01—Abstract
Summary
Summary of the 10-Q filed May 1, 2019. Cited figures are marked; the original filing is the authoritative source.
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 milliona.
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 millionb, 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 billionc in cash and cash equivalents and marketable securities, indicating its ability to fund operations and strategic initiatives.
02—Key points
Key Highlights
- Net sales increased 8% to $766.1 million, driven by robust growth in outdoor, fitness, marine, and aviation segments.
- Net 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.
- Operating income increased by 6% to $151.4 million, with a stable operating margin of 20% year-over-year.
- The Auto segment experienced a 10% decline in net sales, attributed to the ongoing PND market contraction.
- Gross profit dollars increased by 6%, though the overall gross margin slightly compressed by 100 basis points to 59%.
- The 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.
- Acquisition of Tacx Onroerend en Roerend Goed B.V. (indoor bike trainers) completed on April 1, 2019, which was noted as not material.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2019, Garmin Ltd kept $0.18.
- Revenue$766.0M100.0%
- Cost of revenue−$314.4M41.0%
- Gross profit$451.7M59.0%
- Operating costs−$300.3M39.2%
- Operating income$151.4M19.8%
- Interest, other & tax−$11.2M1.5%
- Net income$140.2M18.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2019filed May 1, 2019Financial Statements
Q1 FY2019 against Q1 FY2018
| Line item | Q1 FY2019Q1 FY2018 | Change |
|---|---|---|
| Revenue | $766.05M$710.87M | +7.8% |
| Cost of Revenue | $314.35M$284.34M | +10.6% |
| Gross Profit | $451.70M$426.54M | +5.9% |
| R&D Expenses | $145.92M$141.96M | +2.8% |
| SG&A Expenses | $126.78M$117.06M | +8.3% |
| Operating Expenses | $300.31M$284.33M | +5.6% |
| Operating Income | $151.38M$142.20M | +6.5% |
| Net Income | $140.17M$129.37M | +8.3% |
| EPS (Basic) | $0.74$0.69 | +7.2% |
| EPS (Diluted) | $0.74$0.68 | +8.8% |
| Shares Outstanding (Basic) | 189.60M188K | +100579.2% |
| Shares Outstanding (Diluted) | 190.60M189K | +100590.5% |
05—Questions
Frequently Asked Questions
How did Garmin's different segments perform in the first quarter of 2019?
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).
What is Garmin's current financial health and liquidity position?
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.
How did the adoption of the new lease accounting standard impact Garmin's financial statements?
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.
What are the primary drivers behind the change in gross margin compared to the prior year?
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.
06—Continue