GRMN - Earnings call transcript Q2 2024

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Operator

Thank you for standing by. My name is Christina and I will be your conference operator today. At this time, I would like to welcome everyone to the Garmin Limited Second Quarter 2024 Earnings Conference Call. [Operator Instructions]

I will now turn the floor over to Teri Seck, Director of Investor Relations. begin. may you Teri,

Teri Seck

Garmin's would and XXXX welcome that earnings and available archive website. available press We Internet our on Limited's www.garmin.com/stock. on transcript at the to will second release An at are slides quarter call. the related Relations like morning. site you the webcast to of Garmin earnings Investor related Good Please be note also

in statements future and regarding could not projections and contained includes XX-K other affecting factors statements its Commission. this the and earnings for forward-looking revenues, business. in materially The differ and Garmin. risk and Securities Form and Limited growth shares, margins, statements. Any share our of future This earnings, call actual earnings call Information plans occur demand discussed market forward-looking objectives segment risk our regarding results is forward-looking a our introductions, circumstances position, events dividends financial result gross Garmin future as these are repurchases, factors products, product rates, with operating concerning may or filed Exchange margins, and

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

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

Clifton Pemble

and morning, Teri everyone. good you, Thank

revenue As announced consolidated with operating and earlier in today, Garmin growth income. delivered another results quarter of double-digit outstanding

business is rate. over higher with EPS in XX.X%, increased the pro considering a reporting XX% the operating tax record, X% resulting to significantly of up up a second million, X double-digit of segments expanded operating result XX.X%, XX% revenue forma growth. year-over-year. Consolidated reported to billion, remarkable $XXX margin margin prior $X.XX year, strong which quarter effective $X.XX, income We Gross was new

surpassed as employment we a employer as top as global were our well by and XX,XXX Forbes associates recognized quarter, U.S. the During

World Report. & News

innovative dedicate products. and We to through growth who delivering highly are proud of differentiated themselves our associates

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

our of greater few discuss with Revenue financial and segments. resulting million, performance I'll minutes. remarks the each will improved $XXX Doug increased and in XX% margins outlook Starting and provide XX% business Gross driven detail respectively, to a But on Fitness. primarily operating by in to a results few $XXX XX%, income million. first, operating in of wearables.

Garmin premium with million audible the XX vivid During for quarter, XXXX celebrated launched payments. users Garmin built-in Also X Global during quarter, color miles. the speaker million Edge feedback than the Pay and a cycling year last nearly computer by Day, more display, running mobile a we touchscreen beating with Running miles, we

growth raising revenue estimate Given we the XX% the segment, the Fitness of are our year. strong to for performance

Moving X% Gross resulting fenix and to watches Adventure $XXX million. following primarily launch. Revenue operating XX% the the Series of Outdoor. lower in million, from XX%, $XXX of income epix decreased Pro to and were operating revenue respectively, driven margins anniversary and by

with rangefinder, laser range compatible sends or measurements a Golf smart ZXX distance the Garmin to Approach the smartwatch app. feature, launched we the quarter, smartphone relay the During which Garmin

from dog can view the segment Alpha cellular-based new launched users launches. small, dog's year so a pairs expect the device first We app, tracking far collars Alpha so we LTE. to we attaches performed collar, has the smartphone and with This our rugged also with existing in this the back anticipated Alpha half as handheld their The of product dog movement or to year accelerate Outdoor and an growth device.

for XXXX. revenue our maintaining As such, growth are X% estimate we

Aviation, revenue was quarter at second the $XXX Looking million. relatively next at in flat

the somewhat of of aftermarket $XX the see and income respectively, product normalization the following operating year. OEM operating in margins million. in prior declined XX% XX%, an We uneven resulting were growth while and results categories, continue ongoing to Gross in

& consecutive in GXXXX recently and touch flat the For category year, Electrical most maintaining ninth for as our XXXE. Systems the Phenom has recognized we year far we the in Electrical Prodigy Aviation were this best flight and by deck Embraer our segment estimate performed XXXX. Phenom the expected in so are as XXXEV of The supplier, revenue

to XX% driven to $XXX primarily JL of Marine acquisition Revenue million, segment. the Turning increased the by Audio.

