10-QPeriod: Q2 FY2023

GARMIN LTD Quarterly Report for Q2 Ended Apr 1, 2023

Filed May 3, 2023For Securities:GRMN

Summary

Garmin Ltd. reported net sales of $1,147.4 million 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% 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 million, 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.

Financial Highlights

51 data points
Beta

Revenue

$1.15B

56.9% Gross Margin

Net Income

$202.33M

17.6% Net Margin

EPS (Diluted)

$1.05

Total Assets

$7.73B

Cash & Equivalents

$1.36B

Free Cash Flow

$232.40M

Financial Statements
Beta
Revenue$1.15B
Cost of Revenue$494.63M
Gross Profit$652.79M
R&D Expenses$221.49M
SG&A Expenses$234.33M
Operating Expenses$455.81M
Operating Income$196.98M
Net Income$202.33M
EPS (Basic)$1.06
EPS (Diluted)$1.05
Shares Outstanding (Basic)191.50M
Shares Outstanding (Diluted)191.89M

Key Highlights

  • 1Net sales decreased by 2% year-over-year to $1,147.4 million, primarily due to a 27% decline in the Outdoor segment.
  • 2Fitness, Aviation, and Marine segments demonstrated strong growth, with net sales increasing by 11%, 22%, and 10% respectively.
  • 3Consolidated gross margin improved to 57% from 56% in the prior year, driven by favorable freight costs.
  • 4Operating income decreased by 14% to $197.0 million, impacted by higher operating expenses and lower Outdoor segment performance.
  • 5Research and Development expenses increased by 6% to $221.5 million, reflecting continued investment in innovation.
  • 6The company maintained a strong liquidity position with approximately $2.7 billion in cash, cash equivalents, and marketable securities as of April 1, 2023.
  • 7Garmin repurchased approximately $416,000 worth of its shares under its approved share repurchase program during the quarter.

Frequently Asked Questions

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.

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.

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.

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.