Garmin (GRMN) 10-Q 2023 Q2 Quarterly report

United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 1, 2023

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-41118

GARMIN LTD.

(Exact name of Company as specified in its charter)

Switzerland	98-0229227
(State or other jurisdiction	(I.R.S. Employer
of incorporation or organization)	identification no.)
Mühlentalstrasse 2
8200 Schaffhausen
Switzerland	N/A
(Address of principal executive offices)	(Zip Code)

Company’s telephone number, including area code: +41 52 630 1600

Securities registered pursuant to Section 12(b) of the Act:

Registered Shares, $0.10 Per Share Par Value	GRMN	New York Stock Exchange
(Title of each class)	(Trading Symbol)	(Name of each exchange on which registered)

Indicate by check mark whether the Company (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Company was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☑ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. YES ☐ NO ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ☑

Number of shares outstanding of the registrant’s common shares as of July 28, 2023

Registered Shares, $0.10 par value: 191,451,558 (excluding treasury shares)

Garmin Ltd.

Form 10-Q

Quarter Ended July 1, 2023

Table of Contents

		Page
Part I - Financial Information		1
Item 1.	Condensed Consolidated Financial Statements	1
	Condensed Consolidated Statements of Income for the 13-Weeks and 26-Weeks ended July 1, 2023 and June 25, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Comprehensive Income for the 13-Weeks and 26-Weeks ended July 1, 2023 and June 25, 2022 (Unaudited)	2
	Condensed Consolidated Balance Sheets at July 1, 2023 and December 31, 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the 26-Weeks ended July 1, 2023 and June 25, 2022 (Unaudited)	4
	Condensed Consolidated Statements of Stockholders’ Equity for the 13-Weeks and 26-Weeks ended July 1, 2023 and June 25, 2022 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
Part II - Other Information		25
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	26
Item 6.	Exhibits	27
Signature Page		28

i

Part I - Financial Information

Item I - Condensed Consolidated Financial Statements

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

	13-Weeks Ended					26-Weeks Ended
	July 1, 2023		June 25, 2022			July 1, 2023		June 25, 2022
Net sales	$	1,320,795	$	1,240,833		$	2,468,219	$	2,413,496
Cost of goods sold		561,353		512,007			1,055,983		1,022,190
Gross profit		759,442		728,826			1,412,236		1,391,306
Advertising expense		46,344		43,357			76,691		77,490
Selling, general and administrative expenses		204,349		191,211			408,330		381,995
Research and development expense		224,394		201,518			445,878		410,524
Total operating expense		475,087		436,086			930,899		870,009
Operating income		284,355		292,740			481,337		521,297
Other income (expense):
Interest income		18,760		8,495			34,659		16,048
Foreign currency gains (losses)		10,797		(22,439	)		18,484		(25,946	)
Other income		2,064		170			3,268		3,431
Total other income (expense)		31,621		(13,774	)		56,411		(6,467	)
Income before income taxes		315,976		278,966			537,748		514,830
Income tax provision		28,037		21,093			47,482		45,366
Net income	$	287,939	$	257,873		$	490,266	$	469,464
Net income per share:
Basic	$	1.51	$	1.34		$	2.56	$	2.43
Diluted	$	1.50	$	1.33		$	2.56	$	2.43
Weighted average common shares outstanding:
Basic		191,293		193,074			191,395		192,980
Diluted		191,597		193,450			191,741		193,515

See accompanying notes.

1

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

	13-Weeks Ended						26-Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Net income	$	287,939		$	257,873		$	490,266		$	469,464
Foreign currency translation adjustment		(25,342	)		(64,895	)		(8,451	)		(121,807	)
Change in fair value of available-for-sale marketable securities, net of deferred taxes		(3,392	)		(16,628	)		7,684			(66,640	)
Comprehensive income	$	259,205		$	176,350		$	489,499		$	281,017

See accompanying notes.

2

Garmin Ltd. and Subsidiaries

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

	July 1, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,425,526		$	1,279,194
Marketable securities		253,689			173,288
Accounts receivable, net		716,802			656,847
Inventories		1,402,225			1,515,045
Deferred costs		15,243			14,862
Prepaid expenses and other current assets		297,516			315,915
Total current assets		4,111,001			3,955,151
Property and equipment, net of accumulated depreciation of $960,129 and $904,922		1,180,654			1,147,005
Operating lease right-of-use assets		134,995			138,040
Noncurrent marketable securities		1,100,259			1,208,360
Deferred income tax assets		493,943			441,071
Noncurrent deferred costs		10,451			9,831
Goodwill		572,985			567,994
Other intangible assets, net		165,591			178,461
Other noncurrent assets		101,921			85,257
Total assets	$	7,871,800		$	7,731,170
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	253,803		$	212,417
Salaries and benefits payable		157,774			176,114
Accrued warranty costs		52,352			50,952
Accrued sales program costs		80,708			97,772
Other accrued expenses		191,510			197,376
Deferred revenue		95,618			91,092
Income taxes payable		199,087			246,180
Dividend payable		418,801			139,732
Total current liabilities		1,449,653			1,211,635
Deferred income tax liabilities		116,651			129,965
Noncurrent income taxes payable		34,613			34,627
Noncurrent deferred revenue		35,939			35,702
Noncurrent operating lease liabilities		110,740			114,541
Other noncurrent liabilities		382			360
Stockholders’ equity:
Shares (195,880 and 198,077 shares authorized and issued;     191,470 and 191,623 shares outstanding)		19,588			17,979
Additional paid-in capital		2,077,540			2,042,472
Treasury stock (4,410 and 6,454 shares)		(322,688	)		(475,095	)
Retained earnings		4,464,682			4,733,517
Accumulated other comprehensive income (loss)		(115,300	)		(114,533	)
Total stockholders’ equity		6,123,822			6,204,340
Total liabilities and stockholders’ equity	$	7,871,800		$	7,731,170

See accompanying notes.

3

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

	26-Weeks Ended
	July 1, 2023			June 25, 2022
Operating Activities:
Net income	$	490,266		$	469,464
Adjustments to reconcile net income to net cash provided by    operating activities:
Depreciation		64,816			58,986
Amortization		22,788			23,870
Gain on sale or disposal of property and equipment		(124	)		(1,666	)
Unrealized foreign currency (gains) losses		(13,054	)		21,217
Deferred income taxes		(68,859	)		(66,382	)
Stock compensation expense		43,397			39,755
Realized loss on marketable securities		59			773
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts		(62,832	)		122,428
Inventories		111,531			(294,766	)
Other current and noncurrent assets		2,769			775
Accounts payable		45,206			(29,829	)
Other current and noncurrent liabilities		(39,484	)		(74,273	)
Deferred revenue		4,711			(4,246	)
Deferred costs		(990	)		2,920
Income taxes		(47,288	)		(3,550	)
Net cash provided by operating activities		552,912			265,476
Investing activities:
Purchases of property and equipment		(99,346	)		(134,798	)
Proceeds from sale of property and equipment		152			1,672
Purchase of intangible assets		(847	)		(887	)
Purchase of marketable securities		(68,978	)		(873,110	)
Redemption of marketable securities		98,885			620,796
Acquisitions, net of cash acquired		—			(10,828	)
Net cash used in investing activities		(70,134	)		(397,155	)
Financing activities:
Dividends		(279,442	)		(258,249	)
Proceeds from issuance of treasury stock related to equity awards		21,946			41,050
Purchase of treasury stock related to equity awards		(9,397	)		(14,722	)
Purchase of treasury stock under share repurchase plan		(70,181	)		(25,117	)
Net cash used in financing activities		(337,074	)		(257,038	)
Effect of exchange rate changes on cash and cash equivalents		599			(21,999	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		146,303			(410,716	)
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	$	1,426,215		$	1,088,127

See accompanying notes.

