GRMN - Earnings call 3 2023

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Operator

Hello, and welcome to the Garmin Ltd.

Third Quarter 2023 Earnings Call. [Operator Instructions]

I will now turn the conference over to Teri Seck, Director of Investor Relations. Please go ahead.

Teri Seck

morning. Good to Garmin like XXXX Third 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

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

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

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

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

Clifton Pemble

and Thanks, everyone. morning, good Teri,

announced up year, in outstanding of came the at strong our billion, business quarter, with Consolidated the over revenue, results in growth and in today, delivered consolidated As third growth revenue operating segments. $X.XX in driven income Garmin by prior XX% earlier earnings. X X

came XX% EPS Gross We forma registered and were operating of the at XX.X%, up and prior XX% $XXX XX% and over pro million, year-over-year. margins income GAAP operating respectively, $X.XX, resulting of year. in $X.XX, up EPS in

$X.XX now our EPS XXXX full expect with forma of results our approximately of year and pro We are accordingly. third and quarter billion $X.XX. are We updating revenue guidance pleased

all of and see experiencing million, segment a performance call provide continuation Doug, I'll and the what the been Revenue the Starting a new increased highlights the with $XXX by an segment turning quarter year. we've third for to segment. fitness to record of we XX% over ahead. Before strong outlook

led income year-over-year categories, and XX% $XX wearables. based by improved Gross strong were demand across XX%, operating Growth operating all million. margins of in was [indiscernible] and resulting for respectively,

we quarter, have the and X wellness value smartwatch Venu new X AMOLED These nap features, wearables in health as the vivoactive During new including with and enhanced sleep two introduced a well display. sizes robust the bright as packed family coaching. detection

gives we that series for now as Epix ECG the This Venue signs the records validated introduced with of as including announced checks and Fenix watches. X Also, FDA health. recently The another Pro well powerful and our tool App managing approved is for products, rhythms use expansion Pro ECG app our heart our X recently App clinically popular, cleared atrial customers fibrillation. and for of their

now year-to-date Given the current fitness for revenue the to XX% trends, expect approximately performance increase year. and the strong we

$XXX to increased watches. XX%, operating Gross a and multiple million. income with X% segment. $XXX resulting growth in Moving to quarter outdoor record the and respectively, led operating margins XX% of categories, across million, Revenue of third by venture were

of X, quarter, fiber, display, vision adventure. crafted battery smartwatch flashlight distinctive, strong, Carbon to these premium layers life. a compatible and up AMOLED the making the days watches lightweight ready night recently carbon a launched used MARQ and tactix for XX XXX we During of the We announced with from bright collection,

and to product introductions XXXX. We're of been plunging pleased with the anticipated XXXX growth path than the performance but the has the performance strong of to timing outdoor compared segment, of the when in

the now performance, to year-to-date the X% approximately we year. Given decrease outdoor revenue expect for

respectively, margins operating million. XX% to quarter segment. increased Revenue resulting product aviation and $XX at were Gross income record categories. in million, next OEM of X% at XX%, the a driven growth $XXX operating with Looking third by and of strong

consistently products. Being unrivaled behind News International in quarter, standing care our support ranked consecutive taking and were our for customers on the avionics product Aviation year. after by year support of for we the recognized focus strategic year highlights #X During XXth

long-term Also, very increased all-electric and a result. from to state-of-the-art Year-to-date, we pleased decks aviation to recently Technologies aircraft. are BETA XX%, announced provide revenue with we flight agreement has GXXXX this for its integrated

revenue As a of expect do significant constraints year, back that in caught faced reminder, decrease XXXX. we for from as XX% in we mind, the in year-over-year. implying approximately the X% fourth shifted estimate into With aviation repeat our orders. final supply this We growth revenue XXXX to on quarter that full chain not the maintaining up will we year, these are conditions quarter

with Audio. $XXX categories, multiple segment. contributions marine offset million, the Revenue X% to product by decreased partially across Turning decreases JL to from

reported, market, and have operating performing margins XX% the Gross market exceeded performance slowed XXXX, than XX%, in and many the been our respectively, million. has operating better were marine in expectations. we've $XX income As quarter and our resulting of third but

launched with an we quarter, XXXX Boatbuilders' the International recent at the GPSMAP multiple was that recognized the Exhibition. award During innovation in sizes, GPSMAP XX-inch XXXX the series including

