Garmin (GRMN) 30 Oct 242024 Q3 Earnings call transcript

Thank you for standing by and welcome to the Garmin Limited Third Quarter 2024 Conference Call. [Operator Instructions] I'd now like to turn the call over to Teri Seck, Director of Investor Relations.

You may begin.

Good morning. We would like to welcome you to Garmin Limited's Third Quarter 2024 Earnings Call. earnings Investor and Internet Relations the available slides at that Garmin's at site note press related release are www.garmin.com/stock. Please on the also website. of available archive the and transcript An webcast on will our related be products Garmin demand This earnings and growth plans financial its repurchases, projections and dividends call rates, future shares, for earnings, statements our introductions, revenue operating market Limited margins, or are statements regarding future objectives other business. Any position, forward-looking and forward-looking includes our regarding future segment gross product and margins, share statements. discussed events and as this forward-looking factors not The may of occur result actual circumstances affecting materially in differ earnings results call Garmin. risk and a

contained Cliff Doug Boessen, Information Chief of on XX-K our and behalf Form the Pemble, Executive Limited Officer; Officer Commission. Financial concerning factors filed morning this President Presenting these Garmin is and are in Treasurer. and Securities risk Chief with and Exchange

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

and Teri morning, you, everyone. good Thank

earlier revenue announced market segments points our we increased across business to we third quarter opportunities today, quarter a financial customers growth billion Gross geographies. XXX X record leverage record impressive As Consolidated $X.XX expanded resonate another with XX% achieved basis products revenue and results in new and as all Garmin delivered to segments. and of margin XX%.

favorable as pro up as XXX to reported XX.X%, points of well $X.XX, basis leverage reflecting business. XX% expanded higher increased XX% margin income the gross operating EPS Operating margin and year-over-year across forma both year-over-year. We operational the

intense Garmin single consumer there the consistently is results profile answer is no the that financial of how of debate. wondering Some straightforward we when have strong the The are the customer. subject of is health delivered

are results not broad our behavior. therefore, strictly of to consumer generalizations correlated And

different diversified in market segments, categories product within highly segments each is from dimensions, to consumers. many targeting business Our

business nature, opportunities is allowing in exist. to leverage they our wherever growth Additionally, global us

differentiators unique ordinary utility products And items. finally, essential that discretionary from separate our and offer them

our products is factor customers. that strong with resonating Another our in performance are clearly

in sales as share market competitors. our Garmin marine example, by organic measured our increased For versus

market in Additionally, IDC most basis year-over-year advanced increased only share through data, Garmin's market advanced increased. the to and the our we According XXX shipments. June wearables in brand share of covering global points global over experiencing were recent in XXXX, shipments wearables growth

reflection to of brand in and this globally, According this #X believe by are our wearable are strength and outcomes of direct team. We nature now we and competitive #X. are the IDC, we brilliant global products the considering market. advanced of the remarkable highly execution These fragmented a is Europe our

updating first guidance. Given approximately $X.XX our of full EPS year, We strong of billion performance forma XXXX $X.XX. for we the anticipate are revenue our quarters pro the of X and year

few point improvement running to resonate basis outlook and as Gross million, margin but of business lower over categories a provide financial XX%, discuss the product with results year, first, in $XXX detail products will to segment. our cost the a all was prior performance few a and I'll Doug Fitness. mix. minutes each greater customers. by with increased in [Audio our XX% Revenue advanced and driven remarks with contributing Starting growth Gap] on notably XXX wellness

leverage margin operating gross higher doubled points Operating and the both expanded than margin income nearly year-over-year to in basis reflecting and operating XX%, more X,XXX segment. by favorable

initiatives. and patient which the high-quality Garmin monitoring anniversary XXth our quarter, and Health, support corporate wearable wellness, leverages population of the we portfolio health data celebrated to During sensor extensive

