01—Abstract
Summary
Summary of the 10-Q filed May 2, 2018. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported strong top-line growth for the first quarter of 2018, with net sales increasing 11% year-over-year to $710.9 milliona.
This growth was primarily driven by robust performance in the Outdoor, Fitness, Aviation, and Marine segments, which collectively saw an 18% increase in net sales. The company also experienced an 14% increase in gross profit, reaching $426.5 millionb, accompanied by an improvement in gross margin to 60% from 58% in the prior year period. This indicates effective cost management and favorable product mix shifts.
Despite overall revenue growth, net income saw a significant decrease of $109 millionc compared to the prior year's first quarter, landing at $129.4 million. This was largely due to a substantial income tax benefit in the first quarter of 2017 related to the revaluation of deferred tax assets.
Excluding this one-time item, the company's operational performance remains positive, with operating income increasing by 22% to $142.2 milliond. The company maintains a healthy liquidity position with $2,375.9 million in cash and marketable securities, sufficient to cover operational needs and strategic investments.
02—Key points
Key Highlights
- Net sales increased by 11% to $710.9 million in Q1 2018, driven by growth in Outdoor, Fitness, Aviation, and Marine segments.
- Gross profit rose by 14% to $426.5 million, with gross margin improving to 60% from 58% in the prior year.
- Operating income increased by 22% to $142.2 million, indicating strong operational performance.
- Net income decreased significantly to $129.4 million from $238.4 million due to a large tax benefit in the prior year's comparable quarter.
- The Auto segment experienced a 12% decline in revenue, primarily attributed to the shrinking Personal Navigation Device (PND) market.
- Advertising expenses decreased by 20% to $25.3 million.
- The company ended the quarter with $2,375.9 million in cash and marketable securities, indicating a strong liquidity position.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2018, Garmin Ltd kept $0.18.
- Revenue$710.9M100.0%
- Cost of revenue−$284.3M40.0%
- Gross profit$426.5M60.0%
- Operating costs−$284.3M40.0%
- Operating income$142.2M20.0%
- Interest, other & tax−$12.8M1.8%
- Net income$129.4M18.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2018filed May 2, 2018Financial Statements
| Revenue | $710.87M |
| Cost of Revenue | $284.34M |
| Gross Profit | $426.54M |
| R&D Expenses | $141.96M |
| SG&A Expenses | $117.06M |
| Operating Expenses | $284.33M |
| Operating Income | $142.20M |
| Net Income | $129.37M |
| EPS (Basic) | $0.69 |
| EPS (Diluted) | $0.68 |
| Shares Outstanding (Basic) | 188K |
| Shares Outstanding (Diluted) | 189K |
05—Questions
Frequently Asked Questions
What is the primary driver of Garmin's revenue growth in Q1 2018?
Garmin's revenue growth of 11% in Q1 2018 was primarily driven by strong performance across its Outdoor, Fitness, Aviation, and Marine segments, which collectively increased by 18% and contributed 80% of total revenue.
Why did net income decrease significantly compared to the prior year quarter?
The significant decrease in net income to $129.4 million from $238.4 million was primarily due to a one-time income tax benefit of $168.8 million recognized in the first quarter of 2017 related to the revaluation of certain Switzerland deferred tax assets. Excluding this item, operating performance was strong.
What is the outlook for the Auto segment?
The Auto segment experienced a 12% decline in revenue in Q1 2018, largely due to the ongoing contraction of the Personal Navigation Device (PND) market. This indicates a continued challenging environment for this segment.
How is Garmin managing its investments and cash?
Garmin ended Q1 2018 with $2,375.9 million in cash and marketable securities. The company's investment policy focuses on preserving capital, maintaining liquidity, and maximizing yield with low credit risk. The average interest rate return on cash and investments was approximately 1.7% in Q1 2018.
06—Continue