For Marine Marine We Excellence the Product a leading Only, Trade National Electronics Garmin Soundings recognized Company of awards. the named by as received Year, year, Manufacturer the consecutive also publication. five we Association ninth the were of and marine Most trade Innovative

our product completed recently integrated audio of acquisition all lines. across JL iconic marine premium ability our Audio, audio to of offer We brand an features extends the that highly

of marine and the We quarter prior XXXX. year. our JL Given to the to the addition revenue for flat better-than-expected segment approximately updating we're be expectations full Audio, performance expect now third year

of expect Audio we JL quarter, total fourth segment the XX% to marine sales. approximately be During

with driven BMW. operating the to Moving OEM Revenue shipments controllers was quarter increased primarily million, finally domain $XXX of $XX margin XX% million. auto narrowed to to and Gross the to increased loss segment. by record XX% third a growth

across quarter, the BMW to the lineup. deliveries ramp continue domain controller During

contributions We also growth experienced strong and categories, Honda Motorsports with infotainment in from motorcycles. Yamaha

now XX% expect approximately year. OEM auto the Given the strong to performance, revenue year-to-date for we grow

remarks. my concludes That

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

Douglas Boessen

morning, Good Cliff. Thanks, everyone.

updated balance the provide on and sheet, I'll quarter comments cash begin statement, financial third flow taxes our by reviewing results, guidance.

increase mix, partially segments. third XX% was due a a billion primarily We year decrease margin XX%, to segment of to product quarter. was quarter, year-over-year. the decrease representing in for mix certain XXX-basis-point The due from Gross prior the posted revenue $X.XXX

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

was Our $X.XX. GAAP EPS

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

Next, segments. growth and XX%, growth of In by respectively, fitness solid X we'll look led record of Americas quarter, at our our achieved OEM By EMEA X%. and revenue revenue in third APAC XX% quarter the solid regions and growth third and in of segment region we both geography, achieved consolidated the auto X segments, while the double-digit and by geography. achieved growth

expenses. operating at next Looking

compared prior million, expenses or increased primarily -- due Research quarter, to primarily to million engineering to Third $XX approximately increases SG&A by expenses, higher spend. information co-op $XX and to due year-over-year, advertising operating personnel-related quarter primarily increased increased costs. expense development X%. $XX million in primarily technology $X million costs. increased personnel Advertising

offsetting reductions our the JL quarter, few $X.X and includes $X.X balance Accounts audio in on increased addition Audio securities, consumer balance A in more business, billion. strategy sheet, OEM was receivable cash inventory. and increases approximately In the of of JL highlights with the line sales. taxes. than $XXX cash flow and associated our optimize to execute billion to marketable our to with with the Inventory statement addition the of increase to inventory inventory auto year-over-year year-over-year

million. approximately of million, prior the now quarter to $XX lower from expect increase We third cash year XXXX, of the of we $XX generate quarter, free $XXX a a $XXX million quarter Capital flow were be use free purchase of cash third for to primarily year During XXXX inventory. the due flow full million. cash expenditures

During quarter the program $XXX we X.X% compared December was we forma end Year-over-year tax increase was stock share rate million purchase to quarter. income quarter, million. which was the authorized paid million of through due at dividends company third XXXX. X.X% mix approximately year of purchased remaining $XX approximately prior primarily to of in and by Pro jurisdiction. Also, effective $X

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

primarily XX.X%. marine margin The the of average. XX.X% segment to year change which is has the previous anticipated We than the expect Audio, to to acquired our compared gross segment approximately sales gross increased of guidance be JL margin due mix lower newly of expected mix, full

effective results to includes is in This We margin XX.X%. we a forma forma by Also, pro guidance. X.X%, expect impacted acquired unfavorably pro approximately approximately of rate related which which previous JL per accounting. expect tax of $X.XX, an expected dilutive effects share purchase operating which impact newly Audio, a our from approximately earnings of unchanged is of $X.XX

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

Operator

Your first with Woodring line the Instructions] question Erik comes Morgan Stanley. from of [Operator

Erik Woodring

quarters. the at Maybe higher if level. twice guidance OEM auto rate X start raised in growth the we you've last just Cliff,

kind XX% imply you're ahead you year, Does auto outlook for this target? For now stronger XXXX of are anticipating that your of growth. OEM already XXXX $XXX million that

pull just this this changed we If year? forward? follow-up. then is How could how your this kind of multiple that's should outperformance thinking And have given business of the about Like over trajectory be I unpackage, a help you years? us

Clifton Pemble

the basically is think the from not I certainly beginning demand Erik, the a automakers year. the of guarantee at

and on based their things but estimates, So make flow the we year. ebb best estimates throughout

a of that along. takes So the the and our pull don't or provided. we've really build And for this growth goes from plans outlook puts their or just I really demands the as year this as product tweaking overall is their forward see