4

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 13-Weeks Ended July 1, 2023 and June 25, 2022

(In thousands)

	Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at March 26, 2022	$	17,979		$	1,982,561		$	(294,711	)	$	4,532,102		$	10,911		$	6,248,842
Net income		—			—			—			257,873			—			257,873
Translation adjustment		—			—			—			—			(64,895	)		(64,895	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $4,757		—			—			—			—			(16,628	)		(16,628	)
Comprehensive income																	176,350
Dividends		—			—			—			(564,454	)		—			(564,454	)
Issuance of treasury stock related to equity awards		—			11,322			9,582			—			—			20,904
Stock compensation		—			15,048			—			—			—			15,048
Purchase of treasury stock related to equity awards		—			—			(111	)		—			—			(111	)
Purchase of treasury stock under share repurchase plan, including any associated excise tax		—			—			(30,646	)		—			—			(30,646	)
Balance at June 25, 2022	$	17,979		$	2,008,931		$	(315,886	)	$	4,225,521		$	(70,612	)	$	5,865,933
	Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at April 1, 2023	$	17,979		$	2,048,339		$	(510,478	)	$	4,935,730		$	(86,566	)	$	6,405,004
Net income		—			—			—			287,939			—			287,939
Translation adjustment		—			—			—			—			(25,342	)		(25,342	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $974		—			—			—			—			(3,392	)		(3,392	)
Comprehensive income																	259,205
Dividends		—			—			—			(558,398	)		—			(558,398	)
Issuance of treasury stock related to equity awards		—			8,383			13,563			—			—			21,946
Stock compensation		—			22,665			—			—			—			22,665
Purchase of treasury stock related to equity awards		—			—			(228	)		—			—			(228	)
Purchase of treasury stock under share repurchase plan, including any associated excise tax		—			—			(26,372	)		—			—			(26,372	)
Cancellation of treasury stock		(238	)		—			200,827			(200,589	)		—			—
Share capital currency change		1,847			(1,847	)		—			—			—			—
Balance at July 1, 2023	$	19,588		$	2,077,540		$	(322,688	)	$	4,464,682		$	(115,300	)	$	6,123,822

See accompanying notes.

5

Garmin Ltd. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

For the 26-Weeks Ended July 1, 2023 and June 25, 2022

(In thousands)

	Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 25, 2021	$	17,979		$	1,960,722		$	(303,114	)	$	4,320,737		$	117,835		$	6,114,159
Net income		—			—			—			469,464			—			469,464
Translation adjustment		—			—			—			—			(121,807	)		(121,807	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $19,459		—			—			—			—			(66,640	)		(66,640	)
Comprehensive income																	281,017
Dividends		—			—			—			(564,680	)		—			(564,680	)
Issuance of treasury stock related to equity awards		—			8,454			32,596			—			—			41,050
Stock compensation		—			39,755			—			—			—			39,755
Purchase of treasury stock related to equity awards		—			—			(14,722	)		—			—			(14,722	)
Purchase of treasury stock under share repurchase plan, including any associated excise tax		—			—			(30,646	)		—			—			(30,646	)
Balance at June 25, 2022	$	17,979		$	2,008,931		$	(315,886	)	$	4,225,521		$	(70,612	)	$	5,865,933
	Common Stock			Additional Paid-In Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance at December 31, 2022	$	17,979		$	2,042,472		$	(475,095	)	$	4,733,517		$	(114,533	)	$	6,204,340
Net income		—			—			—			490,266			—			490,266
Translation adjustment		—			—			—			—			(8,451	)		(8,451	)
Adjustment related to unrealized gains (losses) on available-for-sale securities net of income tax effects of $1,642		—			—			—			—			7,684			7,684
Comprehensive income																	489,499
Dividends		—			—			—			(558,512	)		—			(558,512	)
Issuance of treasury stock related to equity awards		—			(6,482	)		28,428			—			—			21,946
Stock compensation		—			43,397			—			—			—			43,397
Purchase of treasury stock related to equity awards		—			—			(9,397	)		—			—			(9,397	)
Purchase of treasury stock under share repurchase plan, including any associated excise tax		—			—			(67,451	)		—			—			(67,451	)
Cancellation of treasury stock		(238	)		—			200,827			(200,589	)		—			—
Share capital currency change		1,847			(1,847	)		—			—			—			—
Balance at July 1, 2023	$	19,588		$	2,077,540		$	(322,688	)	$	4,464,682		$	(115,300	)	$	6,123,822

See accompanying notes.

6

Garmin Ltd. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

July 1, 2023

(In thousands, except per share information)

1. Accounting Policies

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Garmin Ltd. and wholly-owned subsidiaries (collectively, the “Company” or “Garmin”). Intercompany balances and transactions have been eliminated.

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement presentation. The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Additionally, the condensed consolidated financial statements should be read in conjunction with Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q, and the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Our operating results are subject to fluctuations associated with seasonal demand for consumer products, the timing of new product introductions, and OEM customer production schedules. Therefore, operating results for the 13-week and 26-week periods ended July 1, 2023 are not necessarily indicative of the results that may be expected for the year ending December 30, 2023.

The Company’s fiscal year is based on a 52- or 53-week period ending on the last Saturday of the calendar year. Therefore, the financial results of certain 53-week fiscal years, and the associated 14-week quarters, will not be exactly comparable to the prior and subsequent 52-week fiscal years and the associated 13-week quarters. The quarters ended July 1, 2023 and June 25, 2022 both contain operating results for 13 weeks.

Changes in Classification and Allocation

Certain prior period amounts have been reclassified or presented to conform to the current period presentation.

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 and 26-week periods ended June 25, 2022 have been recast herein to conform to the current period presentation. This change had no effect on the Company’s consolidated results of operations.

Significant Accounting Policies

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There were no material changes to the Company’s significant accounting policies during the 26-week period ended July 1, 2023.

Recently Issued Accounting Standards and Pronouncements

Recently adopted accounting standards and recently issued accounting pronouncements not yet adopted are not expected to have a material impact on the Company’s consolidated financial statements, accounting policies, processes, or systems.

7

2. Revenue

In order to further depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors, we disaggregate revenue (“net sales”) by geographic region, major product category, and pattern of recognition.

Disaggregated revenue by geographic region (Americas, APAC, and EMEA) is presented in Note 11 – Segment Information and Geographic Data. Note 11 also contains disaggregated revenue information of the five major product categories identified by the Company – fitness, outdoor, aviation, marine, and auto OEM.

