Garmin announces third quarter 2024 results
Company reports record third quarter consolidated revenue and operating income, and raises full year guidance
SCHAFFHAUSEN, Switzerland, Oct. 30, 2024 /PRNewswire/ -- Garmin(®) Ltd. (NYSE: GRMN), today announced results for the third quarter ended September 28, 2024.
Highlights for third quarter 2024 include:
-- Consolidated revenue of $1.59 billion, a 24% increase compared to the
prior year quarter
-- Gross and operating margins expanded to 60.0% and 27.6%, respectively
-- Operating income of $437 million, a 62% increase compared to the prior
year quarter
-- GAAP EPS of $2.07 and pro forma EPS((1)) of $1.99, representing 41%
growth in pro forma EPS over the prior year quarter
-- Launched the f?nix(®) 8 series and the Enduro(TM) 3, expanding our
lineup of outdoor adventure watches
-- Named 2024 Manufacturer of the Year by the National Marine Electronics
Association for the 10(th) consecutive year, and received six Product of
Excellence awards, for a total of 63 over the last decade
-- Named the #1 Most Innovative Marine Company for the second consecutive
year by Soundings Trade Only, a leading trade publication for the
recreational boating industry
-- Announced the strategic acquisition of Lumishore, a leader in marine LED
lighting
-- Co-founders, Dr. Min Kao and the late Gary Burrell, were enshrined in
the National Aviation Hall of Fame
(In
thousands,
except per
share
information)
13-Weeks Ended
39-Weeks Ended
September 28, September 30, YoY September 28, September 30, YoY
2024 2023 Change 2024 2023 Change
Net sales $
1,586,022 $
1,277,531 24 % $
4,474,342 $
3,745,751 19 %
Fitness 463,887 352,976 31 % 1,235,182 932,561 32 %
Outdoor 526,551 433,997 21 % 1,332,617 1,210,773 10 %
Aviation 204,631 198,160 3 % 639,739 629,195 2 %
Marine 222,244 182,248 22 % 821,933 677,026 21 %
Auto OEM 168,709 110,150 53 % 444,871 296,196 50 %
Gross 60.0 57.0 58.5 57.2
margin % % % % %
Operating 27.6 21.2 24.1 20.1
income % % % % %
GAAP
diluted
EPS $
2.07 $
1.34 54 % $
5.06 $
3.90 30 %
Pro forma
diluted
EPS(1) $
1.99 $
1.41 41 % $
4.99 $
3.88 29 %
(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:
"We delivered another quarter of impressive financial results as our highly differentiated and innovative products resonate with customers, and we successfully leveraged growth opportunities across market segments and geographies. We are raising our 2024 outlook based on the results we have achieved so far and the momentum we are experiencing as we enter the important holiday selling season." - Cliff Pemble, President and Chief Executive Officer of Garmin Ltd.
Fitness:
Revenue from the fitness segment increased 31% in the third quarter with growth across all categories led by strong demand for wearables. Gross and operating margins were 61% and 32%, respectively, resulting in $148 million of operating income. During the quarter, we hosted our annual Garmin Health Summit to recognize innovative digital health solutions utilizing Garmin products, and to celebrate the 10(th) anniversary of Garmin Health. Also, during the quarter we announced updates to Garmin Coach, adding training plans for cyclists in addition to the existing training plans for runners, making it easier to prepare for an event, pursue a personal milestone or improve overall fitness.
Outdoor:
Revenue from the outdoor segment increased 21% in the third quarter primarily due to growth in adventure watches. Gross and operating margins were 68% and 40%, respectively, resulting in $209 million of operating income. During the quarter, we launched both the highly anticipated f?nix 8 series, adding brilliant AMOLED displays, cutting edge features, a built-in speaker, microphone, and an LED flashlight, and the Enduro 3, a lightweight ultraperformance GPS smartwatch purpose-built for ultra-endurance athletes with up to 320 hours of battery life in GPS mode with solar charging. We also launched the inReach(®) Messenger Plus, our first satellite communicator with photo and voice messaging in addition to two-way texting, location sharing and SOS capabilities, expanding our customers' ability to stay in touch beyond cell service.
Aviation:
Revenue from the aviation segment increased 3% in the third quarter with growth driven by aftermarket product categories. Gross and operating margins were 75% and 22%, respectively, resulting in $44 million of operating income. During the quarter, we announced Runway Occupancy Awareness, which uses ADS-B information to help reduce the risk of runway incursions and provide added confidence to pilots navigating busy and complex airports. Garmin is the first to bring this new safety feature to market. We also recently unveiled our new G3000(®) PRIME, which redefines the integrated flight deck experience with sleek, intuitive, all-touchscreen displays and a highly flexible open architecture system that seamlessly adapts to serve a broad and dynamic market.
