Garmin announces third quarter results

·10 min read

Company reports record third quarter revenue

SCHAFFHAUSEN, Switzerland, October 27, 2021--(BUSINESS WIRE)--Garmin® Ltd. (NASDAQ: GRMN), today announced results for the third quarter ended September 25, 2021.

Highlights for third quarter 2021 include:

  • Total revenue of $1.19 billion, a 7% increase over the prior year quarter

  • Gross and operating margin were 58.4% and 23.7%, respectively

  • Operating income of $283 million, an 11% decrease compared to the prior year quarter

  • GAAP EPS was $1.34 and pro forma EPS(1) was $1.41

  • Named Manufacturer of the Year by the National Marine Electronics Association for the seventh consecutive year

  • Ranked #1 in avionics support for the 18th consecutive year by Aviation International News

  • Received production qualification from BMW for our Olathe, Kansas manufacturing facility

  • Launched the Approach® R10, our first portable golf launch monitor

  • Recently hosted fifth annual Garmin Developer Conference where we announced strategic Connect IQ partnerships

(In thousands, except per share information)

13-Weeks Ended

39-Weeks Ended

September 25,

September 26,

YoY

September 25,

September 26,

YoY

2021

2020

Change

2021

2020

Change

Net sales

$

1,191,973

$

1,109,194

7%

$

3,591,206

$

2,835,168

27%

Fitness

342,316

328,446

4%

1,063,642

846,688

26%

Outdoor

323,856

334,844

(3)%

903,715

716,146

26%

Aviation

180,165

151,112

19%

534,886

465,850

15%

Marine

207,534

165,437

25%

678,698

486,269

40%

Auto

138,102

129,355

7%

410,265

320,215

28%

Gross margin %

58.4%

60.2%

59.0%

59.6%

Operating income %

23.7%

28.6%

25.2%

24.1%

GAAP diluted EPS

$

1.34

$

1.63

(18)%

$

4.13

$

3.44

20%

Pro forma diluted EPS(1)

$

1.41

$

1.58

(11)%

$

4.27

$

3.41

25%

(1) See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma diluted EPS

Executive Overview from Cliff Pemble, President and Chief Executive Officer:

"I am very pleased with our performance in the quarter as we are now comparing against the robust pandemic-driven growth from the prior year," said Cliff Pemble, President and CEO of Garmin. "Strong demand for active lifestyle products continued, and our marine and aviation segments recorded impressive double-digit growth resulting in record consolidated revenue in the third quarter. We are very pleased with the results we have delivered thus far, giving us confidence to raise our full year 2021 revenue and EPS guidance."

Fitness:

Revenue from the fitness segment grew 4% in the third quarter driven by solid demand for our cycling and advanced wearable products. Gross margin and operating margins were 53% and 23%, respectively, resulting in $78 million of operating income. We recently hosted our fifth annual Garmin Developer Conference where we announced a collaboration with Dexcom to provide people with Type 1 and Type 2 diabetes with a way to quickly see their glucose levels and trends on their compatible Garmin smartwatch or cycling computer.

Outdoor:

Revenue from the outdoor segment decreased 3% in the third quarter primarily due to the timing of product introductions in the prior year. Gross margin and operating margins were 65% and 38%, respectively, resulting in $124 million of operating income. During the quarter, we launched the Approach R10, our first portable golf launch monitor, designed to help golfers improve their game with more than a dozen key metrics shown in real time.

Aviation:

Revenue from the aviation segment grew 19% in the third quarter with contributions from both OEM and aftermarket product categories. Gross margin and operating margins were 73% and 28%, respectively, resulting in $51 million of operating income. During the quarter, we introduced Smart Glide, a revolutionary safety tool that helps pilots in loss of engine power emergencies by automating tasks to reduce pilot workload. Also during the quarter, we announced the certification of our GFC 600H flight control system for Bell 505 helicopters. The GFC 600H reduces a pilot’s workload and brings a number of helicopter-specific safety features to the market.

