01—Abstract
Summary
Summary of the 10-Q filed April 27, 2022. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported solid revenue growth of 9% year-over-year for the first quarter of 2022, reaching $1.17 billiona, driven by strong performance in its Outdoor, Aviation, and Marine segments.
Despite the revenue increase, net income saw a slight decline of 4% to $211.6 millionb due to increased operating expenses, particularly in R&D and SG&A, as well as higher freight costs and the impact of a stronger U.S. Dollar on gross margins. The company continues to invest in growth platforms, evidenced by an increase in cash used for investing activities, primarily in capital expenditures.
However, Garmin maintains a strong liquidity position with approximately $3.0 billionc in cash, cash equivalents, and marketable securities, indicating a robust financial foundation to navigate ongoing global economic uncertainties and supply chain challenges. Management anticipates these supply chain issues will persist through the end of 2022.
02—Key points
Key Highlights
- Total net sales increased by 9% to $1.17 billion in Q1 2022 compared to $1.07 billion in Q1 2021.
- Net income decreased by 4% to $211.6 million in Q1 2022, down from $220.0 million in Q1 2021.
- Operating income decreased by 8% to $228.6 million, impacted by lower gross margins (down 330 basis points) due to higher freight costs and currency fluctuations.
- The Outdoor segment showed significant revenue growth of 50% ($384.6M), driven by strong demand for adventure watches, while the Fitness segment experienced a 28% revenue decline ($220.9M) due to normalization in cycling product demand.
- Cash provided by operating activities decreased significantly to $185.6 million from $368.4 million in the prior year, mainly due to increased inventory purchases and lower accounts receivable collections.
- The company declared a new share repurchase program authorizing up to $300 million of stock repurchases through December 2023.
- Garmin anticipates ongoing supply chain challenges and inflationary pressures will continue through at least the end of calendar year 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2022, Garmin Ltd kept $0.18.
- Revenue$1.17B100.0%
- Cost of revenue−$510.2M43.5%
- Gross profit$662.5M56.5%
- Operating costs−$433.9M37.0%
- Operating income$228.6M19.5%
- Interest, other & tax−$17.0M1.4%
- Net income$211.6M18.0%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2022filed April 27, 2022Financial Statements
Q1 FY2022 against Q1 FY2021
| Line item | Q1 FY2022Q1 FY2021 | Change |
|---|---|---|
| Revenue | $1.17B$1.07B | +9.4% |
| Cost of Revenue | $510.18M$430.77M | +18.4% |
| Gross Profit | $662.48M$641.56M | +3.3% |
| R&D Expenses | $209.01M$188.85M | +10.7% |
| SG&A Expenses | $190.78M$171.99M | +10.9% |
| Operating Expenses | $433.92M$391.90M | +10.7% |
| Operating Income | $228.56M$249.66M | −8.5% |
| Net Income | $211.59M$220.03M | −3.8% |
| EPS (Basic) | $1.10$1.15 | −4.3% |
| EPS (Diluted) | $1.09$1.14 | −4.4% |
| Shares Outstanding (Basic) | 192.89M191.90M | +0.5% |
| Shares Outstanding (Diluted) | 193.58M192.81M | +0.4% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales despite a decrease in total unit sales?
The increase in net sales was primarily driven by a favorable shift in product and segment mix. While overall unit sales saw a slight decrease, Garmin experienced strong demand and revenue growth in higher-value segments like Outdoor, Aviation, and Marine. The Outdoor segment, in particular, benefited from strong demand for adventure watches, becoming the largest portion of the revenue mix.
What factors contributed to the decrease in gross margin?
The consolidated gross margin decreased by 330 basis points year-over-year, primarily due to higher freight costs and the strengthening U.S. Dollar. These factors put downward pressure on revenues denominated in weaker currencies and increased the cost of goods sold. The Fitness, Outdoor, Marine, and Consumer Auto segments were particularly impacted.
How is Garmin managing its inventory levels given supply chain challenges?
Garmin increased its inventory purchases in Q1 2022 compared to the prior year, as noted in the decrease in cash provided by operating activities. This action is likely a strategic response to the ongoing supply chain challenges and a move to increase days of supply to support its diverse product lines and mitigate potential future disruptions.
What is Garmin's outlook for the remainder of 2022 regarding supply chain and economic conditions?
Garmin expects supply chain challenges, along with disruptions, uncertainty, and inflationary pressures from the global economy and events like the invasion of Ukraine, to persist through at least the end of calendar year 2022. These factors are impacting component availability, lead times, costs, and logistics.
06—Continue