Marine:
Revenue from the marine segment increased 22% in the third quarter primarily driven by the acquisition of JL Audio(®). Gross and operating margins were 55% and 17%, respectively, resulting in $38 million of operating income. During the quarter, we announced several new products to enhance our customers' time on the water, including Fusion Apollo(TM) marine speaker and subwoofer series, the GC(TM) 245/55 marine cameras, and the GPSMAP(®) 9500 black box system. We recently announced the acquisition of Lumishore, a leader in marine LED lighting as we continue to focus on providing seamless integration throughout the boat.
Auto OEM:
Revenue from the auto OEM segment increased 53% during the third quarter primarily driven by growth in domain controllers. Gross margin was 20% and the operating loss narrowed to $1 million as efficiencies improved with higher sales volumes. During the quarter, we successfully launched the Garmin-designed domain controllers across all remaining BMW Group car lines.
Additional Financial Information:
Total operating expenses in the third quarter were $514 million, a 12% increase over the prior year. Both research and development and selling, general and administrative expenses increased 12% driven primarily by personnel related costs.
The effective tax rate in the third quarter was 17.9% compared to the effective tax rate of 8.0% and the pro forma effective tax rate((1)) of 7.2% in the prior year quarter. The increase in the current quarter effective tax rate is primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to global minimum tax requirements.
In the third quarter of 2024, we generated operating cash flows of $258 million and free cash flow((1)) of $219 million. We paid a quarterly dividend of approximately $144 million and repurchased $20 million of the Company's shares within the quarter, leaving approximately $270 million remaining as of September 28, 2024 in the share repurchase program authorized through December 2026. We ended the quarter with cash and marketable securities of approximately $3.5 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.
2024 Fiscal Year Guidance:
Based on our performance in the first three quarters of 2024, we are adjusting our full year guidance. We now anticipate revenue of approximately $6.12 billion and pro forma EPS of $6.85 based on gross margin of 58.5%, operating margin of 24.0% and a full year effective tax rate of 16.5% (see attached discussion on Forward-looking Financial Measures).
Dividend Recommendation:
The board of directors has established December 27, 2024, as the payment date for the next dividend installment of $0.75 per share with a record date of December 13, 2024. At the 2024 annual shareholders' meeting, Garmin shareholders, in accordance with Swiss corporate law, approved a cash dividend in the total amount of $3.00 per share, payable in four equal installments on dates to be determined by the board in its discretion. The first and second payments were made on June 28, 2024 and September 27, 2024. The board currently anticipates the scheduling of the remaining quarterly dividend installments as follows:
Record Date
$s per share
Dividend Date
March 28, 2025 March 14,
2025 $0.75
Webcast Information/Forward-Looking Statements:
The information for Garmin Ltd.'s earnings call is as follows:
When: Wednesday, October 30, 2024 10:30 a.m.
Eastern
Where: Join a live stream of the call at the
following link
https://www.garmin.com/en-US/
investors/events/
An archive of the live webcast will be available until October 29, 2025 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 2024 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, share repurchase programs, currency movements, expenses, pricing, new product launches, market reach, statements relating to possible future dividends, 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 the Annual Report on Form 10-K for the year ended December 30, 2023 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin's 2023 Form 10-K 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 28, 2024. 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, f?nix, G3000, GPSMAP, inReach, and JL Audio are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Enduro, Fusion Apollo, and GC 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.
Investor Relations Contact: Media Relations Contact:
---
Teri Seck
Krista Klaus
913/397-8200
913/397-8200
investor.relations@garmin.com media.relations@garmin.com
Change in Operating Expense Presentation
Certain prior period information presented here has been recast to conform to the current period presentation. In the first quarter of 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general, and administrative expenses on the Company's condensed consolidated statements of income, which management believes to be a more meaningful presentation. This change in presentation had no effect on the Company's consolidated operating or net income.
Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Income (Unaudited)
(In thousands, except per share information)
13-Weeks Ended 39-Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023
Net sales $
1,586,022 $
1,277,531 $
4,474,342 $
3,745,751
Cost of goods sold 634,423 548,962 1,857,712 1,604,945
Gross profit 951,599 728,569 2,616,630 2,140,806
Research and development expense 249,162 221,572 734,848 667,451
Selling, general and administrative expenses 264,962 236,628 803,869 721,649
Total operating expense 514,124 458,200 1,538,717 1,389,100
Operating income 437,475 270,369 1,077,913 751,706
Other income (expense):
Interest income 28,830 19,803 83,143 54,461
Foreign currency gains (losses) 18,131 (11,539) 15,584 6,946
Other income 1,814 938 2,623 4,206
Total other income (expense) 48,775 9,202 101,350 65,613
Income before income taxes 486,250 279,571 1,179,263 817,319
Income tax provision 87,139 22,328 203,560 69,810
Net income $
399,111 $
257,243 $
975,703 $
747,509
Net income per share:
Basic $
2.08 $
1.34 $
5.08 $
3.91
Diluted $
2.07 $
1.34 $
5.06 $
3.90
Weighted average common shares outstanding:
Basic 192,201 191,435 192,055 191,409
Diluted 193,171 191,868 192,940 191,772
Garmin Ltd. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(In thousands)
September 28, December 30,
2023
2024
Assets
Current assets:
Cash and cash equivalents $
2,009,361 $
1,693,452
Marketable securities 414,701 274,618
Accounts receivable, net 922,034 815,243
Inventories 1,505,536 1,345,955
Deferred costs 23,385 16,316
Prepaid expenses and other current assets 334,488 318,556
Total current assets 5,209,505 4,464,140
Property and equipment, net 1,220,113 1,224,097
Operating lease right-of-use assets 137,665 143,724
Noncurrent marketable securities 1,106,532 1,125,191
Deferred income tax assets 787,849 754,635
Noncurrent deferred costs 7,994 11,057
Goodwill 611,884 608,474
Other intangible assets, net 168,230 186,601
Other noncurrent assets 97,960 85,650
Total assets $
9,347,732 $
8,603,569
Liabilities and Stockholders
'
Equity
Current liabilities:
Accounts payable $
374,025 $
253,790
Salaries and benefits payable 218,941 190,014
Accrued warranty costs 57,983 55,738
Accrued sales program costs 75,802 98,610
Other accrued expenses 222,925 245,874
Deferred revenue 113,049 101,189
Income taxes payable 227,735 225,475
Dividend payable 288,204 139,997
Total current liabilities 1,578,664 1,310,687
Deferred income tax liabilities 104,996 114,682
Noncurrent income taxes payable 16,864 16,521
Noncurrent deferred revenue 30,227 36,148
Noncurrent operating lease liabilities 109,832 113,035
Other noncurrent liabilities 602 436
Stockholders' equity:
Common shares (194,901 and 195,880 shares authorized and issued; 19,490 19,588
192,136 and 191,777 shares outstanding)
Additional paid-in capital 2,218,170 2,125,467
Treasury shares (2,765 and 4,103 shares) (243,994) (330,909)
Retained earnings 5,563,576 5,263,528
Accumulated other comprehensive income (loss) (50,695) (65,614)
Total stockholders' equity 7,506,547 7,012,060
Total liabilities and stockholders' equity $
9,347,732 $
8,603,569
Garmin Ltd. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(In thousands)
39-Weeks Ended
September 28, September 30,
2024 2023
Operating Activities:
Net income $
975,703 $
747,509
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 102,343 98,483
Amortization 30,849 33,751
Gain on sale or disposal of property and equipment (48) (50)
Unrealized foreign currency (gains) losses (25,486) 9,927
Deferred income taxes (53,966) (90,214)
Stock compensation expense 101,039 66,214
Realized loss on marketable securities 29 56
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net of allowance for doubtful accounts (103,567) (54,756)
Inventories (163,865) 111,459
Other current and noncurrent assets (47,413) 28,288
Accounts payable 124,315 55,340
Other current and noncurrent liabilities (6,987) 430
Deferred revenue 5,885 7,063
Deferred costs (3,987) (1,152)
Income taxes 13,737 (102,024)
Net cash provided by operating activities 948,581 910,324
Investing activities:
Purchases of property and equipment (108,869) (144,876)
Purchase of marketable securities (363,783) (116,039)
Redemption of marketable securities 277,334 145,094
Net cash from (payments for) acquisitions 5,011 (150,853)
Other investing activities, net (458) (1,018)
Net cash used in investing activities (190,765) (267,692)
Financing activities:
Dividends (428,373) (419,166)
Proceeds from issuance of treasury shares related to equity awards 24,530 21,946
Purchase of treasury shares related to equity awards (16,313) (9,397)
Purchase of treasury shares under share repurchase plan (29,278) (79,533)
Net cash used in financing activities (449,434) (486,150)
Effect of exchange rate changes on cash and cash equivalents 7,536 (12,854)
