Summary
Garmin Ltd. reported a decline in net sales and net income for both the 13-week and 39-week periods ended September 24, 2022, compared to the prior year. Net sales for the 13-week period decreased by 4% to $1.14 billion, and for the 39-week period by 1% to $3.55 billion. This decline was primarily attributed to reduced sales in the Fitness and Auto segments, exacerbated by macroeconomic headwinds such as high inflation, rising interest rates, and a strong U.S. Dollar. Despite the top-line pressure, the company managed to improve its consolidated gross margin slightly in the third quarter due to a favorable segment mix and lower freight costs, though it experienced a decrease for the year-to-date period. Operating expenses increased as a percentage of sales, leading to a significant drop in operating income, down 15% for the quarter and 16% for the year-to-date period. Financially, Garmin's balance sheet remains solid with approximately $2.7 billion in cash, cash equivalents, and marketable securities as of September 24, 2022. However, cash flow from operations saw a substantial decrease, mainly due to increased inventory levels and higher operating expenses. The company continued to return capital to shareholders through dividends and share repurchases, with $186 million remaining under its $300 million repurchase program. Management anticipates that current cash and operational cash flow will be sufficient to meet short- and long-term obligations, despite ongoing global economic and supply chain challenges.
Financial Highlights
51 data points| Revenue | $1.14B |
| Cost of Revenue | $469.94M |
| Gross Profit | $670.50M |
| R&D Expenses | $208.69M |
| SG&A Expenses | $189.55M |
| Operating Expenses | $431.13M |
| Operating Income | $239.37M |
| Net Income | $210.85M |
| EPS (Basic) | $1.09 |
| EPS (Diluted) | $1.09 |
| Shares Outstanding (Basic) | 192.67M |
| Shares Outstanding (Diluted) | 193.10M |
Key Highlights
- 1Net sales decreased by 4% to $1.14 billion for the 13-week period and by 1% to $3.55 billion for the 39-week period ended September 24, 2022, compared to the prior year.
- 2Operating income declined by 15% for the 13-week period to $239.4 million and by 16% for the 39-week period to $760.7 million, reflecting lower sales and increased operating expenses.
- 3Consolidated gross margin improved slightly to 59% in Q3 2022 from 58% in Q3 2021, but decreased year-to-date to 58% from 59%.
- 4Cash provided by operating activities significantly decreased to $419.6 million for the first nine months of 2022 from $843.5 million in the prior year, largely due to higher inventory investments.
- 5The company repurchased $113.7 million of its stock under a $300 million program initiated in April 2022.
- 6Foreign currency fluctuations resulted in a net loss of $25.6 million for the first nine months of 2022, compared to a loss of $5.5 million in the prior year, impacting profitability.
- 7Inventory levels increased significantly, with inventories on the balance sheet rising to $1.53 billion from $1.23 billion year-over-year, indicating a strategic build-up to mitigate supply chain risks.