Garmin announces third quarter 2023 results
[ Back ]   [ More News ]   [ Home ]
Garmin announces third quarter 2023 results

SCHAFFHAUSEN, Switzerland, Nov. 1, 2023 — (PRNewswire) — Garmin® Ltd. (NYSE: GRMN), today announced results for the third quarter ended September 30, 2023.

Highlights for third quarter 2023 include:

 

(In thousands, except per share information)


13-Weeks Ended



39-Weeks Ended




September 30,



September 24,



YoY



September 30,



September 24,



YoY




2023



2022



Change



2023



2022



Change


Net sales


$

1,277,531



$

1,140,434



12 %



$

3,745,751



$

3,553,931



5 %


      Fitness



352,976




279,875



26 %




932,561




772,867



21 %


      Outdoor



433,997




406,832



7 %




1,210,773




1,318,810



(8) %


      Aviation



198,160




188,043



5 %




629,195




567,548



11 %


      Marine



182,248




196,506



(7) %




677,026




693,369



(2) %


      Auto OEM



110,150




69,178



59 %




296,196




201,337



47 %



























Gross margin %



57.0

%



58.8

%






57.2 %



58.0 %































Operating income %



21.2

%



21.0

%






20.1 %



21.4 %































GAAP diluted EPS


$

1.34



$

1.09



23 %



$

3.90



$

3.52



11 %


Pro forma diluted EPS(1)


$

1.41



$

1.24



14 %



$

3.88



$

3.79



2 %



























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


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

"We delivered outstanding performance in the third quarter with double-digit percentage growth in revenue, operating income, and earnings. Looking ahead, we are well positioned for the holiday selling season with a strong lineup of innovative products which gives us confidence to raise our outlook for the remainder of the year." - Cliff Pemble, President and Chief Executive Officer of Garmin Ltd.

Fitness:

Revenue from the fitness segment grew 26% in the third quarter with growth across all categories led by strong demand for wearables. Gross and operating margins were 54% and 21%, respectively, resulting in $75 million of operating income. During the quarter, we introduced the new Venu® 3 smartwatch family in two sizes, as well as the value packed vívoactive® 5 with a bright AMOLED display. We also recently announced the expansion of our ECG App to additional smartwatches. This FDA-cleared and clinically-validated app lets even more Garmin customers record an ECG and check for signs of atrial fibrillation right from their smartwatch.

Outdoor:

Revenue from the outdoor segment grew 7% in the third quarter with growth across multiple categories led by adventure watches. Gross and operating margins were 62% and 31%, respectively, resulting in $136 million of operating income. During the quarter, we launched the tactix® 7 AMOLED Edition, which expands our offering of wearables with AMOLED displays. This highly versatile smartwatch includes a night vision compatible flashlight and up to 31 days of battery life. We recently announced the MARQ® Carbon collection featuring a watch case and bezel inlay machined from a uniquely engineered material called Fused Carbon Fiber™—making it distinctive, strong, lightweight, and ready for adventure.

Aviation:

Revenue from the aviation segment grew 5% in the third quarter driven by growth in OEM product categories. Gross and operating margins were 75% and 25%, respectively, resulting in $49 million of operating income. During the quarter, we announced additional certifications for our GFC 500/600 autopilot, bringing the performance and safety enhancing benefits of our flight control technology to more aircraft models. We recently announced a long-term agreement to provide state-of-the-art G3000® integrated flight decks to BETA Technologies for its all-electric aircraft.

Marine:

Revenue from the marine segment decreased 7% in the third quarter with declines across multiple categories partially offset by contributions from JL Audio. Gross and operating margins were 52% and 13%, respectively, resulting in $24 million of operating income. During the quarter, we launched the GPSMAP® 9000 series in multiple sizes including the 27-inch GPSMAP 9227 that was recognized with an Innovation Award at the recent International Boatbuilders' Exhibition. We were recently named Manufacturer of the Year and received five Product of Excellence Awards from the NMEA, and the Most Innovative Marine Company by Soundings Trade Only, a leading marine trade publication.

Auto OEM:

Revenue from the auto OEM segment grew 59% during the third quarter primarily due to increased shipments of domain controllers. Gross margin was 21% and the operating loss narrowed to $14 million in the quarter. During the quarter, domain controller deliveries continued to ramp up across the BMW lineup. We also experienced strong growth in the infotainment category with contributions from Yamaha Motorsports and Honda motorcycles.  

