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Garmin Announces Strong First Quarter

Schaffhausen, Switzerland    Garmin® Ltd. (NASDAQ: GRMN), today announced results for the first quarter ended March 27, 2021.

Highlights for first quarter 2021 include:

  • Total revenue of $1.07 billion, a 25% increase over the prior year quarter led by double-digit growth in the fitness, outdoor, marine and auto segments
  • Gross margin improved to 59.8% compared to 59.2% in the prior year quarter
  • Operating margin improved to 23.3% compared to 20.7% in the prior year quarter
  • Operating income of $250 million, a 41% increase over the prior year quarter
  • GAAP EPS was $1.14 and pro forma EPS(1) was $1.18, representing 30% growth in pro forma EPS over the prior year quarter
  • Launched Lily™, our smallest and most fashionable smartwatch
  • Expanded our market reach to serve endurance athletes with the launch of EnduroTM
  • Entered the powersports market with an all-new assortment of products including the rugged Tread™ power sport navigator, the PowerSwitch digital switching system and the BC 40 wireless camera
  • Garmin Autoland named a 2020 finalist for the esteemed Robert J. Collier Trophy

 

 (In thousands, except per share information) 13-Weeks Ended 
  March 27,  March 28,  YoY 
  2021  2020  Change 
Net sales  $1,072,327   $856,108  25% 
Fitness  308,125   223,601  38% 
Outdoor  256,455   175,102  46% 
Aviation  173,889   188,599  (8)% 
Marine  209,372   163,005  28% 
Auto  124,486   105,801  18% 
             
Gross margin % 59.8%  59.2%     
             
Operating income % 23.3%  20.7%     
             
GAAP diluted EPS  $1.14   $0.84  36% 
Pro forma diluted EPS(1)  $1.18   $0.91  30% 
             
(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:

“Broad momentum across our business segments resulted in strong double-digit revenue and profit growth,” said Cliff Pemble, President and CEO of Garmin. “Interest in fitness, health, and active lifestyle products has never been higher, and we believe that we are well positioned to capitalize on the opportunities ahead.”

 

Fitness:

Revenue from the fitness segment grew 38% in the first quarter driven by strong demand for our cycling and advanced wearables products. Gross margin and operating margin were 56% and 24%, respectively, resulting in 138% operating income growth. During the quarter, we launched Lily, our smallest and most fashionable smartwatch to-date. We also launched the RallyTM series of power meters including a version designed specifically for off-road cycling, representing a new market opportunity.

 

Outdoor:

Revenue from the outdoor segment grew 46% in the first quarter with growth across all categories led by strong demand for adventure watches. Gross margin and operating margin were 67% and 36%, respectively, resulting in 97% operating income growth. During the quarter, we launched Enduro, a new adventure watch built for endurance racing with up to 80 hours of continuous operation in GPS mode while harvesting power from the sun.  We also expanded the Approach® family of golf tracking devices with the launch of three new products, each offering exemplary battery life and designed to benefit golfers of every skill level.

 

Aviation:

Revenue from the aviation segment declined 8% in the first quarter primarily due to reduced contributions from ADS-B products. Gross margin and operating margin were 73% and 26%, respectively. During the quarter, the Garmin G3000® integrated flight deck was selected by Joby Aviation for its all-electric vertical takeoff and landing (eVTOL) aircraft. In addition, we recently received additional GFC 500/600 autopilot certifications, providing superior autopilot performance, greater reliability, and tremendous safety benefits to a growing number of aircraft models.

 

Marine:

Revenue from the marine segment grew 28% in the first quarter with growth across multiple categories. Gross margin and operating margin were 58% and 29%, respectively, resulting in 53% operating income growth. During the quarter, we experienced strong demand for chartplotters and Panoptix™ LiveScope™ sonars as customers prepare their boats for the upcoming season.

 

Auto:

Revenue from the auto segment grew 18% during the first quarter primarily driven by OEM programs and growth in consumer specialty categories. Gross margin was 39%, and we recorded an operating loss of $24 million in the quarter driven by investments in OEM programs. During the quarter, we entered the powersports market with the launch of the new Tread power sport navigator, the PowerSwitch digital switching system and BC 40 wireless camera. This trio of solutions helps recreational off-roaders find their way while staying connected, control electrical systems on the vehicle, and monitor their surroundings.

 

Additional Financial Information:

Total operating expenses in the first quarter were $392 million, a 19% increase over the prior year.  Research and development increased by 23%, primarily due to engineering personnel costs across all segments and other expenses related to auto OEM programs. Selling, general and administrative expenses increased 15%, driven primarily by personnel related expenses and information technology costs. Advertising increased 16% driven primarily by higher spend in the fitness and outdoor segments.

 

The effective tax rate in the first quarter was 12.2% compared to 9.3% in the prior year quarter. The year-over-year increase in the effective tax rate is primarily due to a larger amount of reserve releases in the prior year.

 

In the first quarter of 2021, we generated approximately $331 million of free cash flow(1) and paid a quarterly dividend of approximately $117 million. We ended the quarter with cash and marketable securities of approximately $3.2 billion.

 

As announced in February 2021, the Board has recommended to the shareholders for approval at the annual meeting to be held on June 4, 2021 a cash dividend in the total amount of $2.68 per share (subject to adjustment if the Swiss Franc weakens more than 35% relative to the USD), payable in four equal installments on dates to be approved by the Board.  The final $0.61 installment of the dividend approved at the 2020 annual meeting was paid on March 31, 2021 to shareholders of record as of March 15, 2021.

 

 

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

 

 

2021 Guidance:

We are maintaining our 2021 guidance for revenue of approximately $4.6 billion and pro forma EPS of $5.15 (see discussion on Forward-looking Financial Measures).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Webcast Information/Forward-Looking Statements:

 

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

When:        Wednesday, April 28, 2021 at 10:30 a.m. Eastern

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

How:          Simply log on to the web at the address above or call to listen in at 855-757-3897

 

An archive of the live webcast will be available until April 27, 2022 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 2021 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, currency movements, expenses, pricing, new products 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 both the Annual Report on Form 10-K for the year ended December 26, 2020 and the Quarterly Report on Form 10-Q for the quarter ended March 27, 2021 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2020 Form 10-K and the Q1 2021 Form 10-Q 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 March 27, 2021. 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, Approach and G3000 are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Enduro, Lily, Rally and Tread are trademarks 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                                                                      Carly Hysell

913/397-8200                                                               913/397-8200

investor.relations@garmin.com                                     media.relations@garmin.com

 

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