A large majority of the Company’s sales are recognized on a point in time basis, usually once the product is shipped and title and risk of loss have transferred to the customer. Sales recognized over a period of time are primarily within the outdoor, aviation, and auto OEM segments and relate to performance obligations that are satisfied over the estimated life of the product or contractual service period. Revenue disaggregated by the timing of transfer of the goods or services is presented in the table below:

	13-Weeks Ended				26-Weeks Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Point in time	$	1,251,214	$	1,179,123	$	2,332,283	$	2,293,324
Over time		69,581		61,710		135,936		120,172
Net sales	$	1,320,795	$	1,240,833	$	2,468,219	$	2,413,496

Transaction price and costs associated with the Company’s unsatisfied performance obligations are reflected as deferred revenue and deferred costs, respectively, on the Company’s condensed consolidated balance sheets. Such amounts are recognized ratably over the applicable service period or estimated useful life. Changes in deferred revenue and costs during the 26-week period ended July 1, 2023 are presented below:

	26-Weeks Ended July 1, 2023
	Deferred  Revenue (1)			Deferred Costs (2)
Balance, beginning of period	$	126,794		$	24,693
Deferrals in period		140,699			11,673
Recognition of deferrals in period		(135,936	)		(10,672	)
Balance, end of period	$	131,557		$	25,694

(1) Deferred revenue is comprised of both deferred revenue and noncurrent deferred revenue per the condensed consolidated balance sheets

(2) Deferred costs are comprised of both deferred costs and noncurrent deferred costs per the condensed consolidated balance sheets

Of the $135,936 of deferred revenue recognized in the 26-week period ended July 1, 2023, $57,948 was deferred as of the beginning of the period. Of the $131,557 of deferred revenue as of July 1, 2023, the Company expects to recognize approximately eighty percent ratably over a total period of three years or less.

8

3. Earnings Per Share

The following table sets forth the computation of basic and diluted net income per share. Stock options, stock appreciation rights, and restricted stock units are collectively referred to as “equity awards”.

	13-Weeks Ended				26-Weeks Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Numerator:
Numerator for basic and diluted net income per share – net income	$	287,939	$	257,873	$	490,266	$	469,464
Denominator:
Denominator for basic net income per share – weighted-average common shares		191,293		193,074		191,395		192,980
Effect of dilutive equity awards		304		376		346		535
Denominator for diluted net income per share – adjusted weighted-average common shares		191,597		193,450		191,741		193,515
Basic net income per share	$	1.51	$	1.34	$	2.56	$	2.43
Diluted net income per share	$	1.50	$	1.33	$	2.56	$	2.43
Shares excluded from diluted net income per share calculation:
Anti-dilutive equity awards		218		757		218		761

4. Marketable Securities

ASC Topic 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The accounting guidance classifies the inputs used to measure fair value into the following hierarchy:

Level 1 Unadjusted quoted prices in active markets for the identical asset or liability

Level 2 Observable inputs for the asset or liability, either directly or indirectly, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability

Level 3 Unobservable inputs for the asset or liability

The Company endeavors to utilize the best available information in measuring fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Valuation is based on prices obtained from an independent pricing vendor using both market and income approaches. The primary inputs to the valuation include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, contractual cash flows, benchmark yields, and credit spreads.

The method described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

9

Marketable securities classified as available-for-sale securities are summarized below:

	Available-For-Sale Securities as of July 1, 2023
	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Agency securities	Level 2	$	11,002	$	—	$	(765	)	$	10,237
Mortgage-backed securities	Level 2		41,559		—		(5,586	)		35,973
Corporate debt securities	Level 2		1,086,519		158		(72,130	)		1,014,547
Municipal securities	Level 2		312,851		1		(25,429	)		287,423
Other	Level 2		6,629		—		(861	)		5,768
Total		$	1,458,560	$	159	$	(104,771	)	$	1,353,948

	Available-For-Sale Securities as of December 31, 2022
	Fair Value Level	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Agency securities	Level 2	$	7,000	$	—	$	(786	)	$	6,214
Mortgage-backed securities	Level 2		45,373		—		(4,525	)		40,848
Corporate debt securities	Level 2		1,106,688		188		(77,802	)		1,029,074
Municipal securities	Level 2		326,058		3		(28,861	)		297,200
Other	Level 2		10,466		—		(2,154	)		8,312
Total		$	1,495,585	$	191	$	(114,128	)	$	1,381,648

The primary objectives of the Company’s investment policy are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. The fair value of securities varies from period to period due to changes in interest rates, the performance of the underlying collateral, and the credit performance of the underlying issuer, among other factors.

Accrued interest receivable, which totaled $11,095 as of July 1, 2023, is excluded from both the fair value and amortized cost basis of available-for-sale securities and is included within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheets. The Company writes off impaired accrued interest on a timely basis, generally within 30 days of the due date, by reversing interest income. No accrued interest was written off during the 26-week period ended July 1, 2023.

The Company recognizes impairments relating to credit losses of available-for-sale securities through an allowance for credit losses and other income (expense) on the Company’s condensed consolidated statements of income. Impairment not relating to credit losses is recorded in accumulated other comprehensive income (loss) on the Company’s condensed consolidated balance sheets. The cost of securities sold is based on the specific identification method. Approximately 99% of securities in the Company’s portfolio were at an unrealized loss position as of July 1, 2023.

The following tables display additional information regarding gross unrealized losses and fair value by major security type for available-for-sale securities in an unrealized loss position as of July 1, 2023 and December 31, 2022.

	As of July 1, 2023
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
Agency securities	$	(16	)	$	3,987	$	(749	)	$	6,250	$	(765	)	$	10,237
Mortgage-backed securities		(15	)		176		(5,571	)		35,797		(5,586	)		35,973
Corporate debt securities		(5,114	)		152,214		(67,016	)		844,933		(72,130	)		997,147
Municipal securities		(155	)		8,817		(25,274	)		276,105		(25,429	)		284,922
Other		—			—		(861	)		5,768		(861	)		5,768
Total	$	(5,300	)	$	165,194	$	(99,471	)	$	1,168,853	$	(104,771	)	$	1,334,047

10

	As of December 31, 2022
	Less than 12 Consecutive Months					12 Consecutive Months or Longer					Total
	Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value
Agency securities	$	—		$	—	$	(786	)	$	6,214	$	(786	)	$	6,214
Mortgage-backed securities		(1,900	)		23,229		(2,625	)		17,619		(4,525	)		40,848
Corporate debt securities		(26,680	)		508,956		(51,122	)		498,834		(77,802	)		1,007,790
Municipal securities		(2,136	)		69,017		(26,725	)		225,679		(28,861	)		294,696
Other		—			—		(2,154	)		8,067		(2,154	)		8,067
Total	$	(30,716	)	$	601,202	$	(83,412	)	$	756,413	$	(114,128	)	$	1,357,615

As of July 1, 2023 and December 31, 2022, the Company had not recognized an allowance for credit losses on any securities in an unrealized loss position.

The Company has not recorded an allowance for credit losses and charge to other income (expense) for the unrealized losses on agency, mortgage-backed, corporate debt, municipal, and other securities presented above because we do not consider the declines in fair value to have resulted from credit losses. We have not observed a significant deterioration in credit quality of these securities, which are highly rated with moderate to low credit risk. Declines in value are largely attributable to current global economic conditions. The securities continue to make timely principal and interest payments, and the fair values are expected to recover as they approach maturity. Management does not intend to sell the securities, and it is not more likely than not that the Company will be required to sell the securities, before the respective recoveries of their amortized cost bases, which may be maturity.

The amortized cost and fair value of marketable securities at July 1, 2023, by maturity, are shown below.