Erik Woodring

That's seeing margins And auto improved nice you I'll saw were on I question. helpful. auto your some Gross points base. points more XXX Okay. basis XXX basis improvement than we're margins then stay OEM second for OpEx think, maybe sequentially. operating sequentially, in And my but OEM down,

if to I profit see if the operating math could next guess, OEM say, trajectory, do auto year. simple midyear business the continue you turn you I this by So an and

Or of should if -- about? would the you curious thinking about that's we I you that math we or kind just how that trajectory the out how thinking of be improvement? the guys in margin kind linearity how auto laid the are should Just OEM of be

Clifton Pemble

beginning of still unpredictable. of probably said doesn't allow updates XXXX, mid at year. sure would put linearity Yes. full that lot to for coming those of profitability with XXXX the weight target from because not the have when in I more progressing somewhat quarter-to-quarter evaluate that. a towards new linearity of model in provide we're the that we changeovers our we'll directly being extrapolate year, a I'm was chance and but year, the we models next At to beginning and on the The and timing to the

Operator

the question next Cardoso JPMorgan. from comes Your line with Joseph of

Joseph Cardoso

the So ago, couple you years just of me business. you including a general first quarter, JL in is talked about any macro that And can guess days back just updated that the had. XX that the think just basis softness go-forward guys business Last one then strong clarify building has of marine on expectations on given now on and for follow-up. you how headwinds just tracked business I mix? a And versus that your thoughts as in about have the a you're on business trough? I you

Clifton Pemble

there QX. beginning seasonality August, looking attribute back guess, early say probably seasonality, that, marine what the at pre-pandemic into last of being as in I we saw the And was July at back that norms real for in definitely, to point, would marked would So deep quarter, of we I part activity. the the is this

moved market. into of in we September. of towards the the month acquired got then hotter JL half the we back things As definitely September, And

about but went mentioned the So The be marine better market headwinds market the softened. that continued things progressively along, has I've got there. to we out as

is I ago. definitely were the everyone changed customers they of behaviors have X reporting what and year a think that or from

Joseph Cardoso

do Or business? of around corporate take to the drive more actions are levers the thinking you then to And how up time post average, you can kind just level those historical improve you you you? additional the drive get in to JL to business any margins for the And the that margins line you in a or Is helpful. relative track it acquisition? to super that pre have about play when average? like acquisition margins That's thoughts to can volume have marine itself, to of of

Clifton Pemble

can category in be over still we this that I general, it think, we of improve have the overall probably segment. on the lower will time. But end do ways

and overall of As leverage well company is you the of as leverage our in operational infrastructure. things, a efficiencies power say, and as broader of terms one leverage Garmin advantage as purchasing taking those

as to on should this. we are So those be we focused the we're to into things And time, categories immediately what it audio are able bring up get our currently. over closer

Operator

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

Dong Wang

kind the cash allocation, of Just and over the kind just billion. on capital buyback given balance $X.X

noticed large kind that of wasn't Just quarter. buyback last

of capital on has and buyback changed if front, just kind additional any, the bolt-on, also on on Just of thinking the if allocation kind especially the philosophy curious we horizon? the

Douglas Boessen

Yes.

were Those share of second Our also strategic in a as which business, the priorities back and third are, And priorities primarily cash to repurchase. same. such our to is which JL weighted for CapEx Audio. relates infrastructures; due acquisitions dividends; obviously, investments our to reliable build then of our

So have an this really market, conditions as we share repurchases, our of that's million year, business authorization and such. do the as to have about the -- it And relates $XX the purchases we through there. based upon end

share gone type how similar of for priorities allocations through the we've So and consistency buybacks.

Dong Wang

you. Okay. Got I quick had a just follow-up.

launch. kind seems tougher compare it kind timing year-over-year product for of basis, of outdoor, the of terms in Just

Just a expectation, collect bit any fenix on refresh -- weaker margin? on the segment can horizon you the your next watch? prior maybe versus if on for little curious fenix the curious, Just the double

Clifton Pemble

Yes.

it year year, product think, that line we year of the an what timing mentioned incredible of later of George, the the refreshes epix. to remarks we introduction our came and with I similar our anticipated. had was in And than fenix this that was X last

in comping saw was against definitely we XXXX difficult. what So

been we other we're lines And this received positive our But strength They've quarter. new seeing about as are across this in and growth product lines. well. generated product last segment well in

strong really year but next product very road And In terms releases. comment refreshing we're I anticipate would on outlook, of next constantly product we have maps. future the our to don't generations,

