GRMN - Earnings call transcript Q1 2022

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Operator

Good day, and thank you for standing by. Welcome to Garmin Limited First Quarter 2022 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to your first speaker today to Teri Seck, Director of Investor Relations. Please go ahead.

Teri Seck

morning. Good to Garmin like XXXX First you Call. Earnings welcome would Ltd.'s to Quarter We the release the earnings are that note Please press Garmin's Relations www.garmin.com/stock. available and Investor site at on Internet at slides related archive on website. available the also our and transcript related An will of be webcast This call Ltd. and statements regarding other earnings forward-looking projections Garmin includes business. its and and are regarding statements future position, future or statements. repurchases, share financial for dividends product demand gross introductions, objectives earnings, Any revenues, future plans our products market forward-looking our margins, margins, and shares, operating The differ in not forward-looking factors this earnings occur, and and circumstances events discussed a risk call actual materially of may results result Garmin. could affecting as Information with concerning and Exchange contained in risk is the our Form Securities factors XX-K Commission. filed these impact COVID-XX particular, of the In significant duration is there pandemic. uncertainty about and the any on business outlook results as information of any change that about statement means based impact and of company's date. could results estimate COVID-XX the This the best time, and on available today's the at is the Ltd. Presenting of on Garmin behalf this morning Boessen, and Officer; are and Executive President Financial Officer Chief Cliff Treasurer. Pemble, and Doug Chief to I time, over the call Pemble. to turn this would like At Cliff

Clifton Pemble

you, good morning, everyone. Thank Teri, and

combined high costs, impacted was income, margin down freight As Four in operating dollar. earlier generated segments X% quarter the performance, to from representing first a Operating revenue the today, margin record. of double-digit million $X.XX by $XXX increased U.S. gross negatively historically of consolidated new declined to the reported X% growth XX.X% which X and the billion, We quarter, reported strengthening delivered year. business was revenue prior which growth. of due with

challenges, increase higher activities Ukraine demand economic costs invasion associate old and and a expenses for Supply chain these increased compensation fill. we of remains products of normalize. of strong outlook. the quarter further for are combination complicated global which unthinkable head the performed optimistic a continue of We well to constraints limited persist, crisis orders an certain increased count, the business Despite very and during created we operational despite future. Russia's expenses the could including new reasons, as headwinds. our and operating humanitarian about addition, the In variety

of proposed addition share a will shareholders approved per share dividend is the be recently annual to Board $XXX at repurchase plan, $X.XX in considered meeting. that which upcoming Our Directors the by million

Doug, but of Before demand ahead. summary what turning XX% for over the All Starting XX% highlights and of the cycling were margins business, respectively. decreased a Gross call the revenue provide segment normalization to contributor. we by and see and $XXX X%, categories products declined, with was million. operating product to I'll main

segments a growth. revenue device fitness Garmin While revenue wearable robust on across from wearables all at basis, declined, combined experienced

to expected performance prior the the first the challenging for compare the the be of half We we outstanding as against of segment year. fitness year

While expected, believe year moderate the new pandemic decline we move will we as than these swings of the the the from XXXX and in trends of greater introductions. product benefit was back half past

Gross and growth by multiple watches. margins XX% respectively, demand XX% Moving operating to outdoor resulting Revenue in million increased to in for of segment. XX%, categories $XXX operating $XXX were and led strong income with million. adventure the

versions design quarter, available in watch power flagship our indefinitely series featuring sizes, using X announced that technology. touchscreen adventure exclusive our fenix the Instinct operate our with sweeping the X distinctive including to solar can and During lineup, a we series display, new X updates including a

the growth the that will days. We be a We up believe remainder to display all-new strong also battery year. as bright class-leading of these the with epix and new announced products for driver in for demand other segment XX AMOLED a categories well touchscreen life as the

XX% XX%, products categories. Supply XX% but increased and growth the Gross driven of Looking $XXX the improved growth by aftermarket growth XX% results experienced marine the in for categories were led revenue in of by multiple margins the quarter situation remainder $XX Revenue with of broad-based both chartplotters. segment million and new $XXX year. impacted delivered new operating increasing across another We The of orders to product impressive Aircraft We believe next were to with these segment. product and cockpit and million. positive a demand Gross X% bar of throughout technology XX%, has systems. million. margins LiveScope separation. income and from system invest reporting existing at are $XX the OEM respectively, strong resolution robust raises Plus are operating and for OEMs is sonar with sales halo quarter. aviation proven to target and images improved operating new of LiveScope income indicators customers resulting also be respectively, higher operating Garmin, as the resulting in customers. the million. constraints Aftermarket