We Garmin also recognize Health to Summit hosted annual Garmin health innovative digital solutions utilize products. the that

and XXX Gross million, increased successful driven to the adventure basis launch prior the series. fenix [Audio income over to $XXX Gap] Moving both higher a XX%, point and watches. performance XX% leverage was in Revenue XX% the improvement mix quarter the highly revenue of new and of of margin operating favorably year-over-year a XX%, by watches segment. from higher Operating year gross X operating strong segment adventure to and Given basis impacted by the the primarily increased reflecting points favorable costs product Fitness margin lower was Outdoor. expanded following margin XXX

tracking all During X the XX speaker, X along AMOLED mode Enduro class-leading the to built-in quarter, we offers series that a built-in cutting-edge flashlight a highly rich only The up smartwatch anticipated endurance hours as using microphone for brilliant X battery an grams fenix with solar well mode GPS features weighs X LED months athletes, up X. display, in fenix Enduro features features, launched and the models. technology. across XXX The in life as to and charging series

the our to Messenger launched stay communicator of roaming photo voice or offer ability messaging Plus, in and our also first We expanding in while areas nonexistent cellular inReach satellite coverage. to touch customers' limited

the fenix are response quarter recent the estimate third the Given growth positive series XX%. our the revenue the in segment launch, X of and following XXXX performance to strong we raising Outdoor

R&D driven aircraft to respectively, product Aviation, operating income products XX% to in of next and million, $XXX increased certify resulting year-over-year, Looking revenue develop categories. Gap] primarily were Gross new a platforms. XX%, aftermarket at decrease XX% new and by [Audio driven and by million, spending X% operating of margins increased $XX

the jet. dynamic flexible GenX PRIME, We recently touch PRIME recently broad the announced Gap] and in market. with integrated GXXXX new Aviation included that which that serve a redefines architecture [Audio to announced open upcoming adapts experience deck be seamlessly edge-to-edge a flight will business GXXXX Textron CJX and screens our highly the

an During called reduce busy and for navigating the the which help provide added confidence new airports. Awareness, complex to pilots information important risk of uses Runway Occupancy ADS-B we incursions runway and safety feature announced quarter,

quarter, Burrell and first into Awareness market. performed year Gary maintaining are Min our to of we late Garmin is National the XXXX. year our far of the full enshrined revolutionized co-founders, bring that products has work, pioneering aviation as Hall so segment Aviation the estimate for developing industry. Occupancy This the flat Dr. and Fame. tremendous this to honor The their expected revenue Kao Aviation Also the were during the Runway celebrates

to Marine, primarily JL million, Turning revenue Audio. by driven increased XX% from new to $XXX revenue

year-over-year Excluding Audio, reflecting Gross and leverage is in of favorable margin ahead pointing increased by JL Operating share the points basis X%, prior point XX%, XX%, trends and lower revenue impacted higher industry favorably in gains was basis margin was product XX% income increased operating over cost. XXX a segment. the year the expanded to market. to operating gross XXX quarter which margin approximately both and improvement the

the also the recognized boating Electronics the Association Marine over of industry. the Marine quarter, the Innovative the consecutive for of XXXX received with total #X During Most National publication awards, XXth Year Trade We decade. several we for by of being the the including XX second year, the Product along for awards consecutive a Excellence named Manufacturer Company leading as a were by year recreational for last Only, Soundings X

culture strength as recognition makes meaningful Soundings as of practices, considered our products our business and Trade this which Only the us. well both especially to

announced has our we full on year product broadens this leader far acquisition our week, which the estimate year XXXX. to enhances maintaining marine performed integrate lighting ability we and and LED for Marine boat. solutions, technologies the in Last a segment portfolio The are Lumishore, expected growth seamlessly our as of the so of XX%

increased controllers. driven growth Auto to Moving XX% operating as $XXX million, domain the in the efficiencies margin and to was OEM Revenue primarily by loss sales finally $X segment. improved with Gross narrowed higher million to XX% volumes.

lines. BMW car Garmin-designed we launched domain all During controllers the the remaining across successfully quarter,

segment OEM performed Auto so this has Our year. far as expected

is With However, estimate to widely full we reported it outlook are this revenue year softening. of in XX%. XXXX mind, automakers has been that lowering major our the growth

That concludes my remarks.