	Amortized Cost		Fair Value
Due in one year or less	$	259,584	$	253,689
Due after one year through five years		1,172,343		1,076,583
Due after five years through ten years		17,908		16,363
Due after ten years		8,725		7,313
Total	$	1,458,560	$	1,353,948

5. Income Taxes

The Company recorded income tax expense of $28,037 in the 13-week period ended July 1, 2023, compared to income tax expense of $21,093 in the 13-week period ended June 25, 2022. The effective tax rate was 8.9% in the second quarter of 2023, compared to 7.6% in the second quarter of 2022. The increase was primarily due to a decrease in uncertain tax position reserves released in the second quarter of 2023, compared to the second quarter of 2022.

The Company recorded income tax expense of $47,482 in the 26-week period ended July 1, 2023, compared to income tax expense of $45,366 in the 26-week period ended June 25, 2022. The effective tax rate was 8.8% in both the first half of 2023 and the first half of 2022.

6. Inventories

The components of inventories consist of the following:

	July 1, 2023		December 31, 2022
Raw materials	$	544,655	$	600,858
Work-in-process		172,109		180,873
Finished goods		685,461		733,314
Inventories	$	1,402,225	$	1,515,045

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7. Warranty Reserves

The Company’s standard warranty obligation to its end-users provides for a period of one to two years from the date of shipment, while certain aviation, marine, and auto OEM products have a warranty period of two years or more from the date of installation. The Company’s estimates of costs to service its warranty obligations are based on historical experience and management’s expectations and judgments of future conditions, and are recorded as a liability on the balance sheet. The following reconciliation provides an illustration of changes in the aggregate warranty reserve.

	13-Weeks Ended						26-Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Balance - beginning of period	$	52,675		$	40,698		$	50,952		$	45,467
Accrual for products sold (1)		18,345			14,154			40,726			25,025
Expenditures		(18,668	)		(14,903	)		(39,326	)		(30,543	)
Balance - end of period	$	52,352		$	39,949		$	52,352		$	39,949

(1) Changes in cost estimates related to pre-existing warranties were not material and aggregated with accruals for new warranty contracts in the ‘accrual for products sold’ line.

8. Commitments and Contingencies

Commitments

The Company is party to certain commitments that require the future purchase of goods or services (“unconditional purchase obligations”). The Company’s unconditional purchase obligations primarily consist of payments for inventory, capital expenditures, and other indirect purchases in connection with conducting the business. The aggregate amount of purchase orders and other commitments open as of July 1, 2023 that may represent noncancellable unconditional purchase obligations having a remaining term in excess of one year was approximately $376,000.

Certain cash balances are held as collateral in relation to bank guarantees. This restricted cash is reported within other assets on the condensed consolidated balance sheets and totaled $689 and $718 on July 1, 2023 and December 31, 2022, respectively. The total of the cash and cash equivalents balance and the restricted cash reported within other assets in the condensed consolidated balance sheets equals the total cash, cash equivalents, and restricted cash shown in the condensed consolidated statements of cash flows.

Contingencies

Management of the Company currently does not believe it is reasonably possible that the Company may have incurred a material loss, or a material loss in excess of recorded accruals, with respect to loss contingencies in the aggregate, for the fiscal quarter ended July 1, 2023. The results of legal proceedings, investigations and claims, however, cannot be predicted with certainty. An adverse resolution of one or more of such matters in excess of management’s expectations could have a material adverse effect in the particular quarter or fiscal year in which a loss is recorded, but based on information currently known, the Company does not believe it is likely that losses from such matters would have a material adverse effect on the Company’s business or its consolidated financial position, results of operations or cash flows.

The Company settled or resolved certain matters during the 13-week and 26-week periods ended July 1, 2023 that did not individually or in the aggregate have a material impact on the Company’s business or its consolidated financial position, results of operations or cash flows.

9. Stockholders' Equity

Dividends

Under Swiss corporate law, dividends must be approved by shareholders at the annual general meeting of the Company’s shareholders. Approved dividends are subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting, and payable in four equal installments on dates to be determined by the Board of Directors. A reduction of retained earnings and a corresponding liability are recorded at the time of shareholders' approval and are periodically adjusted based on the number of applicable shares outstanding.

12

Our shareholders approved the following dividends:

Declaration Date	Dividend Date	Record Date	Dividend Per Share
Fiscal 2023
June 9, 2023	June 30, 2023	June 20, 2023	$	0.73
June 9, 2023	September 29, 2023	September 15, 2023	$	0.73
June 9, 2023	December 29, 2023	December 15, 2023	$	0.73
June 9, 2023	March 29, 2024	March 15, 2024	$	0.73
Total			$	2.92
Fiscal 2022
June 10, 2022	June 30, 2022	June 20, 2022	$	0.73
June 10, 2022	September 30, 2022	September 15, 2022	$	0.73
June 10, 2022	December 30, 2022	December 15, 2022	$	0.73
June 10, 2022	March 31, 2023	March 15, 2023	$	0.73
Total			$	2.92
Fiscal 2021
June 4, 2021	June 30, 2021	June 15, 2021	$	0.67
June 4, 2021	September 30, 2021	September 15, 2021	$	0.67
June 4, 2021	December 31, 2021	December 15, 2021	$	0.67
June 4, 2021	March 31, 2022	March 15, 2022	$	0.67
Total			$	2.68

Share Repurchase Program

On April 22, 2022, the Board of Directors approved a share repurchase program (the “Program”) authorizing the Company to repurchase up to $300,000 of the common shares of Garmin Ltd., exclusive of the cost of any associated excise tax. The timing and volume of share repurchases are subject to market conditions, business conditions and applicable laws, and are at management’s discretion. Share repurchases may be made from time to time in the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The Program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 29, 2023. As of July 1, 2023, the Company had repurchased 2,936 shares for $273,250, leaving approximately $26,750 available to repurchase additional shares under the Program.

Share Capital

In the second quarter of 2023, the share capital currency of the Company was changed from the Swiss Franc (CHF) to the U.S. Dollar (USD), as approved by shareholders at the Company’s 2023 Annual General Meeting. This aligns the share capital currency with the financial statement presentation currency of the Company. The Company’s nominal par value per share of CHF 0.10 was slightly reduced to USD $0.10, the impact of which is reflected in share capital, captioned as shares on the Company’s condensed consolidated balance sheets. Total stockholders’ equity reported for the Company was not affected by this change. Our common shares had a par value of USD $0.10 and CHF 0.10 per share as of July 1, 2023 and December 31, 2022, respectively.

Treasury Stock

In June 2023, our shareholders approved the cancellation of 2,197 shares previously purchased under our share repurchase program. The capital reduction by cancellation of these shares became effective in June 2023. Total stockholders’ equity reported for the Company was not affected.

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10. Accumulated Other Comprehensive Income (Loss)

The following provides required disclosure of changes in accumulated other comprehensive income (loss) balances by component for the 13-week and 26-week periods ended July 1, 2023:

	13-Weeks Ended July 1, 2023
	Foreign currency translation adjustment			Net gains (losses) on available-for-sale securities			Total
Balance - beginning of period	$	(9,090	)	$	(77,476	)	$	(86,566	)
Other comprehensive income (loss) before reclassification, net of income tax benefit of $984		(25,342	)		(3,421	)		(28,763	)
Amounts reclassified from accumulated other comprehensive income (loss) to other income, net of income tax benefit of $10 included in income tax provision		—			29			29
Net current-period other comprehensive income (loss)		(25,342	)		(3,392	)		(28,734	)
Balance - end of period	$	(34,432	)	$	(80,868	)	$	(115,300	)

	26-Weeks Ended July 1, 2023
	Foreign currency translation adjustment			Net gains (losses) on available-for-sale securities			Total
Balance - beginning of period	$	(25,981	)	$	(88,552	)	$	(114,533	)
Other comprehensive income (loss) before reclassification, net of income tax expense of $1,629		(8,451	)		7,638			(813	)
Amounts reclassified from accumulated other comprehensive income (loss) to other income, net of income tax benefit of $13 included in income tax provision		—			46			46
Net current-period other comprehensive income (loss)		(8,451	)		7,684			(767	)
Balance - end of period	$	(34,432	)	$	(80,868	)	$	(115,300	)

11. Segment Information and Geographic Data

Garmin is organized in the five operating segments of fitness, outdoor, aviation, marine, and auto OEM. These operating segments represent our reportable segments.

