01—Abstract
Summary
Summary of the 10-Q filed April 29, 2020. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong first quarter for 2020, with net sales increasing by 12% year-over-year to $856.1 milliona.
This growth was primarily driven by robust performance in the Fitness, Outdoor, Aviation, and Marine segments, which collectively saw a 17%b increase in revenue. The Fitness segment, in particular, showed significant expansion, partly due to the acquisition of Tacx and strong sales in advanced wearables. Despite an overall increase in net sales and operating income, the company cautioned about the potential impact of the COVID-19 pandemic on future demand, supply chain, and operations, although the financial impact in Q1 2020 was not yet significant.
Profitability remained strong, with gross profit also increasing by 12% and operating income growing by 17% to $177.5 millionc, representing 21% of net sales. Diluted earnings per share (EPS) rose to $0.84 from $0.74 in the prior year's comparable quarter.
The company maintained a healthy balance sheet with substantial cash and marketable securities, providing liquidity for ongoing operations, capital expenditures, and strategic initiatives. While the company is navigating the early stages of the pandemic, its diversified business segments and strong financial position offer resilience.
02—Key points
Key Highlights
- Net sales grew 12% year-over-year to $856.1 million, driven by Fitness, Outdoor, Aviation, and Marine segments.
- Fitness segment revenue increased by 24%, boosted by Tacx and advanced wearables.
- Operating income rose 17% to $177.5 million, with an operating margin of 21%.
- Diluted Earnings Per Share (EPS) improved to $0.84 from $0.74 in the prior year's quarter.
- The company reported a significant foreign currency loss of $15.4 million due to strengthening USD against major currencies.
- Despite initial resilience, Garmin warned of potential adverse impacts from the COVID-19 pandemic on future demand and operations.
- Cash and cash equivalents and marketable securities stood at $2.6 billion, indicating strong liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Garmin Ltd kept $0.19.
- Revenue$856.1M100.0%
- Cost of revenue−$349.2M40.8%
- Gross profit$506.9M59.2%
- Operating costs−$329.5M38.5%
- Operating income$177.5M20.7%
- Interest, other & tax−$16.3M1.9%
- Net income$161.2M18.8%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed April 29, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $856.11M$766.05M | +11.8% |
| Cost of Revenue | $349.17M$314.35M | +11.1% |
| Gross Profit | $506.94M$451.70M | +12.2% |
| R&D Expenses | $165.39M$145.92M | +13.3% |
| SG&A Expenses | $137.19M$126.78M | +8.2% |
| Operating Expenses | $329.46M$300.31M | +9.7% |
| Operating Income | $177.48M$151.38M | +17.2% |
| Net Income | $161.18M$140.17M | +15.0% |
| EPS (Basic) | $0.84$0.74 | +13.5% |
| EPS (Diluted) | $0.84$0.74 | +13.5% |
| Shares Outstanding (Basic) | 190.80M189.60M | +0.6% |
| Shares Outstanding (Diluted) | 191.68M190.60M | +0.6% |
05—Questions
Frequently Asked Questions
What was the main driver of Garmin's revenue growth in Q1 2020?
Garmin's revenue growth of 12% in Q1 2020 was primarily driven by strong performance in its Fitness, Outdoor, Aviation, and Marine segments. The Fitness segment, in particular, saw a 24% increase due to sales from Tacx and advanced wearables.
How did the COVID-19 pandemic affect Garmin's Q1 2020 results, and what are the future concerns?
In Q1 2020, the financial impact of COVID-19 was not yet significant. However, Garmin cautioned that it expects future adverse impacts on net sales and profitability in the second quarter and beyond due to reduced demand, supply chain disruptions, and operational challenges. The company highlighted that the duration and magnitude of these impacts are uncertain.
What is Garmin's financial health and liquidity position?
Garmin maintains a strong financial position with $2.6 billion in cash and marketable securities as of March 28, 2020. This provides ample liquidity to fund operations, capital expenditures, dividends, and strategic acquisitions. The company believes its current cash and cash flow from operations are sufficient to meet its short- and long-term needs.
How did the Auto segment perform compared to other segments?
The Auto segment experienced a revenue decrease of 17% year-over-year, primarily due to the ongoing contraction of the personal navigation device (PND) market and lower auto OEM sales. This segment's operating income also saw a significant decrease, moving towards breakeven.
06—Continue