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

of begin third product updated results, certain everyone. $X.XXX increase a representing provide product XXX I'll increase morning, to third on costs in by Good Gross basis taxes XX%, comments increased favorable our balance Posted financial statement, sheet, billion Cliff. for the guidance. due margin to XX% and point cash mix and lower segments. reviewing quarter, year-over-year. Thanks, the flow quarter revenue

basis was and sales margins. basis decrease. as margin on XXX our XX.X%, a a gross Operating Operating leverage XXX point increase. increase achieve sales percentage income expense XX% was point XX.X%, $XXX was Operating a improved million, strong of to

$X.XX and forma pro was EPS was $X.XX. EPS GAAP Our

at by revenue and quarter Next, third segment our geography. look

quarter, achieved double-digit XX% we We revenue X on in OEM of During growth, segment growth The XX% Outdoor and achieved the have record consolidated third a XX%, X segments. segments our of segments, basis growth. respectively. with our Fitness, each The and X auto for Marine XX% by led

By geography, we by growth with double XX% region EMEA XX% all with APAC by with XX% led the X region region and growth. growth Americas followed across growth, the the regions, achieved

expenses. operating at next Looking

increased each due expenses. million. approximately expense and or operating XX%. increases million quarter development increased were Third to and SG&A Research $XX Year-over-year by personnel-related primarily $XX

sheet, expenditures marketable were balance A quarter of than flow few $XXX increased $XXX year-over-year for the the XXXX $XX quarter. Ended billion. and Capital the sequentially the quarter $XX approximately generated flow both sales $X.X billion. million prior third Accounts securities cash Inventory of receivable million, In lower to third in year strong quarter. the cash approximately we million approximately taxes. million, $X.X statement the quarter to year-over-year highlights sequentially quarter. following third balance and increased with on cash XXXX, of [ $X million, year ] free from prior decrease

$XXX to flow million. $X.X billion, year full expenditures XXXX expect be We capital approximately cash approximately free

Switzerland is During in of quarter XX.X% in in we the prior approximately $XXX share of rate tax tax compared company end, XXXX, effective quarter and Increase had global year [indiscernible] rate we in remaining purchased of of stock. program, combined to the million increase effective in primarily minimum which third tax to the million December tax rate requirements. to At million is the due approximately of $XX quarter. XXXX. X.X% forma pro dividends response paid repurchase through authorized the $XXX effective tax rate

$X.XX revenue to next $X.XX to billion year guidance previous approximately Estimated guidance. of our compared billion. full our Turning

due We expect performance. to of it's than higher year-to-date gross guidance margin previous XX% to approximately XX.X%, our be

projected margin which pro share expect increase forma to mix of higher forma to of income our is by previous an earnings of XX% $X.XX, XX% expect This full a approximately $X.XX previous guidance year We of the per $X. Also, expect jurisdiction. of effective an of to XX.X%. tax compared approximately pro guidance of results previous our than XX.X%, operating rate we tax guidance a

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

of Cleveland Research. [Operator comes from Instructions] from question Bollin the Your first line Ben

you Cliff, about [Audio within I Gap] thought a base could see speak you some little think refresh? launches And was seen what underlying drivers growth installed you how the of share the the of to with you've as versus you Could what recent on hoping these wearables.

Yes.

market. the We as that we a different different we're statements, Ben, many in very prepared lot player remarked of So offer is across cases. our wearables use in a in products drivers unique the

so that find lifestyles And able resonate be whole to market and to products we're to customers our ways with activities across do. as our want really the successful

of great thing. terms new our registration being the still base, -- installed is new which to a In our point trends Garmin, users our of of current majority to

which So continuing we're well terms I as across received seeing product mentioned, launches, our fenix very was that recent for rolls all it the and we're of demand And of series channels. by as out retail grow, then is to good. fill X that in the market the

on to you're product you benefits? color is were what number doing mentions related there some see stronger And to the lower it seeing a you're provide margins that or gross what of those on Could costs. also

quite costs. But we're from the definitely there's help pure all moving operations dollar of our few scale seeing of has our scale also we're across factory costs, business which of Taiwan materials segments. our product think the benefit in some getting is increased and there significantly. I in some a our as efficiencies pieces One the

about for one it that retailer inventory seeing thoughts holidays? you view into levels is holidays going the last have Interested into Any me. thoughts commitments versus The to they're any you the what in on years? how prior

some transition telling lines promotions. our channel very take clean, The our to as like They're planning us in products. for retail that appears are to they're of especially eager X. product the fenix Retailers we be

we're and we're partners. position believe good I a what in from our So hearing retail that's

comes next the line of Your question Erik from from Woodring Morgan Stanley.

