01—Abstract
Summary
Summary of the 10-Q filed May 3, 2023. Cited figures are marked; the original filing is the authoritative source.
Garmin Ltd. reported net sales of $1,147.4 milliona for the first quarter of 2023, a 2% decrease compared to $1,172.7 million in the prior year period.
This decline was primarily driven by a significant reduction in the Outdoor segment's revenue, which fell 27%b year-over-year. However, the Fitness, Aviation, and Marine segments showed robust growth of 11%, 22%, and 10% respectively, indicating a positive trend in these key areas. Despite the slight dip in overall revenue, Garmin managed to improve its consolidated gross margin to 57% from 56% in the prior year, benefiting from lower freight costs.
Operating income, however, saw a 14% decline to $197.0 millionc, largely due to increased operating expenses as a percentage of revenue and the revenue drop in the Outdoor segment. The company continues to invest in Research and Development and SG&A, reflecting a commitment to future growth. Management expects the Auto OEM segment to continue experiencing operating losses through 2023 due to ongoing investments.
02—Key points
Key Highlights
- Net sales decreased by 2% year-over-year to $1,147.4 million, primarily due to a 27% decline in the Outdoor segment.
- Fitness, Aviation, and Marine segments demonstrated strong growth, with net sales increasing by 11%, 22%, and 10% respectively.
- Consolidated gross margin improved to 57% from 56% in the prior year, driven by favorable freight costs.
- Operating income decreased by 14% to $197.0 million, impacted by higher operating expenses and lower Outdoor segment performance.
- Research and Development expenses increased by 6% to $221.5 million, reflecting continued investment in innovation.
- The company maintained a strong liquidity position with approximately $2.7 billion in cash, cash equivalents, and marketable securities as of April 1, 2023.
- Garmin repurchased approximately $416,000 worth of its shares under its approved share repurchase program during the quarter.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2023, Garmin Ltd kept $0.18.
- Revenue$1.15B100.0%
- Cost of revenue−$494.6M43.1%
- Gross profit$652.8M56.9%
- Operating costs−$455.8M39.7%
- Operating income$197.0M17.2%
- Interest, other & tax$5.3M0.5%
- Net income$202.3M17.6%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2023filed May 3, 2023Financial Statements
Q2 FY2023 against Q2 FY2022
| Line item | Q2 FY2023Q2 FY2022 | Change |
|---|---|---|
| Revenue | $1.15B$1.24B | −7.5% |
| Cost of Revenue | $494.63M$512.01M | −3.4% |
| Gross Profit | $652.79M$728.83M | −10.4% |
| R&D Expenses | $221.49M$201.52M | +9.9% |
| SG&A Expenses | $234.33M$191.21M | +22.5% |
| Operating Expenses | $455.81M$436.09M | +4.5% |
| Operating Income | $196.98M$292.74M | −32.7% |
| Net Income | $202.33M$257.87M | −21.5% |
| EPS (Basic) | $1.06$1.34 | −20.9% |
| EPS (Diluted) | $1.05$1.33 | −21.1% |
| Shares Outstanding (Basic) | 191.50M193.07M | −0.8% |
| Shares Outstanding (Diluted) | 191.89M193.45M | −0.8% |
05—Questions
Frequently Asked Questions
What was the primary reason for the year-over-year decrease in net sales?
The primary reason for the 2% year-over-year decrease in net sales was a significant 27% decline in revenue from the Outdoor segment, which was partially offset by growth in the Fitness, Aviation, and Marine segments.
How did the company's profitability fare in the quarter?
While the consolidated gross margin improved slightly to 57% due to lower freight costs, operating income decreased by 14% to $197.0 million. This was driven by increased operating expenses as a percentage of revenue and the revenue decline in the Outdoor segment.
What is the outlook for the Auto OEM segment?
Garmin expects the Auto OEM segment to continue experiencing operating losses through 2023 due to ongoing investments in its automotive programs. Despite these losses, the segment did see an 11% increase in net sales year-over-year.
How is the company managing its cash and investments?
Garmin ended the quarter with approximately $2.7 billion in cash, cash equivalents, and marketable securities. Cash flow from operations was strong, providing sufficient resources for capital expenditures, dividends, share repurchases, and potential acquisitions. The company also reported an increase in interest income due to higher average interest returns on its investments.
06—Continue