Net increase in cash, cash equivalents, and restricted cash 315,918 143,628
Cash, cash equivalents, and restricted cash at beginning of period 1,694,156 1,279,912
Cash, cash equivalents, and restricted cash at end of period $
2,010,074 $
1,423,540
Garmin Ltd. and Subsidiaries
Net Sales, Gross Profit and Operating Income by Segment (Unaudited)
(In thousands)
Fitness Outdoor Aviation Marine Auto Total
OEM
13-Weeks Ended September 28, 2024
Net sales $
463,887 $
526,551 $
204,631 $
222,244 $
168,709 $
1,586,022
Gross profit 283,325 358,693 154,138 122,433 33,010 951,599
Operating income (loss) 147,768 208,866 44,278 37,839 (1,276) 437,475
13-Weeks Ended September 30, 2023
Net sales $
352,976 $
433,997 $
198,160 $
182,248 $
110,150 $
1,277,531
Gross profit 190,685 270,774 148,364 95,186 23,560 728,569
Operating income (loss) 74,614 136,401 49,269 23,850 (13,765) 270,369
39-Weeks Ended September 28, 2024
Net sales $
1,235,182 $
1,332,617 $
639,739 $
821,933 $
444,871 $
4,474,342
Gross profit 723,375 885,646 478,131 449,472 80,006 2,616,630
Operating income (loss) 323,511 451,408 146,899 185,422 (29,327) 1,077,913
39-Weeks Ended September 30, 2023
Net sales $
932,561 $
1,210,773 $
629,195 $
677,026 $
296,196 $
3,745,751
Gross profit 484,759 755,800 463,774 365,162 71,311 2,140,806
Operating income (loss) 139,651 351,399 169,730 142,135 (51,209) 751,706
Garmin Ltd. and Subsidiaries
Net Sales by Geography (Unaudited)
(In thousands)
13-Weeks Ended
39-Weeks Ended
September 28, September 30, YoY September 28, September 30, YoY
2024 2023 Change 2024 2023 Change
Net sales $
1,586,022 $
1,277,531 24 % $
4,474,342 $
3,745,751 19 %
Americas 724,572 628,157 15 % 2,181,266 1,881,710 16 %
EMEA 612,658 439,123 40 % 1,618,058 1,252,526 29 %
APAC 248,792 210,251 18 % 675,018 611,515 10 %
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 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 three quarters of 2024 there were no such discrete tax items identified.
(In
thousands)
13-Weeks Ended
39-Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023
$ ETR(1)
$ ETR(1)
$ ETR(1)
$ ETR(1)
GAAP income $
87,139 17.9 $
22,328 8.0 $
203,560 17.3 $
69,810 8.5
tax
provision % % % %
Pro forma
discrete
tax item:
Tax effect
of state
rate
change(2) (2,269) (2,269)
Pro forma $
87,139 17.9 $
20,059 7.2 $
203,560 17.3 $
67,541 8.3
income tax
provision % % % %
(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 third quarter 2023, the Company recognized $2.3 million of tax expense due to the revaluation of deferred tax assets associated with the change in corporate income tax rate for the state of Kansas. The impact of the revaluation of these
deferred tax assets was not reflective of income tax expense incurred as a result of current period earnings.
Pro forma net income (earnings) per share
Management believes 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 to permit a consistent comparison of the Company's performance between periods.
(In thousands, except per share information) 13-Weeks Ended 39-Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023
GAAP net income $
399,111 $
257,243 $
975,703 $
747,509
Foreign currency gains / losses(1) (18,131) 11,539 (15,584) (6,946)
Tax effect of foreign currency gains / losses(2) 3,249 (828) 2,690 574
Pro forma discrete tax item(3) 2,269 2,269
Pro forma net income $
384,229 $
270,223 $
962,809 $
743,406
GAAP net income per share:
Basic $
2.08 $
1.34 $
5.08 $
3.91
Diluted $
2.07 $
1.34 $
5.06 $
3.90
Pro forma net income per share:
Basic $
2.00 $
1.41 $
5.01 $
3.88
Diluted $
1.99 $
1.41 $
4.99 $
3.88
Weighted average common shares outstanding:
Basic 192,201 191,435 192,055 191,409
Diluted 193,171 191,868 192,940 191,772
(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 was calculated using the effective tax rate of 17.9% and 17.3% for the 13-weeks and 39-weeks ended September 28, 2024 and 7.2% and 8.3% for the 13-weeks and 39-weeks ended September 30, 2023.
Free cash flow
Management believes 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 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 39-Weeks Ended
September 28, September 30, September 28, September 30,
2024 2023 2024 2023
Net cash provided by operating activities $
257,955 $
357,412 $
948,581 $
910,324
Less: purchases of property and equipment (38,544) (45,530) (108,869) (144,876)
Free Cash Flow $
219,411 $
311,882 $
839,712 $
765,448
Forward-looking Financial Measures
The forward-looking financial measures in our 2024 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 39-weeks ended September 28, 2024.
At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2024, estimate the impact of any such items, or anticipate the impact of any other events that may be considered in the calculation of non-GAAP financial measures.
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SOURCE Garmin Ltd.
