GRMN - Earnings call transcript Q2 2022

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Operator

Thank you for standing by and welcome to the Garmin Ltd.

Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will b a question-and-answer session. [Operator Instructions] As a reminder, today's program may be recorded. to of host Investor like Teri today's I'd Director Seck, Relations. now, introduce for your program And Please go ahead.

Teri Seck

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

Cliff Pemble

Teri you, Thank morning and good everyone.

earlier reported billion, of at As comparable the prior X% margin XXXX. pandemic-driven million down consolidated the from revenue operating We of was $XXX generated today for came profit $X.XX in year strong operating quarter, and XX.X%. down which XX% was the from

quarter was several Our by performance influenced factors. the in

dollar major year over US significantly impacted $XX to million. approximately prior strengthened the relative unfavorably other second the revenue First, currencies quarter and by

highlights in a million. fitness orders business more performance for just adjusted and and experience impact far, continue and $XX I in provide the Considering finally, of could we decreased our year-over-year constraints, XX% detail on year. specifically which From segment marine, approximately we income Doug cover perspective, quarter year. in is trends. fill a the just we million. fitness, the a limited And so the current X%, revenue on is results, had this our approach reset updated $X.XX, remainder Gross fluctuations and rapid dollar fitness in to and new results stabilize and Our relentless now for this We US expectations of performance pricing new with we margins billion, prices financial XX% be and products. growth in segment. each we're Starting very EPS the year prior a I'll where the for innovative and of of This but headwind currency currency managing $X nature a strengthening guidance We will effective significant managing revenue on operating provide business to flat XX%. strategy changes over which believe will marine chain resulting our in decline will anticipate for of adjusting moment. guidance at which representing and are rates as of in in and remainder of a underperformance the supply to significant increase expectations the operating of approximately currency to $XXX assumes introduce the were we of long-term, reflect which outlook able is the first the details levels more have current moment, the but respectively exchange aviation.

demand wearable of The by XXXX. which and was pandemic decline all cycling significantly segment the advanced normalization benefited second These quarter was broad-based the half in categories. from categories categories fuel and in primarily the first in demand driven impacting are

our QX are to product we by our response was encouraged the introductions. Although, disappointing, new performance

the to with up During launch which solar XXX. the of capability, and battery Forerunner Global the charging watch first celebrated life the mode. with XXX Day running provides we two version XX solar new in quarter, our is smartwatch Running XXX Forerunner running of watches, days Forerunner The

battery in for launched ride GPS the most also life charging the featuring computer cycling We technology challenging Edge cover. environments as or such for street urban multiband superior found and accurate solar in dense those XXXX capability areas high-performance positioning

now we the year. Given and for performance fitness year-to-date XX% current revenue expect the decline trends to

at in increased growth Gross Revenue million. operating led by Adventure across outdoor. and $XXX XX%, $XXX income and Watches. operating XX% strong were margins with respectively of to multiple XX% million to Moving categories resulting

a the has compatibility so unique launched vision we capabilities features. premium of estimate outdoor as revenue maintaining advanced a for we strong and far such X, are our quarter, growth tactical smartwatch night tactix XX% performer navigation well year. with as the performance risk-based and as segment the been During The

by Gross $XX and were in in at increased operating to million income XX%, OEM aftermarket growth XX% XX% resulting margins aviation. Revenue of next $XXX driven respectively, Looking operating categories. strong at million. both and and

demonstrates announced do more have now meet XX,XXX strong more quarter constraints down recently our from across bringing decks to to that in service demand broad During of we has for the to and piston integrated levels, far XX% systems. so solid unmatched we from historically work This chain and than supply are estimate range a our delivered but for the performance segment jets. eased the deck orders versatility achievement maintaining integrated business aviation flight The back we year. the flight growth our of of products. capability We applications trainers high revenue have transcontinental

sonar of inland addressable for and lineup for scope applications. deep the fishing bring market live expanded $XX introduction with during and marine was of the second operating the to constraints. a our the segment. products system decreased margins opportunity introduced unable operating market million. next recently lake at chain lake XXXX, it Since historic and LiveScope supply to XX% it respectively, has income $XXX the and all quarter and but another marine live was first XXXX We expands We're which coastal the deep the marine our growth Demand to for our been we and operates Turning greater technology product segment. higher million. Sonar action represents it fishing system believe X% changer the XR game to to of Revenue excited growth due even was has to segment. were the of XX% LiveScope than in Gross a resulting demand fishing in catalyst were for satisfy the for depths market been to

