“The first quarter of 2020 was remarkably strong continuing the momentum from last year,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “The economic uncertainty and impact on consumer behavior caused by the COVID-19 pandemic affects every business, and we are no exception. Accordingly, we are withdrawing our fiscal 2020 guidance. However, we are optimistic for the long term because the markets we serve and the products we offer are well positioned to thrive in the future.”

Fitness:

Revenue from the fitness segment grew 24% in the first quarter driven by strength in advanced wearables and contributions from Tacx. Gross margin and operating margin were 50% and 14%, respectively, resulting in 71% operating income growth. Now more than ever, people are looking for tools that can help them live a healthy life. Our fitness segment is committed to providing innovative and compelling products that motivate our customers to achieve their fitness, health, and wellness goals.

Marine:

Revenue from the marine segment grew 22% in the first quarter driven by our innovative chartplotters and advanced sonars. Gross margin and operating margin were 58% and 25%, respectively, resulting in 58% operating income growth. Boating is an active lifestyle pursuit that promotes family time, relaxation, and a sense of freedom. Our marine segment is committed to providing leading edge, high quality products and systems with the latest technology that our customers demand as they turn their attention to activities on the water.

Outdoor:

Revenue from the outdoor segment grew 14% in the first quarter with significant contributions from adventure watches. Gross margin and operating margin were 64% and 27%, respectively, resulting in 12% operating income growth. Outdoor recreation is important for those who love adventure and exploring nature. Our outdoor segment is committed to providing compelling products that enable and enrich the experiences of our customers as they turn their attention to activities in the great outdoors.

Aviation:

Revenue from the aviation segment grew 10% in the first quarter with contributions from multiple product categories. Gross margin and operating margin were 74% and 31%, respectively, resulting in 3% operating income growth. General aviation will play an important role in the future by offering transportation options that are secure, flexible, and convenient. Our aviation segment is committed to providing products and services that make general aviation safer and more accessible.

Auto:

Revenue from the auto segment declined 17% during the first quarter, primarily due to the ongoing PND market contraction and lower year-over-year OEM sales. Gross margin was 47% with breakeven operating income. Personal transportation will remain an important part of the post-pandemic world. Our auto segment is committed to enhancing the automotive experience through compelling aftermarket products for adventure, professional and daily drivers, and becoming a respected tier 1 supplier of innovative electronic solutions for a broad range of vehicles.

Additional Financial Information:

Total operating expenses in the first quarter were $329 million, a 10% increase over the prior year. Research and development increased 13%, primarily due to engineering personnel costs and incremental costs associated with acquisitions. Selling, general and administrative expenses increased 8%, driven primarily by personnel related expenses and incremental costs associated with acquisitions. Advertising decreased 3%, driven by lower spending in the auto, outdoor and marine segments.

The effective tax rate in the first quarter of 2020 was 9.3% compared to 15.7% in the prior year quarter. The decrease in the current quarter effective tax rate is primarily due to the migration of intellectual property ownership from Switzerland to the United States.

In the first quarter of 2020, we generated approximately $185 million of free cash flow⁽¹⁾. We continued to return cash to shareholders with our quarterly dividend of approximately $109 million. We ended the quarter with cash and marketable securities of approximately $2.6 billion.

As announced in February 2020, the Board has recommended to the shareholders for approval at the annual meeting to be held on June 5, 2020 a cash dividend in the total amount of $2.44 per share (subject to adjustment if the Swiss Franc weakens more than 35% relative to the USD), payable in four equal installments on dates to be approved by the Board. The final $0.57 installment of the dividend approved at the 2019 annual meeting was paid on March 31, 2020 to shareholders of record as of March 16, 2020.

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

2020 Guidance:

We are withdrawing our fiscal 2020 guidance due to the rapid and unpredictable economic changes caused by the COVID-19 pandemic. Management expects to provide guidance once the trajectory of the economy and consumer behaviors are better understood.

Webcast Information/Forward-Looking Statements:

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

An archive of the live webcast will be available until April 29, 2021 on the Garmin website at www.garmin.com. To access the replay, click on the Investor Relations 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 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 to be introduced in 2020, 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 both the Annual Report on Form 10-K for the year ended December 28, 2019 and the Quarterly Report on Form 10-Q for the quarter ended March 28, 2020 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2019 Form 10-K and the Q1 2020 Form 10-Q can be downloaded from https://www.garmin.com/en-US/investors/sec/

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.