10-QPeriod: Q1 FY2020

GARMIN LTD Quarterly Report for Q1 Ended Mar 28, 2020

Filed April 29, 2020For Securities:GRMN

Summary

Garmin Ltd. reported a strong first quarter for 2020, with net sales increasing by 12% year-over-year to $856.1 million. This growth was primarily driven by robust performance in the Fitness, Outdoor, Aviation, and Marine segments, which collectively saw a 17% 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 million, 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.

Financial Highlights

49 data points
Beta

Revenue

$856.11M

59.2% Gross Margin

Net Income

$161.18M

18.8% Net Margin

EPS (Diluted)

$0.84

Total Assets

$6.05B

Cash & Equivalents

$1.05B

Free Cash Flow

$184.51M

Financial Statements
Beta
Revenue$856.11M
Cost of Revenue$349.17M
Gross Profit$506.94M
R&D Expenses$165.39M
SG&A Expenses$137.19M
Operating Expenses$329.46M
Operating Income$177.48M
Net Income$161.18M
EPS (Basic)$0.84
EPS (Diluted)$0.84
Shares Outstanding (Basic)190.80M
Shares Outstanding (Diluted)191.68M

Key Highlights

  • 1Net sales grew 12% year-over-year to $856.1 million, driven by Fitness, Outdoor, Aviation, and Marine segments.
  • 2Fitness segment revenue increased by 24%, boosted by Tacx and advanced wearables.
  • 3Operating income rose 17% to $177.5 million, with an operating margin of 21%.
  • 4Diluted Earnings Per Share (EPS) improved to $0.84 from $0.74 in the prior year's quarter.
  • 5The company reported a significant foreign currency loss of $15.4 million due to strengthening USD against major currencies.
  • 6Despite initial resilience, Garmin warned of potential adverse impacts from the COVID-19 pandemic on future demand and operations.
  • 7Cash and cash equivalents and marketable securities stood at $2.6 billion, indicating strong liquidity.

Frequently Asked Questions

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.

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.

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.

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.