01—Abstract
Summary
Summary of the 10-Q filed October 26, 2016. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported solid financial results for the quarter ended September 24, 2016, with total net sales increasing by 6% year-over-year to $722.3 milliona.
This growth was driven by strong performances in the Fitness, Outdoor, and Marine segments, which saw revenue increases of 32%, 28%, and 12% respectively. Despite a 21% decline in the Auto segment, primarily due to the continued Personal Navigation Device (PND) market contraction, overall company revenue growth remained positive. Profitability also improved, with operating income rising 27% to $159.6 millionb and net income increasing by 4.9% to $125.1 million.
The company demonstrated effective cost management, with cost of goods sold decreasing as a percentage of revenue and overall gross profit margin improving by 290 basis points. These results reflect Garmin's strategic diversification into wearable technology and other growing markets, successfully offsetting the challenges in its legacy Auto segment.
02—Key points
Key Highlights
- Total net sales increased by 6% to $722.3 million for the 13-week period ended September 24, 2016, compared to the prior year.
- Fitness segment revenue grew by 32% and Outdoor segment revenue increased by 28%, indicating strong demand in these wearable technology and outdoor recreation markets.
- The Auto segment experienced a significant decline of 21% in net sales, attributed to the ongoing contraction of the PND market.
- Gross profit increased by 12% to $406.0 million, with a corresponding improvement in gross profit margin to 56%, up from 53% in the prior year quarter.
- Operating income saw a substantial increase of 27% to $159.6 million, reflecting improved revenue and margin management.
- Net income for the quarter rose by 4.9% to $125.1 million, resulting in diluted earnings per share of $0.66, up from $0.63 in the prior year.
- The company maintained a strong balance sheet with $912.6 million in cash and cash equivalents and $1.53 billion in marketable securities.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2016, Garmin Ltd kept $0.17.
- Revenue$722.3M100.0%
- Cost of revenue−$316.3M43.8%
- Gross profit$406.0M56.2%
- Operating costs−$246.4M34.1%
- Operating income$159.6M22.1%
- Interest, other & tax−$34.6M4.8%
- Net income$125.1M17.3%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed October 26, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $722.25M$679.69M | +6.3% |
| Cost of Revenue | $316.27M$317.50M | −0.4% |
| Gross Profit | $405.98M$362.19M | +12.1% |
| R&D Expenses | $116.45M$105.79M | +10.1% |
| SG&A Expenses | $96.96M$94.06M | +3.1% |
| Operating Expenses | $246.36M$236.73M | +4.1% |
| Operating Income | $159.62M$125.46M | +27.2% |
| Net Income | $125.05M$119.30M | +4.8% |
| EPS (Basic) | $0.66$0.63 | +4.8% |
| EPS (Diluted) | $0.66$0.63 | +4.8% |
| Shares Outstanding (Basic) | 189K190.34M | −99.9% |
| Shares Outstanding (Diluted) | 189K190.82M | −99.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of Garmin's revenue growth in Q3 2016?
Garmin's revenue growth in the third quarter of 2016 was primarily driven by strong performance in its Fitness and Outdoor segments, which saw significant increases of 32% and 28% respectively. The Marine segment also contributed positively with a 12% increase. These gains helped offset the decline in the Auto segment.
How did the decline in the Auto segment affect overall financial performance?
While the Auto segment revenue decreased by 21%, largely due to the shrinking Personal Navigation Device (PND) market, Garmin's overall net sales still grew by 6%. This resilience was due to the robust growth in other segments, particularly Fitness and Outdoor, demonstrating successful diversification. The company's operating income and net income also saw healthy increases, indicating effective management of the changing business landscape.
What is the company's strategy regarding its share repurchase program?
Garmin has an ongoing share repurchase program authorized up to $300 million, with $103.4 million remaining available as of September 24, 2016. The program, which expires on December 31, 2016, is used to repurchase shares as market and business conditions warrant, reflecting the company's commitment to returning value to shareholders.
How is Garmin managing its inventory and receivables in the current economic climate?
The company reported a slight decrease in total unit sales but managed its inventories effectively, with inventory levels increasing at a slower pace than sales growth. The MD&A section notes a positive impact from inventories providing more cash in the first three quarters of 2016 due to reduced raw material purchases. Accounts receivable also provided a working capital benefit, though it was less than the prior year period, suggesting efficient management of collections and rebates.
06—Continue