01—Abstract
Summary
Summary of the 10-Q filed May 3, 2017. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong first quarter for 2017, with net sales increasing by 2% year-over-year to $638.5 milliona.
This growth was driven by robust performance in the outdoor, marine, and aviation segments, which saw double-digit increases. Despite a decline in the auto segment due to the PND market contraction, overall revenue benefited from strong wearables in the fitness segment and aftermarket growth in aviation. Gross profit significantly increased by 9% to $372.1 millionb, with gross profit margin expanding by 380 basis points, indicating improved profitability across most segments.
This was supported by a favorable shift in product mix towards higher-margin items. Net income saw a substantial surge to $237.8 millionc from $88.1 million in the prior year's comparable period. This significant increase was partly attributed to a notable income tax benefit of $150.1 million, which included a $168.8 million benefit from revaluing Switzerland deferred tax assets.
The company continued to invest in research and development, with R&D expenses increasing by 13%d to support new product development. Garmin's financial position remains solid, with healthy operating cash flow and sufficient liquidity to fund future initiatives.
02—Key points
Key Highlights
- Net sales increased 2% year-over-year to $638.5 million, driven by strong performance in outdoor, marine, and aviation segments.
- Gross profit increased 9% to $372.1 million, with gross profit margin expanding by 380 basis points, indicating improved profitability.
- Net income surged to $237.8 million from $88.1 million in the prior year, boosted by a significant income tax benefit.
- Research and development expenses increased 13% to $122.2 million, reflecting continued investment in new product development.
- The auto segment experienced a 19% decline in revenue due to the PND market contraction, while the fitness segment saw a 3% decrease.
- Garmin continued its share repurchase program, with $47.5 million remaining under its authorization as of April 1, 2017.
- The company's financial position is stable, with $833.6 million in cash and cash equivalents and sufficient liquidity to meet future obligations.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Garmin Ltd kept $0.37.
- Revenue$641.5M100.0%
- Cost of revenue−$268.7M41.9%
- Gross profit$372.8M58.1%
- Operating costs−$255.8M39.9%
- Operating income$117.0M18.2%
- Interest, other & tax$121.4M18.9%
- Net income$238.4M37.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed May 3, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $641.51M$811.61M | −21.0% |
| Cost of Revenue | $268.70M$348.65M | −22.9% |
| Gross Profit | $372.81M$462.96M | −19.5% |
| R&D Expenses | $122.20M$114.36M | +6.9% |
| SG&A Expenses | $102.05M$103.68M | −1.6% |
| Operating Expenses | $255.78M$262.28M | −2.5% |
| Operating Income | $117.03M$200.67M | −41.7% |
| Net Income | $238.40M$161.06M | +48.0% |
| EPS (Basic) | $1.27$0.85 | +49.4% |
| EPS (Diluted) | $1.26$0.85 | +48.2% |
| Shares Outstanding (Basic) | 188.33M189K | +99604.1% |
| Shares Outstanding (Diluted) | 189.03M189K | +99728.4% |
05—Questions
Frequently Asked Questions
What was the primary driver of Garmin's revenue growth in the first quarter of 2017?
Garmin's net sales increased by 2% year-over-year, primarily driven by strong performance in the outdoor, marine, and aviation segments, which experienced double-digit revenue growth. Growth in advanced wearables within the fitness segment and aftermarket expansion in aviation also contributed positively.
Why did net income increase so significantly compared to the prior year?
The substantial increase in net income to $237.8 million was significantly influenced by a large income tax benefit of $150.1 million recognized in the quarter. This benefit primarily stemmed from the revaluation of certain Switzerland deferred tax assets.
How is Garmin managing its investments in future growth?
Garmin is actively investing in research and development, with R&D expenses increasing by 13% year-over-year. This investment is focused on developing new products and improving existing software capabilities across its various segments.
What is the outlook for the auto segment, given the reported revenue decline?
The auto segment's revenue decreased by 19%, largely attributed to the ongoing contraction of the Portable Navigation Device (PND) market. This indicates a strategic shift away from traditional PNDs and potentially a focus on other automotive solutions or different market segments.
06—Continue