this the marine return revenue in now X% patterns normal Given market, our year. for will performance anticipated growth and we so of far expect seasonality year of the the

was face categories. who of million, programs. in Gross an impacted ongoing own automakers finally from their Consumer consumer XX% with and by by in million auto Looking impacted by PNDs, decreased investments chain consumer challenges. we $XX was margin was of declines X% orders reduced Revenue operating and both supply while auto. at recorded OEM OEM loss to lower sales $XXX OEM driven

offering of a During diesel talk category units. the integration navigator XX truck our with features first and launch to continuous the up quarter drivers hours we audio with of product entered our unique diesel time high-quality headset new

of as will in we half has been believe production second the improves. expectations, first below year the half automaker slightly growth resume the While

maintaining are year. of growth revenue for the our estimate result, a X% As we

So, in provides business within it's each growth facing closing diversified headwinds for while model variety opportunities we a remember, segment. our are important to of many

strong we'll environment. macroeconomic very way. we on on products what control are We focused the the product be more and agile and and a evolving have navigate We new opportunistic can remain lineup we as

my concludes remarks. that So

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

Doug Boessen

and taxes, Thanks Operating posted XX.X% our rates percentage was million, was costs. representing on basis reviewing updated in for Cliff. provide decrease. XXX-basis Good compared statement, margin We margin higher favorable foreign offset by our point sheet, was the as the expense decrease. mix to year-over-year. Gross quarter morning, begin of second XXX segment everyone. prior income quarter results, like guidance. as I'd $X.XXX and to year flow of X% impact the second XX% flat a exchange unfavorable prior cash decrease was a product a billion Operating the point actually of Operating revenue XX.X% and sales year balance quarter. XX.X%, the increase $XXX financial a freight quarter comments

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

by second offset declines rates outdoor during half quarter regions was for auto declined Next revenue exchange growth segments. APAC In more in the geography. the and quarter and Americas than region look quarter. By geography flat, of by about and EMEA second contributed double-digit segment impacted in quarter. marine our the segments The at the the and aviation revenue were fitness, both foreign

personnel compared X%. quarter due year-over-year, technology to at $XX engineering prior increased million by information operating or expenses, $XX to costs. in costs. expenses development year Research personnel-related next Looking million operating increased quarter, increases SG&A $XX primarily primarily expenses million to due increased second and

increase We is stronger with statement highlights quarter line Inventory increased in securities ended $XXX to to safety versus approximately of quarter balance carry with billion. our freight increased stock lead Accounts receivable year-over-year We're approximately relatively to strategy, decline. second consistent declined increasingly to The $X.X balance mix billion. the our and times. year-over-year, million taxes. raw the optimize seasonally days while lines, sheet, the $X.X shipments increased relatively diversified cash executing advertising expense to supply on mitigate of levels support flow sequentially and ocean product marketable air the sufficient our year-over-year. cash, sales materials Our

income the to increased Capital flow capital XXXX, cash $X generated operating free and expenditures quarter were from primarily operating second decrease needs. quarter, million. prior million second due $XX for lower a quarter we $XXX of of During the million,

Also to December approximately of $XXX program We remaining $XX through cash authorized million. million year company leaving $XXX we approximately $XXX expenditures repurchased of million, paid shares, expect repurchase free capital full share XXXX. be million, XXXX in of the quarter flow $XXX million dividends

by the The rate in tax jurisdiction the prior effective in XXXX XX.X% compared of quarter quarter. credits. was tax second mix the tax to effective primarily and year due deductions to in was increase X.X%, tax an For income U.S. rate decrease

Turning billion. revenue we to our our of previous full billion compared guidance, $X next, to year estimate of $X.X approximately guidance

U.S. second previously a As impact dollar unfavorable revenue. the quarter significant on of our mentioned, strengthening

the XXXX. back half be remainder the unfavorable Assuming parity euro the in revenue will accelerate impact the with U.S. the will year-over-year year, dollar at for of of

We is unfavorable expect approximately year guidance gross XX.X%, to margin full previous foreign to primarily impact which anticipated our than rates. lower be of the XX.X%, due exchange

approximately Also can of rate pro pro mix, margin X.X% per guidance income results of Jonathan, $X.XX. earnings forma projected Q&A? This forma line concludes our expect year expected the operating XX%. open in of approximately expect than for formal This tax effective jurisdiction. please lower tax XX.X% by which a remarks. to our you previous share we full was We

