10-QPeriod: Q1 FY2019

GARMIN LTD Quarterly Report for Q1 Ended Mar 30, 2019

Filed May 1, 2019For Securities:GRMN

Summary

Garmin Ltd. reported solid financial results for the first quarter ended March 30, 2019, demonstrating an 8% year-over-year increase in net sales to $766.1 million. This growth was driven by strong performance in the outdoor, fitness, marine, and aviation segments, which collectively rose 12%. The company saw an increase in total unit sales and benefited from strong demand in wearables and aviation product lines, although the auto segment experienced a 10% decline due to the continued contraction of the PND market. Net income for the quarter rose by approximately 8.3% to $140.2 million, or $0.74 per diluted share, up from $129.4 million, or $0.68 per diluted share, in the prior year period. Operating income also saw a healthy 6% increase. While gross profit dollars grew, the overall gross margin slightly decreased year-over-year, primarily impacted by product mix and pricing in the fitness and outdoor segments. The company maintains a strong liquidity position with approximately $2.7 billion in cash and cash equivalents and marketable securities, indicating its ability to fund operations and strategic initiatives.

Financial Highlights

50 data points
Beta

Revenue

$766.05M

59.0% Gross Margin

Net Income

$140.17M

18.3% Net Margin

EPS (Diluted)

$0.74

Total Assets

$5.28B

Cash & Equivalents

$1.12B

Free Cash Flow

$134.49M

Financial Statements
Beta
Revenue$766.05M
Cost of Revenue$314.35M
Gross Profit$451.70M
R&D Expenses$145.92M
SG&A Expenses$126.78M
Operating Expenses$300.31M
Operating Income$151.38M
Net Income$140.17M
EPS (Basic)$0.74
EPS (Diluted)$0.74
Shares Outstanding (Basic)189.60M
Shares Outstanding (Diluted)190.60M

Key Highlights

  • 1Net sales increased 8% to $766.1 million, driven by robust growth in outdoor, fitness, marine, and aviation segments.
  • 2Net income grew to $140.2 million ($0.74/share diluted) from $129.4 million ($0.68/share diluted) in the prior year's first quarter.
  • 3Operating income increased by 6% to $151.4 million, with a stable operating margin of 20% year-over-year.
  • 4The Auto segment experienced a 10% decline in net sales, attributed to the ongoing PND market contraction.
  • 5Gross profit dollars increased by 6%, though the overall gross margin slightly compressed by 100 basis points to 59%.
  • 6The company ended the quarter with a strong balance sheet, holding $1.1 billion in cash and cash equivalents and $1.5 billion in marketable securities.
  • 7Acquisition of Tacx Onroerend en Roerend Goed B.V. (indoor bike trainers) completed on April 1, 2019, which was noted as not material.

Frequently Asked Questions

Garmin's Outdoor, Fitness, Marine, and Aviation segments showed positive growth. Outdoor sales increased 7%, Fitness by 9%, Marine by 18%, and Aviation by 17%. The Auto segment was the only area of decline, down 10%, primarily due to the shrinking market for personal navigation devices (PNDs).

Garmin maintains a strong financial position. As of March 30, 2019, the company reported approximately $2.7 billion in cash and cash equivalents and marketable securities. Net cash provided by operating activities was $164.6 million for the quarter, indicating healthy cash generation.

Garmin adopted the new lease standard (ASC 842) at the beginning of the 2019 fiscal year using a modified approach. The company reported a right-of-use asset of $54.98 million and a corresponding lease liability of $56.37 million on its balance sheet as of March 30, 2019. Management stated that the adoption did not result in a cumulative effect adjustment to retained earnings and is not expected to materially impact the consolidated statements of income or cash flows in future periods.

While gross profit dollars increased, the overall gross margin decreased by 100 basis points to 59% compared to the prior year. This was primarily due to a less favorable product mix and, in some segments like Fitness, lower average selling prices. Specifically, the Fitness and Outdoor segments saw their gross margins decrease, while Auto saw an increase, and Marine and Aviation remained relatively flat.