“Garmin delivered strong second quarter financial results in a period filled with unprecedented challenges,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “Business conditions rapidly improved from April lows driven by popular fitness, marine, and outdoor products. We believe these results affirm the resilient nature of our business and the strong utility of our products.”

Fitness:

Revenue from the fitness segment grew 17% in the second quarter driven by strong demand for our advanced wearables and cycling products. Gross margin and operating margin were 53% and 24%, respectively. We launched new Edge® cycling products that add performance insights, safety and tracking features to monitor health stats and provide training guidance to our cycling customers. We recently acquired Firstbeat Analytics, establishing Garmin as a global leader in physiological analytics. We continue to see opportunities for innovative and compelling new products within the fitness segment.

Marine:

Revenue from the marine segment grew 4% in the second quarter across multiple categories led by chartplotters and Panoptix™ sonar technology. Gross margin and operating margin were 59% and 28%, respectively. Regulator Marine expanded its exclusive relationship with Garmin, selecting the Fusion Apollo series stereos as standard equipment on its offshore sportfishing center console boats. Also, we launched quatix® solar, our first marine smartwatch featuring solar charging technology. We remain focused on providing leading edge, high quality products and systems with the latest technology that our customers demand.

Outdoor:

Revenue from the outdoor segment decreased 2% in the second quarter as declines in handhelds were mostly offset by strong demand of adventure watches. Gross margin and operating margin were 65% and 33%, respectively. We recently expanded our solar charging technology to the Instinct, fēnix 6 and 6S and tactix® Delta adventure watches allowing customers to “Do What They Love Longer” through significantly increased battery life and new purpose-built functionality. Looking forward, our outdoor segment remains focused on providing compelling new products and new categories that enable and enrich the outdoor experiences of our customers.

Aviation:

Revenue from the aviation segment declined 31% in the second quarter, as the pandemic negatively impacted OEM and aftermarket product categories, and the ADS-B market rapidly matured. Gross margin and operating margin were 73% and 12%, respectively. During the quarter, we received FAA certification for the Garmin Autoland system in the Piper M600, marking the beginning of a new era for general aviation safety technology. We continue to invest in additional certifications and new products that will make general aviation safer and more accessible.

Auto:

Revenue from the auto segment declined 46% during the second quarter, as the pandemic significantly impacted driving activity and production of new vehicles. Gross margin was 47%, and we experienced an operating loss of $10 million in the quarter. During the quarter, we launched the oversized dēzl GPS truck navigators featuring large, easy-to-read HD touchscreens, industry-best load-to-dock guidance and popular truck routing for professional truck drivers. We also launched the RV 890 navigator specifically geared for the RV and camping lifestyle, with a large high-resolution touchscreen display and revamped voice assistant which simplifies overall interaction with the navigator. Looking forward, 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 second quarter were $327 million, a 2% increase over the prior year. Research and development increased 11%, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 3%, driven primarily by personnel related expenses. Advertising decreased 29%, driven by lower media spend in the quarter.

The effective tax rate in the second quarter of 2020 was 6.8%. Excluding the impact of a $14 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, our pro forma effective tax rate in the second quarter 2020 was 14.0% compared to 18.9% in the prior year quarter. The decrease in the pro forma effective tax rate is primarily due to the intellectual property migration transaction.

In the second quarter of 2020, we generated approximately $142 million of free cash flow⁽¹⁾, and paid a quarterly dividend of approximately $109 million. 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.

An archive of the live webcast will be available until July 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, 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 28, 2019 and the Quarterly Report on Form 10-Q for the quarter ended June 27, 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 Q2 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.

Garmin, the Garmin logo and the Garmin delta, Edge, fēnix, Fusion, Instinct, quatix and tactix are trademarks of Garmin Ltd. or its subsidiaries and are registered in one or more countries, including the U.S. dezl, and Panoptix, 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