Garmin (GRMN) 21 Feb 242023 Q4 Earnings call transcript

Good morning, and welcome to the Garmin Ltd. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to turn the call over to Teri Seck, Director of Investor Relations. Please go ahead.

morning. Good to Garmin like you welcome would Ltd. to We Quarter XXXX Call. Earnings Fourth at release the Relations slides Internet that note and site earnings the Investor Please Garmin's press related at are on www.garmin.com/stock. available and related archive on website. the An transcripts our of also be will available webcast

earnings revenue other statements product segment margins, earnings, margins, Ltd. projections growth regarding regarding our future and Any for our and demand plans forward-looking operating share future shares, its rate, introduction, business. statements includes repurchases, dividends future call Garmin This and forward-looking and financial market are or position, gross products objectives statements.

events risk results this earnings could factors our Form is forward-looking Garmin. with of call actual as circumstances materially affecting and result contained Securities a in occur, The Commission. discussed filed and Exchange differ risk XX-K and these may the concerning in factors not Information

this of Financial Chief Doug Officer; behalf and Garmin on Presenting are Treasurer. Ltd. and President Cliff Executive and Chief Pemble, Boessen, morning Officer

like call I this turn over Pemble. to At to Cliff time, would the

you, everyone. good morning, and Thank Teri,

earlier in As growth the quarter in fourth delivered results outstanding strong Garmin profit. revenue with and consolidated today, announced

up This segments Consolidated in operating double-digit in revenue to billion, business $X.X a over growth. resulted EPS fourth of $XXX prior XX%, XX% income $X.XX, increased operating the for quarter to three year. with pro Gross XX% nearly new and XX% year-over-year the margins record resulting year. expanded representing and XX% delivering respectively, of up million, forma

which at annual income increased to X% $X.X a operating in year. revenue We the billion, $X.X continued, X% in resulted multiple XX%. billion, entered came year momentum experienced segments, we cautiously which is increased record-breaking record. XXXX better-than-expected in margin nearly as new optimistic, Consolidated and Operating a to but

normalize, the current forward We to grow is free our are component at a inventory availability levels healthy appropriate combined that and factors, times $X.X reduced this with year, with line will billion. to believe expect in products, nearly rate shipping boosted point cash demand continued flow for sales. lead eased. inventory while bottlenecks inventory roughly These and During and levels from

a XXXX year. Looking will and are revenue products, forward, XX% increase launches anticipate the We planned $X.XX approximately robust recently we introduced consolidated throughout additional billion. lineup of have product to

results increase dividend the meeting. give the at over for which outlook Our and an annual us share, to by considered the $X.XX will dividend confidence prior an $X year the propose per of annual be amount, shareholders upcoming

of approved X share $XXX Board our the addition, recently next years. a Directors million In program over repurchase

the for to performance business and ranked recognition for outlook I in share Garmin received do, what Large recognized customers Before deep to to on America. we from We're best-in-class segment, serving Best passionate moving list want who we each a their commitment on Employers and recently #X of be creating are mention Forbes we honored about each associates and other. Garmin workplace. to the a

operating margins more operating the led and and Moving to respectively, to across our watches. segment were XX% increased categories, $XXX growth revenue than XX% demand all product new highlights. Full year and running for year, for doubled by million. income next with strong Fitness growth XX%,

is its At battery life, recognized including product. long for Venu and the indeed and was awards, best Electronics display best-in-class X rich Show, bright of engineering. three Venu a features, recent with outstanding Consumer innovation fitness With the the X wellness

growth. running, lineup in year we With expect have to introduced we the ahead, and support will mind, products additional a wellness recently cycling of during Looking expect for this products fitness launch X% revenue increase strong to the approximately and year.