Gross widely resulting outperforming X%, respectively, operating and approximately increased of to $XX revenue operating Audio, trends. million. improved margins and reported JL XX% Excluding market in XX% income

accommodate adding motor a expanded series, to the range Kraken recently of length XX-inch broader shaft Force a We trolling sizes. boat

at ice expanded win ultraportable of This ICAST. winter year's the PS-XX Best offerings for the live a fishing, largest sonar our Fishing Category We with an consecutive in sportfishing solution this won ICAST, at consecutive show. which award seventh fourth award is Ice Panoptix category ice world's also and trade fishing our fishing Bundle, the

as we selected exclusive Boatbuilders Additionally marine Incorporated again both XXXX as well an Independent equipment. quarter, the audio to once in as through were traditional for supplier electronics,

of XX% are Given the growth raising for the Marine revenue segment, year. the we performance our strong estimate to

was finally OEM by loss decreased segment, million. primarily $XX XX%, and the increased million, revenue Auto to XX% driven $XXX growth in moving controllers. Gross to the domain And to margin operating

Technology year Auto for the recognized recently XXXX received Auto so segment Excellence Award expected as growth solutions. from this far XX% to motorcycle Development outstanding we OEM maintaining our are OEM in has performed an for be infotainment as Yamaha partner. and and for revenue Our We our Global continues XXXX. Motor, estimate

So that concludes remarks. my

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

Douglas Boessen

I'll second on statement, comments guidance. updated sheet, balance by taxes, quarter morning, the reviewing Thanks, Cliff. cash by our results, flow begin financial Good everyone.

XX% for Operating from $X.XXX the of a million, XX.X%, of was decrease. year-over-year. We sales increase Operating income was point XX.X%, posted a decrease XXX-basis was XX% increase. margin percentage increase. margin billion year second as was quarter, revenue the XX.X%, XX-basis a point quarter. expense Operating prior $XXX XXX-basis point representing Gross

$X.XX. was $X.XX. Pro was Our EPS GAAP forma EPS

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

segment the region. growth XX% By with of achieved growth X double-digit we in quarter, Marine During the Fitness had growth region Auto geography, respectively. achieved second and XX% XX% segments, and and in the the growth. EMEA X%. our growth, Americas we X XX% in OEM led double-digit XX% of APAC region segments by was

expenses. Looking next at operating

compared Second personnel quarter JL to of acquisition Research $XX personnel-related approximately prior million increased in $XX the increased Audio. year-over-year, primarily by approximately costs. operating quarter, increased expense development due to primarily or and $XX the due million XX%. year impact engineering of million to increases including expenses, SG&A

seasonally the statement sales securities marketable We billion. $XXX $X.X year-over-year balance cash ended increased to sheet, approximately and balance in and strong both billion. taxes. year-over-year and quarter flow second with approximately quarter. A few highlights million, the but decreased sequentially on of $X.X the to Inventory receivable cash increased sequentially following Accounts

flow for $XX of generated free cash the million than quarter. $XXX XXXX from million CapEx second XXXX, quarter quarter year second $X the million, year the we approximately decrease $XX were During prior lower of the million, expenditures quarter. prior

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

of the rate of effective We rate quarter in company $XXX to X.X% of response million the tax Increase primarily the requirements. approximately in paid quarter. December XXXX. effective the prior increase tax due in XX.X% compared share is global minimum to combined rate, year tax tax had Switzerland in an the to For million and XXXX, program of $XX remaining $XXX purchased million is second approximately we a authorized repurchase of had which stock. dividend At quarter-end, through we

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

margin than guidance We performance. be our gross expect for XX%, approximately year-to-date to higher the of previous XX.X%

