01—Abstract
Summary
Summary of the 10-Q filed July 28, 2021. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported a strong second quarter for 2021, with total net sales soaring by 53% year-over-year to $1.33 billiona.
This growth was driven by robust performance across most of its segments, particularly in Fitness, Outdoor, Marine, and Auto, which benefited from increased consumer demand and a rebound from pandemic-induced lows in the prior year. The company's operating income more than doubled to $371.2 millionb, reflecting significant revenue growth and improved operating expense leverage. Despite facing ongoing supply chain challenges and increased freight costs, Garmin demonstrated resilience by maintaining a stable gross margin.
The company's financial position remains solid, with substantial cash reserves and strong operating cash flow generation. While the aviation and auto segments experienced headwinds from the pandemic, the positive momentum in other key segments, coupled with strategic investments in product development, positions Garmin favorably for continued growth.
02—Key points
Key Highlights
- Net sales surged by 53% year-over-year to $1.33 billion for the 13-week period ended June 26, 2021.
- Operating income more than doubled, increasing by 97% to $371.2 million, with operating margin improving to 28% from 22% in the prior year.
- The Fitness segment saw a 40% increase in net sales, driven by cycling and advanced wearables.
- The Outdoor segment experienced a strong 57% net sales growth, with adventure watches showing high demand.
- Marine and Auto segments also showed significant growth at 66% and 74% respectively, indicating broad-based recovery and demand.
- Inventories increased by approximately 33% compared to the prior year-end, signaling preparation for continued demand.
- Cash, cash equivalents, and marketable securities totaled approximately $3.2 billion, providing ample liquidity.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2021, Garmin Ltd kept $0.24.
- Revenue$1.33B100.0%
- Cost of revenue−$546.1M41.2%
- Gross profit$780.9M58.8%
- Operating costs−$409.7M30.9%
- Operating income$371.2M28.0%
- Interest, other & tax−$54.2M4.1%
- Net income$317.0M23.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2021filed July 28, 2021Financial Statements
Q2 FY2021 against Q2 FY2020
| Line item | Q2 FY2021Q2 FY2020 | Change |
|---|---|---|
| Revenue | $1.33B$869.87M | +52.5% |
| Cost of Revenue | $546.05M$354.44M | +54.1% |
| Gross Profit | $780.85M$515.43M | +51.5% |
| R&D Expenses | $186.02M$165.74M | +12.2% |
| SG&A Expenses | $180.72M$132.02M | +36.9% |
| Operating Expenses | $409.68M$327.04M | +25.3% |
| Operating Income | $371.17M$188.39M | +97.0% |
| Net Income | $317.00M$184.18M | +72.1% |
| EPS (Basic) | $1.65$0.96 | +71.9% |
| EPS (Diluted) | $1.64$0.96 | +70.8% |
| Shares Outstanding (Basic) | 192.15M191.02M | +0.6% |
| Shares Outstanding (Diluted) | 192.87M191.60M | +0.7% |
05—Questions
Frequently Asked Questions
What is the primary driver of Garmin's significant revenue growth in Q2 2021?
Garmin's significant revenue growth in Q2 2021 was primarily driven by a broad-based increase in net sales across most of its operating segments, including Fitness, Outdoor, Marine, and Auto. This growth was fueled by increased consumer demand, a favorable shift in consumer behavior towards active lifestyle products, and a strong recovery from the lower comparable period in Q2 2020 which was impacted by the COVID-19 pandemic.
How is Garmin managing supply chain challenges and cost pressures?
Garmin acknowledges ongoing supply chain challenges, including component shortages and increased lead times, which are expected to continue through at least the end of 2021. The company also experienced higher freight costs and some pressure on gross margins, particularly in the auto OEM segment due to product mix. While gross margin remained stable overall, management is actively monitoring these factors and seems to be mitigating them through strategic inventory management and operational efficiencies.
What is the outlook for the Aviation and Auto segments given the pandemic's impact?
The Aviation and Auto segments experienced unfavorable impacts from the COVID-19 pandemic in the prior year. While the unfavorable impact has lessened in the first half of 2021, the report indicates that the Auto OEM segment, in particular, continues to face challenges including lower gross margins and increased expenses associated with new programs. Management expects this trend to continue through 2021.
What is the company's liquidity position and how is it being utilized?
Garmin maintains a strong liquidity position with approximately $3.2 billion in cash, cash equivalents, and marketable securities as of June 26, 2021. The company primarily uses cash flow from operations to fund capital expenditures, support working capital requirements, pay dividends, and pursue strategic acquisitions. Management believes its existing cash and operating cash flow are sufficient to meet its short- and long-term financial needs.
06—Continue