XX%, and operating the respectively, year, half. weaker resulting decreased fully year the second operating XX% Full offset as performance solid first Revenue the of outdoor. the of and $XXX to not million. half Moving in gross year in X% for margins income could were

lineup Solar-Ocean first-ever During of quarter, underwater products with expanded ocean-bound the Descent the plastics. diving our introduction our product Edition, of made the we GX fourth with recycled

We Descent transceiver messaging communication wrist. enables on SubWave and enhanced new the watch pressure the tank TX launched MkX that technology and dive with the also monitoring diver-to-diver Descent

which decades, series an solar GPS new For of adventurers. for our been handhelds outdoor the hikers, harvested changer over using for have off-the-grid handheld is essential X power technology. launched game only Solar, first indefinitely adventures. the the This operate handheld our We recently from can and eTrex explorers with product eTrex a sun, charging

X% in we ahead, the result Looking that growth year. road of for will map revenue our expect product strong outdoor

a aviation. and year categories. gross operating resulting for Revenue next growth margins respectively, by driven at XX%, increased new the X% in year. X% million, and operating XX% Full income were over up $XXX year million, Looking record product to the of $XXX in prior OEM

and Integrated Deck was Eve electric growing our joins our a Air takeoff Embraer selected quarter, Flight advanced systems. cockpit mobility GXXXX Air landing air the list Eve aircraft. companies its During have vertical selected of Mobility state-of-the-art for who Mobility by backed

for products made this accomplishment business. ranked is direct result the the the Professional survey. year Pilot's of the support our aviation team in Garmin and in investments hard XXth we XXXX commitment of This #X in consecutive recently, work strong More was have and avionics manufacturers

an has segment travel. growth recent air driven categories in in equipment by In private interest the increased experienced years, OEM aviation

trend historically this continue through back in expect high XXXX, as aircraft to work orders. We makers

softer hand, the coming sales the On expect we in aftermarket other year.

flat we aviation mind, expect in to things prior these approximately revenue the year. be to With

the included Audio JL million to next from acquired $XXX revenue increased Revenue Turning recently the record, and $XX business. X% to new of segment. marine million, approximately a

for Audio, Excluding marine year. X% revenue the decreased approximately from JL

were we resulting $XXX with players outperformed revenue competitors. The reporting many in has margins by and marine and operating year XX% income double-digit XX%, market million. but operating our declines, slowed market respectively, capturing in from share of gross XXXX, Full

and wireless During networking capability. mapping ECHOMAP sonar, launched series the the fourth quarter, premium X designed chartplotter we Ultra with

deepwater. why our rapid demonstrate the for imaging We marine XX also sonar in performing is innovations otherwise soft segment an launched well in with GSD higher-resolution so These return market. technology

JL the with total to growth increase sales. year, driven Looking XX% marine is marine of XX% about we approximately forward, by Audio be expect revenue which for expected will

to Revenue segment. gross auto by growth primarily $XXX just shipments under fourth domain the was OEM XX%, quarter. a with indeed our margin Full million finally narrowed record, driven ending to controllers XX% increased the $XX XXXX year, of for million, new losses the Moving BMW. year at and progressively throughout to

by what Many automaker controllers to OEM we entertainment beyond history announced the motorcycles on auto new projected vehicles. a a be to domain for we selected share that the solution another market the customer was We are have programs growth. report were during award our contract business, winning This and Motors with the of basis fueling scooters. new supply global our to categories. in premium XXXX. that largest for awarded base award our in controllers. We're BMW both XXXX, are currently to domain our other I'm with across pleased certain Yamaha starting motorcycle and wondering already single lies is multiyear smart business strong recently expanding business Yamaha also marine in X-wheel adds This and

OEM team I'm progress has made our the auto proud in XXXX. of

on deliveries domain of reach approximately the back XX% revenue a continue basis increase up, as we expect half ramp the to ahead, controllers quarterly and year. Looking we of profitability to in expect to

concludes That remarks. my

on additional results. you walk will through Doug Doug? Next, financial details our

Thanks, taxes like Cliff. begin to our and and flow full balance Good guidance. comments financial by quarter year the morning, everyone. XXXX on statement, fourth reviewing provide I'd cash results, sheet,

increased $X.XXX for of freight costs. revenue was the XX.X%, representing posted We prior year-over-year. billion increase fourth for the a basis primarily year to quarter, XXX XX% points Gross due margin quarter, lower