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

could line Concludes our open Q&A? the you remarks. formal for Christina,

Operator

line Joseph from first Cardoso comes JPMorgan. question Your from [Operator the Instructions] of

Joseph Cardoso

through So maybe muted half on implied the full the When maybe at is more here incremental on the earnings seeing follow-up. updated Can revenue first just And accustomed maybe flow-through Garmin. maybe are to suggests takes pressures you second guide, half? into a guide. a the look then second for and than puts I outlook there the a walk the take the just we margins what's driving question perhaps have I year and

Douglas Boessen

Yes.

half. to think that we gross the first impact. the yes, what have an an about back the in back margin mix versus segment to half, half when we'll relating That impact the gross continue have -- see reduce we've that, will in seen So to margin,

we'll our to relates to to R&D, primarily it As expenses, investments yes, make continue support in innovation.

Joseph Cardoso

outperform maybe then broader market Marine as just on second continues an And highlighting. as my organic to question, the it. been you have Got guys trends, basis

I gains it share experienced, across what so on just better of other vantage? be you are then this be how on in curious your seeing Garmin curious example? if has broadly of Or there. contributing the and you you just trends could area factors what sustainable portfolio? broadly And here Like, the thoughts the are more double-click outperformance any could the could portfolio? as And was drivers for Is particular seeing the maybe from a

Clifton Pemble

And aftermarket our in definitely is the better think markets OEM even we the our channels the Yes, market. the broader serve, much Joe, performance I much performance reporting. that overall been in than better is than

very mapping I expanding radar newer and somewhat helping innovative really highly take And broad. trolling we a are We're motors doing autopilots. the of in to and for sonar think have us It's share. lines, product us. category to we and chartplotters, our systems, best attribute and and this very well

Operator

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

Erik Woodring

of Doug want your you, just kind get or either viewpoint. Cliff, one of to I

that, better of kind to you Just this to And want the second kind are have Or we've as XQ guidance of sense, you thought into so is about increase, the tracking guidance. follow-up. relative Would sustain we and half is outperformance? that a then As first well? reflection better raised Or that in outperformance nice above half? were the the reflection seeing you of say a half now guidance in you a obviously, solely expectations? year you is seen get I than the some think a increase of of XQ, of just second your

Clifton Pemble

lot Yes, we're into in moving optimistic very think Erik, I think Fitness, pieces performance. our by encouraged some cases, In a and the as go that of I there's guide.

different the a rolling more year. And certainly that a so of And as we anniversary forward little wait-and-see the mostly launches products we're major we in that there's guide Marine, We're taking I think had then optimism last in slightly approach. But the and a stabilizing with else been has performance. line view higher so had And generally as everything already there. we're in we is noted, what the earlier just simply remains said. market marine taking

Douglas Boessen

acquisition one in JL also. to QX thing Marine, add are we the end And of Audio anniversarying

Erik Woodring

that's No, you. And Doug, maybe for helpful. very then, Okay.

year second for cash least us it, Your the weaker it moving was high. Can cash half flow the free or often some $XXX call you for flow half relates understand would be free take to historically of cash about been you the historically free that's than year. see the cash half free imply help annual just XX% viewpoint year, million bit of seasonality to free flow is the If as like, And decade your we be kind the XX%, more cash volatile than of first near XX% do not it more you but seasonality actually flow, on we it I so of much a it has pieces guys? of would flow? which updated maybe for in first would believe Why at me.

