10-QPeriod: Q2 FY2021

GARMIN LTD Quarterly Report for Q2 Ended Jun 26, 2021

Filed July 28, 2021For Securities:GRMN

Summary

Garmin Ltd. reported a strong second quarter for 2021, with total net sales soaring by 53% year-over-year to $1.33 billion. 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 million, 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.

Financial Highlights

50 data points
Beta

Revenue

$1.33B

58.8% Gross Margin

Net Income

$317.00M

23.9% Net Margin

EPS (Diluted)

$1.64

Total Assets

$7.40B

Cash & Equivalents

$1.64B

Free Cash Flow

$120.03M

Financial Statements
Beta
Revenue$1.33B
Cost of Revenue$546.05M
Gross Profit$780.85M
R&D Expenses$186.02M
SG&A Expenses$180.72M
Operating Expenses$409.68M
Operating Income$371.17M
Net Income$317.00M
EPS (Basic)$1.65
EPS (Diluted)$1.64
Shares Outstanding (Basic)192.15M
Shares Outstanding (Diluted)192.87M

Key Highlights

  • 1Net sales surged by 53% year-over-year to $1.33 billion for the 13-week period ended June 26, 2021.
  • 2Operating income more than doubled, increasing by 97% to $371.2 million, with operating margin improving to 28% from 22% in the prior year.
  • 3The Fitness segment saw a 40% increase in net sales, driven by cycling and advanced wearables.
  • 4The Outdoor segment experienced a strong 57% net sales growth, with adventure watches showing high demand.
  • 5Marine and Auto segments also showed significant growth at 66% and 74% respectively, indicating broad-based recovery and demand.
  • 6Inventories increased by approximately 33% compared to the prior year-end, signaling preparation for continued demand.
  • 7Cash, cash equivalents, and marketable securities totaled approximately $3.2 billion, providing ample liquidity.

Frequently Asked Questions

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.

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.

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.

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.