XX.X%, point was Operating $XXX Operating XX%, million, XX% was increase. as Operating increase the income expense XXX prior XXX percentage year-over-year sales a of margin point basis year. decrease. from basis was

a EPS XX% EPS. was pro $X.XX. prior from GAAP increase year forma Our forma Pro the EPS $X.XX, was

at results. from XX increase basis was decrease full We Looking posted Gross an year. margin XX.X%, year-over-year. of point prior billion, the revenue a $X.XXX X% the representing year

X% as was comparable Operating $X.XX year. billion, a XX prior Operating margin the was Operating from of expense income prior percentage point was the a decrease to XX.X%, basis sales XX.X%, increase. year.

X% EPS prior the was a Our GAAP from EPS $X.XX, of $X.XX. pro EPS. was forma Pro year forma increase

look segment geography. and fourth our at by we quarter revenue Next

and quarter, fourth record in growth achieved segments. the During revenue X consolidated double-digit of we our X

XX% By achieved of double-digit APAC geography, while growth of and growth respectively, XX%, achieved Americas, EMEA region the regions X%.

in X% X achieved For of growth, the we with growth in X% geography, X% XXXX, in we consolidated Americas, record full APAC. year X% EMEA growth X achieved growth segments. in revenue By and our

Fourth costs. due expenses. increased operating operating XX%. approximately to $XX quarter or and increased personnel next, million Research by $XX expenses million year-over-year, primarily development engineering Looking

in increase to SG&A the $X due increased expense quarter addition million business. Audio year personnel-related the in approximately primarily to compared JL to million Advertising higher to prior expenses, approximately co-op advertising. increased primarily due $XX

the flow $XXX highlights sequentially ended on the million A fourth in to balance receivable cash We year-over-year of and share billion. increased the to with due strong and approximately securities and cash few $X.X market quarter seasonally repurchase. sales quarter. statement, sheet, Accounts dividends

consumer to to than increase Inventory decreased in addition JL and business to inventory, inventory. year-over-year balance associated our $X.X the strategy, offsetting more the with optimize OEM billion auto of inventory, reductions our our Audio execute

inventory. quarter, to we the the generated of lower $XXX due flow quarter million, purchases of of million use from free increase XXXX, cash During cash fourth year $XXX prior primarily

year XXXX. of not due which For free primarily we the of billion, the we repeat million do was $XXX a year, XXXX, generated lower $X.XXX cash to in purchase full from of flow which inventory, cash to prior expect increase use

were capital IT-related $XXX decrease in and million, expect continue make expect In In XXXX, free flow prior to XXXX, to clean we for million $XXX For approximately expenditures to approximately a million million year. to investments $XXX be we capital XXXX, and platforms facilities projects. the our of cash expenditures. growth, $XX compared

annual to approximately our we an Also dividend of $X from we paid seek for share dividend our In XXXX is per payment. a shareholder current XXXX, is X% increase announced increase $X.XX June per $X.XX share. dividends our quarterly approval of dividend with plan or per a cash Proposal $XXX in the which of beginning quarter, million.

In to million $XXX of program. share purchase used XXXX, previous completing cash shares, $XX repurchase million we company the

a program, repurchase of is share million Directors XXXX. through recently Board approved December $XXX which Our authorized

is in prior X.X% of pro increase to expected XXXX rate pro pro in over in tax Switzerland year-over-year be to implementation rates, forma X.X% a increases the full tax effective was the forma Expected rate minimum basis prior forma year XXXX of global compared is year. the tax XXX tax requirements. tax XXXX Our XX.X%, primarily due Fiscal year. impact rate to increase point combined the effective

guidance. full increase of XX% $X.XX estimate We to the year year. our approximately revenue approximately an of next for Turning prior billion,

XX.X%, approximately which is auto mix point basis OEM be to business. as XXX our percentage We year-over-year a margin to expect segment gross becomes primarily large due decrease, of

pro XX.X%. operating an share expected of is rate tax the be of XX%, in earnings results full expect This expected margin year pro forma per $X.XX. approximately We forma approximately to effective approximately and

for Julianne, line This the you concludes Q&A? open our remarks. can formal please

will [Operator Instructions] JPMorgan. Our question Joseph first Cardoso come from from

question auto it's I is business. OEM First on two-parter. guess, here the a

OEM expanded First, Obviously, can auto in you $XXX revenue just million expand? 'XX.

'XX. $XXX in You're million targeting to expand another

As Particularly, $XXX customer then that have follow-up. another million you'll board? And your profile you for approach you should you're vein, of in are win trajectory million thinking it there business this with level on given thinking any that from is are on? And implications your the of a overachieve how $XXX about how you now? new as belt, margin of we eventually think about I revenue to of ability similar we think the about under then by target current on ramping a your year 'XX, that this

Thanks.

I terms overachieve, So from a production go far on we in as near. as of out that overachieve. $XXX dates or of don't that by our us the who to of mentioned would their ability can down to provide up in the forecast, We're but about and with question those in input part manufacturers million XXXX, peak ability under going what project first we've the say of terms longer-term

in think, to points people those I consider. just So for general, are reference

are of doing. auto been OEM is telling expected margin lower In to has do our on higher-margin volume, XX the it's well as the margin terms mid-XX% mix range been that very some profile, people only segment. expect a for that but as be lower to we've in go high That's the down We target, of of based margin speculative. in it products volume, -- products that as kind

this second I question. just and got a up my it. I follow there, I'll guess, use as

not about that need how need you Or new you expenses customer? win just onboard though, new increased that cost the you'll about thinking of to talk ramp you elevated you're are you're that there? terms can in Just assuming onboarding to that the

that's profile at guess, getting auto margin kind the was the I I on terms of in what of OEM business.

think of implications about how start thinking ramp to that or new kind margins that to you are headwinds in customer, with you about As you customer? new bringing as the

significant significant most that win investment. amount with we is global a a new the So automaker mentioned program require does not R&D the of that

result, investment intensity that terms a be that that lower on the it will as make to So we in will board. bring of in customer

Our next Wang from question George comes Barclays. from

Congrats on the quarter.

Just two ones. quick

of capital additional see for to $XXX the terms share nice in authorization. return, just Firstly, million

to evenly so front-load try So X of any of Do color, color share years. the this in Just curious, gather of some or guys of spread? the term more can additional kind kind terms beyond of kind near additional you just plan any buyback of cadence. to possible you kind over

Yes, just our $XXX million over additional X Yes. and completed previous Board $XXX the authorized we George. the Thanks, years. an next million authorization,

cadence will acquisitions that upon So be market of that conditions, point time. conditions in business the at based just

Great. Okay.

revenue aided by It's Just of nice approaching to see auto OEM year-over-year, follow-up partially the a kind XX% kind the in growth business. of obviously of terms business.

as So any of share theory curious the major the you to my kind of outdoor? has you X versus segments, whether changed of the anything sort or X question the incremental over to from last kind point by of want Just months. it's is segment fitness data for back, if months project FY any the of 'XX really sort

QX all Yes. George, half in did really of demonstrate in both and the think in we good momentum outdoor and some XXXX back I of fitness.

of especially more current positive So of incrementally product as front those considering on products us. out a two, in have result, become and we we've that lineup map the our road

next from David Longbow comes question MacGregor from Our Research.

what for color were just from kind off to any price to what seeing different fourth on sales and noticing, quarter? how you by were what patterns Great quarter consumer, people the the quarter. wanted asking you Congratulations. fourth impressions away holiday took can mean, you of from start kind season, state I the provide on of you responding I your of you the consumer points. were the

quite I better response say actually from the would we consumer that was and strong. generally side seem than the expected

and production in did good course, sell-through drove and, supply/demand. to fourth be appeared to very quarter Our very, of incremental we that the third

here we could any in color And competitive us? kind dimension for of

particularly Well, share. also than market in is of different wearables say taking I position probably not where our products in of -- product lines in the nature some we're a the lot true to marine, taking market. have other that the is probably the remarks unique It that well. we made, market we But in and much as that share because market our all we're

seeing not or like Yes. that. And you're any mix dynamic any down

been to response the XXXX, that back has higher-end good. the very say recent X, would of I or half our quarter in products Actually, the

Okay.

ask As business. automotive a follow-up, the I on just wanted to

second noted rate year profitable expect an margins? How to the you the on exit thinking are in half. end of run that segment about you You turn business

of gross guided the we've upper in mid-single digits. and margins people to margin Well, to in mid- about operating think teens range the

That's for full year, right? the

No. That's a rate really on basis. run

expect don't I basis. on the the for in into then we XXXX profitable expect but profitable as that a quarterly the remarks year, be work half XXXX We year, mentioned exit full think back on a we to basis. that we'll full to

from next Jordan of Our from comes America. Bank question Lyonnais

the lower on aftermarket? Would be aviation more able you color give revenue what guys to in drove

Yes.

channel retail narrow And on the dynamic. their it same significant market. with have of and dealers into through I off a come part XXXX supply we interesting challenges, and specialty doesn't installers, of XXXX behaviors of the to Jordan, shelves. installers it's Because aftermarket, think kind which aviation did inventory distribution on chain have is more very an those drove

were in, we XXXX. working During installs also burning that and XXXX, continue come in And expect that they to some essentially we saw off had as they of on aircraft. them

comes Erik Our Woodring Morgan Stanley. from next from question

philosophical Maybe margins is of about we amazing of was historically you, for which of is at gross Obviously, it the my kind Garmin Cliff, over that time. higher generally have kind always look a Awesome. if first like story, trended question, bit a question back premiumization.

be is segment. largest your margin strongest gross lowest segment Your to going growing now also sorry, your --

So you then And really think us should just how we is a that Is have of about change have -- the think what is Can it how follow-up. dollars exploding through the maximizing to margins? model more now? that auto about really opposed OEM you profit this opportunity? I taking kind as place now help operating

that say, markets Garmin comes Yes. to our in the breadth a like strength when we niche customers, have integration, one I will those still And Erik, businesses. we serve traditional We has would opportunities smart and attractive. new premium of been put probably our to no markets. to our serve in chain see depth way the mold as always there's it supply which in ability capability auto our OEM and our very factories, vertical to and leverage

the to it's doing we And the about we end the to have. profit strengths that the day, bank. all of we put dollars going at So that in try play simply that, can

helpful. second a product reflective the of somewhat outdoor few last question between we've and deviation the key somewhat then That's unusually maybe of And is kind kind over businesses, seen launches. years, okay. or Okay, a of fitness really the gap, of bit

businesses to with obviously, guided you've in tracking line XXXX, those For back of kind another. one

bit other? more think launch of when on about the kind launches, we your way evenly maybe the those product XXXX product should both two focusing these in product those split of this the entirety across as segments a on that Is of of my to question launches we one of So about just cadence the maybe lines importance and emphasis maybe right think for being or the specifically? opposed product is just thinking

ideally, way say comes want lines just that because even product cadence between product various doesn't would would that two segments and of those out always take a the It of of launches. that, I we we it the to very development the complexity when Well, to have nature product work on.

in then, will fitness. active expect more was that than active outdoor would But XXXX fitness outdoor. be than again, XXXX, in more I

Zatzkin next Our Noah from Markets. Capital from question comes KeyBanc

kind on of for me. one just Maybe marine

could kind about you if your thinking wondering that color business year how you're into Just as expand this you're just aftermarket about any on and OEM market we thinking dynamics XXXX. how end of out upon dynamic versus look playing and

I would in say, the market, is Noah, as mentioned remarks, that the softer. we

would the that general, I we gains. various share XXXX. with all declined you estimate outperformed say I market look the think, we market at XX% in in about When players,

and thrilled in we're that, of we So ahead XXXX that the with to continue expect perform market. we'll

and really if aftermarket the aftermarket pie, terms In the the the marine, you of in bigger of OEM between will. slice dynamic is

more we're offset of we about XX% softness, do revenue So expect influenced of any which in XXXX We be will be revenue year. by will by to for the terms be Audio, JL from expect those new dynamics. offset the segment