I if may. Two,

really Cliff, on and margin operating especially on the impressive gross Outdoor, start, to side. Just Fitness performance and

before segments. haven't margins that necessarily we these seen for posting You're

margins? new moving through we that maybe moving as these I So sustain unpack pricing of downs your just of think Are you we to, much And aside Can from a really just help really, perspective, these this getting alluded is, have you flowing these are just And then I'm some you some question is how that? from quick of at cost curious, these margin if follow-up. your these us abnormally about product levels the Could margins? from -- put how launches? on strategy high? to sustainable the

Yes.

it's aside to that's think an that I reinforce cost probably structure. margin put important their difficult because way down companies obviously to continue

So design, that. as in terms efficiency in new And designs we that's try make as think of we're costs. premium on of those everyone I allow one have of gains differentiators unique sustainability, each What But an that is offer we working the component very hard and don't. us of well the to the questions to focus things competitors pricing going creating that with to opinion on is have on. that our products terms

recipe forward. our that's to to So continue going going be

previously the Auto change on or impact Auto that $XXX had market set you target either then $XXX goal? appreciate OEM in change the that. any does just timing softness, of Gap] OEM that I second on new OEM it And of weakness. all? for the just And target And kind you given [Audio the Obviously, as does million your XXXX. that to Okay. Does it a million of at have to any contracts alluded comments But OEM backdrop magnitude follow-up. you that, that then

the Again, that, on really next to than year, although comment are ready be. trends aren't car obviously, for in the the to industry they softer we used

that we XXXX and update at our introduce look an we'll So provide when outlook.

point, say, of say. too programs, on terms at new impact I In to early our this would

XXXX. of rolling out some I beyond those think are

the it I as that as would outlook economy the so expect lower would get it with better people interest could will that evolves, rates and believe And improve.

question next Ivan the from Feinseth Financial comes Your of line from Tigress Partners.

quarter. It's another on phenomenal. great Congratulations

connected recent messenger and in grow point seeing? messenger some do what are apps recent inReach these of that's platform, the Connect the and seeing? paid of expanded you kind the think app features the -- uptake would introduction say, of also to app this kind with some some And what ecosystem, you of the downloads new of of the as subscriptions start the With coming what of, on give subscriptions? availability IQ the indication kind out at revenue are from some of some as of uptake you you And let's you

our to things as they we that in terms you've view of the some as paid Ivan, seen Yes. recently of on these apps and incremental the value customers. store, bring

that are And we've bandwidth higher in structure go margin where out that is so cellular for which the we able that our great coverage as enhancers people more to sharing, poor. and to picture of overall the really Expanded revenue areas messaging roll in those out. and inReach, being been just -- voice excited and have is about

of a use expect although days terms what the we case that so product, completely far. in So results probably of in the be the for incremental early it's to terms early not of and are share lot

I so being we're now very like a product, by of and great new said, the roll to used see just it starting it's out customers. specifically, In terms messenger and

going of a your forward kind cams. potential if an seems these new becoming kind people you reception necessary growth the new finding seeing out you of item. increasing on that are where are what's And do dash What of lot what to demand of are those? see there going then there, to And see be a you introduction on

did from and range market focus very receive focused quality well. to nighttime. The our but of others, a providing new dashcam functionality is on Yes. to very use including superior a daytime on the We've releases dashcam broad mature, that's optics cases market product heavy

the we've response. favorable appreciates market So a had that think and I

of line from next question comes Lyonnais Jordan America. of Bank the Your from

side, the seeing up now the impact guys that you the reramping and Textron? any are On aero is strike for from strike over

