10-QPeriod: Q2 FY2020

GARMIN LTD Quarterly Report for Q2 Ended Jun 27, 2020

Filed July 29, 2020For Securities:GRMN

Summary

Garmin Ltd. reported its second quarter 2020 financial results, ending June 27, 2020. The company experienced a year-over-year decline in net sales of 9% to $869.9 million for the quarter, and flat net sales of $1.73 billion for the first half of the year. This performance was primarily impacted by the COVID-19 pandemic, which affected demand across most segments, particularly Auto and Aviation. Despite the top-line headwinds, Garmin demonstrated resilience. The Fitness and Marine segments showed year-over-year growth in both the quarter and the first half, with Fitness becoming the largest revenue contributor. The company maintained a strong gross margin of 59% for the quarter. Operating income saw a decline due to lower sales and increased R&D spending, especially in the Auto segment which posted an operating loss. Garmin maintained a healthy cash position and generated strong operating cash flow.

Financial Highlights

50 data points
Beta

Revenue

$869.87M

59.3% Gross Margin

Net Income

$184.18M

21.2% Net Margin

EPS (Diluted)

$0.96

Total Assets

$6.22B

Cash & Equivalents

$1.36B

Free Cash Flow

$142.33M

Financial Statements
Beta
Revenue$869.87M
Cost of Revenue$354.44M
Gross Profit$515.43M
R&D Expenses$165.74M
SG&A Expenses$132.02M
Operating Expenses$327.04M
Operating Income$188.39M
Net Income$184.18M
EPS (Basic)$0.96
EPS (Diluted)$0.96
Shares Outstanding (Basic)191.02M
Shares Outstanding (Diluted)191.60M

Key Highlights

  • 1Net sales decreased by 9% to $869.9 million in Q2 2020 compared to Q2 2019, largely due to the impact of COVID-19.
  • 2For the first six months of 2020, net sales remained flat year-over-year at $1.73 billion.
  • 3The Fitness segment was a key growth driver, with net sales up 17% in Q2 and 20% in H1 2020, becoming the largest segment by revenue.
  • 4Operating income declined by 26% in Q2 2020 to $188.4 million and by 10% in H1 2020 to $365.9 million, impacted by lower sales and increased R&D.
  • 5The Auto segment experienced a significant 46% decline in Q2 net sales and reported an operating loss for both the quarter and the first half of the year.
  • 6Garmin generated $425.1 million in cash from operating activities in the first half of 2020, an increase of $149.9 million compared to the prior year period.
  • 7The company reported $1.35 billion in cash and cash equivalents as of June 27, 2020.

Frequently Asked Questions

The primary reason for the decline in net sales was the adverse impact of the COVID-19 pandemic on global economic activity and consumer demand. This led to reduced demand for certain products and disruptions in distribution channels, particularly affecting the Auto and Aviation segments.

The Fitness and Marine segments showed resilience and growth, with Fitness becoming the largest revenue contributor. The Outdoor segment experienced a slight decline. The Aviation and Auto segments were significantly impacted by the pandemic, with Auto reporting an operating loss.

Garmin maintained a strong financial position with $1.35 billion in cash and cash equivalents and $380.9 million in marketable securities as of June 27, 2020. The company generated robust operating cash flow of $425.1 million in the first half of 2020, indicating sufficient liquidity to meet its obligations and fund operations.

The cyber attack occurred after the end of the reporting period (June 27, 2020) and therefore did not impact the financial results for the second quarter of 2020. Management stated they do not expect a material impact to operations or financial results from this incident.