01—Abstract
Summary
Summary of the 10-Q filed July 29, 2020. Cited figures are marked; the original filing is the authoritative source.
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 milliona 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%b 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.
02—Key points
Key Highlights
- Net sales decreased by 9% to $869.9 million in Q2 2020 compared to Q2 2019, largely due to the impact of COVID-19.
- For the first six months of 2020, net sales remained flat year-over-year at $1.73 billion.
- The 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.
- Operating 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.
- The 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.
- Garmin 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.
- The company reported $1.35 billion in cash and cash equivalents as of June 27, 2020.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Garmin Ltd kept $0.21.
- Revenue$869.9M100.0%
- Cost of revenue−$354.4M40.7%
- Gross profit$515.4M59.3%
- Operating costs−$327.0M37.6%
- Operating income$188.4M21.7%
- Interest, other & tax−$4.2M0.5%
- Net income$184.2M21.2%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed July 29, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $869.87M$954.84M | −8.9% |
| Cost of Revenue | $354.44M$379.48M | −6.6% |
| Gross Profit | $515.43M$575.37M | −10.4% |
| R&D Expenses | $165.74M$148.88M | +11.3% |
| SG&A Expenses | $132.02M$128.74M | +2.5% |
| Operating Expenses | $327.04M$319.14M | +2.5% |
| Operating Income | $188.39M$256.22M | −26.5% |
| Net Income | $184.18M$223.66M | −17.7% |
| EPS (Basic) | $0.96$1.18 | −18.6% |
| EPS (Diluted) | $0.96$1.17 | −17.9% |
| Shares Outstanding (Basic) | 191.02M189.85M | +0.6% |
| Shares Outstanding (Diluted) | 191.60M190.71M | +0.5% |
05—Questions
Frequently Asked Questions
What was the primary reason for the decline in net sales in the second quarter of 2020?
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.
How did the different business segments perform?
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.
What is the company's financial health and liquidity position?
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.
Did the recent cyber attack on July 23, 2020, affect these financial results?
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.
06—Continue