Douglas Boessen

you consideration question. Good Okay. capital consideration the There take working also. is into

which So inventory. one of is

relating being the in in half be inventory our the half, This expect we lower. that benefit inventory. back saw in year, So some increasing would we year, the we back last our to

On a cash for there back probably in basis, of line be half year-over-year we will so the a in use with inventory. sales, expect decrease inventory

Operator

Wang George from question your the comes next Barclays. from of And line

Dong Wang

parts. Two

thoughts balance, capital given just was XQ, the on Firstly, the small. give can allocation, you cash pretty still buyback elevated updated especially

CapEx -- through walk question XH X related you Just $XXX just elevated million, Maybe with you me year these the guys parts. you full pretty and smaller being a spend. the on being CapEx, how think have also can about guided still

Douglas Boessen

Sure.

conditions. really the We'll As depending reliable consistent it's at upon take is with quarter. past, as business back in the in CapEx, what are share also and our share had we've every it acquisitions JL relates and market to investments allocation, such a Audio business really as buybacks. priorities capital that the And dividends, then buybacks our look

CapEx, investments infrastructure here to as those have we'll As back our facilities half, relate it renovations enhance invest projects some facilities. of some our some continuing investments IT really as our Also, to in -- of manufacturing well security relates in Kansas. to yes, our the we're

Dong Wang

Okay.

I system, higher margin. would be color the assume color can, and kind kind of ramp XXXX Just you especially kind follow-up, I starting bit wins thoughts can quarter, guys a system to, squeeze appreciated. beyond on we kind -- infotainment of assume you controller. it's it's main more of if as to on you just infotainment OEM, wanted X a to the honing new quick side. I the just Auto alluded going give Last kind Can on any I from kind look the of of in. if of maybe BMW, more

Clifton Pemble

awards last hard those Nothing to has we those Yes, George, then. in as in we We're quarter. to working bring mentioned, really XXXX. announced since changed additional starting market, that

the of just would products. domain those terms for products, out profile In that's controller point margin I still

so of well. gross that carries typical it been kind mid-teens talking with And about we've as margin that that

with of the in in settle the Auto OEM revenue we're much very it's currently line that seeing So structure. terms business in,

Operator

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

David S. MacGregor

I discussion on and the auto the just wanted around OEM guess up to the there. congratulations progress on I pick

little the more with and a on a in building customers little benefit I'm outlook. terms that the Yamaha scale margin isn't You're market with in obviously there But why is now BMW, your I with guess on a and others. succeeding of product confused

the there's so and And you've that your EBIT contribution that kind in maybe still still -- past. margin profile in the build there's you of I But controllers mentioned have that you business. gross would build communicated would as scale thought

we variable about expected? is cost longer-term we not the Or at think as that this than just it should you it's grow more economics just So scale, than how business?

Clifton Pemble

Yes.

where last been been mix saying we've you profile think, a be product look is we the are the swing versus of impact a I this products. category, controller quarter that definitely in of domain what that if David, big margin year, for that, there's to those because year past would which,

year And dollars compared that's year. gross so driving our what's the of last it year. this last gross margin with to put much kind margin pretty And even

gone through. big point that a transition we've there's So already

would our You down which a structure allocated and absorbs expense decreased. amount Auto point OEM saw company, loss go that our out other come of certain also engineering costs so and the to And I across would otherwise segments.

We're we to of So small in very we're a little that the behind difference. talking about we're leverage. would numbers bit starting we see thought although probably where terms be,

into additional come looking and And ramp go the volume so play forward those the as we're to leverages up. seeing efficiencies

David S. MacGregor

and about Fitness just shift if Okay. and retail and in Maybe at ask could seeing just Outdoor about conditions could I you talk gears and point? retail you're what this inventories

Clifton Pemble

our registrations. a are our very We're is very clean Yes. be through sell-in right the rate products sales very versus really And them. that our And now. with see in. selling that the able channel seem and appreciate closely. popular The products at to people we watch to really very consistent We believe

we're really So in in our about wearables general. performance excited

David S. MacGregor

And Okay. How And there addition of much trolling just offer didn't up a for on you of having earlier. a product coming just offering? maybe growth to that, is XX%. incremental the Marine the that last guidance, year the product the from me, have they're expanding

Clifton Pemble

specifics not that revenue. contributing would We that only to the don't motors increased organic say break but But that out on it's trolling I are category.

of as also are and people the our indicator were their good. installing on the robustness market boats. an line of basically chartplotters And product it fact, strength In very that's

David S. MacGregor

you And was, say growth JL? organic Marine in did excluding what

Clifton Pemble

is X% what Up we said.

