10-QPeriod: Q1 FY2018

GARMIN LTD Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 2, 2018For Securities:GRMN

Summary

Garmin Ltd. reported strong top-line growth for the first quarter of 2018, with net sales increasing 11% year-over-year to $710.9 million. 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 million, 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 million 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 million. 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.

Financial Highlights

50 data points
Beta

Revenue

$710.87M

60.0% Gross Margin

Net Income

$129.37M

18.2% Net Margin

EPS (Diluted)

$0.68

Total Assets

$4.86B

Cash & Equivalents

$899.26M

Free Cash Flow

$187.85M

Financial Statements
Beta
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

Key Highlights

  • 1Net sales increased by 11% to $710.9 million in Q1 2018, driven by growth in Outdoor, Fitness, Aviation, and Marine segments.
  • 2Gross profit rose by 14% to $426.5 million, with gross margin improving to 60% from 58% in the prior year.
  • 3Operating income increased by 22% to $142.2 million, indicating strong operational performance.
  • 4Net income decreased significantly to $129.4 million from $238.4 million due to a large tax benefit in the prior year's comparable quarter.
  • 5The Auto segment experienced a 12% decline in revenue, primarily attributed to the shrinking Personal Navigation Device (PND) market.
  • 6Advertising expenses decreased by 20% to $25.3 million.
  • 7The company ended the quarter with $2,375.9 million in cash and marketable securities, indicating a strong liquidity position.

Frequently Asked Questions

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.

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.

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.

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.