Company reports record second quarter revenue
and operating income
Garmin® Ltd. (NASDAQ: GRMN), today announced results for the
second quarter ended June 26, 2021.
Highlights for second quarter 2021 include:
- Total revenue of $1.33 billion, a 53% increase over the prior
year quarter with double-digit growth in all segments
- Gross margin of 58.8% compared to 59.3% in the prior year
quarter
- Operating margin improved to 28.0% compared to 21.7% in the
prior year quarter
- Operating income of $371 million, a 97% increase over the prior
year quarter
- GAAP EPS was $1.64 and pro forma EPS(1) was $1.68, representing
85% growth in pro forma EPS over the prior year quarter
- Garmin Autoland was awarded the 2020 Robert J. Collier Trophy,
which recognizes the greatest achievements in aeronautics or
astronautics in America
- Expanded our family of health and fitness smartwatches with the
launch of Venu 2 and Venu 2S
- Launched Descent Mk2S, our smallest watch-style dive
computer
(In thousands, except per share
information)
13-Weeks Ended
26-Weeks Ended
June 26,
June 27,
YoY
June 26,
June 27,
YoY
2021
2020
Change
2021
2020
Change
Net sales
$
1,326,905
$
869,867
53
%
$
2,399,232
$
1,725,975
39
%
Fitness
413,201
294,642
40
%
721,326
518,242
39
%
Outdoor
323,405
206,200
57
%
579,859
381,302
52
%
Aviation
180,832
126,140
43
%
354,721
314,739
13
%
Marine
261,790
157,827
66
%
471,163
320,832
47
%
Auto
147,677
85,058
74
%
272,163
190,860
43
%
Gross margin %
58.8
%
59.3
%
59.3
%
59.2
%
Operating income %
28.0
%
21.7
%
25.9
%
21.2
%
GAAP diluted EPS
$
1.64
$
0.96
71
%
$
2.78
$
1.80
54
%
Pro forma diluted EPS(1)
$
1.68
$
0.91
85
%
$
2.85
$
1.82
57
%
(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:
“Strong demand for active lifestyle products continued, and we
experienced solid recovery within our aviation and auto segments
resulting in record revenue and profits in the second quarter,”
said Cliff Pemble, President and CEO of Garmin. “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 40% in the second quarter
driven by strong demand for our cycling and advanced wearable
products. Gross margin and operating margin were 54% and 28%,
respectively, resulting in 62% operating income growth. During the
quarter, we launched the Forerunner 945 LTE, bringing safety and
real-time tracking features to our premium GPS running smartwatch.
This watch is designed to allow runners to send for help, if
necessary, and stay connected without their phones. In addition, we
celebrated Global Running Day with the launch of the Forerunner 55,
an easy-to-use smartwatch that encourages runners of all skill
levels to get out and run.
Outdoor:
Revenue from the outdoor segment grew 57% in the second quarter
with growth across all categories led by strong demand for
adventure watches. Gross margin and operating margin were 64% and
38%, respectively, resulting in 81% operating income growth. During
the quarter, we launched Descent Mk2S, a stylish smartwatch
featuring multiple dive modes, multisport training and smart
features. We also debuted our children’s book, “Women of Adventure:
Being Brave in a Big World,” featuring six stories from our Women
of Adventure series. The book captures the traits that make each
woman unique while touching on the science behind her sport or
passion, to encourage readers to explore the world and find ways to
be brave every day.
Aviation:
Revenue from the aviation segment grew 43% in the second quarter
with contributions from both OEM and aftermarket product
categories. Gross margin and operating margin were 73% and 28%,
respectively, resulting in 226% operating income growth. During the
quarter, Garmin Autoland won the prestigious Robert J. Collier
Trophy, for the world’s first autonomous system designed to
activate during an emergency to safely fly and land an aircraft
without human interaction. In addition, we announced the
acquisition of AeroData, a leading provider of performance data
solutions for commercial aircraft.
Marine:
Revenue from the marine segment grew 66% in the second quarter
with growth across multiple categories, led by strong demand for
our chartplotters. Gross margin and operating margin were 58% and
34%, respectively, resulting in 106% operating income growth.
