Garmin announces third quarter 2022 results
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Garmin announces third quarter 2022 results

SCHAFFHAUSEN, Switzerland, Oct. 26, 2022 — (PRNewswire) — Garmin® Ltd. (NYSE: GRMN), today announced results for the third quarter ended September 24, 2022.

Highlights for third quarter 2022 include:

(In thousands, except per share
information)


13-Weeks Ended



39-Weeks Ended




September 24,



September 25,



YoY



September 24,



September 25,



YoY




2022



2021



Change



2022



2021



Change


Net sales


$

1,140,434



$

1,191,973



(4) %



$

3,553,931



$

3,591,206



(1) %



Fitness



279,875




342,316



(18) %




772,867




1,063,642



(27) %



Outdoor



340,388




323,856



5 %




1,106,908




903,715



22 %



Aviation



188,043




180,165



4 %




567,548




534,886



6 %



Marine



196,506




207,534



(5) %




693,369




678,698



2 %



Auto



135,622




138,102



(2) %




413,239




410,265



1 %



























Gross margin %


58.8 %



58.4 %







58.0 %



59.0 %































Operating income %


21.0 %



23.7 %







21.4 %



25.2 %































GAAP diluted EPS



$1.09




$1.34



(19) %




$3.52




$4.13



(15) %


Pro forma diluted EPS(1)



$1.24




$1.41



(12) %




$3.79




$4.27



(11) %




























(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:

"Revenue was negatively impacted by the strengthening of the U.S. Dollar," said Cliff Pemble, President and CEO of Garmin. "Despite this significant headwind, gross margin expanded and operating margin remained solid.  Looking forward, we are lowering our revenue outlook for the remainder of the year consistent with the trends we are experiencing, while also raising our EPS guidance on an improving margin outlook. We believe that our strong lineup of innovative products and vertical integration strategy will allow us to remain strong in this challenging economic environment."

Fitness:

Revenue from the fitness segment decreased 18% in the third quarter, primarily driven by lower revenue from our advanced wellness and indoor cycling products. Gross and operating margins were 53% and 15%, respectively, resulting in $41 million of operating income. During the quarter, we launched our first smart blood pressure monitor, the Index™ BPM, allowing a user to measure and track systolic and diastolic blood pressure at home or on the go. When paired with the Garmin Connect app, users can view their measurement history and trends alongside other health stats. Also, during the quarter, we launched the Venu® Sq 2, featuring a bright AMOLED display with nearly double the battery life over its predecessor.  We recently hosted our sixth annual Garmin Developers Conference where hundreds of developers virtually gathered to explore how Garmin can support their ideas and innovations. 

Outdoor:

Revenue from the outdoor segment grew 5% in the third quarter primarily due to growth in adventure watches and inReach devices and services, partially offset by declines in other product lines. Gross and operating margins were 65% and 36%, respectively, resulting in $121 million of operating income. During the quarter, we launched the inReach Messenger, a versatile new communication-focused device with global two-way texting, location sharing and SOS capabilities.

Aviation:

Revenue from the aviation segment grew 4% in the third quarter driven by growth in multiple product lines, primarily in aftermarket. Gross and operating margins were 73% and 26%, respectively, resulting in $48 million of operating income. During the quarter, we announced that Tactical Air has chosen the G3000® integrated flight deck to modernize the U.S. Department of Defense fleet of Navy and Marine Corps F-5 aircraft.

Marine:

Revenue from the marine segment decreased 5% in the third quarter primarily due to the return of typical seasonality trends. Gross and operating margins were 56% and 23%, respectively, resulting in $45 million of operating income. During the quarter, we launched the LiveScope® XR System, bringing revolutionary live-scanning sonar technology to deep water fishing allowing anglers to see real-time images of fish and structure up to 500' in front of or below the boat. We also launched the LiveScope Plus Ice Fishing Bundle, creating the ultimate portable solution for winter fishing.

Auto:

Revenue from the auto segment decreased 2% during the third quarter as declines in our consumer products more than offset the growth in OEM programs. Gross margin was 40%, and we recorded an operating loss of $16 million in the quarter driven by ongoing investments in auto OEM programs. During the quarter, we announced that our Garmin Tread® navigators had been selected by Arctic Cat, Inc. as standard equipment on select side-by-side vehicles beginning in model year 2023.