Textron think go to But small was deliver normal. think probably had as terms to some now their back strike of working I aircraft. to plan the near-term in unable they're I effects hard

from effects long-term any anticipate don't we so And that.

it. Got

Okay. this was now because giving that quarter, into what raise quarter it have the And from quarter? the so guidance versus past is strong, more then in guys XQ you last confidence this versus on visibility

as don't in lot get or think quarter. I the of the last of QX. course, plans we with through until sometime materialize A move Well, confidence we QX in retailers more along the year,

complete of quarter. with confident fourth And the in more we course, can so a picture more now, be

Your question next comes the of Zatzkin from Noah Capital line from Markets. KeyBanc

a Lumishore, just business couple is Marine guess you Maybe on I that general? strength. the quantified how on large first in have

Yes.

general, can have to integrate the on people our lighting is important business and it's we Lumishore to that marine the the component that another our systems chartplotter around also incremental think provide one want in boat Marine a That's with segment. because boat. I and an

just growth, then been industry, challenging. kind terms into Like implied kind strong the market when obviously, kind your of of continued share share in kind And you In of what marine what looking gains gains confidence of the underpins by of industry in the at term? medium it's there? look market general, like

Yes.

of everyone terms seem is But I that think, where would the have it's again, us it I to outlook, fairly think probably market is opinion. the somewhere in stable this and better And people additional lot obviously at, will where I an or probably the a the improves, especially don't economy the to about rate see feel interest boats. downside. purchasing think of moves environment then upside will as

as In in our our to share thrilled that, been range especially sustained again, trolling more difficult we the do as more I ability new to gets like it grows. take enter terms and whole terms our of to market ability with But motors. that the across do categories we've ability share, market of think and

can great that that creating are customers out just products serve on we making And the and so we're there. concentrating sure

from from comes George of Wang line Your Barclays. the next question

Just X quick ones.

channel especially the we look difference end sheet, into the true of you of I kind inventory When $X.X double-click of can December just quarter And the you about Just of kind of can So kind a lot at how kind the versus is much sequentially season? to restocking? versus sell-through inventory increased kind demand? kind on firstly, billion. of of balance head sort market sell-in as dynamic, holiday talk

the inventory think is selling And to to down, managing in our our I inventory question, been not probably higher up calls mentioned a while that own any We're uncomfortably few over George, coming way. Well, our for now related think low. levels, that's in inventory inventory they've start I to have season we've prepare on channel QX. been first a

those so improve all working all here And And having serve I we think that serve in QX our able more orders in we've we to product a good way. the been so that the came inventory definitely was that results were because to can thing our you needs. saw of

sell-in they're would sell-out, to In versus good terms track registering say our that as of buying products activity customer a have I ability and them. and we very

like existing as been very XXX, a And so have XXX registration with in that X so well the rates. and with series, the have them Venu products such sell-out far, XXX while and fenix pleased the the as of also we're very Vivoactive market as especially the the new and products all the strong

Great. Okay.

the top profile? the medium-term terms outlook OEM affect this your margin Obviously, you given the your some I profitability profile Just Does it on a Auto Auto side year. later income for are margin for quick for guess, the Auto of getting the softer customers close follow-up. for to of of OEM in kind line guidance. lowering outlook OEM,

for thinking Auto operating gross any the curious, in for outlook medium in change of segment? terms the OEM margin margin the and just So

Yes.

the although in comes would impacted, it you that it the are margin that's And margin. fully is be course, in we've segment general, a think because because But of if unfortunate, to on about high basis in weakened, do the all we XX% the depending With something to factor their loaded ability of that's that of gross would for on a probably part, concern the But activity, most then we expenses for product lower can't I there. the could teens sales mix, to that said be respond kind not automakers customer course, the outlook have for range don't have say is customer really ultimate the gross we lower cover that. product. of volume. to this anything the sales,

Teri That now back concludes will final the remarks. session. I for Seck our turn some question-and-answer to closing call over

Doug joining we are all and Thank for for rest and you available the a hope great I day. your callbacks you of call. have Bye.

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

disconnect. You now may