Garmin Ltd GRMN

NYS: GRMN | ISIN: CH0114405324   27/03/2024
147,98 USD (+0,39%)
(+0,39%)   27/03/2024

Garmin announces first quarter 2023 results

Four segments post double-digit revenue growth

SCHAFFHAUSEN, Switzerland, May 3, 2023 /PRNewswire/ -- Garmin® Ltd. (NYSE: GRMN), today announced results for the first quarter ended April 1, 2023.

Highlights for first quarter 2023 include:

  • Consolidated revenue of $1.15 billion, a 2% decrease compared to the prior year quarter
  • Gross margin increased to 56.9%, and operating margin was 17.2%
  • Operating income was $197 million, a 14% decrease compared to the prior year quarter
  • GAAP EPS was $1.05 and pro forma EPS(1) was $1.02
  • Launched the next-gen Forerunner 265 and Forerunner 965, our first running watches with a bright AMOLED display
  • Announced the fēnix 7 adventure watches will be worn by crew members on the upcoming Polaris Dawn space mission to help scientists understand how space travel affects the human body
  • We were recently named the "Best of the Best" supplier to Embraer, and also received two top supplier awards in the categories of Systems as well as Services & Support

(In thousands, except per share information)


13-Weeks Ended




April 1,



March 26,



YoY




2023



2022



Change


Net sales


$

1,147,424



$

1,172,662




(2)

%


Fitness



244,721




220,896




11

%


Outdoor



328,662




449,734




(27)

%


Aviation



213,582




174,766




22

%


Marine



278,975




254,069




10

%


Auto OEM



81,484




73,197




11

%














Gross margin %



56.9

%



56.5

%


















Operating income %



17.2

%



19.5

%


















GAAP diluted EPS


$

1.05



$

1.09




(4)

%

Pro forma diluted EPS(1)


$

1.02



$

1.11




(8)

%















(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma diluted EPS




Executive Overview from Cliff Pemble, President and Chief Executive Officer:

"2023 is off to a good start with four of our five segments posting double-digit revenue growth driven by new product introductions and solid demand trends. We are excited about what lies ahead as we anticipate many more exciting product introductions throughout the remainder of the year." - Cliff Pemble, president and chief executive officer of Garmin Ltd.

Fitness:

Revenue from the fitness segment grew 11% in the first quarter, primarily due to strong demand for our advanced wearables. Gross and operating margins were 49% and 4%, respectively, resulting in $11 million of operating income. During the quarter, we launched the Forerunner 265 and Forerunner 965, our first running smartwatches to offer vibrant AMOLED displays. Designed for runners, by runners, these Forerunners combine advanced training metrics, recovery insights and everyday health stats with a sunlight readable AMOLED display without sacrificing battery life.  

Outdoor:

Revenue from the outdoor segment decreased 27% in the first quarter primarily due to year-over-year declines in adventure watches as we passed the one year anniversary of the highly successful fēnix 7, epix, and Instinct 2 launch. Gross and operating margins were 62% and 23%, respectively, resulting in $77 million of operating income. During the quarter, we launched the GPSMAP 67 Series and eTrex SE handhelds. These versatile handhelds offer longer battery life, improved positional accuracy, and global communication via inReach satellite technology. We recently announced the Drive 53 GPS navigator featuring a high-resolution capacitive touchscreen, fresh design, and traffic options to simplify the drive, and the zūmo XT2 — the rugged motorcycle navigator that's built for adventure, with a larger and brighter 6" sunlight-readable display.   

Aviation:

Revenue from the aviation segment grew 22% in the first quarter with contributions from both OEM and aftermarket categories. Gross and operating margins were 72% and 27%, respectively, resulting in $58 million of operating income. During the quarter, we announced additional certifications for our GFC autopilots, including the GFC 600 in the King Air 200 series of aircraft, bringing the performance and safety enhancing benefits of our flight control technology to more aircraft models.  We were recently named Best Supplier to Embraer in the categories of Systems as well as Services & Support. We were also named the "Best of the Best" supplier to the entire Embraer organization which is a significant accomplishment reflecting our strong commitment to create the best products and provide outstanding service to our customers.

Marine:

Revenue from the marine segment grew 10% in the first quarter, primarily due to the timing of spring promotions. Gross and operating margins were 54% and 26%, respectively, resulting in $72 million of operating income. During the quarter, we expanded the ECHOMAP UHD2 chartplotter series to offer anglers premium features like easy-to-use touchscreens with keyed assist, Ultra High-Definition sonar and preloaded Garmin Navionics+ mapping. Also during the quarter, we were recognized as the leader in navigation and sonar categories by Best Marine Electronics and Technology, and for the fifth consecutive year Garmin received a 2023 Top Product award for the ECHOMAP UHD2 64sv from Boating Industry.