The Company’s Chief Executive Officer, who has been identified as the CODM, primarily uses operating income as the measure of profit or loss to assess segment performance and allocate resources. Operating income represents net sales less costs of goods sold and operating expenses. Net sales are directly attributed to each segment. Most costs of goods sold and the majority of operating expenses are also directly attributed to each segment, while certain other costs of goods sold and operating expenses are allocated to the segments in a reasonable manner considering the specific facts and circumstances of the expenses being allocated.

As indicated in Note 1 to the condensed consolidated financial statements, 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 and 26-week periods ended June 25, 2022 have been recast below to conform with the current period presentation.

14

Net sales (“revenue”), gross profit, and operating income for each of the Company’s five reportable segments are presented below.

	Fitness		Outdoor		Aviation		Marine		Auto OEM			Total
13-Weeks Ended July 1, 2023
Net sales	$	334,863	$	448,114	$	217,454	$	215,802	$	104,562		$	1,320,795
Gross profit		173,163		280,078		160,957		120,344		24,900			759,442
Operating income (loss)		54,458		138,255		62,766		46,377		(17,501	)		284,355
13-Weeks Ended June 25, 2022
Net sales	$	272,095	$	462,243	$	204,739	$	242,794	$	58,962		$	1,240,833
Gross profit		134,016		290,508		147,931		137,406		18,965			728,826
Operating income (loss)		23,462		163,371		61,745		68,619		(24,457	)		292,740
26-Weeks Ended July 1, 2023
Net sales	$	579,584	$	776,776	$	431,036	$	494,777	$	186,046		$	2,468,219
Gross profit		294,073		485,026		315,410		269,976		47,751			1,412,236
Operating income (loss)		65,036		214,999		120,460		118,285		(37,443	)		481,337
26-Weeks Ended June 25, 2022
Net sales	$	492,992	$	911,977	$	379,505	$	496,863	$	132,159		$	2,413,496
Gross profit		240,205		568,964		275,474		265,987		40,676			1,391,306
Operating income (loss)		24,043		316,182		101,871		127,501		(48,300	)		521,297

Net sales to external customers by geographic region were as follows for the 13-week and 26-week periods ended July 1, 2023 and June 25, 2022. Note that APAC includes Asia Pacific and Australian Continent and EMEA includes Europe, the Middle East and Africa:

	13-Weeks Ended				26-Weeks Ended
	July 1, 2023		June 25, 2022		July 1, 2023		June 25, 2022
Americas	$	641,848	$	646,172	$	1,253,552	$	1,216,807
EMEA		457,550		412,550		813,403		810,027
APAC		221,397		182,111		401,264		386,662
Net sales to external customers	$	1,320,795	$	1,240,833	$	2,468,219	$	2,413,496

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The discussion set forth below, as well as other portions of this Quarterly Report, contain statements concerning potential future events. Such forward-looking statements are based upon assumptions by management, as of the date of this Quarterly Report, including assumptions about risks and uncertainties faced by the Company. Readers can identify these forward-looking statements by their use of such verbs as expects, anticipates, believes or similar verbs or conjugations of such verbs. If any of the Company’s assumptions prove incorrect or should unanticipated circumstances arise, actual results could materially differ from those anticipated by such forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to, those factors identified in Part II, Item 1A of this Quarterly Report on Form 10-Q and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. This report has been filed with the Securities and Exchange Commission (the “SEC” or the “Commission”) in Washington, D.C. and can be obtained by contacting the SEC’s public reference operations or obtaining it through the SEC’s website at http://www.sec.gov. Readers are strongly encouraged to consider those factors when evaluating any forward-looking statement concerning the Company. The Company will not update any forward-looking statements in this Quarterly Report to reflect future events or developments.

The information contained in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Condensed Consolidated Financial Statements and Notes thereto included in this Form 10-Q and the audited financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Unless the context otherwise requires, references in this document to "we", "us", "our" and similar terms refer to Garmin Ltd. and its subsidiaries.

Unless otherwise indicated, amounts set forth in the discussion below are in thousands.

Company Overview

The Company is a leading worldwide provider of wireless devices, many of which feature Global Positioning System (GPS) navigation, and applications that are designed for people who live an active lifestyle. We are organized in the five operating segments of fitness, outdoor, aviation, marine, and auto OEM. Our products are sold through a variety of indirect distribution channels, including a large worldwide network of independent retailers, dealers, distributors, installation and repair shops, as well as original equipment manufacturers (OEMs). We also sell our products and services directly through our online webshop (garmin.com), subscriptions for connected services, and our own retail stores.

Business Environment Update

A number of headwinds including high inflation and rising interest rates have recently affected the economic environment and consumer behaviors. Additionally, while our global supply chain is routinely subject to component shortages, increased lead times, cost fluctuations, and logistics constraints, certain of these factors have at times been further amplified by the recent business environment. The nature and degree of effects of the business environment over time remain uncertain. Refer to Part II, Item 1A, “Risk Factors” of this Quarterly Report for further discussion of the risks and uncertainties facing our Company.

Results of Operations

As indicated in Note 1 to the condensed consolidated financial statements, 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 and 26-week periods ended June 25, 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.

16

Comparison of 13-Weeks Ended July 1, 2023 and June 25, 2022

Net Sales

Net Sales	13-Weeks Ended July 1, 2023			Year-over-Year Change			13-Weeks Ended June 25, 2022
Fitness	$	334,863			23	%	$	272,095
Percentage of Total Net Sales		25	%					22	%
Outdoor		448,114			(3	%)		462,243
Percentage of Total Net Sales		34	%					37	%
Aviation		217,454			6	%		204,739
Percentage of Total Net Sales		17	%					16	%
Marine		215,802			(11	%)		242,794
Percentage of Total Net Sales		16	%					20	%
Auto OEM		104,562			77	%		58,962
Percentage of Total Net Sales		8	%					5	%
Total	$	1,320,795			6	%	$	1,240,833

Net sales increased 6% for the 13-week period ended July 1, 2023 when compared to the year-ago quarter. Total unit sales in the second quarter of 2023 increased to 4,162 when compared to total unit sales of 3,743 in the second quarter of 2022, which differs from the percent increase in revenue primarily due to shifts in segment and product mix. Outdoor was the largest portion of our revenue mix at 34% in the second quarter of 2023 compared to 37% in the second quarter of 2022.

The increase in fitness revenue was driven by sales growth across all categories, led by strong demand for advanced wearables. Aviation revenue increased due to growth in OEM product categories. Auto OEM revenue increased primarily due to increased shipments of domain controllers. Outdoor revenue declined as growth in adventure watches was more than offset by declines in other categories. The decrease in marine revenue was primarily due to the timing of promotions, which contributed to lower sales of chartplotter products.