Additional Financial Information:

Total operating expenses in the third quarter were $458 million, a 6% increase over the prior year. Research and development increased 6% primarily due to engineering personnel costs. Selling, general and administrative expenses increased 6% driven primarily by personnel related expenses and information technology costs. Advertising expenses increased 7% primarily due to higher cooperative advertising spend.

The effective tax rate in the third quarter was 8.0%. Excluding $2 million of income tax expense due to the revaluation of certain deferred tax assets associated with a state tax rate change, our pro forma effective tax rate(1) in the third quarter of 2023 was 7.2% compared to 4.3% in the prior year quarter. The year-over-year increase in the pro forma effective tax rate is primarily due to income mix by jurisdiction.  

In the third quarter of 2023, we generated strong operating cash flows of $357 million and free cash flow(1) of $312 million. We paid a quarterly dividend of approximately $140 million and repurchased approximately $9 million of the Company's shares within the quarter, leaving approximately $18 million remaining as of September 30, 2023, in the share repurchase program authorized through December 29, 2023. Including the funding of the strategic acquisition of JL Audio, we ended the quarter with cash and marketable securities of approximately $2.8 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.

2023 Fiscal Year Guidance:

Based on our performance in the first three quarters of 2023 and the closing of our acquisition of JL Audio, we are adjusting our full year guidance. We now anticipate revenue of approximately $5.150 billion and pro forma EPS of $5.25 based on gross margin of 56.7%, operating margin of 19.8% and a full year pro forma effective tax rate of 8.5%. This expected pro forma EPS of $5.25 includes approximately $0.05 of dilutive impact related to newly acquired JL Audio (see attached discussion on Forward-looking Financial Measures).

Dividend:

The board of directors has established December 29, 2023, as the payment date for the third dividend installment of $0.73 per share with a record date of December 15, 2023. At the 2023 annual shareholders' meeting, Garmin shareholders, in accordance with Swiss corporate law, approved a cash dividend in the total amount of $2.92 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 30, 2023 and September 29, 2023. The board currently anticipates the scheduling of the remaining quarterly dividend installment as follows:

 

Dividend Date


Record Date


$s per share

March 29, 2024


March 15, 2024


$0.73

Webcast Information/Forward-Looking Statements:

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

When: 

Wednesday, November 1, 2023 at 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 November 1, 2024 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 2023 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 31, 2022 filed by Garmin with the Securities and Exchange Commission (Commission file number 001-41118). A copy of Garmin's 2022 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 30, 2023. 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, epix, fēnix, Fused Carbon Fiber, venu, vivoactive, tactix, MARQ, G3000, and GPSMAP are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. 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

 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Income (Unaudited)


(In thousands, except per share information)





















13-Weeks Ended



39-Weeks Ended




September 30,



September 24,



September 30,



September 24,




2023



2022



2023



2022


Net sales


$

1,277,531



$

1,140,434



$

3,745,751



$

3,553,931


Cost of goods sold



548,962




469,935




1,604,945




1,492,126


Gross profit



728,569




670,499




2,140,806




2,061,805



















Advertising expense



35,158




32,888




111,849




110,378


Selling, general and administrative expense



201,470




189,546




609,800




571,541


Research and development expense



221,572




208,692




667,451




619,215


Total operating expense



458,200




431,126




1,389,100




1,301,134



















Operating income



270,369




239,373




751,706




760,671



















Other income (expense):

















Interest income



19,803




10,472




54,461




26,520


Foreign currency gains (losses)



(11,539)




(29,863)




6,946




(55,809)


Other income



938




285




4,206




3,716


Total other income (expense)



9,202




(19,106)




65,613




(25,573)



















Income before income taxes



279,571




220,267




817,319




735,098


Income tax provision



22,328




9,419




69,810




54,785


Net income


$

257,243



$

210,848



$

747,509



$

680,313



















Net income per share:

















Basic


$

1.34



$

1.09



$

3.91



$

3.53


Diluted


$

1.34



$

1.09



$

3.90



$

3.52



















Weighted average common shares outstanding:

















Basic



191,435




192,672




191,409




192,878


Diluted



191,868




193,105




191,772




193,378


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Balance Sheets (Unaudited)


(In thousands)













September 30,

2023



December 31,
2022


Assets









Current assets:









Cash and cash equivalents


$

1,422,855



$

1,279,194


Marketable securities



273,050




173,288


Accounts receivable, net



721,137




656,847


Inventories



1,439,894




1,515,045


Deferred costs



15,296




14,862


Prepaid expenses and other current assets



284,682




315,915


Total current assets



4,156,914




3,955,151











Property and equipment, net



1,187,375




1,147,005


Operating lease right-of-use assets



140,635




138,040


Noncurrent marketable securities



1,081,674




1,208,360


Deferred income tax assets



514,876




441,071


Noncurrent deferred costs



10,538




9,831


Goodwill



594,449




567,994


Other intangible assets, net



185,835




178,461


Other noncurrent assets



92,726




85,257


Total assets


$

7,965,022



$

7,731,170











Liabilities and Stockholders' Equity









Current liabilities:









Accounts payable


$

268,030



$

212,417


Salaries and benefits payable



196,665




176,114


Accrued warranty costs



53,533




50,952


Accrued sales program costs



71,558




97,772


Other accrued expenses



208,717




197,376


Deferred revenue



98,289




91,092


Income taxes payable



151,559




246,180


Dividend payable



279,447




139,732


Total current liabilities



1,327,798




1,211,635











Deferred income tax liabilities



116,419




129,965


Noncurrent income taxes payable



24,577




34,627


Noncurrent deferred revenue



35,525




35,702


Noncurrent operating lease liabilities



111,035




114,541


Other noncurrent liabilities



388




360











Stockholders' equity:









Shares (195,880 and 198,077 shares authorized and issued;

    191,387 and 191,623 shares outstanding)



19,588




17,979


Additional paid-in capital



2,100,357




2,042,472


Treasury stock (4,493 and 6,454 shares)



(331,393)




(475,095)


Retained earnings



4,721,555




4,733,517


Accumulated other comprehensive income (loss)



(160,827)




(114,533)


Total stockholders' equity



6,349,280




6,204,340


Total liabilities and stockholders' equity


$

7,965,022



$

7,731,170


 

Garmin Ltd. and Subsidiaries


Condensed Consolidated Statements of Cash Flows (Unaudited)


(In thousands)













39-Weeks Ended




September 30,
2023



September 24,
2022


Operating Activities:









Net income


$

747,509



$

680,313


Adjustments to reconcile net income to net cash provided by

   operating activities:









Depreciation



98,483




88,005


Amortization



33,751




34,349


Gain on sale or disposal of property and equipment



(50)




(1,652)


Unrealized foreign currency losses



9,927




45,498


Deferred income taxes



(90,214)




(101,133)


Stock compensation expense



66,214




57,871


Realized loss on marketable securities



56




982


Changes in operating assets and liabilities, net of acquisitions:









Accounts receivable, net of allowance for doubtful accounts



(54,756)




156,666


Inventories



111,459




(442,312)


Other current and noncurrent assets



28,288




29,299


Accounts payable



55,340




(64,199)


Other current and noncurrent liabilities



430




(84,287)


Deferred revenue



7,063




(3,299)


Deferred costs



(1,152)




3,426


Income taxes



(102,024)




20,067


Net cash provided by operating activities



910,324




419,594











Investing activities:









Purchases of property and equipment



(144,876)




(184,928)


Proceeds from sale of property and equipment



157




1,693


Purchase of intangible assets



(1,175)




(1,411)


Purchase of marketable securities



(116,039)




(1,044,942)


Redemption of marketable securities



145,094




923,894


Acquisitions, net of cash acquired



(150,853)




(13,455)


Net cash used in investing activities



(267,692)




(319,149)











Financing activities:









Dividends



(419,166)




(399,074)


Proceeds from issuance of treasury stock related to equity awards



21,946




41,052


Purchase of treasury stock related to equity awards



(9,397)




(14,750)


Purchase of treasury stock under share repurchase plan



(79,533)




(105,206)


Net cash used in financing activities



(486,150)




(477,978)











Effect of exchange rate changes on cash and cash equivalents



(12,854)




(38,265)











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



143,628




(415,798)


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



1,279,912




1,498,843


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


$

1,423,540



$

1,083,045


 

Garmin Ltd. and Subsidiaries
Net Sales, Gross Profit and Operating Income by Segment (Unaudited)
(In thousands)


The Company announced an organization realignment in January 2023, which combined the consumer auto operating segment with the outdoor operating segment. As a result, the Company's operating segments, which also represent our reportable segments, are fitness, outdoor, aviation, marine, and auto OEM. Results for the 13-week and 39-week periods ended September 24, 2022 have been recast below to conform with the current period presentation. This change had no effect on the Company's consolidated results of operations.