Operator

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

please. question Your

Paul Chung

Hi. Thanks question. my for taking

of up for for the of on think should been some the cycling initial channel about kind So four the products? XXX? the what's how feedback fitness, And underlines year refreshing we the where have seasonality of fitness? I follow-up. balance for on we first on some And a the of just levels the demand are And including the

Cliff Pemble

and look good. the and Good is morning, the very side. and have other side The Okay. response say at that. cycle computer Channel computer trainer One different I’d the XXXX is cycling, indoor cycling the Paul. new two of the and you levels to side is to sides

the at trainers every the think now I generally levels all inventory think And inventory right kinds so the on cycling market trainers, side of of the of things heavy are manufacturer. fine. The channel from is with indoor tax I

that. It's at there's to some sell-in. as But our so backup And think through retail those retail of time for take general impacts the I which demand is products, retailers going to work retail in winter a really we sales what people the half yet in the It's for improved would of this the back approaches. generally expect time year. Northern the not see season should Hemisphere in and

we're fitness the been terms those the good, the very on and the has well. as back and demand In orders through products, actually of other working XXX XXX,

Paul Chung

on leverage resulting Great. revenues segment. you And very the quarterly record aviation, operating for saw then in, nice some

Now revenue half? outlook, we expand in think you're the it's above of in strength for segment, that margin share? And seeing on XX% market mark provided the mix, again. product Can some second but the you about how the should outlook you've the aviation

Cliff Pemble

Yeah.

good a definitely quarter. So

think lingering of in segment, and grew in Most catch of our on quarter. I the up aftermarket some segment. the the Both that were we were to the aftermarket. to the of able side Aviation sides those targeted the OEM backorders

the we're well. are in catching OEMs side they that as half orders have back expect to aftermarket working still airplanes, strong still fill are and We that of for because on which things course up to back continue orders the in of the very

market margin, said jet when In margin up those XX say offer. R&D that terms our for the sweet new and profile to kind range gross the in I wise, to very piston is everything through that margin on it as our we which been And from the win we're the in the for then that are create range mid margin heavy has that products we margin more continue upper aviation very in XX% to investment and funds operating share And solid of platforms spot. business a midsize to revenues comes before, would for build singles of working strong we've future. projects on categories to very and

we As course, range. generally more to it target tend we in leverage, of up. But goes that get

Paul Chung

sense for the channel lastly particularly very the to And if there for then more versus How have there? the new And thoughts Thanks. of then in. be the strong one fenix And you a fenix? there of would some tough Great. I the fit the any refresh users status could upgrade sell-through Outdoor do comps. with platform quarter despite and great. is the tracking

Cliff Pemble

the So refresh gone has well. very

taken pockets to it close in think I earlier There's of up catch getting the this up being are time, fenix some demand epix, on. the still us and we orders working initial categories lingering since those the to was some year. caught it's for launched that but we're on back

normalizing being sell-through very right with healthy terms and it's to In the think of kind the seems channel, of we very, now, sell-in be balanced.

we're launches, seeing coming which much of generation In we recent have from and advanced then capable kinds from about half even terms who much to our users roughly in new to what of user coming we have customers upgrade profile, upgrade looking to older into a fenix, is of launch. pretty seen, users all those are families more users our products, are wellness

Paul Chung

Great. Thank you.

Cliff Pemble

Thank you.

Operator

from from the Ben And Bollin you. Thank next our comes line question Cleveland of Research.

please. question, Your

Ben Bollin

to a thinking and your do have Good any there's on How and behavior balance about picture to now? their been you build those everyone. where seeing your then the stand And selling partners, what some targets going had morning, inventory the about for holiday When right they you from into thoughts have exposure go-to-market think Cliff you're about to current based thoughts overall levels and the question Thanks on season sheet partners, your they're evolved? commitment from follow-on, that. a I inventory, bigger question. inventory taking Doug, I know levels.

Cliff Pemble

Yes.

a high-level overall just inventory. maybe So comment our on

component know, been you lead long. As have times very

In XX XX- ensure, times were able material order we've times. been to demand. to before some the increase had in week faced lead XX-week XX raw of to weeks with so materials on lead And what the to our now typically, pandemic extending the supply cases, to we meet We've to be have side.