Gross Profit

Gross Profit	13-Weeks Ended July 1, 2023			Year-over-Year Change			13-Weeks Ended June 25, 2022
Fitness	$	173,163			29	%	$	134,016
Percentage of Segment Net Sales		52	%					49	%
Outdoor		280,078			(4	%)		290,508
Percentage of Segment Net Sales		63	%					63	%
Aviation		160,957			9	%		147,931
Percentage of Segment Net Sales		74	%					72	%
Marine		120,344			(12	%)		137,406
Percentage of Segment Net Sales		56	%					57	%
Auto OEM		24,900			31	%		18,965
Percentage of Segment Net Sales		24	%					32	%
Total	$	759,442			4	%	$	728,826
Percentage of Total Net Sales		57	%					59	%

Gross profit dollars in the second quarter of 2023 increased 4%, primarily due to the increase in net sales when compared to the year-ago quarter, as described above. Consolidated gross margin decreased 120 basis points when compared to the year-ago quarter primarily due to segment mix.

The fitness gross margin increase of 250 basis points was primarily attributable to favorable freight costs. The aviation gross margin increase of 180 basis points was primarily attributable to lower product costs. The outdoor and marine gross margins were relatively flat when compared to the year-ago quarter. The auto OEM gross margin decrease of 840 basis points was primarily attributable to unfavorable product mix.

Operating Expense

Operating Expense	13-Weeks Ended July 1, 2023			Year-over-Year Change			13-Weeks Ended June 25, 2022
Advertising expense	$	46,344			7	%	$	43,357
Percentage of Total Net Sales		4	%					3	%
Selling, General and administrative expenses		204,349			7	%		191,211
Percentage of Total Net Sales		15	%					15	%
Research and development expense		224,394			11	%		201,518
Percentage of Total Net Sales		17	%					16	%
Total	$	475,087			9	%	$	436,086
Percentage of Total Net Sales		36	%					35	%

17

Total operating expense increased 9% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago quarter.

Advertising expense increased 7% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago quarter. The absolute dollar increase was primarily attributable to increased media spend.

Selling, general and administrative expense increased 7% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago quarter. The absolute dollar expense increase in the second quarter of 2023 was primarily attributable to increased personnel-related expenses and information technology costs.

Research and development expense increased 11% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago quarter. The absolute dollar expense increase was primarily due to higher engineering personnel costs.

Operating Income

Operating Income (Loss)	13-Weeks Ended July 1, 2023			Year-over-Year Change			13-Weeks Ended June 25, 2022
Fitness	$	54,458			132	%	$	23,462
Percentage of Segment Net Sales		16	%					9	%
Outdoor		138,255			(15	%)		163,371
Percentage of Segment Net Sales		31	%					35	%
Aviation		62,766			2	%		61,745
Percentage of Segment Net Sales		29	%					30	%
Marine		46,377			(32	%)		68,619
Percentage of Segment Net Sales		21	%					28	%
Auto OEM		(17,501	)		(28	%)		(24,457	)
Percentage of Segment Net Sales		(17	%)					(41	%)
Total	$	284,355			(3	%)	$	292,740
Percentage of Total Net Sales		22	%					24	%

Total operating income decreased 3% in absolute dollars and 210 basis points as a percent of revenue when compared to the year-ago quarter. The decrease as a percent of revenue was primarily due to higher operating expenses, partially offset by sales growth, as described above. The decrease in outdoor and marine operating income was partially offset by improved performance in fitness, aviation, and auto OEM. Auto OEM experienced an operating loss in the current quarter driven by ongoing investments in auto OEM programs, and we expect the segment to continue to experience operating losses through 2023.

Other Income (Expense)

Other Income (Expense)	13-Weeks Ended July 1, 2023		13-Weeks Ended June 25, 2022
Interest income	$	18,760	$	8,495
Foreign currency gains (losses)		10,797		(22,439	)
Other income		2,064		170
Total	$	31,621	$	(13,774	)

The average interest return on cash and investments during the second quarter of 2023 was 2.7%, compared to 1.2% during the same quarter of 2022.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian Dollar, Chinese Yuan, Japanese Yen, and Polish Zloty. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables and payables held in a currency other than the functional currency at a given legal entity.

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The $10.8 million currency gain recognized in the second quarter of 2023 was primarily due to the U.S. Dollar weakening against the Polish Zloty, British Pound Sterling, and Euro, and strengthening against the Taiwan Dollar, partially offset by the U.S. Dollar strengthening against the Chinese Yuan, Japanese Yen, and Australian Dollar, within the 13-week period ended July 1, 2023. During this period, the U.S. Dollar weakened 4.7% against the Polish Zloty, 3.0% against the British Pound Sterling, 0.7% against the Euro, and strengthened 2.0% against the Taiwan Dollar, resulting in gains of $9.4 million, $1.4 million, $0.9 million, and $7.1 million, respectively, partially offset by the U.S. Dollar strengthening 5.3% against the Chinese Yuan, 8.0% against the Japanese Yen, and 1.4% against the Australian Dollar, resulting in losses of $3.1 million, $2.1 million, and $0.8 million, respectively. The remaining net currency loss of $2.0 million was related to the impacts of other currencies, each of which was individually immaterial.

The $22.4 million currency loss recognized in the second quarter of 2022 was primarily due to the U.S. Dollar strengthening against the Australian Dollar, Polish Zloty, Euro, Chinese Yuan, British Pound Sterling, and Japanese Yen, partially offset by the U.S. Dollar strengthening against the Taiwan Dollar, within the 13-week period ended June 25, 2022. During this period, the U.S. Dollar strengthened 8.3% against the Australian Dollar, 3.1% against the Polish Zloty, 3.9% against the Euro, 4.9% against the Chinese Yuan, 7.0% against the British Pound Sterling, and 9.7% against the Japanese Yen resulting in losses of $7.2 million, $5.3 million, $3.8 million, $3.0 million, $2.4 million, and $2.3 million, respectively, partially offset by the U.S. Dollar strengthening 3.5% against the Taiwan Dollar, resulting in a gain of $8.9 million. The remaining net currency loss of $7.3 million was related to the impacts of other currencies, each of which was individually immaterial.

Income Tax Provision

The Company recorded income tax expense of $28.0 million in the 13-week period ended July 1, 2023, compared to income tax expense of $21.1 million in the 13-week period ended June 25, 2022. The effective tax rate was 8.9% in the second quarter of 2023, compared to 7.6% in the second quarter of 2022. The increase was primarily due to a decrease in uncertain tax position reserves released in the second quarter of 2023, compared to the second quarter of 2022.

Net Income

As a result of the above, net income for the 13-week period ended July 1, 2023 was $287.9 million compared to $257.9 million for the 13-week period ended June 25, 2022, an increase of $30.0 million.