Auto OEM:

Revenue from the auto OEM segment grew 11% during the first quarter primarily due to increased shipments of domain controllers. Gross margin was 28%, and we recorded an operating loss of $20 million in the quarter driven by ongoing investments in auto OEM programs. During the quarter, we began production for the 2024 BMW X5 and X6 Domain Controllers in our U.S. manufacturing facility. Also during the quarter, we launched an infotainment solution for the 2023 Yamaha Tracer 9GT+, Tracer 7/7GT and the Niken GT sport touring motorcycles.

Additional Financial Information:

Total operating expenses in the first quarter were $456 million, a 5% increase over the prior year. Research and development increased 6% primarily due to engineering personnel costs. Selling, general and administrative expenses increased 7% driven primarily by personnel related expenses and information technology costs. Advertising expenses decreased 11% primarily due to lower cooperative advertising.

The effective tax rate in the first quarter was 8.8% compared to 10.3% in the prior year quarter. The year-over-year decrease in the effective tax rate is primarily due to income mix by jurisdiction.

In the first quarter of 2023, we generated approximately $232 million of free cash flow(1). We paid a quarterly dividend of approximately $140 million and repurchased approximately $41 million of the Company's shares within the quarter, leaving approximately $53 million remaining as of April 1, 2023 in the share repurchase program authorized through December 29, 2023.  We ended the quarter with cash and marketable securities of approximately $2.7 billion.

(1)

See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including free cash flow.



2023 Fiscal Year Guidance:

We are maintaining our 2023 guidance calling for revenue of approximately $5.00 billion and pro forma EPS of $5.15 (see attached discussion on Forward-looking Financial Measures).

Dividend Recommendation:

As announced in February, the Board will recommend to the shareholders for approval at the annual meeting to be held on June 9, 2023 a cash dividend in the total amount of $2.92 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting) payable in four equal quarterly installments. 

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.'s earnings call is as follows:

When:

Wednesday, May 3, 2023 at 10:30 a.m. Eastern

Where:

Join a live stream of the call at the following link


https://www.garmin.com/en-US/investors/events/



An archive of the live webcast will be available until May 2, 2024 on the Garmin website at www.garmin.com.  To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as "anticipates," "would," "may," "expects," "estimates," "plans," "intends," "projects," and other words or phrases with similar meanings.  Any statements regarding the Company's expected fiscal 2023 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company's expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, share repurchase programs, currency movements, expenses, pricing, new product launches, market reach, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, and the Company's plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in the Annual Report on Form 10-K for the year ended December 31, 2022 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin's 2022 Form 10-K can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of April 1, 2023. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo, the Garmin delta, Echomap, eTrex, fēnix, Forerunner, GFC, GPSMAP, Instinct, Navionics, and zūmo are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Drive is a trademark of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Investor Relations Contact:

Media Relations Contact:

Teri Seck

Krista Klaus

913/397-8200

913/397-8200

investor.relations@garmin.com

media.relations@garmin.com 

 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Income (Unaudited)


(In thousands, except per share information)













13-Weeks Ended




April 1,



March 26,




2023



2022


Net sales


$

1,147,424



$

1,172,662


Cost of goods sold



494,630




510,183


Gross profit



652,794




662,479











Advertising expense



30,347




34,133


Selling, general and administrative expense



203,980




190,784


Research and development expense



221,485




209,006


Total operating expense



455,812




433,923











Operating income



196,982




228,556











Other income (expense):









Interest income



15,899




7,553


Foreign currency gains (losses)



7,688




(3,506)


Other income



1,203




3,261


Total other income (expense)



24,790




7,308











Income before income taxes



221,772




235,864


Income tax provision



19,445




24,272


Net income


$

202,327



$

211,592











Net income per share:









Basic


$

1.06



$

1.10


Diluted


$

1.05



$

1.09











Weighted average common shares outstanding:









Basic



191,498




192,887


Diluted



191,886




193,579


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Balance Sheets (Unaudited)


(In thousands, except per share information)













April 1,

2023



December 31,
2022


Assets









Current assets:









Cash and cash equivalents


$

1,361,593



$

1,279,194


Marketable securities



188,878




173,288


Accounts receivable, net



610,654




656,847


Inventories



1,478,997




1,515,045


Deferred costs



14,573




14,862


Prepaid expenses and other current assets



309,303




315,915


Total current assets



3,963,998




3,955,151











Property and equipment, net



1,165,035




1,147,005


Operating lease right-of-use assets



134,569




138,040


Noncurrent marketable securities



1,163,989




1,208,360


Deferred income tax assets



455,095




441,071


Noncurrent deferred costs



9,504




9,831


Goodwill



571,534




567,994


Other intangible assets, net



172,685




178,461


Other noncurrent assets



89,622




85,257


Total assets


$

7,726,031



$

7,731,170











Liabilities and Stockholders' Equity









Current liabilities:









Accounts payable


$

208,796



$

212,417


Salaries and benefits payable



164,812




176,114


Accrued warranty costs



52,675




50,952


Accrued sales program costs



58,332




97,772


Other accrued expenses



178,264




197,376


Deferred revenue



90,568




91,092


Income taxes payable



254,753




246,180


Dividend payable






139,732


Total current liabilities



1,008,200




1,211,635











Deferred income tax liabilities



131,753




129,965


Noncurrent income taxes payable



34,936




34,627


Noncurrent deferred revenue



34,378




35,702


Noncurrent operating lease liabilities



111,388




114,541


Other noncurrent liabilities



372




360











Stockholders' equity:









Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 191,450

   shares outstanding at April 1, 2023 and 191,623 shares outstanding

   at December 31, 2022



17,979




17,979


Additional paid-in capital



2,048,339




2,042,472


Treasury stock (6,627 and 6,454 shares, respectively)



(510,478)




(475,095)


Retained earnings



4,935,730




4,733,517


Accumulated other comprehensive (loss) income



(86,566)




(114,533)


Total stockholders' equity



6,405,004




6,204,340


Total liabilities and stockholders' equity


$

7,726,031



$

7,731,170


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Cash Flows (Unaudited)


(In thousands)













13-Weeks Ended




April 1, 2023



March 26, 2022


Operating Activities:









Net income


$

202,327



$

211,592


Adjustments to reconcile net income to net cash provided by

   operating activities:









Depreciation



31,952




28,984


Amortization



11,463




12,228


Gain on sale or disposal of property and equipment



(129)




(1,129)


Unrealized foreign currency gains



(867)




(5,113)


Deferred income taxes



(15,713)




(25,996)


Stock compensation expense



20,732




24,706


Realized loss (gain) on marketable securities



20




(2)


Changes in operating assets and liabilities, net of acquisitions:









Accounts receivable, net of allowance for doubtful accounts



46,873




238,134


Inventories



43,712




(134,807)


Other current and noncurrent assets



4,780




(1,628)


Accounts payable



(4,202)




(61,939)


Other current and noncurrent liabilities



(67,405)




(119,159)


Deferred revenue



(1,876)




(3,704)


Deferred costs



622




1,904


Income taxes



6,921




21,563


Net cash provided by operating activities



279,210




185,634











Investing activities:









Purchases of property and equipment



(46,814)




(59,715)


Proceeds from sale of property and equipment



142




1,131


Purchase of intangible assets



(332)




(547)


Purchase of marketable securities



(18,684)




(497,526)


Redemption of marketable securities



57,789




431,604


Acquisitions, net of cash acquired






(10,828)


Net cash used in investing activities



(7,899)




(135,881)











Financing activities:









Dividends



(139,847)




(128,856)


Proceeds from issuance of treasury stock related to equity awards






20,146


Purchase of treasury stock related to equity awards



(9,169)




(14,610)


Purchase of treasury stock under share repurchase plan



(43,273)





Net cash used in financing activities



(192,289)




(123,320)











Effect of exchange rate changes on cash and cash equivalents



3,387




(6,960)











Net increase (decrease) in cash, cash equivalents, and restricted cash



82,409




(80,527)


Cash, cash equivalents, and restricted cash at beginning of period



1,279,912




1,498,843


Cash, cash equivalents, and restricted cash at end of period


$

1,362,321



$

1,418,316


 

 

Garmin Ltd. and Subsidiaries

Net Sales, Gross Profit and Operating Income by Segment (Unaudited)

(In thousands)


The Company announced an organization realignment in January 2023, which combined the consumer auto operating segment with the outdoor operating segment. As a result, the Company's operating segments, which also represent our reportable segments, are fitness, outdoor, aviation, marine, and auto OEM. Results for the 13-week period ended March 26, 2022 have been recast below to conform with the current period presentation. This change had no effect on the Company's consolidated results of operations.




