operating expenses as a percentage of net sales, particularly in Selling, General & Administrative expenses and Research & Development, which grew by 8% and 7% respectively in absolute terms, while revenue declined.
What is Garmin's financial position regarding cash and debt?
Garmin maintained a strong financial position with approximately $2.7 billion in cash, cash equivalents, and marketable securities as of December 31, 2022. The company has no outstanding long-term debt, indicating a healthy liquidity profile.
What are the major risks and challenges facing Garmin as highlighted in the filing?
Key risks include intense competition, the need for continuous product innovation and timely introduction of new products, reliance on third-party suppliers for components, potential disruptions from global events like pandemics or geopolitical instability, foreign currency exchange rate fluctuations, and the ongoing investments in the Auto OEM segment which are currently generating losses. Additionally, evolving data privacy regulations and cybersecurity threats are ongoing concerns.
06—Continue