Additional Financial Information:

Total operating expenses in the third quarter were $431 million, a 4% increase over the prior year. Research and development increased 5% primarily due to engineering personnel costs. Selling, general and administrative expenses increased 7% driven primarily by personnel related expenses and information technology costs. Advertising expenses decreased 10% primarily due to lower cooperative advertising.

The effective tax rate in the third quarter was 4.3% compared to 5.9% in the prior year quarter. The year-over-year decrease in the effective tax rate is primarily due to income mix by jurisdiction and an increase in U.S. tax deductions and credits.

In the third quarter of 2022, we generated approximately $104 million of free cash flow(1). We paid a quarterly dividend of approximately $141 million and repurchased approximately $83 million of the Company's shares within the quarter, leaving approximately $186 million remaining as of September 24, 2022 in the share repurchase program authorized through December 29, 2023.  We ended the quarter with cash and marketable securities of approximately $2.7 billion.

(1)

See attached Non-GAAP Financial Information for discussion and reconciliation of non-GAAP financial measures, including free cash flow.



2022 Fiscal Year Guidance:

Based on our performance in the first three quarters of 2022, we are adjusting our full year guidance. We now anticipate revenue of approximately $4.85 billion, gross margin of 57.5%, operating margin of 20.7%, and a full year effective tax rate of 8.0% resulting in EPS of approximately $4.95 (see attached discussion on Forward-looking Financial Measures).

Dividend Payment Date Confirmation:

The board of directors has established December 30, 2022, as the payment date for the next dividend installment of $0.73 per share with a record date of December 15, 2022.  At the 2022 annual shareholders' meeting, Garmin shareholders, in accordance with Swiss corporate law, approved a cash dividend in the total amount of $2.92 per share (subject to possible adjustment based on the total amount of the dividend in Swiss Francs as approved at the annual meeting), 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 30, 2022 and September 30, 2022. The board currently anticipates the scheduling of the remaining quarterly dividend installment as follows:

Dividend Date


Record Date


$ per share

March 31, 2023


March 15, 2023


$0.73

Webcast Information/Forward-Looking Statements:

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

When:

Wednesday, October 26, 2022 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



An archive of the live webcast will be available until October 25, 2023 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 2022 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, 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 the Annual Report on Form 10-K for the year ended December 25, 2021 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin's 2021 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 24, 2022. 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, inReach, Venu, G5000, G3000, LiveScope and Tread are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. Index 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.

Investor Relations Contact:

Media Relations Contact:

Teri Seck

Krista Klaus     

913/397-8200

913/397-8200

investor.relations@garmin.com

  Email Contact

Changes in Classification and Allocation

Prior period information presented here has been recast to conform to the current period presentation. Refer to the Current Report on Form 8-K/A announcing the Company's financial results for the fiscal first quarter ended March 26, 2022 for further description and full recast impacts.

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Income (Unaudited)


(In thousands, except per share information)





















13-Weeks Ended



39-Weeks Ended




September 24,



September 25,



September 24,



September 25,




2022



2021



2022



2021


Net sales


$

1,140,434



$

1,191,973



$

3,553,931



$

3,591,206


Cost of goods sold



469,935




496,026




1,492,126




1,472,852


Gross profit



670,499




695,947




2,061,805




2,118,354



















Advertising expense



32,888




36,705




110,378




110,705


Selling, general and administrative expense



189,546




177,647




571,541




530,351


Research and development expense



208,692




198,925




619,215




573,798


Total operating expense



431,126




413,277




1,301,134




1,214,854



















Operating income



239,373




282,670




760,671




903,500



















Other income (expense):

















Interest income



10,472




6,897




26,520




21,568


Foreign currency losses



(29,863)




(15,014)




(55,809)




(30,621)


Other income



285




833




3,716




3,511


Total other income (expense)



(19,106)




(7,284)




(25,573)




(5,542)



















Income before income taxes



220,267




275,386




735,098




897,958


Income tax provision



9,419




16,347




54,785




101,894


Net income


$

210,848



$

259,039



$

680,313



$

796,064



















Net income per share:

















Basic


$

1.09



$

1.35



$

3.53



$

4.14


Diluted


$

1.09



$

1.34



$

3.52



$

4.13



















Weighted average common shares outstanding:

















Basic



192,672




192,322




192,878




192,123


Diluted



193,105




193,185




193,378




192,955


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Balance Sheets (Unaudited)


(In thousands, except per share information)