During the quarter, we announced the integration of our displays on
Mercury-powered boats which can receive engine performance data via
Mercury’s new SmartCraft Connect gateway, which enables monitoring
of up to four engines simultaneously. We launched the MSC 10 marine
satellite compass, a GPS-based navigation tool with multi-band GNSS
and a fully integrated attitude and heading reference system for a
smooth and accurate GPS-derived heading and position on the water.
Also, with the assistance of our innovative marine electronics,
Hank Cherry, a Garmin sponsored angler, won the Bassmaster
Classic.
Auto:
Revenue from the auto segment grew 74% during the second quarter
driven by both auto OEM programs and consumer auto products. Gross
margin was 43%, and we recorded an operating loss of $8 million in
the quarter driven by investments in auto OEM programs. During the
quarter, we launched the dezl OTR500, truck navigator that adds
PrePass weigh station bypass notifications saving drivers time,
fuel and money. Also, we launched our first connected dash cam with
automatic video storage and Live View monitoring options.
Additional Financial
Information:
Total operating expenses in the second quarter were $410
million, a 25% increase over the prior year. Research and
development increased by 21%, primarily due to engineering
personnel costs across all segments. Selling, general and
administrative expenses increased 26%, driven primarily by
personnel related expenses and information technology costs.
Advertising increased 47% driven primarily by higher spend in the
fitness and outdoor segments.
The effective tax rate in the second quarter of 2021 was
14.8%.
In the second quarter of 2021, we generated approximately $120
million of free cash flow(1) and paid a quarterly dividend of
approximately $117 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 half of 2021, we
are updating our full year guidance. We now anticipate revenue of
approximately $4.9 billion with projected growth in all segments.
We anticipate our full year pro forma EPS will be approximately
$5.50 based on a gross margin of approximately 58.5%, operating
margin of approximately 23.8% and a full year pro forma effective
tax rate of approximately 11.5%.
2021 Guidance
Segment
Revenue Growth
Estimates
Updated
Prior
Updated
Prior
Revenue
$4.9B
$4.6B
Fitness
17%
10%
Gross Margin
58.5%
59.2%
Outdoor
17%
10%
Operating Margin
23.8%
23.5%
Aviation
10%
5%
Tax Rate
11.5%
10.5%
Marine
27%
15%
EPS
$5.50
$5.15
Auto
15%
5%
(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,
July 28, 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 July 27,
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 June 26, 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 Q2 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 June 26,
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, Forerunner are
trademarks of Garmin Ltd. or its subsidiaries and are registered in
one or more countries, including the U.S. Descent and dezl are
trademarks 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
26-Weeks Ended
June 26,
June 27,
June 26,
June 27,
2021
2020
2021
2020
Net sales
$
1,326,905
$
869,867
$
2,399,232
$
1,725,975
Cost of goods sold
546,054
354,437
976,825
703,605
Gross profit
780,851
515,430
1,422,407
1,022,370
Advertising expense
42,939
29,285
74,000
56,165
Selling, general and administrative
expense
165,759
132,016
323,381
269,202
Research and development expense
200,981
165,740
404,195
331,131
Total operating expense
409,679
327,041
801,576
656,498
Operating income
371,172
188,389
620,831
365,872
Other income (expense):
Interest income
7,018
10,455
14,670
22,481
Foreign currency losses
(7,326
)
(4,493
)
(15,607
)
(19,916
)
Other income
1,195
3,241
2,679
6,789
Total other income (expense)
887
9,203
1,742
9,354
Income before income taxes
372,059
197,592
622,573
375,226
Income tax provision
55,062
13,412
85,548
29,866
Net income
$
316,997
$
184,180
$
537,025
$
345,360
Net income per share:
Basic
$
1.65
$
0.96
$
2.80
$
1.81
Diluted
$
1.64
$
0.96
$
2.78
$
1.80
Weighted average common shares
outstanding:
Basic
192,150
