01—Abstract
Summary
Summary of the 10-Q filed October 30, 2019. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong third quarter for 2019, with a 15% year-over-year increase in net sales, reaching $934.4 milliona.
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 millionb, reflecting improved gross margins and operational efficiencies.
For the first nine months of 2019, net sales grew 10% to $2.66 billionc, 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 billiond 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.
02—Key points
Key Highlights
- Net sales increased 15% year-over-year to $934.4 million in Q3 2019.
- Growth was broad-based, with Outdoor, Fitness, Marine, and Aviation segments showing strong double-digit increases.
- Operating income saw a substantial increase of 33% year-over-year to $261.5 million in Q3 2019.
- The Auto segment declined 17% in Q3 2019 due to market contraction and lower OEM sales.
- For the first nine months of 2019, net sales grew 10% to $2.66 billion.
- Company anticipates a significant income tax benefit of $20-$220 million in Q4 2019 due to Switzerland's corporate tax reform.
- Strong balance sheet with $2.5 billion in cash and marketable securities as of September 28, 2019.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2019, Garmin Ltd kept $0.24.
- Revenue$934.4M100.0%
- Cost of revenue−$366.9M39.3%
- Gross profit$567.5M60.7%
- Operating costs−$306.0M32.7%
- Operating income$261.5M28.0%
- Interest, other & tax−$33.6M3.6%
- Net income$227.9M24.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2019filed October 30, 2019Financial Statements
Q3 FY2019 against Q3 FY2018
| Line item | Q3 FY2019Q3 FY2018 | Change |
|---|---|---|
| Revenue | $934.38M$810.01M | +15.4% |
| Cost of Revenue | $366.93M$329.26M | +11.4% |
| Gross Profit | $567.46M$480.75M | +18.0% |
| R&D Expenses | $148.56M$138.98M | +6.9% |
| SG&A Expenses | $124.77M$114.67M | +8.8% |
| Operating Expenses | $306.00M$284.79M | +7.4% |
| Operating Income | $261.46M$195.96M | +33.4% |
| Net Income | $227.87M$184.21M | +23.7% |
| EPS (Basic) | $1.20$0.98 | +22.4% |
| EPS (Diluted) | $1.19$0.97 | +22.7% |
| Shares Outstanding (Basic) | 190.10M188.80M | +0.7% |
| Shares Outstanding (Diluted) | 190.96M190.00M | +0.5% |
05—Questions
Frequently Asked Questions
What were the primary drivers of Garmin's sales growth in the third quarter of 2019?
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.
Why did the Auto segment's sales decline?
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.
How is Garmin managing its cash and investments?
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.
What is the expected impact of the Switzerland corporate tax reform?
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.
06—Continue