01—Abstract
Summary
Summary of the 10-Q filed July 27, 2016. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd.'s second-quarter 2016 report shows robust top-line growth and improved profitability, driven by strong performance in its Fitness and Outdoor segments.
Total net sales increased by 5% year-over-year to $811.6 milliona, with a notable 34% surge in the Fitness segment and a 23% rise in the Outdoor segment. This growth, coupled with a 300-basis point improvement in gross margin to 57%, led to a significant 20% increase in operating income to $200.7 million. The company also demonstrated solid operational cash flow generation, highlighting its financial health and ability to reinvest in growth initiatives and return capital to shareholders.
02—Key points
Key Highlights
- Net sales grew 5% to $811.6 million, driven by strong performance in Fitness and Outdoor segments.
- Fitness segment sales increased by 34%, and Outdoor segment sales rose by 23%.
- The Auto segment experienced a 18% decline in net sales, impacting overall growth.
- Gross profit increased by 10% to $463.0 million, with gross margin improving by 300 basis points to 57%.
- Operating income surged 20% to $200.7 million, reflecting improved sales and margins.
- Cash provided by operating activities was $279.4 million for the first half of 2016, a significant increase from the prior year.
- The company repurchased approximately $123.5 million worth of shares under its buyback program as of June 25, 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2016, Garmin Ltd kept $0.20.
- Revenue$811.6M100.0%
- Cost of revenue−$348.7M43.0%
- Gross profit$463.0M57.0%
- Operating costs−$262.3M32.3%
- Operating income$200.7M24.7%
- Interest, other & tax−$39.6M4.9%
- Net income$161.1M19.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2016filed July 27, 2016Financial Statements
Q2 FY2016 against Q2 FY2015
| Line item | Q2 FY2016Q2 FY2015 | Change |
|---|---|---|
| Revenue | $811.61M$773.83M | +4.9% |
| Cost of Revenue | $348.65M$354.58M | −1.7% |
| Gross Profit | $462.96M$419.25M | +10.4% |
| R&D Expenses | $114.36M$109.24M | +4.7% |
| SG&A Expenses | $103.68M$97.55M | +6.3% |
| Operating Expenses | $262.28M$252.59M | +3.8% |
| Operating Income | $200.67M$166.66M | +20.4% |
| Net Income | $161.06M$137.75M | +16.9% |
| EPS (Basic) | $0.85$0.72 | +18.1% |
| EPS (Diluted) | $0.85$0.72 | +18.1% |
| Shares Outstanding (Basic) | 189K191.10M | −99.9% |
| Shares Outstanding (Diluted) | 189K191.60M | −99.9% |
05—Questions
Frequently Asked Questions
What was Garmin's overall financial performance for the second quarter of 2016?
Garmin Ltd. reported a 5% increase in net sales to $811.6 million for the second quarter of 2016, compared to the same period in 2015. Gross profit rose by 10% to $463.0 million, and operating income grew by 20% to $200.7 million, indicating improved profitability.
Which segments drove Garmin's revenue growth, and which faced challenges?
The Fitness and Outdoor segments were the primary drivers of growth, with sales increasing by 34% and 23%, respectively. The Auto segment, however, experienced a significant 18% decline in net sales, which partially offset the gains from other segments.
How did Garmin manage its cash flow and capital resources during this period?
Garmin generated $279.4 million in cash from operating activities in the first half of 2016, a substantial improvement from the prior year. The company also continued its share repurchase program, with approximately $123.5 million remaining under its authorization as of June 25, 2016, indicating a commitment to returning capital to shareholders.
What is the company's outlook regarding its diverse product segments?
While the report highlights strong growth in Fitness and Outdoor, the decline in the Auto segment suggests a potential shift in market dynamics or competitive pressures. Investors should monitor the company's strategies for the Auto segment and its ability to sustain growth in its other key areas like Aviation, Marine, and the emerging wearable categories.
06—Continue