Fitness



Outdoor



Aviation



Marine



Auto
OEM



Total


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



























13-Weeks Ended September 24, 2022


Net sales


$

279,875



$

406,832



$

188,043



$

196,506



$

69,178



$

1,140,434


Gross profit



147,716




250,412




137,732




110,747




23,892




670,499


Operating income (loss)



40,850




122,947




48,487




44,950




(17,861)




239,373



























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



























39-Weeks Ended September 24, 2022


Net sales


$

772,867



$

1,318,810



$

567,548



$

693,369



$

201,337



$

3,553,931


Gross profit



387,921




819,376




413,206




376,734




64,568




2,061,805


Operating income (loss)



64,894




439,129




150,359




172,451




(66,162)




760,671


 

Garmin Ltd. and Subsidiaries


Net Sales by Geography (Unaudited)


(In thousands)





























13-Weeks Ended



39-Weeks Ended




September 30,



September 24,



YoY



September 30,



September 24,



YoY




2023



2022



Change



2023



2022



Change


Net sales


$

1,277,531



$

1,140,434



12 %



$

3,745,751



$

3,553,931



5 %


Americas



628,157




563,310



12 %




1,881,710




1,780,117



6 %


EMEA



439,123




382,865



15 %




1,252,526




1,192,893



5 %


APAC



210,251




194,259



8 %




611,515




580,921



5 %



























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 thousands)


13-Weeks Ended



39-Weeks Ended




September 30,



September 24,



September 30,



September 24,




2023



2022



2023



2022




$



ETR(1)



$



ETR(1)



$



ETR(1)



$



ETR(1)


GAAP income tax provision


$

22,328




8.0

%


$

9,419




4.3

%


$

69,810




8.5

%


$

54,785




7.5

%

Pro forma discrete tax item:

































Tax effect of state rate change(2)



(2,269)















(2,269)













Pro forma income tax provision


$

20,059




7.2

%


$

9,419




4.3

%


$

67,541




8.3

%


$

54,785




7.5

%


































(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 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 30,



September 24,



September 30,



September 24,




2023



2022



2023



2022


GAAP net income


$

257,243



$

210,848



$

747,509



$

680,313


Foreign currency gains / losses(1)



11,539




29,863




(6,946)




55,809


Tax effect of foreign currency gains/ losses(2)



(828)




(1,277)




574




(4,159)


Pro forma discrete tax item(3)



2,269







2,269





Pro forma net income


$

270,223



$

239,434



$

743,406



$

731,963



















GAAP net income per share:

















Basic


$

1.34



$

1.09



$

3.91



$

3.53


Diluted


$

1.34



$

1.09



$

3.90



$

3.52



















Pro forma net income per share:

















Basic


$

1.41



$

1.24



$

3.88



$

3.79


Diluted


$

1.41



$

1.24



$

3.88



$

3.79



















Weighted average common shares outstanding:

















Basic



191,435




192,672




191,409




192,878


Diluted



191,868




193,105




191,772




193,378



















(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 pro forma effective tax rates of 7.2% and 8.3% for the 13-weeks and 39-weeks ended September 30, 2023,
respectively and 4.3% and 7.5% for the 13-weeks and 39-weeks ended September 24, 2022, 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



39-Weeks Ended




September 30,



September 24,



September 30,



September 24,




2023



2022



2023



2022


Net cash provided by operating activities


$

357,412



$

154,118



$

910,324



$

419,594


Less: purchases of property and equipment



(45,530)




(50,130)




(144,876)




(184,928)


Free Cash Flow


$

311,882



$

103,988



$

765,448



$

234,666


Forward-looking Financial Measures

The forward-looking financial measures in our 2023 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 $0.03 per share for the 39-weeks ended September 30, 2023.

At this time, management is unable to determine whether or not additional significant discrete tax items will occur in fiscal 2023, 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.

 

Cision View original content to download multimedia: https://www.prnewswire.com/news-releases/garmin-announces-third-quarter-2023-results-301973722.html

SOURCE Garmin Ltd.

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