Operator

from comes Epstein Ron Bank of question Your of line America. the of next

Unknown Analyst

Jordan is on Ron. for This

the you So Could I then give and any like guys just holidays? you current backlog inventory that a quick commentary are guys question. had going on channel seeing into

Clifton Pemble

Yes.

inventories have they aren't put business backlog-wise, that indications tend backlog fourth really point has season, and adequate when this good or from potential have their been a the But selling the for up that see to need closer they long to orders in them. retailers think we season. we They're I the channel are a for quarter because that Jordan, preparing a even. retailers lean to

So they're a good up season. for shopping gearing

Operator

Cleveland of from question Your line next Bollin Ben comes Research. the with

Benjamin Bollin

outdoor Cliff picture on and your I'm on or bigger gross curious perspective Doug, fitness margins.

we still 'XX. to gross If you seen and look 'XX pre-COVID, haven't level recovered quite back margin in the

those categories? Just then levels curious you the how higher-end return a wearables think I in to about have opportunity to follow-up. And the

Clifton Pemble

Yes.

and would the build terms to a much now it really part be now. where I so that. from hard has mix there's big think I were that to say happened between then we bridge then probably has that back product a structure in of would of margin

as gross will and various flows accordingly. terms in categories, of so segment margin the ebbs vary the And

Benjamin Bollin

app in recurring you, maybe or space, other introduce space expanded. about own? also. question more on bigger you if it and your to picture How And the Okay. pursue for other high-level thoughts like content then Curious the reach, think that. with talked and opportunities that's see is lower Cliff, about you You've Just M&A in arm revenue? opportunities seems a other

Clifton Pemble

all that including are ways that we looking offer across looking customers. company, can value-added our services that for content we into the for things and a monetize We're as of

marine Some segment. of recent that and our products all also outdoor that with examples on can outdoor focus with bundle that we subscriptions of the really chart come maps our chartplotters that are

we at necessarily M&A, but that have more opportunities not we're leverage. a and at So can looking do lot of organically where we

Operator

the Your MacGregor next Longbow David question line Research. comes from with of

Unknown Analyst

on This is Joe David. Nolan for

just you XXXX? conversations level was initial with any your just could maybe XXXX? So thoughts And customers are some of about for talk going not how quantitative I anything, I'm regarding sort or but high guidance expecting hoping of

Clifton Pemble

Yes.

really really cycle, focused we're most much I lot unfortunately, mentioned provide on a next thinking what -- are lines earlier, our color year. they're as that are think, I because, around we of I discussions had QX. business now can't shorter meaning retailers haven't of for And

right the will getting indications we indications that hopefully, now fourth continue good momentum as generally again, would So just quarter at XXXX. have generally, favorable be look to and for in I business we're

Unknown Analyst

it. Got

follow-up. then just And a quick Okay.

talk what of what can just With you about business? sort the any, your -- having impact, if UAW guys on that's strike,

Clifton Pemble

really no outside were that are that. had OEM there's that from our we've of affected by event. customers impact the that Big Yes, of X Most

us. not something that's So that's affected

Operator

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

Noah Zatzkin

in me have stronger-than-expected them for a performance could driving better-than-expected one the Then X that you on ago? trends the maybe quick relative I fitness, just Maybe quarter play any Hoping maybe in or trends as around you fitness. some follow-up. see to color are expectations a drivers? provide And larger at

Clifton Pemble

remarks, we the is, the wearables And Yes. strong. of advanced families running have from The all the driver wearable as across very basic in watches mentioned even wearables to in fitness, really wearables. that's big been to

everything strong. has So been there

categories strong. the the very also strength saw Other really. were segment segment whole across We in

So it the had as year, definitely was new came our to received. anticipated much they were we products better well and than market what earlier in

Noah Zatzkin

then margins. And on one marine EBIT just maybe

think down I a bit. quite sequentially XX%

could takes So margins some to provide historical just and about quarter And Audio? you to think kind relative the addition color next given the how on puts hoping of of JL then there?

Douglas Boessen

Yes.

So that's marine expenses. average. obviously, decline relating the JL an the on talked we gross sales a about, impact previously obviously, on we in as did Also lower margins, us, relating Audio margin margins, -- to our deleveraging gross in to there, than had with those the

on it that have impact So did also. an

to are mix basis, just [indiscernible]. our well it's marine gross Audio, as as JL an to margin Cliff see they relates of business the a it talked as ongoing as our it combination about, we lower. -- there So gross in relates that should some product really as and organic margins, on And

but those synergies opportunities, to improved of move along. probably that we'll hopefully, get some as of and be dilution there'll get able we the go, be So some