September 24,

2022



December 25,
2021


Assets









Current assets:









Cash and cash equivalents


$

1,082,338



$

1,498,058


Marketable securities



378,705




347,980


Accounts receivable, net



641,072




843,445


Inventories



1,533,271




1,227,609


Deferred costs



14,398




15,961


Prepaid expenses and other current assets



318,339




328,719


Total current assets



3,968,123




4,261,772











Property and equipment, net



1,100,257




1,067,478


Operating lease right-of-use assets



121,937




89,457


Noncurrent marketable securities



1,236,350




1,268,698


Deferred income tax assets



390,105




260,205


Noncurrent deferred costs



10,393




12,361


Goodwill



540,740




575,080


Other intangible assets, net



179,890




215,993


Other noncurrent assets



79,811




103,383


Total assets


$

7,627,606



$

7,854,427











Liabilities and Stockholders' Equity









Current liabilities:









Accounts payable


$

268,674



$

370,048


Salaries and benefits payable



184,802




211,371


Accrued warranty costs



39,925




45,467


Accrued sales program costs



75,182




121,514


Other accrued expenses



195,117




225,988


Deferred revenue



88,563




87,654


Income taxes payable



169,665




128,083


Dividend payable



420,995




258,023


Total current liabilities



1,442,923




1,448,148











Deferred income tax liabilities



117,941




117,595


Noncurrent income taxes payable



50,943




62,539


Noncurrent deferred revenue



37,068




41,618


Noncurrent operating lease liabilities



100,181




70,044


Other noncurrent liabilities



361




324











Stockholders' equity:









Shares, CHF 0.10 par value, 198,077 shares authorized and issued; 192,180

   shares outstanding at September 24, 2022 and 192,608 shares outstanding

   at December 25, 2021



17,979




17,979


Additional paid-in capital



2,027,019




1,960,722


Treasury stock (5,897 and 5,469 shares, respectively)



(398,974)




(303,114)


Retained earnings



4,439,004




4,320,737


Accumulated other comprehensive (loss) income



(206,839)




117,835


Total stockholders' equity



5,878,189




6,114,159


Total liabilities and stockholders' equity


$

7,627,606



$

7,854,427


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Cash Flows (Unaudited)


(In thousands)













39-Weeks Ended




September 24,
2022



September 25,
2021


Operating Activities:









Net income


$

680,313



$

796,064


Adjustments to reconcile net income to net cash provided by

   operating activities:









Depreciation



88,005




75,272


Amortization



34,349




38,485


(Gain) loss on sale or disposal of property and equipment



(1,652)




246


Unrealized foreign currency losses



45,498




24,390


Deferred income taxes



(101,133)




8,358


Stock compensation expense



57,871




68,656


Realized loss (gain) on marketable securities



982




(513)


Changes in operating assets and liabilities, net of acquisitions:









Accounts receivable, net of allowance for doubtful accounts



156,666




197,024


Inventories



(442,312)




(357,387)


Other current and noncurrent assets



29,299




(31,398)


Accounts payable



(64,199)




57,602


Other current and noncurrent liabilities



(84,287)




(39,941)


Deferred revenue



(3,299)




(6,914)


Deferred costs



3,426




7,547


Income taxes



20,067




5,974


Net cash provided by operating activities



419,594




843,465











Investing activities:









Purchases of property and equipment



(184,928)




(187,960)


Proceeds from sale of property and equipment



1,693




26


Purchase of intangible assets



(1,411)




(1,408)


Purchase of marketable securities



(1,044,942)




(1,081,789)


Redemption of marketable securities



923,894




975,318


Acquisitions, net of cash acquired



(13,455)




(15,893)


Net cash used in investing activities



(319,149)




(311,706)











Financing activities:









Dividends



(399,074)




(362,602)


Proceeds from issuance of treasury stock related to equity awards



41,052




35,733


Purchase of treasury stock related to equity awards



(14,750)




(17,636)


Purchase of treasury stock under share repurchase plan



(105,206)





Net cash used in financing activities



(477,978)




(344,505)











Effect of exchange rate changes on cash and cash equivalents



(38,265)




(6,172)











Net (decrease) increase in cash, cash equivalents, and restricted cash



(415,798)




181,082


Cash, cash equivalents, and restricted cash at beginning of period



1,498,843




1,458,748


Cash, cash equivalents, and restricted cash at end of period


$

1,083,045



$

1,639,830




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 (Unaudited)