is, And very left with we a don't demand situation. with do want challenging it's what So, inventory to build. be no to

mode challenging. the freight long which have a side solve have issue, Additionally, time. really we things that and the on lower-cost shipment of the inventory very is on in inventory to freight boats, of side, takes been has a to cost more order And coming

lines. is We We're to inventory. And extends inventory good of feel components are amount like, sell our the we product have that materials that And different feel time. cycle that versatile. can of it simply just general, product very we we and solid inventory we carry. products have, many that so like the reuse in lines long long-term we over can We across life most have

feel we right So, very now. good where at we're with

In holiday terms days. early outlook their of still it's go-to-market, and upcoming for the season,

we big in finalize indications season. done the some being to to early there's of that the products promoting that. in The segments, strong holiday quantities So, a work of is very for have commitment all

again we days. what far. know But that's so probably early it's So, very

Ben Bollin

one then the how already you pull-forward. adventure at potential look And are Okay. the business year-end? be balancing And risks you through for as thinking watches, of you outdoor about performance the business specifically of would some you've follow-up the are that how maybe seen

seen stronger You refresh haven't versus it. yet underlying it secular given demand that's you. . Thank And the the

Cliff Pemble

Yes.

the strong XX%. guide a first for our had year up half. is We So,

you as ability half. the our So, achievable we from the in to is coming right overall we that believe is very that our back expect which should more data, grow can line infer moderate We boost back have strong new and the now. products will we also in half. product that And believe

Ben Bollin

you. Thank

Operator

question for you. Thank One our from next next Nikolay And from comes moment question. Research. Longbow Todorov our

Your question please.

Nikolay Todorov

morning Yes, thank you everyone. and good

perishable know given you're can but it where question How like strong like of you a some also quarter, the backdrop? much backlog. consider I seems you do you marine. had see on the prior worsened. about from do I First still you seems Cliff it that building have talk guess And constraints macroeconomic constraints? they

Cliff Pemble

Yes.

we cases, key quarter. order impacted those there plotters they the main better get we've would I not to issue was they're Nik year that in of QX and it we'll is to assuming end highest during then for are be typical greater on of our spring. components covering and backlog And the made much boats worse usually and that follows level and QX of The as in some Northern them that. constraints customers they the we general, bringing -- of more didn't in quarter they upgrade in would I in the the some of segment. a them the the our segment the seasonality and off put water chart-plotters into to but work selling their able the Hemisphere storage say in and higher say people prioritize deliver So wait progress out But prices. in have boats some the

So, we're assuming of to down guide our why be brought that's about deferred some but X%. that may we

Nikolay Todorov

Okay. you revision side, what outlook? lines is the changes talk can maybe you're is the given OpEx question in second new then And that I are maybe following have the implementing the outlook on the OpEx how the changing about

Cliff Pemble

think hiring don't OpEx a being priorities we're that the We're two revenue I definitely selective general to and essentials things. focusing in we areas. at priorities that at on Yes, at we're growth. to also taking outgrow our And different sure the look make looking that important our we very we're making and sure looking our most narrow and

steer to the So, that for manage we're trying long-term. it and

Nikolay Todorov

the the environment there near-term, Fitness norm in that should and and if one I change that the Last margin, XXs Okay. any direction? can that or is potential puts gross is current of high the expect kind takes inventory overhang we squeeze. can given

Doug Boessen

lot gross rates, half. we in continue relating fitness, some We anticipate you margin did back exchange that the which and in to takes the of would the puts unfavorability foreign a said In Yeah. to see it.

Freight's there impacting about also also margins standpoint. also gross from Now that Cliff been talked freight. our

facing. there mixes other it's But for probably the product that you've outdoor we're what probably, the have higher some some side some so, seen as going a be that of of improvement is margins currently we'll we what they makes of of But have But go in things to from may like product And watch where that you do similar and up our you said segments mix that have headwinds to that fitness percentage indicated seen -- some gross forward. really a function things. portfolio those.

Nikolay Todorov

guys. Thanks Good it. Got luck.

Doug Boessen

Nick. Thank you,

Operator

from Thank you. from Tigress And our the next Financial. comes question of line Ivan Feinseth

Your question please.