Operator

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

Ivan Feinseth

again results Congratulations outlook. the on great increased the and

JL about headset. the think you areas? product Do you this recently, some in a audio, On opportunities you of there's in consumer a induction what of headset, launched company talked some for marine audio do acquisition automotive expanding the then expand bone audio? but to the And opportunity another integrate OEM, Audio, about you think to

Clifton Pemble

and market marine already they has of products of several one fairly the But biggest. is home as a power also well have including, broad markets, audio Audio course, aftermarket sports as audio. for JL across reach

pretty diverse, opportunities they're consequently, of so each has areas. us And is new I own think one And those explore some some gives to which exciting, their nuances.

audio of very kind in for think aftermarket home also I audio Garmin. areas of specific is a sports expansion power but play, business the are and new

Ivan Feinseth

audio if them, And would brand? into be with would brand It a Garmin rebranding? a Garmin you JL home you went or be

Clifton Pemble

home audio. in already they're Well,

So they're now. currently selling systems right

So we'll systems. some theater for things refer home

And continue and lines business product in appropriate an innovation intend of so various across to we invest lines. those their level

Ivan Feinseth

of introduction Very new And on the good. the Carbon. MARQ then

So higher or new type are what people you of or you kind go of different different marketing points, price And brand retail to like much like platform upgrading for because seeing are say, watches? the of also watches? into looking let's those a the uptake from, to existing distribution

Clifton Pemble

MARQ I in high-end overall think product our line. with Carbon nicely fits

If you starting launches are these adventure and the mine, premium look, fenix watches, with epix especially in anyway.

been and why materials own our do But niche designs, in carving out we've this unique market. successful and huge in customers appreciate that's unique

as offer to to customers from ability and low repeat to either mostly new customers. what the broad cover product on product we end to is, vary we're pleased into I line see registrations, as by anywhere coming category look end line to can. at many with tend the think we depending But high customers it at customers we way, the a they as but

Ivan Feinseth

sensors functionality? because because new Pro that advanced you able that the are line? ECG fenix the on go, the on can with the to broad you're line, integrate of let's is Pro then how functionality in that And now more Or say,

Clifton Pemble

I think platform the that that's we capability an indication of have.

that and able all different across design that platform technology to move we're platforms, kinds product sensor have We of we lines. in

to products and epix fenix we as and that ones the the the that platform, the so series were receive ECG pro App well. then able those latest launch for that And are

Ivan Feinseth

think to of Then some inReach feature? the you one that that last at point one Do some there's for just question. SOS functionality watch, incorporate within opportunity a

Clifton Pemble

comment on Well, our we're I product on but features, specific innovations can't across line. working constantly

many be to opportunity there's I So great we need feel of ideas and always working more ahead. like that on lots

Operator

[Operator Instructions] follow-up is Stanley. next of Erik Woodring question from Morgan Your a

Erik Woodring

you demand wanted Awesome. outlook? ask you, trends will I just What kind your it because that this brought just about Cliff, up year. into you're that your seeing visibility are holiday to emerging earlier, consumer influence of

XQ asked seasonality because XX% implies revenue XX%. guide versus normal to in historical I for close growth about the XX% sequential to And

be that of takes it's and So if why just seeing potentially you what are the the subseasonal growth? Or of And might some if nonconsumer reflection the business? holidays is puts of pieces the consumer and a demand? kind

Clifton Pemble

Yes, probably every year I is think different.

are the mentioned quarter. fourth earlier, for I about anticipating positive retailers As they are what

So have we're provide to in. that we definitely gearing estimates up these for that. provide want And definitely we high estimates, when confidence

And is approach we so guidance. how that the

Operator

of Ron next America. of the line question from comes Epstein with Your Bank

Ronald Epstein

you question, Are seeing in quick products? OEM know in release, bezel changes it too, demand the was I on any that press guys, sales. driven you said you aviation. by A the for guys

Clifton Pemble

Yes.

activity next backlogs activity worked of dramatically few definitely fill. all through saying meaning production amount remains that report strong. a of they that over backlog that be has large think years. on the are people rates, And big if that sitting business who there's I increased trying to They're the jet to haven't they're

platforms to customers result, encouraging probably products. across And want So we and and demand these show But as forward leave general, that. there still to be work promise in a market the all business about would them. to speculation continues through that demand jet as seems I aircraft

Operator

time. closing remarks. further for the Teri will call this turn no at are to questions back I There Seck

Teri Seck

Bye. be Doug many time your and to callbacks talking Thanks, wonderful everyone, day. the for throughout day and today. available will I of you. for a Have

Operator

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

now You disconnect. may

Garmin (GRMN) 1 Nov 232023 Q3 Earnings call transcript