growth LiveScope to and products demand We for year. of continue remainder positive see builds a this is our strong Plus of momentum. marine We for the indicator this the believe on

the the mass truck it BMW million, Revenue our in of to BMW XX% second our to OEM preparing with auto new finally the offerings for of we the programs. approved consumer to In the module an investments category, was We Instinct Gross delivering for drivers. growth rating made segment. we recorded loss consumer factory, operating for production million rare dezl auto product XX%, in $XX continue $XXX computing and production progress to a auto, OEM both with the by and next-generation OEM BMW parts Moving diversify readiness. launch we platform. starting X anticipate green of from margin the increased quarter. categories. driven edition Poland launch smartwatch significant In giving

our on to achieve call in to model to important We excite diversified business different customers Doug, many and segments over remain lead paths Before the success. offers to consolidated all I goals. creating remember it's products growth differentiated turn our highly that our that focused

Also, might us. we represents quarter face, seasonal the impact the predict ahead Regarding we these our outlook and our year, of and the the year financial I business. the quarter the first and for cannot lowest rest much of that new year existing the on of of several headwinds remains mentioned have

our in $X.X we XXXX mind, maintaining and February, for in which called are things revenue issued share. billion a these With $X.XX EPS of of consolidated guidance

concludes my that remarks. So

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

Douglas Boessen

I a margin reviewing morning, revenue basis representing the Good year-over-year. statement quarter, flow quarter impact increase. sheet, $XXX Operating point was the our expense XX.X%, exchange posted basis decrease. XXX point million, results a was in Operating basis everyone. the income cash Cliff. rates. prior decrease begin financial foreign margin decrease as XX.X%, taxes. Operating billion of first sales XX primarily comments X% point from by due We Thanks, increase was quarter. higher XXX first provide and Gross was X% balance The favorable and XX%, on freight of of costs decrease. $X.XXX to and was percentage

Our was GAAP EPS former was $X.XX. EPS $X.XX. The

quarter. by segment, first XX% our the and quarter offset in geography, XX%; double-digit our In XX% XX% and foreign robust exchange segment the during growth growth outdoor marine we led the was the quarter, at first APAC, EMEA, in segment, look by growth followed X by rates of the which of by segment, geography. revenue was growth; auto growth we negatively Next, partially impacted XX% achieved Americas decline By in X X% growth. segments, in by

Looking at expenses. next operating

strategy, also of of in diversified safety cash quarter. decrease This in you The carry mitigate prior due capital raw the lines approximately personnel-related versus working $XXX First higher tax and effective XXXX, spend in is the engineering due and times. tax an increased decrease supply to year ended to air We open the lead Q&A? marine we primarily million million million, billion. year-over-year, year-over-year, increases million of Research costs. strong million million to please primarily quarter, formal the Talon, and increase quarter material U.S. to balance increased personnel in and our to credits. A a development to could We're flow expenditures, rate compared generated million remarks. marketable of relatively prior increased sales quarter Accounts quarter grew increase due sheet, primarily freight capital reported stock approximately executing $XX the Inventory in rate product cash, operating the sequentially support with line due increased few deductions on to of to increasingly expense highlights to flow needs primarily expenses, first our optimize and taxes. line outdoor levels securities to segments. the decreased to the the $XXX XX%. fourth Advertising quarter, billion. increased $X.X by to or statement and growth. year-over-year days In balance $XXX our SG&A in technology concludes in expense sufficient $X effective XX.X% with shipments to mix costs. XX.X% receivable $XX increased a for higher increased seasonally ocean compared free quarter due tax prior cash information following $X $XX our

Operator

[Operator comes from JPMorgan. Instructions]. the I of line Paul our first Chung from show question

Paul Chung

product fenix That us up, we had for releases. of off the outlook on throughout Any expect be about more also and the head other And can year releases First think of seasonal the year? start a and would of you we strength to in that? help very the product of outdoor update outdoor? nice kind you kind kind then Should how helpful.

