Cyclry

Cycling news and humor from industry veterans

Garmin reports strong revenue for first quarter 2020; withdraws fiscal 2020 guidance

Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the first quarter ended March 28, 2020.

“The first quarter of 2020 was remarkably strong continuing the momentum from last year”

Highlights for first quarter 2020 include:

  • Total revenue of $856 million, a 12% increase, with fitness, marine, outdoor and aviation collectively increasing 17% over the prior year quarter
  • Gross margin of 59.2% compared to 59.0% in the prior year quarter
  • Operating margin improved to 20.7% compared to 19.8% in the prior year quarter
  • Operating income of $177 million, increasing 17% over the prior year quarter
  • GAAP EPS was $0.84 and pro forma EPS(1) was $0.91, representing 25% growth over the prior year quarter
  • Strong balance sheet with no debt and $2.6 billion of cash and marketable securities
  • Garmin ADS-B solution selected for British Airways’ franchise partner SUN-AIR’s Dornier 328 aircraft
  • Recognized as an exceptional marine and aviation OEM supplier, winning several awards in the quarter
  • With the assistance of Panoptix LiveScope, Garmin sponsored anglers swept the top three spots at the 2020 Bassmaster Classic
  • Withdrawing fiscal 2020 guidance due to economic uncertainty caused by the COVID-19 pandemic

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

“The first quarter of 2020 was remarkably strong continuing the momentum from last year,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “The economic uncertainty and impact on consumer behavior caused by the COVID-19 pandemic affects every business, and we are no exception. Accordingly, we are withdrawing our fiscal 2020 guidance. However, we are optimistic for the long term because the markets we serve and the products we offer are well positioned to thrive in the future.”

Fitness:

Revenue from the fitness segment grew 24% in the first quarter driven by strength in advanced wearables and contributions from Tacx. Gross margin and operating margin were 50% and 14%, respectively, resulting in 71% operating income growth. Now more than ever, people are looking for tools that can help them live a healthy life. Our fitness segment is committed to providing innovative and compelling products that motivate our customers to achieve their fitness, health, and wellness goals.

Additional Financial Information:

Total operating expenses in the first quarter were $329 million, a 10% increase over the prior year. Research and development increased 13%, primarily due to engineering personnel costs and incremental costs associated with acquisitions. Selling, general and administrative expenses increased 8%, driven primarily by personnel related expenses and incremental costs associated with acquisitions. Advertising decreased 3%, driven by lower spending in the auto, outdoor and marine segments.

The effective tax rate in the first quarter of 2020 was 9.3% compared to 15.7% in the prior year quarter. The decrease in the current quarter effective tax rate is primarily due to the migration of intellectual property ownership from Switzerland to the United States.

In the first quarter of 2020, we generated approximately $185 million of free cash flow(1). We continued to return cash to shareholders with our quarterly dividend of approximately $109 million. We ended the quarter with cash and marketable securities of approximately $2.6 billion.

As announced in February 2020, the Board has recommended to the shareholders for approval at the annual meeting to be held on June 5, 2020 a cash dividend in the total amount of $2.44 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 $0.57 installment of the dividend approved at the 2019 annual meeting was paid on March 31, 2020 to shareholders of record as of March 16, 2020.

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

2020 Guidance:

We are withdrawing our fiscal 2020 guidance due to the rapid and unpredictable economic changes caused by the COVID-19 pandemic. Management expects to provide guidance once the trajectory of the economy and consumer behaviors are better understood.