191,024
192,023
190,914
Diluted
192,871
191,597
192,840
191,640
Garmin Ltd. and
Subsidiaries
Condensed Consolidated Balance
Sheets (Unaudited)
(In thousands, except per
share information)
June 26, 2021
December 26, 2020
Assets
Current assets:
Cash and cash equivalents
$
1,639,447
$
1,458,442
Marketable securities
330,567
387,642
Accounts receivable, net
737,268
849,469
Inventories
938,607
762,084
Deferred costs
16,966
20,145
Prepaid expenses and other current
assets
220,910
191,569
Total current assets
3,883,765
3,669,351
Property and equipment, net
957,924
855,539
Operating lease right-of-use assets
93,097
94,626
Marketable securities
1,203,705
1,131,175
Deferred income taxes
250,230
245,455
Noncurrent deferred costs
13,814
16,510
Intangible assets, net
820,116
828,566
Other assets
180,073
190,151
Total assets
$
7,402,724
$
7,031,373
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
303,947
$
258,885
Salaries and benefits payable
160,815
181,937
Accrued warranty costs
44,575
42,643
Accrued sales program costs
97,213
109,891
Deferred revenue
85,888
86,865
Accrued advertising expense
31,481
31,950
Other accrued expenses
140,807
149,817
Income taxes payable
78,797
68,585
Dividend payable
515,307
233,644
Total current liabilities
1,458,830
1,164,217
Deferred income taxes
124,149
116,844
Noncurrent income taxes
97,556
92,810
Noncurrent deferred revenue
43,554
49,934
Noncurrent operating lease liabilities
74,336
75,958
Other liabilities
20,051
15,494
Stockholders’ equity:
Shares, CHF 0.10 par value, 198,077 shares
authorized and issued; 192,321 shares outstanding at June 26, 2021
and 191,571 shares outstanding at December 26, 2020
17,979
17,979
Additional paid-in capital
1,927,137
1,880,354
Treasury stock
(303,369
)
(320,016
)
Retained earnings
3,775,874
3,754,372
Accumulated other comprehensive income
166,627
183,427
Total stockholders’ equity
5,584,248
5,516,116
Total liabilities and stockholders’
equity
$
7,402,724
$
7,031,373
Garmin Ltd. and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows (Unaudited)
(In thousands)
26-Weeks Ended
June 26, 2021
June 27, 2020
Operating Activities:
Net income
$
537,025
$
345,360
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
48,776
37,030
Amortization
25,903
20,502
Loss (gain) on sale or disposal of
property and equipment
207
(1,807
)
Unrealized foreign currency losses
12,205
16,678
Deferred income taxes
5,560
272
Stock compensation expense
45,301
31,484
Realized gain on marketable securities
(374
)
(331
)
Changes in operating assets and
liabilities, net of acquisitions:
Accounts receivable, net of allowance for
doubtful accounts
103,928
178,120
Inventories
(177,193
)
(57,126
)
Other current and non-current assets
(27,279
)
(10,427
)
Accounts payable
44,144
(51,463
)
Other current and non-current
liabilities
(39,377
)
(58,662
)
Deferred revenue
(7,317
)
(19,301
)
Deferred costs
5,863
7,817
Income taxes payable
20,670
(13,035
)
Net cash provided by operating
activities
598,042
425,111
Investing activities:
Purchases of property and equipment
(146,542
)
(98,270
)
Proceeds from sale of property and
equipment
8
1,916
Purchase of intangible assets
(1,170
)
(1,374
)
Purchase of marketable securities
(755,360
)
(346,129
)
Redemption of marketable securities
720,937
566,688
Acquisitions, net of cash acquired
(15,893
)
(7,893
)
Net cash (used in) provided by investing
activities
(198,020
)
114,938
Financing activities:
Dividends
(233,860
)
(217,450
)
Proceeds from issuance of treasury stock
related to equity awards
35,733
15,202
Purchase of treasury stock related to
equity awards
(17,604
)
(11,883
)
Net cash used in financing activities
(215,731
)
(214,131
)
Effect of exchange rate changes on cash
and cash equivalents
(2,819
)
1,651
Net increase in cash, cash equivalents,
and restricted cash
181,472
327,569
Cash, cash equivalents, and restricted
cash at beginning of period
1,458,748
1,027,638
Cash, cash equivalents, and restricted
cash at end of period
$
1,640,220
$
1,355,207
The following table includes supplemental financial information
for the consumer auto and auto OEM operating segments that
management believes is useful.