Operator

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

Jordan Lyonnais

Is few your have fitness interested rings. looking that Garmin of competitors A expand is for smart to started be line? in, something would to launching the

Clifton Pemble

including and Well, that product we're categories, of all interested others. kinds in

with has factor. well very most group there's people utility. But done think that wearables that we've I like form and of kind a far, So certainly our of the it

all and explore So to we possibilities. we open categories minds the keep

Jordan Lyonnais

then pushing anything from follow-up are retailers And it. in it through else? any a Got or you increases promotions guys you seeing just to,

Clifton Pemble

activity I materially is don't think the different. promotional

typical shaping yearly can calendar be Prime pretty for Day. we a from The say example, around year-to-year and a mix that our have We year. cadence recently, affect promotional vary up of products most general, But of retailers, probably can more the offer it's that would it's or less. whether I to in

Operator

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

Benjamin Bollin

Cliff, certainly on how your is added there you've Any be a Forerunner year-to-date remarkable. any you on what had And I'm TAM? obviously, How drivers in a during refresh on the the opportunity? you about product on XXX. Fitness, interested strong that. seen? to bigger Any think I'm would performance with have about in thoughts curious customers do thoughts a perspective then thoughts of COVID, cohort if that You helpful.

Clifton Pemble

Yes.

of our remarkable. year-to-date it been to credit We It's the the our strength line. just has think XXX. not certainly Forerunner product performance I

XXX We vivoactive and been Venu the very popular. very, all advanced doing XXX well, as have of and X the which as XS, the which low wearables, on has end X well also are the of

So end. low high end the products we're to of across seeing range from success

growth would of generally terms I of see which with we that gains, It's share results a stable. is huge it's market, driving. really our the opportunity In happening we're market a that say kind huge market. it's overall the but not And

about we're that. excited So

or cycle that to users versus and already what go have had we that from this we especially occurs as in new And our might products refresh they a starting behind where with what see kinds some of really our refresh users opportunities, track they they to. generation of go that, that X to years. And terms that, and using. base we're see new And product leapfrog products existing they were the of X customer every X definitely,

ongoing existing with customer the So there's opportunities base. definitely,

Benjamin Bollin

The a Okay. internal very unique think curious about customer It you last have how high-fidelity one you seems for cases. in use me. for both and data potential AI Also opportunities set Connect. like

thoughts some you at AI. Just curious could or guys be around looking on options your what

Clifton Pemble

Yes.

companies. no as tool AI We we're business than most doing different at think we're a and I look some of that. potential

customer that we more is of driven terms by that what of would AI have we're products that there, that, demonstrated. technology. that I still a making in that's at a explore be we that features we because look very But a in future approach claims constrained the model around is to continue of product-specific uses, Some wait-and-see say trends and there's would take data yet to in in. something our interested have possible And we lot

Operator

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

Ivan Feinseth

another Fitness but on you wearables? the first say, and half. great in talk driven Congratulations the about driving -- revenue in Outdoor driven was wearables, What the was quarter versus outdoor fitness the a what's is the let's the strength decline between In by difference Adventure by the strength slides, great in wearables the watches.

