10-QPeriod: Q3 FY2019

GARMIN LTD Quarterly Report for Q3 Ended Sep 28, 2019

Filed October 30, 2019For Securities:GRMN

Summary

Garmin Ltd. reported a strong third quarter for 2019, with a 15% year-over-year increase in net sales, reaching $934.4 million. This growth was driven by robust performance across its Outdoor, Fitness, Marine, and Aviation segments, which collectively saw a 24% increase. The Auto segment experienced a decline of 17%, largely due to the contracting PND market and lower OEM sales. Overall, operating income surged by 33% to $261.5 million, reflecting improved gross margins and operational efficiencies. For the first nine months of 2019, net sales grew 10% to $2.66 billion, with significant contributions from the Fitness, Aviation, and Marine segments. Despite a challenging Auto segment, the company demonstrated strong operating income growth of 20% to $669.1 million. Garmin's financial position remains solid, with approximately $2.5 billion in cash and marketable securities as of September 28, 2019. The company also anticipates a significant income tax benefit in the fourth quarter due to Switzerland's corporate tax reform.

Financial Highlights

50 data points
Beta

Revenue

$934.38M

60.7% Gross Margin

Net Income

$227.87M

24.4% Net Margin

EPS (Diluted)

$1.19

Total Assets

$5.76B

Cash & Equivalents

$977.44M

Free Cash Flow

$157.98M

Financial Statements
Beta
Revenue$934.38M
Cost of Revenue$366.93M
Gross Profit$567.46M
R&D Expenses$148.56M
SG&A Expenses$124.77M
Operating Expenses$306.00M
Operating Income$261.46M
Net Income$227.87M
EPS (Basic)$1.20
EPS (Diluted)$1.19
Shares Outstanding (Basic)190.10M
Shares Outstanding (Diluted)190.96M

Key Highlights

  • 1Net sales increased 15% year-over-year to $934.4 million in Q3 2019.
  • 2Growth was broad-based, with Outdoor, Fitness, Marine, and Aviation segments showing strong double-digit increases.
  • 3Operating income saw a substantial increase of 33% year-over-year to $261.5 million in Q3 2019.
  • 4The Auto segment declined 17% in Q3 2019 due to market contraction and lower OEM sales.
  • 5For the first nine months of 2019, net sales grew 10% to $2.66 billion.
  • 6Company anticipates a significant income tax benefit of $20-$220 million in Q4 2019 due to Switzerland's corporate tax reform.
  • 7Strong balance sheet with $2.5 billion in cash and marketable securities as of September 28, 2019.

Frequently Asked Questions

Garmin's sales growth in Q3 2019 was primarily driven by strong performance in its Outdoor, Fitness, Marine, and Aviation segments. These segments saw significant increases, particularly in adventure watches, wearables, chartplotters, and both OEM and aftermarket aviation products.

The Auto segment's sales decreased by 17% primarily due to the ongoing contraction of the Personal Navigation Device (PND) market and lower Original Equipment Manufacturer (OEM) sales in the current quarter.

Garmin maintained a strong liquidity position with approximately $2.5 billion in cash and marketable securities as of September 28, 2019. The company's investment policy focuses on capital preservation, liquidity, and maximizing yield within low credit risk constraints. Cash flow from operations is used to fund capital expenditures, working capital, dividends, and strategic acquisitions.

Garmin expects to record an income tax benefit of approximately $20 million to $220 million in the fourth quarter of 2019 due to the enactment of Switzerland's Federal and cantonal tax reform. The company is still evaluating the full impact of transitional measures on its deferred tax assets and ongoing effective tax rate.