01—Abstract
Summary
Summary of the 10-Q filed April 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong first quarter for 2021, with net sales increasing by 25% year-over-year to $1.07 billiona.
This growth was driven primarily by robust performance in the Fitness and Outdoor segments, which saw significant increases in sales and operating income. Despite broader economic disruptions from COVID-19, Garmin's consumer-facing segments have benefited from shifting consumer behaviors, while the Aviation and Auto segments experienced headwinds. The company demonstrated solid profitability, with operating income up 41% to $249.7 millionb and net income rising 36% to $220.0 million.
Diluted earnings per share also saw a substantial increase, reflecting the strong top-line and operational improvements. Garmin's balance sheet remains healthy, with ample cash and marketable securities to fund operations and strategic initiatives.
02—Key points
Key Highlights
- Net sales surged 25% year-over-year to $1.07 billion, driven by strong performance in Fitness and Outdoor segments.
- Operating income increased significantly by 41% to $249.7 million, indicating improved operational efficiency and higher sales.
- Net income grew by 36% to $220.0 million, demonstrating strong profitability.
- Diluted earnings per share increased to $1.14 from $0.84 in the prior year period.
- The Fitness segment saw sales rise 38% and operating income increase 138%, highlighting strong consumer demand for wearables and cycling products.
- The Outdoor segment experienced a 46% increase in net sales and a 97% surge in operating income, driven by adventure watches and other outdoor products.
- Despite supply chain challenges in the broader electronics industry, Garmin maintained healthy cash and marketable securities balances of approximately $3.2 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2021, Garmin Ltd kept $0.21.
- Revenue$1.07B100.0%
- Cost of revenue−$430.8M40.2%
- Gross profit$641.6M59.8%
- Operating costs−$391.9M36.5%
- Operating income$249.7M23.3%
- Interest, other & tax−$29.6M2.8%
- Net income$220.0M20.5%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2021filed April 28, 2021Financial Statements
Q1 FY2021 against Q1 FY2020
| Line item | Q1 FY2021Q1 FY2020 | Change |
|---|---|---|
| Revenue | $1.07B$856.11M | +25.3% |
| Cost of Revenue | $430.77M$349.17M | +23.4% |
| Gross Profit | $641.56M$506.94M | +26.6% |
| R&D Expenses | $188.85M$165.39M | +14.2% |
| SG&A Expenses | $171.99M$137.19M | +25.4% |
| Operating Expenses | $391.90M$329.46M | +19.0% |
| Operating Income | $249.66M$177.48M | +40.7% |
| Net Income | $220.03M$161.18M | +36.5% |
| EPS (Basic) | $1.15$0.84 | +36.9% |
| EPS (Diluted) | $1.14$0.84 | +35.7% |
| Shares Outstanding (Basic) | 191.90M190.80M | +0.6% |
| Shares Outstanding (Diluted) | 192.81M191.68M | +0.6% |
05—Questions
Frequently Asked Questions
How did Garmin's different segments perform in Q1 2021?
Garmin experienced varied performance across its segments. The Fitness segment saw a 38% increase in net sales and a substantial 138% rise in operating income, driven by cycling and advanced wearables. The Outdoor segment also performed exceptionally well with a 46% sales increase and a 97% operating income jump. The Marine segment grew by 28% in net sales. However, the Aviation segment saw an 8% decline in net sales, and the Auto segments faced challenges, with Auto OEM experiencing an operating loss due to product mix and increased expenses.
What is the impact of supply chain issues and COVID-19 on Garmin?
Garmin acknowledges the electronics industry is experiencing component supply constraints and high demand, which has affected and is expected to continue to affect its ability to secure components. While COVID-19 has negatively impacted the Aviation and Auto segments, it has benefited the Fitness, Outdoor, and Marine segments due to shifts in consumer behavior. The company is actively managing these challenges.
How is Garmin managing its financial resources and liquidity?
Garmin maintained a strong liquidity position as of March 27, 2021, with approximately $3.2 billion in cash, cash equivalents, and marketable securities. The company's cash flow from operations is expected to be sufficient to cover capital expenditures, working capital needs, dividends, and strategic acquisitions. Management's investment policy prioritizes capital preservation, liquidity, and yield with low credit risk.
What is the outlook for Garmin's Auto OEM segment?
The Auto OEM segment experienced a significant increase in R&D expenses and an operating loss in Q1 2021. Management expects this trend of increased costs and potential operating losses to continue through 2021, primarily due to a lower gross margin and increased expenses associated with certain programs, with a substantial portion of costs not being contractually reimbursable.
06—Continue