Comparison of 26-Weeks Ended July 1, 2023 and June 25, 2022

Net Sales

Net Sales	26-Weeks Ended July 1, 2023			Year-over-Year Change			26-Weeks Ended June 25, 2022
Fitness	$	579,584			18	%	$	492,992
Percentage of Total Net Sales		24	%					20	%
Outdoor		776,776			(15	%)		911,977
Percentage of Total Net Sales		31	%					38	%
Aviation		431,036			14	%		379,505
Percentage of Total Net Sales		17	%					16	%
Marine		494,777			0	%		496,863
Percentage of Total Net Sales		20	%					21	%
Auto OEM		186,046			41	%		132,159
Percentage of Total Net Sales		8	%					5	%
Total	$	2,468,219			2	%	$	2,413,496

Net sales increased 2% for the 26-week period ended July 1, 2023 when compared to the year-ago period. Total unit sales in the first half of 2023 increased to 7,372 when compared to total unit sales of 7,182 in the first half of 2022. Outdoor was the largest portion of our revenue mix at 31% in the first half of 2023 compared to 38% in the first half of 2022.

The increase in fitness revenue was primarily driven by strong demand for our advanced wearables. Aviation revenue increased due to growth in both OEM and aftermarket product categories. Auto OEM revenue increased primarily due to increased shipments of domain controllers. Outdoor revenue decreased primarily due to declines in adventure watches. Marine revenue was relatively flat.

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Gross Profit

Gross Profit	26-Weeks Ended July 1, 2023			Year-over-Year Change			26-Weeks Ended June 25, 2022
Fitness	$	294,073			22	%	$	240,205
Percentage of Segment Net Sales		51	%					49	%
Outdoor		485,026			(15	%)		568,964
Percentage of Segment Net Sales		62	%					62	%
Aviation		315,410			14	%		275,474
Percentage of Segment Net Sales		73	%					73	%
Marine		269,976			1	%		265,987
Percentage of Segment Net Sales		55	%					54	%
Auto OEM		47,751			17	%		40,676
Percentage of Segment Net Sales		26	%					31	%
Total	$	1,412,236			2	%	$	1,391,306
Percentage of Total Net Sales		57	%					58	%

Gross profit dollars in the first half of 2023 increased 2%, primarily due to the increase in net sales when compared to the year-ago period, as described above. Consolidated gross margin was relatively flat when compared to the year-ago period.

The fitness and marine gross margin increases of 200 and 100 basis points, respectively, were primarily attributable to favorable freight costs. The outdoor and aviation gross margins were relatively flat when compared to the year-ago period. The auto OEM gross margin decrease of 510 basis points was primarily attributable to unfavorable product mix.

Operating Expense

Operating Expense	26-Weeks Ended July 1, 2023			Year-over-Year Change			26-Weeks Ended June 25, 2022
Advertising expense	$	76,691			(1	%)	$	77,490
Percentage of Total Net Sales		3	%					3	%
Selling, General and administrative expenses		408,330			7	%		381,995
Percentage of Total Net Sales		17	%					16	%
Research and development expense		445,878			9	%		410,524
Percentage of Total Net Sales		18	%					17	%
Total	$	930,899			7	%	$	870,009
Percentage of Total Net Sales		38	%					36	%

Total operating expense increased 7% in absolute dollars and 170 basis points as a percent of revenue when compared to the year-ago period.

Advertising expense decreased 1% in absolute dollars and was relatively flat as a percent of revenue when compared to the year-ago period. The absolute dollar decrease was primarily attributable to decreased cooperative spend.

Selling, general and administrative expense increased 7% in absolute dollars and was relatively flat as a percent of revenue compared to the year-ago period. The absolute dollar expense increase in the first half of 2023 was primarily attributable to increased personnel-related expenses and information technology costs.

Research and development expense increased 9% in absolute dollars and 110 basis points as a percent of revenue when compared to the year-ago period. The absolute dollar expense increase was primarily due to higher engineering personnel costs.

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Operating Income

Operating Income (Loss)	26-Weeks Ended July 1, 2023			Year-over-Year Change			26-Weeks Ended June 25, 2022
Fitness	$	65,036			170	%	$	24,043
Percentage of Segment Net Sales		11	%					5	%
Outdoor		214,999			(32	%)		316,182
Percentage of Segment Net Sales		28	%					35	%
Aviation		120,460			18	%		101,871
Percentage of Segment Net Sales		28	%					27	%
Marine		118,285			(7	%)		127,501
Percentage of Segment Net Sales		24	%					26	%
Auto OEM		(37,443	)		(22	%)		(48,300	)
Percentage of Segment Net Sales		(20	%)					(37	%)
Total	$	481,337			(8	%)	$	521,297
Percentage of Total Net Sales		20	%					22	%

Total operating income decreased 8% in absolute dollars and 210 basis points as a percent of revenue when compared to the year-ago period. The decrease as a percent of revenue was primarily due to higher operating expenses, partially offset by sales growth, as described above. The decrease in outdoor and marine operating income was partially offset by improved performance in fitness, aviation, and auto OEM. Auto OEM experienced an operating loss in the current period driven by ongoing investments in auto OEM programs, and we expect the segment to continue to experience operating losses through 2023.

Other Income (Expense)

Other Income (Expense)	26-Weeks Ended July 1, 2023		26-Weeks Ended June 25, 2022
Interest income	$	34,659	$	16,048
Foreign currency gains (losses)		18,484		(25,946	)
Other Income		3,268		3,431
Total	$	56,411	$	(6,467	)

The average interest returns on cash and investments during the 26-week periods ended July 1, 2023 and June 25, 2022 were 2.5% and 1.1%, respectively.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian Dollar, Chinese Yuan, Japanese Yen, and Polish Zloty. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities, receivables and payables held in a currency other than the functional currency at a given legal entity.

The $18.5 million currency gain recognized in the 26-week period ended July 1, 2023 was primarily due to the U.S. Dollar weakening against the Polish Zloty, British Pound Sterling, and Euro, and strengthening against the Taiwan Dollar, partially offset by the U.S. Dollar strengthening against the Chinese Yuan, Japanese Yen, and Australian Dollar, within the 26-week period ended July 1, 2023. During this period, the U.S. Dollar weakened 7.5% against the Polish Zloty, 5.0% against the British Pound Sterling, 1.9% against the Euro, and strengthened 1.6% against the Taiwan Dollar, resulting in gains of $13.9 million, $2.7 million, $1.4 million, and $5.9 million, respectively, partially offset by the U.S. Dollar strengthening 4.0% against the Chinese Yuan, 9.1% against the Japanese Yen, and 2.4% against the Australian Dollar, resulting in losses of $2.4 million, $2.0 million, and $0.5 million, respectively. The remaining net currency loss of $0.5 million was related to the impacts of other currencies, each of which was individually immaterial.

The $25.9 million currency loss recognized in the 26-week period ended June 25, 2022 was primarily due to the U.S. Dollar strengthening against the Australian Dollar, Polish Zloty, Euro, Chinese Yuan, British Pound Sterling, and Japanese Yen partially offset by the U.S. Dollar strengthening against the Taiwan Dollar, within the 26-week period ended June 25, 2022. During this period, the U.S. Dollar strengthened 4.9% against the Australian Dollar, 8.6% against the Polish Zloty, 6.7% against the Euro, 4.9% against the Chinese Yuan, 8.4% against the British Pound Sterling, and 15.4% against the Japanese Yen resulting in losses of $6.6 million, $11.3 million, $8.9 million, $3.0 million, $2.5 million, and $3.9 million, respectively, partially offset by the U.S. Dollar strengthening 6.8% against the Taiwan Dollar, resulting in a gain of $17.1 million. The remaining net currency loss of $6.8 million was related to the impacts of other currencies, each of which was individually immaterial.