Clifton Pemble

Yes.

out, strong seeing that do conclusions But things we the have to update we've very it's that the terms now, we any all segments. a early and the to are the right throughout in our laid the products product the way year coming basically based of have of and really in we've think on them had. more I year start make new lineup we still in year,

momentum and a new and innovation so And of products. new driven our is growth around lot

Paul Chung

fitness. we well? related? on of what year? profit of operating quarter? of the And drove more the component mostly cost And year in how rebound the about then that similar And How than Is you. think decline as a bit Got expected. kind minimal do that the pace and a question the does throughout The was balance

Clifton Pemble

Yes.

the the than weaker fitness category sure. So contributor for cycling we expected biggest was that. to is And

results year. comping against are strong We really last from

pieces, much our normal of this. different lots have profiles margin mostly profit are is in pretty affected from freight those cycling the biggest at of FX there's we have the one margin circumstances, the if under of dimensions you If would look things it been the operating range was gross segment. and and by operating the that's for a moving the where angle, But impact. been things to side costs. would of really So lots But

Paul Chung

And Got the you. cash messaging, new. guide? then on free that's flow. share on buyback update annual And Kind of any lastly, Doug, the

buybacks and potential there given we should kind X cash? kind -- seen X material $X haven't last of think pace for in years. the buybacks kind How billion We more years of about net of

Douglas Boessen

Yes. Yes.

the in inventory couple have in of of some QX, consider, but early which still yes, we where here did one saw flow, working We needs capital increased capital year, there's our cash need free of to Regarding than is previous those the year. more things working you a needs.

inventory in year. the also of back You factor we to large last had increases need in the a amount year, of

have more things, hopefully, also other you than things, say, consistent operating but an as on on is in CapEx increase the pretty So for It there. QX. the in did cash year But we won't much we full I'll there. that give depends year-over-year and in working year year-over-year we'll in free of last side the the guidance inventory, of flow

that we share in relates felt and that As appropriate the buyback, something at was we it's this to something point time. Board, with evaluate that was it the

it's that depending we a amount period. going back that the point conditions time, upon market during doing, conditions, at to buy the business amount really the be Regarding we're in

Operator

line Baird. I of Will the Power show comes from our next question from

William Power

follow-up a just first Maybe Great. fitness. on

some broader guess but wondering I if drivers think out picture. changes to the you'd categories, there. competitive cycling noted, some areas any there understand on fitness Any I'm any I year-over-year, call it of are fitness the and sounds you climate? key we, the all in weakness Maybe comments trying comps there that? like there year-over-year Just were in was particularly other tough too.

Clifton Pemble

Yes.

categories all last the from year-over-year. in against monster I segment quarter We're were think weaker a really that this mentioned, as we comparing year.

particularly dimension. the one probably of product things the impact that's So new which then of lineup outdoor well. you as our overall company the and impacted adventure can't across wearables And side, the release discount wearable the on

I Garmin. So mentioned, at wearables all robust across as growth experienced we

robust. So we and is the feel market is robust our market in very position the also like

William Power

Cliff, to sense. little get makes That what as a Okay. across Europe. great seeing to it'd color you're of kind be real-time more

the from QX continent, kind trends, As trends? pressures of in them impacts anything into across respect and Eastern obviously just appetite think now and any demand to you As you inflationary kind Europe? talk out retail particularly purchasing as to you you there the call partners, exit QX, of your about have change with conflict the seen you'd in of Russia-Ukraine

Clifton Pemble

Yes.

weak I think can our Europe is as geographical see more notably results. in you

One really Ukraine back in impact think aspects conflict some of noticeable kind initial people by maybe for and worry concern are inflation. only situation. for normalize Europeans environment higher get a show the just it's risk was the as I the X We European, has that But over prices other signs impacted in used the It's they not see particularly of recently they're or is economy. really global, broke out to that and that. factor product did and high but definitely to is fuel but to the and popping weaker period started registrations as the much there.

So stronger in Americas us we APAC. I impacted in factors a growth those Europe, but think and much saw

William Power

Yes.

guess just last maybe I Okay. question. a

color for think you You early in any that about year. there. chain, the really we're supply you the confidence that other just mean sounds it's uncertainties the color on diversity out are as still point? your maintained of at still as gives other as But guidance business, and just this maintaining in maybe like built recognize Maybe just et inflation, I various confidence I whether the there, it what cetera, to to year. outlook the any it's

Clifton Pemble

Yes.

year, early we our you and February. As seasonal what in in lowest we're quarter. maintaining It said, is this said the is

our how see before our changes of that business evolving say in to I to general, uncertainties make is indicators, the the segments. demand that in the is increased we complexities our many same have positive The my remarks, high. we we as in is diversity strong. increased, year of would like see material said and of the the any recognize segments very So I And outlook. our as But several at well. so across have time, we

And what base so go confidence our we forward. that's as on we

Operator

Todorov question comes of Nik next from Our Longbow. from line the

Nikolay Todorov

to and Doug question Obviously, probably the on trajectory is throughout How think if logistics not I and is think much. changing FX piece going should increase for anything, Cliff, first we probably year? about in headwind, sequentially fitness. the the gross margin XQ

rest of So trajectory color the year? any kind margin the on of of gross fitness through

Douglas Boessen

Yes.

FX. margin in gross are on obviously, yes, X impact As is fitness of just big And a the of there, FX EMEA actually, it given relates business there. the bigger to fitness, for drivers side freight and our business the

in we mitigate dollar there. seen some We're freight. trying air something inventory. optimize increases of ocean it to the previously mitigate that's our to it's mentioned relates those early versus as here, we'll manage to those We're year So strengthening to and doing and how year, hopefully, to some hopefully. of see the but we've of the mitigate have still things, -- help have increases. But the there through the I headwinds, of FX, and more

the see all for that plays to of have the we rest year. out So how

Nikolay Todorov

that to I visibility easing then, that's to any And mentioned normal in business return second some improvement of see rest to you call? your you into half? think the the the maybe expect early do Or to into further starting some supply. remarks Do in as aftermarket you're year? too environment component a you Cliff, it the aviation And to in have relates Okay.

Clifton Pemble

Yes.

time improve, were see actions started some March of supply to half is year constraints existing of be as we we I more as we mentioned still to supply aftermarket back and getting of be expected more the challenging as more things chain think aviation one we're into see as of because do the experiencing. especially rolled improvement to actually source the first we're the expect We've get dual our we month for onward. the because half to to we we taking suppliers. But that last able into well from parts the the

Nikolay Todorov

any question of been wondering, signs last And marine? exposed of signs of on of Okay. But aftermarket demand, the boating I some effect, you aftermarket know just more you're seeing and on side side. the spillover retail any me. are moderation moderation I'm for There's

Clifton Pemble

Yes.

that our We very really developments especially made and in see and display products hear nothing strong terms in call popular to that, of in speak of that area after. and ordered. our that retail still business to say in would boating driven the we've most are say or I say our think on general, I and I deliver years technology would for of by systems partners of. still OEM live the backlogs demand the OEM all good working boats very the sonar, sought they're we is what side their have very sitting we hard would been but

still the demand So the of see forward side business. OEM from moving we a strong cycle

Operator

show from I line of Rand question next the comes our from Jeffrey Deutsche Bank.

Jeffrey Rand

current you cycling your the products year? how are inventory How channel for rest cycling the for think the through end of customer levels of demand about business? your And do

Clifton Pemble

a expect also a while. terms one in we indoor go by that situation clears going in into inventory have soon indoor I inventory the training we the talking be of channel quickly. the that's Retailers in do it inventory, warehouses been that, varies line, category, they're have to about the improve it as as to have through up. inventory. is of We our trainer kind most course. around we've lot selling but a think would it and product that of But And don't that's that of for

through to to be and work that. patient we're So going just have

don't inventory levels depends we In by retailer, there. are of in geography, other reasonable, general, it any concern channel categories, line. product by we and by see terms think really But

Jeffrey Rand

about sequentially. for projects auto this relatively further? quarters then next the were business And few operating think business do ramp up flat you OEM margins your over Great. How margins operating in as

Clifton Pemble

Yes.

deliveries in think business. to terms what scale as we I be will in of that forward, going happen able increase, our experience will

improve the margin it new expecting products that to overall near improve. as swing a deliver to scale to operating we're to we term. increases, But should as in our should not generally the positive BMW production it So number performance, although and our start

Operator

Ben the Cleveland question Research. from our Bollin of next show line I comes from

Benjamin Bollin

A couple questions. of

think you preexisting about is that outdoor had refresh first The fitness bit I follow-up. Cliff, of a is, buyers? be you business versus buyers little of then and talk how completely much how how of think And new do a might you wearables? And could much

Clifton Pemble

Yes, thanks.

for I the time mostly a depends by creating it on our who customers think to in we highest the amount But new segment. a first and registering at account. to level, that have, sizable line products terms of of all really are the selling brand-new to release. we of current that device Connect by who the business profile do our course, latest of we wearables, customer also with Garmin and wearables, But we look if across a people you product are stay love Garmin

side still well. it's see the still so majority a right an that wearables. -- we more of that as And it's But of to are new now, business of people our

Benjamin Bollin

Okay.