Clifton Pemble

will think basically additional forward. as pipeline look the Pro forward, epix really that we we have of we move year. the we anticipate fenix we're factoring I we in that And the grow releases as outdoor of our last for wearables, from and passed and rest that the Ivan, our product was year when fill releases

Ivan Feinseth

these do that envision the talk sales? have the the how or far like talk the And then And measurement health about better of future like you like and launch functionality focus what the as in you things are ECG HRV. the upgrades Like Pro -- there's with models, ongoing updated of driving in can functionality? you as of some are of some importance

Clifton Pemble

measurements, when Yes, those all pioneer HRV, sensor are you many I really devices, particularly from think performance, metrics quality, sleep a very been kinds in look at in our important our to which which condition things. drives we've of of

broadly the more these and invent been forefront available users. practice that. them expand we of And functionality we it and been, our has across product as so the make we've roll And and our on features, has even lines to history been

Operator

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

Noah Zatzkin

housekeeping business, have to the addition industry. First, been think and you kind of of a OEM then choppy to guys between the kind us just in of aftermarket Marine maintain a Marine been obviously how post second, Could you within what's And strong question. remind able JL? mix margins about

margin So like on exiting kind is assuming like kind year, do stable from business? longer-term this structure about margin perspective, of industry a the how a footing, the Marine you more think of of the

Clifton Pemble

Yes.

of at inventory field our a this especially is building where business worked environment So in reduced aftermarket, comprised has Marine mostly is down. level boat as

little more the sales With because to Audio, OEM. those is distributors in to the harder JL some addition of we smaller builders. in independent probably that aftermarket boat track although area, goes who the of there are channels lot It's of categorize distribution a sell some in to Marine a turn

And aftermarket so go seeing products well the side. it OEM isn't in always possible where. to track better-than-industry strength we're general, performance the exactly in in as channels But which as

especially margin the the continue in that that we've ranges to Marine that and than we Audio see market will of as really would perform historically impact dilutive structure, the any don't year, with I other say true. the of the JL a about factor, as the in talked have see change we overall, towards end you segment terms the margin mentioned, overall been the In that would picture,

Operator

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

Erik Woodring

-- spending big some hardware also been Europe, questions I'd of growing concerns consumer some Maybe me. say hearing alluded in Just some topic. may. ones, weakness it, But spending. X about We're picture, evidence incremental, if maybe to quick I hardware let's have excuse spending in have of call this the around Europe there

you -- what just follow-up. to reach we end trading wide your seeing make given the down? to then you is. just quick each on Are It want demand kind an how And you're a significant from doesn't you related just your seem I sure perspective give exactly market, how but like standpoint detail some of given maybe get can consumer? exposure Just us any seeing to it

Clifton Pemble

Yes.

there's evidence I and think, for any little Erik, are hard would say spending we being our a base patterns impacted. currently to not say because that customer significant that our not it's lines It's product customer ranges measure base because at doing product so we are low-end don't to against to But that do have that and we we're control tend the not a data level. target well. commodity

So and with premium to step clear them. them we up differentiators make customers products appreciate seem and for

it So would that customers. with resonating that, appear is

Erik Woodring

lot That maybe Okay. a last of And just sense. then makes one.

app? Garmin new Just reengaging. periods? just with kind the past look understand If you that versus look than any users versus you existing at are And behavior trying that basis in And for year-over-year. customer past monthly users the of additions Garmin help Connect what it MAUs, is has to Connect strength cycles prior there there, customers that reengaging way that's different very us on at been a Is mid-teens me. growth any of least can new growth consistent strength there does or the that of understand just

Clifton Pemble

Yes.

Connect, products the gives which to on sell people of engage a an And those with we've somebody, customers. behaviors, from one opportunity robust new number see, upgrade us registered time, their registration up secondhand the of their them frankly, and we continue are existing customers we time future. and devices. where see to trade might comes one Connect to to into another from in and brand-new that the Our then of market a devices Garmin see mentioned do customer they accounts new that to and upgrade We Connect healthy Garmin, new a most

it's a customers. environment, So in mostly healthy by very would general, new still I say and driven

Operator

turn further back I'll the Teri, you. to over With floor no questions.

Teri Seck

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

Operator

Thank you. call. This conference does conclude today's

a You may now day. disconnect. great Have

Garmin (GRMN) 31 Jul 242024 Q2 Earnings call transcript