10-Q/APeriod: Q1 FY2021

GARMIN LTD Quarterly Report (Amendment) for Q1 Ended Mar 27, 2021

Filed April 30, 2021For Securities:GRMN

Summary

Garmin Ltd. reported strong first-quarter 2021 results, demonstrating significant year-over-year growth across key financial metrics. Total net sales surged by 25% to $1.07 billion, driven by robust performance in the Fitness and Outdoor segments, which benefited from ongoing consumer trends towards active lifestyles. The company also saw positive contributions from its Marine and Consumer Auto segments. Profitability also saw substantial improvement, with operating income climbing 41% to $250 million and net income increasing 36% to $220 million. This growth was supported by improved gross margins, particularly in Fitness and Outdoor, and effective cost management across operating expenses. Despite some headwinds in the Aviation segment and ongoing supply chain challenges within the broader electronics industry, Garmin's diversified business model and strong execution position it well for continued performance. The company maintains a healthy liquidity position with substantial cash reserves.

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 increased by 25% to $1.07 billion compared to the prior year's first quarter.
  • 2Operating income grew significantly by 41% year-over-year, reaching $250 million.
  • 3Net income rose by 36% to $220 million, with diluted EPS of $1.14.
  • 4The Fitness segment experienced a 38% increase in net sales, driven by cycling and advanced wearables.
  • 5The Outdoor segment saw a 46% increase in net sales, led by strong demand for adventure watches.
  • 6Consolidated gross margin improved to 60% from 59% in the prior year, reflecting favorable product mix.
  • 7The company maintained a strong liquidity position with approximately $3.2 billion in cash, cash equivalents, and marketable securities.

Frequently Asked Questions

Garmin's revenue growth in Q1 2021 was primarily driven by strong performance in its Fitness and Outdoor segments, which saw increases of 38% and 46% respectively. This growth was fueled by continued consumer demand for wearable technology, cycling products, and adventure watches, reflecting a sustained trend towards active lifestyles. The Marine and Consumer Auto segments also contributed positively to the overall revenue increase.

While Garmin reported strong overall growth, the company did acknowledge ongoing challenges in securing certain electronic components due to industry-wide supply constraints. However, management indicated that these issues have not materially hindered their ability to meet demand in the first quarter, and they continue to actively manage these supply chain dynamics.

The Aviation segment experienced a revenue decline of 8% in Q1 2021 compared to the prior year, primarily due to reduced contributions from ADS-B products. The Auto OEM segment saw revenue growth of 33%, but reported an operating loss. Management expects the Auto OEM operating loss trend to continue through 2021 due to lower gross margins and increased program expenses, while the impact on Aviation is less clear but suggests a segment facing headwinds.

Garmin effectively managed its operating expenses. While Research & Development (R&D) expenses increased by 23% year-over-year due to higher personnel costs, total operating expenses as a percentage of net sales decreased from 38% in Q1 2020 to 37% in Q1 2021. This efficiency, combined with increased net sales, contributed to a significant rise in operating income.