And officially then in the of rate you're rate any when But XX.X%. changes? know on pro forma I update -- of maybe terms just tax to tax the one of guiding kind

Yes.

are we the to yes, XX.X% So full year. a guiding for

a minimum and in the taxes. impact tax it's of combined really the Switzerland computation global So rates to the related increase

combined here, or of -- the some Schaffhausen tax 'XX, rate which legislation, increased actually [indiscernible] combined recently, to So in XX%. Switzerland effectively December passed

XXXX. basically affect the that of year, So beginning

Our Research. Ben from next question comes Cleveland Bollin from

versus across then of fitness. you a the curious think and refresh had I'm how outdoor And contribution both I Cliff, activations new about follow-up.

Yes.

have still on Garmin registrations that new platforms. of to our majority are So the our we customers

and more Does that Is versus between pretty outdoor other there be noticed to the differences fitness? of one refresh a segments? or it's across linear any seem you've

segment. No. by And it I mean, it specifically, by varies does vary more line. product

to Some by to existing of new actually customers, do while be driven others our tend customers. by product be lines tend driven

curious for is one you're and The China what Okay. seeing me last in India.

initiative it strategic What you seen? what's do? picture, And to there? of that's for have your bigger me. type you are performance What Just trying

more challenging. think the economic China, I has in situation been

our think performance okay. has I been

better doing say countries situation But do Some than Asia general, would the I others. in in fine given there. it's

in We do have of including parts our Asia, retail and own partners a China. mix shops of various retail

those So we countries. direct go little more some tend to in of customer to a

that's see we've of we've India, and In kind India there. kind is expect us market, small there, of approach got But to the and working a market in now. our new reset a we improvements for partner general, distribution right

Ivan from come Financial Feinseth will question Partners. last Tigress from Our

Congratulations year. quarter on of and the questions. I a have couple great

wearables. -- from offering. that pulse their You had consumer another was company of watches? wearable that large mentioned driver that readings Do their the notable in Garmin recently a major an did now There dropped smart ox feel you gaining market share and product you issue eventually choice smart to right with see as or

Yes. feature, that's I driver, a a from different have But don't we certainly, that, that specific we other out and major there. that was any do know very Ivan. offer that's player feature

basis I strong ability But monitor doing products a would the on of as all across as strong because well. that in well well wellness health both and performance broad to and general, as functions say activity features, our are kinds they're

out a app. premium that thoughts then as your as tiering far significant subscription started roll And to are upgrades level? on And what to maybe your you Connect still

the options eager and plow privacy that app into because That's of base. look at security we that how we're and our the data. for to trust continue Garmin, monetize a we their Well, not of especially do our use with people recognize we lot platforms to something

done, we look in possibly But could we've premium our like golfing. much features example, in are some apps, premium will of there for tiers result for that that at

automotive Then questions two the side. on OEM

profitable? far Is be incremental much invested you've of R&D and require a so the will forward from customer that that R&D. going that going you're You more onboarding mentioned mileage and each to lot get will customer new because the more not you're that

this able be There's build-to-print of is certainly order some developed leveraging actually this opportunity. of technologies to the kind to But a support customer. that in we've

work engineering our bring done, to has Garmin been factories. factory our design and leveraging our it process into we're so the and So

could mentioned 'XX. give idea to last what products my question, product we you momentum strong And some of going then you expect new and the us Can see? into areas

Well, super upcoming bright Forerunner a just announce excited It's did the we a it with think strong of already aren't product. about. have expectations entry-level actually, public. watch OLED And a any which lot personal display. be yesterday, XXX, that don't mention that releases I our a will But we I I'm really popular of

We have to no to turn would the further remarks. I for back closing questions. Seck over Teri call like

Thank you all for have joining us this morning. and Doug and I day. hope we Bye. are great available for you callbacks, a

today's you concludes Thank call. conference for your This participation.

You disconnect. may now