Garmin Ltd. and
Subsidiaries
Net Sales, Gross Profit and
Operating Income by Segment
(In thousands)
Auto
Fitness
Outdoor
Aviation
Marine
Total Auto
Consumer Auto
Auto OEM
Total
13-Weeks Ended June 26, 2021
Net sales
$
413,201
$
323,405
$
180,832
$
261,790
$
147,677
$
86,278
$
61,399
$
1,326,905
Gross profit
225,192
208,158
131,934
152,609
62,958
42,261
20,697
780,851
Operating income (loss)
116,966
122,056
50,810
89,752
(8,412
)
15,684
(24,096
)
371,172
13-Weeks Ended June 27, 2020
Net sales
$
294,642
$
206,200
$
126,140
$
157,827
$
85,058
$
55,270
$
29,788
$
869,867
Gross profit
156,817
133,189
92,036
93,470
39,918
26,917
13,001
515,430
Operating income (loss)
71,981
67,414
15,566
43,553
(10,125
)
4,237
(14,362
)
188,389
26-Weeks Ended June 26, 2021
Net sales
$
721,326
$
579,859
$
354,721
$
471,163
$
272,163
$
148,673
$
123,490
$
2,399,232
Gross profit
398,737
379,833
258,116
273,989
111,732
74,225
37,507
1,422,407
Operating income (loss)
190,702
215,085
95,679
151,315
(31,950
)
24,084
(56,034
)
620,831
26-Weeks Ended June 27, 2020
Net sales
$
518,242
$
381,302
$
314,739
$
320,832
$
190,860
$
114,283
$
76,577
$
1,725,975
Gross profit
269,142
245,447
230,844
187,680
89,257
55,029
34,228
1,022,370
Operating income (loss)
102,992
114,581
74,887
83,712
(10,300
)
7,450
(17,750
)
365,872
Garmin Ltd. and
Subsidiaries
Net Sales by Geography
(In thousands)
13-Weeks Ended
26-Weeks Ended
June 26,
June 27,
YoY
June 26,
June 27,
YoY
2021
2020
Change
2021
2020
Change
Net sales
$
1,326,905
$
869,867
53%
$
2,399,232
$
1,725,975
39%
Americas
646,393
423,091
53%
1,150,085
850,491
35%
EMEA
488,724
335,201
46%
888,232
635,069
40%
APAC
191,788
111,575
72%
360,915
240,415
50%
EMEA - Europe, Middle East and Africa;
APAC - Asia Pacific and Australian Continent
Non-GAAP Financial Information
To supplement our financial results presented in accordance with
GAAP, this release includes the following measures defined by the
Securities and Exchange Commission as non-GAAP financial measures:
pro forma effective tax rate, pro forma net income (earnings) per
share and free cash flow. These non-GAAP measures are not based on
any comprehensive set of accounting rules or principles and should
not be considered a substitute for, or superior to, financial
measures calculated in accordance with GAAP, and may be different
from non-GAAP measures used by other companies, limiting the
usefulness of the measures for comparison with other companies.
Management believes providing investors with an operating view
consistent with how it manages the Company provides enhanced
transparency into the operating results of the Company, as
described in more detail by category below.
The tables below provide reconciliations between the GAAP and
non-GAAP measures.
Pro forma effective tax rate
The Company’s income tax expense is periodically impacted by
discrete tax items that are not reflective of income tax expense
incurred as a result of current period earnings. Therefore,
management believes disclosure of the effective tax rate and income
tax provision before the effect of certain discrete tax items are
important measures to permit investors' consistent comparison
between periods. In the first and second quarter 2021, there were
no such discrete tax items identified.
(In thousands)
13-Weeks Ended
26-Weeks Ended
June 26,
June 27,
June 26,
June 27,
2021
2020
2021
2020
$
ETR(1)
$
ETR(1)
$
ETR(1)
$
ETR(1)
GAAP income tax provision
$
55,062
14.8
%
$
13,412
6.8
%
$
85,548
13.7
%
$
29,866
8.0
%
Pro forma discrete tax item:
Uncertain tax reserve release(2)
—
14,308
—
14,308
Pro forma income tax provision
$
55,062
14.8
%
$
27,720
14.0
%
$
85,548
13.7
%
$
44,174
11.8
%
(1) Effective tax rate is calculated by
taking the income tax provision divided by income before taxes, as
presented on the face of the Condensed Consolidated Statements of
Income.