Marine:

Revenue from the marine segment grew 25% in the third quarter with growth across multiple categories, led by strong demand for our chartplotters. Gross margin and operating margins were 56% and 26%, respectively, resulting in $54 million of operating income. During the quarter, we launched Surround View, the marine industry’s first intelligent camera system to offer captains a 360-degree bird’s-eye view around the boat. Also, during the quarter, Garmin marine electronics were selected by Malibu Boats to exclusively outfit their full line of Axis wakesurf and wakeboarding boats.

Auto:

Revenue from the auto segment grew 7% during the third quarter primarily driven by growth in auto OEM programs. Gross margin was 40%, and we recorded an operating loss of $24 million in the quarter driven by investments in auto OEM programs. During the quarter, we began production shipments of the BMW computing module from our United States manufacturing facility and began prototype shipments of next-generation BMW computing modules from our Poland manufacturing facility. Also, we recently introduced a new lineup of Drive navigators for the consumer market, bringing larger displays and more connected features to our customers.

Additional Financial Information:

Total operating expenses in the third quarter were $413 million, an 18% increase over the prior year. Research and development increased by 22%, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 14%, driven primarily by personnel related expenses and information technology costs. Advertising increased 8% driven primarily by higher media spend in the quarter.

The effective tax rate in the third quarter of 2021 was 5.9% compared to 6.9% in the prior year quarter.

In the third quarter of 2021, we generated approximately $204 million of free cash flow(1) and paid a quarterly dividend of approximately $129 million. We ended the quarter with cash and marketable securities of approximately $3.2 billion.

  1. See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including pro forma effective tax rate and free cash flow.

2021 Guidance(2):

Based on our strong performance in the first three quarters of 2021, we are updating our full year guidance. We now anticipate revenue of approximately $4.95 billion with projected growth in all segments. We anticipate our full year pro forma EPS will be approximately $5.60 based on a gross margin of approximately 58.2%, operating margin of approximately 24.0% and a full year pro forma effective tax rate of approximately 11.5%.

2021 Guidance

Segment

Revenue Growth Estimates

Updated

Prior

Updated

Prior

Revenue

$4.95B

$4.90B

Fitness

17%

17%

Gross Margin

58.2%

58.5%

Outdoor

17%

17%

Operating Margin

24.0%

23.8%

Aviation

12%

10%

Tax Rate

11.5%

11.5%

Marine

30%

27%

EPS

$5.60

$5.50

Auto

17%

15%

(2) All amounts and %s in the above 2021 Guidance tables are approximate. Also, see attached discussion on Forward-looking Financial Measures

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.’s earnings call is as follows:

When: Wednesday, October 27, 2021 at 10:30 a.m. Eastern
Where: https://www.garmin.com/en-US/investors/events/
How: Simply log on to the web at the address above or call to listen in at 855-757-3897

An archive of the live webcast will be available until October 26, 2022 on the Garmin website at www.garmin.com. To access the replay, click on the Investors link and click over to the Events Calendar page.

This release includes projections and other forward-looking statements regarding Garmin Ltd. and its business that are commonly identified by words such as "anticipates," "would," "may," "expects," "estimates," "plans," "intends," "projects," and other words or phrases with similar meanings. Any statements regarding the Company’s expected fiscal 2021 GAAP and pro forma estimated earnings, EPS, and effective tax rate, and the Company’s expected segment revenue growth rates, consolidated revenue, gross margins, operating margins, potential future acquisitions, currency movements, expenses, pricing, new products launches, market reach, statements relating to possible future dividends, statements related to the ongoing impact of the COVID-19 pandemic, and the Company’s plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this release may not occur and actual results could differ materially as a result of risk factors and uncertainties affecting Garmin, including, but not limited to, the risk factors that are described in both the Annual Report on Form 10-K for the year ended December 26, 2020 and the Quarterly Report on Form 10-Q for the quarter ended September 25, 2021 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2020 Form 10-K and the Q3 2021 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/. All information provided in this release and in the attachments is as of September 25, 2021. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to us on the date hereof. We undertake no duty to update this information unless required by law.

This release and the attachments contain non-GAAP financial measures. A reconciliation to the nearest GAAP measure and a discussion of the Company's use of these measures are included in the attachments.

Garmin, the Garmin logo, the Garmin delta, and Approach are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Drive is a trademark of Garmin Ltd. or its subsidiaries. All other brands, product names, company names, trademarks and service marks are the properties of their respective owners. All rights reserved.

Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)

(In thousands, except per share information)

13-Weeks Ended

39-Weeks Ended

September 25,

September 26,

September 25,

September 26,

2021

2020

2021

2020

Net sales

$

1,191,973

$

1,109,194

$

3,591,206

$

2,835,168

Cost of goods sold

496,026

441,211

1,472,852

1,144,816

Gross profit

695,947

667,983

2,118,354

1,690,352

Advertising expense

36,705

33,866

110,705

90,031

Selling, general and administrative expense

162,515

142,134

485,896

411,335

Research and development expense

214,057

174,882

618,253

506,013

Total operating expense

413,277

350,882

1,214,854

1,007,379

Operating income

282,670

317,101

903,500

682,973

Other income (expense):

Interest income

6,897

7,777

21,568

30,258

Foreign currency (losses) gains

(15,014

)

10,113

(30,621

)

(9,802

)

Other income

833

1,726

3,511

8,515

Total other income (expense)

(7,284

)

19,616

(5,542

)

28,971

Income before income taxes

275,386

336,717

897,958

711,944

Income tax provision

16,347

23,300

101,894

53,168

Net income

$

259,039

$

313,417

$

796,064

$

658,776

Net income per share:

Basic

$

1.35

$

1.64

$

4.14

$

3.45

Diluted

$

1.34

$

1.63

$

4.13

$

3.44

Weighted average common shares outstanding:

Basic

192,322

191,234

192,123

191,021

Diluted

193,185

191,998

192,955

191,760

Garmin Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands, except per share information)

September 25,
2021

December 26,
2020

Assets

Current assets:

Cash and cash equivalents

$

1,639,056

$

1,458,442

Marketable securities

345,214

387,642

Accounts receivable, net

639,345

849,469

Inventories

1,113,503

762,084

Deferred costs

16,046

20,145

Prepaid expenses and other current assets

255,802

191,569

Total current assets

4,008,966

3,669,351

Property and equipment, net

974,981

855,539

Operating lease right-of-use assets

89,934

94,626

Marketable securities

1,253,589

1,131,175

Deferred income taxes

251,983

245,455

Noncurrent deferred costs

13,035

16,510

Intangible assets, net

809,163

828,566

Other assets

169,838

190,151

Total assets

$

7,571,489

$

7,031,373

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

$

318,604

$

258,885

Salaries and benefits payable

173,566

181,937

Accrued warranty costs

42,849

42,643

Accrued sales program costs

78,251

109,891

Deferred revenue

87,770

86,865

Accrued advertising expense

30,044

31,950

Other accrued expenses

146,426

149,817

Income taxes payable

109,862

68,585

Dividend payable

386,567

233,644

Total current liabilities

1,373,939

1,164,217

Deferred income taxes

127,733

116,844

Noncurrent income taxes

78,176

92,810

Noncurrent deferred revenue

42,022

49,934

Noncurrent operating lease liabilities

71,527

75,958

Other liabilities

23,354

15,494

Stockholders’ equity:

Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 192,322

shares outstanding at September 25, 2021 and 191,571 shares outstanding

at December 26, 2020

17,979

17,979

Additional paid-in capital

1,950,464

1,880,354

Treasury stock

(303,373

)

(320,016

)

Retained earnings

4,034,912

3,754,372

Accumulated other comprehensive income

154,756

183,427

Total stockholders’ equity

5,854,738

5,516,116

Total liabilities and stockholders’ equity

$

7,571,489

$

7,031,373

Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)

39-Weeks Ended

September 25,
2021

September 26,
2020

Operating Activities:

Net income

$

796,064

$

658,776

Adjustments to reconcile net income to net cash provided by

operating activities:

Depreciation

75,272

57,141

Amortization

38,485

32,969

Loss (gain) on sale or disposal of property and equipment

246

(1,815

)

Unrealized foreign currency losses

24,390

4,384

Deferred income taxes

8,358

14,353

Stock compensation expense

68,656

53,515

Realized gain on marketable securities

(513

)

(1,316

)

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable, net of allowance for doubtful accounts

197,024

59,474

Inventories

(357,387

)

(56,063

)

Other current and non-current assets

(31,398

)

(27,019

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting