10-QPeriod: Q1 FY2021

GARMIN LTD Quarterly Report for Q1 Ended Mar 27, 2021

Filed April 28, 2021For Securities:GRMN

Summary

Garmin Ltd. reported a strong first quarter for 2021, with net sales increasing by 25% year-over-year to $1.07 billion. 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 million 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.

Financial Highlights

49 data points
Beta

Revenue

$1.07B

59.8% Gross Margin

Net Income

$220.03M

20.5% Net Margin

EPS (Diluted)

$1.14

Total Assets

$7.00B

Cash & Equivalents

$1.60B

Free Cash Flow

$331.47M

Financial Statements
Beta
Revenue$1.07B
Cost of Revenue$430.77M
Gross Profit$641.56M
R&D Expenses$188.85M
SG&A Expenses$171.99M
Operating Expenses$391.90M
Operating Income$249.66M
Net Income$220.03M
EPS (Basic)$1.15
EPS (Diluted)$1.14
Shares Outstanding (Basic)191.90M
Shares Outstanding (Diluted)192.81M

Key Highlights

  • 1Net sales surged 25% year-over-year to $1.07 billion, driven by strong performance in Fitness and Outdoor segments.
  • 2Operating income increased significantly by 41% to $249.7 million, indicating improved operational efficiency and higher sales.
  • 3Net income grew by 36% to $220.0 million, demonstrating strong profitability.
  • 4Diluted earnings per share increased to $1.14 from $0.84 in the prior year period.
  • 5The Fitness segment saw sales rise 38% and operating income increase 138%, highlighting strong consumer demand for wearables and cycling products.
  • 6The Outdoor segment experienced a 46% increase in net sales and a 97% surge in operating income, driven by adventure watches and other outdoor products.
  • 7Despite supply chain challenges in the broader electronics industry, Garmin maintained healthy cash and marketable securities balances of approximately $3.2 billion.

Frequently Asked Questions

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.

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.

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.

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.