Fitness



Outdoor



Aviation



Marine



Auto OEM



Total


13-Weeks Ended April 1, 2023


Net sales


$

244,721



$

328,662



$

213,582



$

278,975



$

81,484



$

1,147,424


Gross profit



120,910




204,948




154,454




149,631




22,851




652,794


Operating income (loss)



10,578




76,743




57,695




71,908




(19,942)




196,982



























13-Weeks Ended March 26, 2022


Net sales


$

220,896



$

449,734



$

174,766



$

254,069



$

73,197



$

1,172,662


Gross profit



106,189




278,455




127,543




128,581




21,711




662,479


Operating income (loss)



580




152,810




40,127




58,882




(23,843)




228,556



























   

Garmin Ltd. and Subsidiaries


Net Sales by Geography (Unaudited)


(In thousands)

















13-Weeks Ended




April 1,



March 26,



YoY




2023



2022



Change


Net sales


$

1,147,424



$

1,172,662



(2) %


Americas



611,704




570,634



7 %


EMEA



355,853




397,477



(10) %


APAC



179,867




204,551



(12) %















EMEA - Europe, Middle East and Africa; APAC - Asia Pacific and Australian Continent




Non-GAAP Financial Information

To supplement our financial results presented in accordance with GAAP, this release includes the following measures defined by the Securities and Exchange Commission as non-GAAP financial measures: pro forma effective tax rate, pro forma net income (earnings) per share and free cash flow. These non-GAAP measures are not based on any comprehensive set of accounting rules or principles and should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and may be different from non-GAAP measures used by other companies, limiting the usefulness of the measures for comparison with other companies. Management believes providing investors with an operating view consistent with how it manages the Company provides enhanced transparency into the operating results of the Company, as described in more detail by category below. 

The tables below provide reconciliations between the GAAP and non-GAAP measures.

Pro forma effective tax rate

The Company's income tax expense is periodically impacted by discrete tax items that are not reflective of income tax expense incurred as a result of current period earnings. Therefore, management believes disclosure of the effective tax rate and income tax provision before the effect of certain discrete tax items are important measures to permit investors' consistent comparison between periods. In the first quarter 2023 and 2022 there were no such discrete tax items identified.

Pro forma net income (earnings) per share

Management believes that net income (earnings) per share before the impact of foreign currency gains or losses and certain discrete income tax items, as discussed above, is an important measure in order to permit a consistent comparison of the Company's performance between periods.

(In thousands, except per share information)


13-Weeks Ended




April 1,



March 26,




2023



2022


GAAP net income


$

202,327



$

211,592


Foreign currency gains / losses(1)



(7,688)




3,506


Tax effect of foreign currency gains/ losses(2)



674




(361)


Pro forma net income


$

195,313



$

214,737











GAAP net income per share:









Basic


$

1.06



$

1.10


Diluted


$

1.05



$

1.09











Pro forma net income per share:









Basic


$

1.02



$

1.11


Diluted


$

1.02



$

1.11











Weighted average common shares outstanding:









Basic



191,498




192,887


Diluted



191,886




193,579











(1) Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar and the related exchange rate impact on the significant cash, receivables, and payables held in a currency other than the functional currency at a given legal entity.  However, there is minimal cash impact from such foreign currency gains and losses.











(2) The tax effect of foreign currency gains and losses was calculated using the effective tax rate of 8.8% for the 13-weeks ended April 1, 2023 and 10.3% for the 13-weeks ended March 26, 2022.




Free cash flow

Management believes that free cash flow is an important liquidity measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flows less capital expenditures for property and equipment. Management believes that excluding purchases of property and equipment provides a better understanding of the underlying trends in the Company's operations and allows more accurate comparisons of the Company's results between periods. This metric may also be useful to investors but should not be considered in isolation as it is not a measure of cash flow available for discretionary expenditures. The most comparable GAAP measure is net cash provided by operating activities.

(In thousands)


13-Weeks Ended




April 1,



March 26,




2023



2022


Net cash provided by operating activities


$

279,210



$

185,634


Less: purchases of property and equipment



(46,814)




(59,715)


Free Cash Flow


$

232,396



$

125,919












Forward-looking Financial Measures

The forward-looking financial measures in our 2023 guidance provided above do not consider the potential future net effect of foreign currency exchange gains and losses, certain discrete tax items and any other impacts that may be identified as pro forma adjustments in calculating the non-GAAP measures described above. 

The estimated impact of foreign currency gains and losses cannot be reasonably estimated on a forward-looking basis due to the high variability and low visibility with respect to non-operating foreign currency exchange gains and losses and the related tax effects of such gains and losses. The impact on diluted net income per share of foreign currency gains and losses, net of tax effects, was $0.03 per share for the 13-weeks ended April 1, 2023.

At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2023 or anticipate the impact of any other events that may be considered in the calculation of non-GAAP financial measures.

 

Cision View original content to download multimedia:https://www.prnewswire.com/news-releases/garmin-announces-first-quarter-2023-results-301814202.html

SOURCE Garmin International, Inc.

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