(2) In second quarter 2020, the Company
recognized a $14.3 million income tax benefit due to the release of
uncertain tax position reserves associated with the 2014
intercompany restructuring, which was a pro forma adjustment in
2014. The second quarter 2020 impact of the reserve release is not
reflective of income tax expense incurred as a result of current
period earnings and therefore affects period-to-period
comparability.
Pro forma net income (earnings) per share
Management believes that net income (earnings) per share before
the impact of foreign currency gains or losses and certain discrete
income tax items, as discussed above, is an important measure in
order to permit a consistent comparison of the Company’s
performance between periods.
(In thousands, except per share
information)
13-Weeks Ended
26-Weeks Ended
June 26,
June 27,
June 26,
June 27,
2021
2020
2021
2020
GAAP net income
$
316,997
$
184,180
$
537,025
$
345,360
Foreign currency losses(1)
7,326
4,493
15,607
19,916
Tax effect of foreign currency
losses(2)
(1,084
)
(630
)
(2,145
)
(2,345
)
Pro forma discrete tax item(3)
—
(14,308
)
—
(14,308
)
Pro forma net income
$
323,239
$
173,735
$
550,487
$
348,623
GAAP net income per share:
Basic
$
1.65
$
0.96
$
2.80
$
1.81
Diluted
$
1.64
$
0.96
$
2.78
$
1.80
Pro forma net income per share:
Basic
$
1.68
$
0.91
$
2.87
$
1.83
Diluted
$
1.68
$
0.91
$
2.85
$
1.82
Weighted average common shares
outstanding:
Basic
192,150
191,024
192,023
190,914
Diluted
192,871
191,597
192,840
191,640
(1) Foreign currency gains and losses for
the Company are driven by movements of a number of currencies in
relation to the U.S. Dollar and the related exchange rate impact on
the significant cash, receivables, and payables held in a currency
other than the functional currency at a given legal entity.
However, there is minimal cash impact from such foreign currency
gains and losses.
(2) The tax effect of foreign currency
gains and losses was calculated using the effective tax rate of
14.8% and 13.7% for the 13-weeks and 26-weeks ended June 26, 2021,
respectively, and a pro forma effective tax rate of 14.0% and 11.8%
for the 13-weeks and 26-weeks ended June 27, 2020,
respectively.
(3) The discrete tax item is discussed in
the pro forma effective tax rate section above.
Free cash flow
Management believes that free cash flow is an important
liquidity measure because it represents the amount of cash provided
by operations that is available for investing and defines it as
operating cash flows less capital expenditures for property and
equipment. Management believes that excluding purchases of property
and equipment provides a better understanding of the underlying
trends in the Company’s operations and allows more accurate
comparisons of the Company’s results between periods. This metric
may also be useful to investors, but should not be considered in
isolation as it is not a measure of cash flow available for
discretionary expenditures. The most comparable GAAP measure is net
cash provided by operating activities.
(In thousands)
13-Weeks Ended
26-Weeks Ended
June 26,
June 27,
June 26,
June 27,
2021
2020
2021
2020
Net cash provided by operating
activities
$
229,680
$
199,237
$
598,042
$
425,111
Less: purchases of property and
equipment
(109,648
)
(56,909
)
(146,542
)
(98,270
)
Free Cash Flow
$
120,032
$
142,328
$
451,500
$
326,841
Forward-looking Financial Measures
The forward-looking financial measures in our 2021 guidance
provided above do not consider the potential future net effect of
foreign currency exchange gains and losses, certain discrete tax
items and any other impacts that may be identified as pro forma
adjustments in calculating the non-GAAP measures described
above.
The estimated impact of foreign currency gains and losses cannot
be reasonably estimated on a forward-looking basis due to the high
variability and low visibility with respect to non-operating
foreign currency exchange gains and losses and the related tax
effects of such gains and losses. The impact on diluted net income
per share of foreign currency gains and losses, net of tax effects,
was $0.07 per share for the 26-weeks ended June 26, 2021.
At this time, management is unable to determine whether or not
significant discrete tax items will occur in fiscal 2021 or
anticipate the impact of any other events that may be considered in
the calculation of non-GAAP financial measures.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210728005350/en/
Investor Relations Contact: Teri
Seck 913/397-8200 investor.relations@garmin.com
Media Relations Contact: Krista
Klaus 913/397-8200 media.relations@garmin.com
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