How any platform us the methodology thoughts opportunity? different content go remind you with The And BMW. recognition may on as change broader can it you other China? of question, on outside revenue the into

Douglas Boessen

Yes.

revenue different out come as this -- that point much recognition from different probably standpoint, the be we standpoint. recognition in at models So than time from revenue in that have a shouldn't that standpoint

Benjamin Bollin

what Or similar on the per saw you that As vehicle? these you Any change models, content going get of into dollar content more China? with thoughts forward? amount it in is of does

Clifton Pemble

adopted is the we're get out content well actually, to delivered vehicle some delivering current per on Ben, In production factory once per mode seeing products with on platforms. vehicle of as than newer across the of think all the as out here. what we're U.S. China that they've much the BMW, higher of their full cases, I platforms we it

or more vehicle. these modules of vehicles the Some have within X could

long per over dramatically So the BMW. increase we're to term what will based it vehicle on delivering

Operator

I from of Bank of show our the Grenfell question America. line comes next Elizabeth from

Elizabeth Grenfell

you the And what normalized? expect at consider cycling it we're about to the and have normal? seeing, you As business normalization completely that we when do level think do

Clifton Pemble

good Yes, I think question. that's very a

that factory During the could those the factory the all first devices were half of products, elevated Garmin demand. and the -- beyond trainers including XXXX, market every indoor for they of cycling we make every just broadly and speaking delivering every to of where because demands manufacturer saw all

in very So the that half strong that the and significantly demand pandemic-driven because was robust half. first of then really tailed second off

that to second probably comps really expecting of year are we normalize. So remainder the will throughout to those starting the take will half the in and improve see

seeing, In at overall years. we're settling the terms of are reasonable market with X for we're of levels X to growth the products generally, we that line the in to continue see over cycling levels past the

So probably level means to the it's numbers. growth reasonable X% early some the over of that even settling market, in what is XXXX XX% and in type overall range the somewhere is CAGR at XXXX or

Operator

[Operator line question Stanley. Morgan comes our next from Instructions]. Woodring show the of I Erik from

Erik Woodring

question, Maybe Cliff. with one inventory that clarification Was me. just comment? Starting was that mentioned earlier you Or about a being channel total just a comment? reasonable. company fitness a Cliff, for And levels few

Clifton Pemble

of popular say our all would total I product in retail. lines that across are

Erik Woodring

in similar marine, on maybe, calling that comments out those each bit in you then positive just prepared can those what markets, are? positive a presentation outdoor, -- the of you made Okay. And aviation, in in elaborate the for Any way remarks, deck, your indicators just indicators.

Clifton Pemble

by one, of the would for all product the we're say, there's popularity to I we there. we've have if of the that our And some one demand outdoor, that products are think we that to addition, we seeing in those. at and to those fill work match of struggled watches products demand some golf just continue in adventure I new look -- Well, releases the

of things. the So that's side outdoor

is marine side Panoptix LiveScope our of new system popular. the On Plus things, extremely

display lot systems. we're of so a which orders fulfill also working on to And back drives that product,

fully aftermarket situation. aviation, that some is But of deliver the right of we're in we biggest that there's of because to it opportunity things. finally, a incrementally, in And think kind of of So to because then side I time been marine as mentioned, the I but see really to recover. supply that constrained there strong. backlogs our now better need we segment is get And chain have demand We've our that. starting the will take things broad-based

Erik Woodring

were And helpful. last Super second all of then Or in you Okay. that, XQ? -- outperformance, to able much there your were one outdoor. sales to products you you me being kind into from to result for in you'd then fill still -- question speak, the all How that that was channel pushed XQ of to say? with launched so a new XQ is And of the the on with of outdoor? come, of more

Clifton Pemble

think certainly, optimally, of it tried in we like late to not the felt QX. the and best new I time we the time to products launch most was launch

to So say how speculate demand you sure. there's probably it's there for part some waiting impact second that would because of new was. products hard on for again? But your much that shifted our were And people

Erik Woodring

Yes.

Just get for you'd come enough say? products the in there still curious more in fill if the to you channel your supply to launch of ideal is those levels new that outdoor, to were future, if to able

Clifton Pemble

continued think able the definitely is fill I found our plan, be to And have reorders initial the what for strong. that we we were to channel.

still we're product line that initial so that chasing to we're demand fill. for And working

Operator

I Relations, this of time, remarks. Seck, At Director turn Teri Investor like I'm over for closing to the the showing queue. no back call to would further in questions

Teri Seck

are so day. great available callbacks and Thanks for much a time. everyone. and Okay, your Doug I have for

Operator

This concludes today's for you participating. call. conference Thank

disconnect. now may You

Garmin (GRMN) 27 Apr 222022 Q1 Earnings call transcript