Ivan Feinseth

my aviation on question congratulations you performance. Thank taking good the and for

by you Following considering the to expand none only two have? of cockpit you the headset, do and opportunity introduction have into presence companies headsets think an that for there's those of that's cockpits aviation the diesel you really dominated

Cliff Pemble

Yeah.

markets in are I think technology this growth strategies morning, entering focused excited and we're I've good our and categories, commitment. attacking other truck we're new -- that side. on might kind about diesel. And we're the as Right the where reflects exploring the on useful. new Ivan, times really products opportunities the this And be of new past, introducing many product mentioned now, avenues for then

Ivan Feinseth

Now and now your be? Olathe, bigger you're feel you what right seeing in the short-term you're that is think on of going bigger to of expansion based overall continue headwinds? do what through And some you plans space do picture hiring picture growth opportunities that just more

Cliff Pemble

that the short be proved think Well, that I really hopes has everyone but term, of none economic situation to first, true. is

So we're managing we're for the the business long-term. sure making

needing We some more we also more and need particularly needs. bring overall and to that in more people well our people be are have in to hiring balancing on able Olathe as consumer aviation areas campus of and in to on space priorities those back focusing particularly of the

comes So in we're overall people it here and of building committed the kind growth. to shape, space our space Olathe. in of accommodations finishing to then think our And when expansion good for out next phase we're for I

Ivan Feinseth

this introduced in or new the year? idea should of focused you upcoming this some second be some year we'll give and see where of half we that new And areas products, on Right. stay tuned the us can products

Cliff Pemble

introductions in most have every we segment. planned Well,

of pretty some stay so I'm what's but tuned, And excited about coming.

Ivan Feinseth

much. very you Thank right. All

Cliff Pemble

you. Thank

Operator

moment from from line Thank comes Woodring our question. of next our for Erik And question you. One next Morgan Stanley. the

Your question please.

Erik Woodring

ask and Maybe Cliff, one question Hey, kind good morning, I'll question. start guys. you high-level my then for a taking Thank for of for a you Doug. with

think we've to in a quasi-pandemic gone this now take would through have of gone the of how you love elevated get could as your demand normalizing. through stage say is just electronics and --consumer Just larger period consumer-facing high-level near now some and about process on pandemic the Cliff how than it's think businesses. just permanently that about kind levels? Do that your think record I I Is of pandemic. a returns? thinking you're the thought today as there for the past we you move peak of risk TAM it TAM the pre-COVID kind

Cliff Pemble

think, Erik. and to Thanks, I the the certainly fitness. people pandemic highlighted Yes, importance of wellness health and

that than so experience that's new new long I lot with very device capabilities for longer-term look And they focus new I those probably look into opportunity did believe will believe and change a mindset. a ecosystem. upgrade. an to then in enduring then demand is and Garmin use devices our We customers for of had a as a people's they and coming

So I in for opportunities believe that the creates an enduring us future. customer leads base to and

Erik Woodring

XX%. margins math kind helpful. And second gross margins be by will be bit Operating my the in below Okay. half maybe of will Doug, a then That's XX.X%. around

So you the is kind way impacting any half just kind factors new outlook? of lower of us the quantify can of various impact margin help there second this

Doug Boessen

is a rates. Well big that foreign exchange factor Yes. of

assuming should the to US -- year-over-year as parity So expect for dollar, I impact and euro mentioned change we accelerate.

at I XXX where is will think if XXX. of average to assume about XXX. we're was then Then Then and which to QX of last we're by similar XXXX, about right this now, XXXX for it instance the QX parity, year in accelerate. XXX. went that exchange year-over-year year you For And

there is that that we gross are well So as our of as for freight But that bigger piece also managing impacting piece. is through the something we also. then mentioned margin

Erik Woodring

that of incremental more headwind, is could only kind FX headwind would I XX expected ago? you if the just you maybe clarify a freight days say And or now would say you is of than

Doug Boessen

freight. interesting It's

biggest Maybe quarters So the couple year-over-year. were we ago story. a of freight was probably

a as of that are Now, inventory levels. our Cliff to managing piece we as relates it mentioned

And helping year-over-year air, saw those but We versus which the percentage our some stabilizing. here I'd rates. rates we that. a are ocean trying year maybe shipments those bumpy to is increases larger a less also little probably large too, on on are of some have a last of basis say or more And of in

will are of the year bigger ups be there as to but FX in we're . there whether So of back the think freight what's which be kind rates that downs the and against -- I a on the it driver with won't rates, through be exchange going probably some going significant half the going see be as foreign back of item a to half. headwind ocean in

Erik Woodring

Thank for you much the color guys. Okay. so

Doug Boessen

you. Thank

Operator

to the session I'd Thank for question-and-answer of any does further program. conclude program you. This today's like to the remarks. hand back Theresa Seck

Teri Seck

your callbacks. and Doug I everyone for a Thanks day. time. great available for Bye. are Have

Operator

for gentlemen Thank today's and participation does ladies you, your This in program. conference. conclude the

may You now disconnect. Good day.

Garmin (GRMN) 27 Jul 222022 Q2 Earnings call transcript