(In thousands)





















































Auto








Fitness



Outdoor



Aviation



Marine



Total

Auto



Consumer

Auto



Auto

OEM



Total


13-Weeks Ended September 24, 2022


Net sales


$

279,875



$

340,388



$

188,043



$

196,506



$

135,622



$

66,444



$

69,178



$

1,140,434


Gross profit



147,716




219,980




137,732




110,747




54,324




30,432




23,892




670,499


Operating income (loss)



40,850




120,842




48,487




44,950




(15,756)




2,105




(17,861)




239,373



































13-Weeks Ended September 25, 2021


Net sales


$

342,316



$

323,856



$

180,165



$

207,534



$

138,102



$

82,914



$

55,188



$

1,191,973


Gross profit



183,028




210,522




131,260




116,152




54,985




39,342




15,643




695,947


Operating income (loss)



74,469




122,875




51,747




55,142




(21,563)




11,979




(33,542)




282,670



































39-Weeks Ended September 24, 2022


Net sales


$

772,867



$

1,106,908



$

567,548



$

693,369



$

413,239



$

211,902



$

201,337



$

3,553,931


Gross profit



387,921




720,731




413,206




376,734




163,213




98,645




64,568




2,061,805


Operating income (loss)



64,894




424,071




150,359




172,451




(51,104)




15,058




(66,162)




760,671



































39-Weeks Ended September 25, 2021


Net sales


$

1,063,642



$

903,715



$

534,886



$

678,698



$

410,265



$

231,587



$

178,678



$

3,591,206


Gross profit



581,765




590,355




389,376




390,141




166,717




113,567




53,150




2,118,354


Operating income (loss)



258,884




335,728




147,888




209,140




(48,140)




37,371




(85,511)




903,500


 

Garmin Ltd. and Subsidiaries


Net Sales by Geography (Unaudited)


(In thousands)





























13-Weeks Ended



39-Weeks Ended




September 24,



September 25,



YoY



September 24,



September 25,



YoY




2022



2021



Change



2022



2021



Change


Net sales


$

1,140,434



$

1,191,973



(4) %



$

3,553,931



$

3,591,206



(1) %


Americas



563,310




573,331



(2) %




1,780,117




1,723,415



3 %


EMEA



382,865




442,622



(14) %




1,192,893




1,330,855



(10) %


APAC



194,259




176,020



10 %




580,921




536,936



8 %



























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 three quarters 2022 and 2021 there were no such discrete tax items identified.

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



39-Weeks Ended




September 24,



September 25,



September 24,



September 25,




2022



2021



2022



2021


GAAP net income


$

210,848



$

259,039



$

680,313



$

796,064


Foreign currency losses(1)



29,863




15,014




55,809




30,621


Tax effect of foreign currency losses(2)



(1,277)




(891)




(4,159)




(3,475)


Pro forma net income


$

239,434



$

273,162



$

731,963



$

823,210



















GAAP net income per share:

















Basic


$

1.09



$

1.35



$

3.53



$

4.14


Diluted


$

1.09



$

1.34



$

3.52



$

4.13



















Pro forma net income per share:

















Basic


$

1.24



$

1.42



$

3.79



$

4.28


Diluted


$

1.24



$

1.41



$

3.79



$

4.27



















Weighted average common shares outstanding:

















Basic



192,672




192,322




192,878




192,123


Diluted



193,105




193,185




193,378




192,955



















(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 losses was calculated using the effective tax rates of 4.3% and 7.5% for the 13-weeks and 39-weeks ended September 24, 2022, respectively and 5.9% and 11.3% for the 13-weeks and 39-weeks ended September 25, 2021, respectively.


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



39-Weeks Ended




September 24,



September 25,



September 24,



September 25,




2022



2021



2022



2021


Net cash provided by operating activities


$

154,118



$

245,423



$

419,594



$

843,465


Less: purchases of property and equipment



(50,130)




(41,418)




(184,928)




(187,960)


Free Cash Flow


$

103,988



$

204,005



$

234,666



$

655,505


Forward-looking Financial Measures

The forward-looking financial measures in our 2022 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 $0.27  per share for the 39-weeks ended September 24, 2022.

At this time, management is unable to determine whether or not significant discrete tax items will occur in fiscal 2022 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.

Contact:
Company Name: Garmin Ltd.
Financial data for Garmin Ltd.