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Income Tax Provision

The Company recorded income tax expense of $47.5 million in the first half of 2023, compared to income tax expense of $45.4 million in the first half of 2022. The effective tax rate was 8.8% in both the first half of 2023 and the first half of 2022.

Net Income

As a result of the above, net income for the 26-week period ended July 1, 2023 was $490.3 million compared to $469.5 million for the 26-week period ended June 25, 2022, an increase of $20.8 million.

Liquidity and Capital Resources

We primarily use cash flow from operations, and expect that future cash requirements may be used, to fund our capital expenditures, support our working capital requirements, pay dividends, fund share repurchases, and fund strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our short- and long-term projected working capital needs, capital expenditures, and other cash requirements.

Cash, Cash Equivalents, and Marketable Securities

As of July 1, 2023, we had approximately $2.8 billion of cash, cash equivalents and marketable securities. Management invests idle or surplus cash in accordance with the investment policy, which has been approved by the Company’s Board of Directors. The investment policy’s primary objectives are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest returns on cash and investments during the first halves of 2023 and 2022 were 2.5% and 1.1%, respectively. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral, and in the credit performance of the underlying issuer, among other factors. See Note 4 for additional information regarding marketable securities.

Cash Flows

Cash provided by operating activities totaled $552.9 million for the first half of 2023, compared to $265.5 million for the first half of 2022. The increase was primarily due to a lower use of cash on purchases of inventory compared to the year-ago quarter, partially offset by a decrease in collections of accounts receivable in the first half of 2023 compared to the first half of 2022.

Cash used in investing activities totaled $70.1 million for the first half of 2023, compared to $397.2 million for the first half of 2022. The decrease was primarily due to net redemptions of marketable securities in the first half of 2023, compared to the net purchases of marketable securities in the first half of 2022, as well as a decrease in purchases of property and equipment.

Cash used in financing activities totaled $337.1 million for the first half of 2023, compared to $257.0 million for the first half of 2022. This increase was primarily due to higher purchases of treasury stock under the share repurchase plan, and higher cash dividend payments in the first half of 2023, as the first half of 2022 included two dividend payments of $0.67 per share, while the first half of 2023 included two dividend payments of $0.73 per share.

Use of Cash

Operating Leases

The Company has lease arrangements for certain real estate properties, vehicles, and equipment. Leased properties are typically used for office space, distribution, and retail. As of July 1, 2023, the Company had fixed lease payment obligations of $158.4 million, with $31.7 million payable within 12 months.

Inventory Purchase Obligations

The Company obtains various raw materials and components for its products from a variety of third party suppliers. The Company’s inventory purchase obligations are primarily noncancelable. As of July 1, 2023, the Company had inventory purchase obligations of $702.5 million, with $496.1 million payable within 12 months.

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Other Purchase Obligations

The Company’s other purchase obligations primarily consist of noncancelable commitments for capital expenditures and other indirect purchases in connection with conducting our business. As of July 1, 2023, the Company had other purchase obligations of $366.5 million, with $143.5 million payable within 12 months.

Critical Accounting Policies and Estimates

General

Our discussion and analysis of financial condition and results of operations are based upon the Company’s condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The presentation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to customer sales programs and incentives, product returns, bad debts, inventories, investments, intangible assets, income taxes, warranty obligations, and contingencies and litigation. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week and 26-week periods ended July 1, 2023.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

There are numerous market risks that can affect our future business, financial condition and results of operations. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes during the 13-week and 26-week periods ended July 1, 2023 in the risks described in our Annual Report on Form 10-K related to market sensitivity, inflation, foreign currency exchange rate risk and interest rate risk.

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company maintains a system of disclosure controls and procedures that are designed to provide reasonable assurance that information, which is required to be timely disclosed, is accumulated and communicated to management in a timely fashion. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. As of July 1, 2023, the Company carried out an evaluation, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded as of July 1, 2023 that our disclosure controls and procedures were effective such that the information relating to the Company, required to be disclosed in our Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in internal control over financial reporting. There has been no change in the Company’s internal controls over financial reporting that occurred during the Company’s fiscal quarter ended July 1, 2023 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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Part II - Other Information

Item 1. Legal Proceedings

In the normal course of business, the Company and its subsidiaries are parties to various legal claims, actions, and complaints, including matters involving patent infringement, other intellectual property, product liability, customer claims and various other risks. It is not possible to predict with certainty whether or not the Company and its subsidiaries will ultimately be successful in any of these legal matters, or if not, what the impact might be. However, the Company’s management does not expect that the results in any of these legal proceedings will have a material adverse effect on the Company’s results of operations, financial position or cash flows. For additional information, see Note 8 – Commitments and Contingencies in the above Condensed Consolidated Financial Statements and Part I, Item 3, “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Item 1A. Risk Factors

There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022. There have been no material changes during the 26-week period ended July 1, 2023 in the risks described in our Annual Report on Form 10-K. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties, including those not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Share repurchase activity during the 13-week period ended July 1, 2023, summarized on a trade-date basis, was as follows (in thousands, except per share amounts):

Period	Total Number of Shares Purchased (1)		Average Price Paid Per Share (2)		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares That May Yet Be Purchased Under the Program
April 2, 2023 - April 29, 2023		160	$	98.58		160	$	37,129
April 30, 2023 - May 27, 2023		49	$	101.46		49	$	32,147
May 28, 2023 - July 1, 2023		52	$	103.79		52	$	26,750
Total		261				261

(1) The Board of Directors approved a share repurchase program on April 22, 2022 (the "Program"), authorizing the Company to purchase up to $300 million of its common shares, exclusive of the cost of any associated excise tax. Share repurchases may be made in the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. The timing and volume of share repurchases are subject to market conditions, business conditions and applicable laws, and are at management’s discretion. The Program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. The share repurchase authorization expires on December 29, 2023. See Note 9 in Part I, Item 1 of this Quarterly Report for additional information related to share repurchases.

(2) Average price paid per share includes costs associated with the repurchases, except for the cost of any associated excise tax.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

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Item 5. Other Information

(c) Trading Plans

During the 13-week period ended July 1, 2023, no director or officer (as defined in Rule 16a-1(f) of the Securities Exchange Act of 1934) of the Company adopted or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

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Item 6. Exhibits

Exhibit 3.1	Garmin Ltd. Articles of Association, as amended and restated on June 9, 2023 (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on June 12, 2023).
Exhibit 10.1	Garmin Ltd. 2005 Equity Incentive Plan, as amended and restated on June 9, 2023.
Exhibit 10.2	Garmin Ltd. Employee Stock Purchase Plan, as amended and restated on June 9, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on June 12, 2023).
Exhibit 10.3	Garmin Ltd. 2011 Non-Employee Directors’ Equity Incentive Plan, as amended and restated on June 9, 2023 (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on June 12, 2023).
Exhibit 31.1	Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit 31.2	Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).
Exhibit 32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Exhibit 101.INS	XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
Exhibit 101.SCH	Inline XBRL Taxonomy Extension Schema
Exhibit 101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase
Exhibit 101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase
Exhibit 101.LAB	Inline XBRL Taxonomy Extension Label Linkbase
Exhibit 101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase
Exhibit 104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

GARMIN LTD.
By	/s/ Douglas G. Boessen
	Douglas G. Boessen
	Chief Financial Officer
	(Principal Financial Officer and
	Principal Accounting Officer)

Dated: August 2, 2023

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