|By Business Wire||
|April 30, 2014 07:01 AM EDT||
Garmin Ltd. (Nasdaq: GRMN) today announced results for the fiscal year and quarter ended March 29, 2014.
Highlights in the quarter include:
- Total revenue of $583 million in first quarter 2014 with outdoor, fitness, aviation and marine delivering 58% of total revenues and growing 22% over the year ago quarter
- Gross and operating profit margins improved from the prior year quarter to 57% and 21%, respectively
- Pro forma EPS growth of 38%, or $0.55 for first quarter 2014
- Delivered vívofit™, our first fitness band, in the rapidly growing activity monitor category
- Announced the G3X™ Touch for the experimental and light-sport aircraft markets with five OEM partners at launch
|(in thousands,||13-Weeks Ended|
|except per share data)||Mar 29,||Mar 30,||Yr over Yr|
|Gross profit %||57%||52%|
|Operating profit %||21%||15%|
|Pro forma diluted EPS (1)||$0.55||$0.40||38%|
(1) See attached table for reconciliation of GAAP EPS to pro forma diluted EPS
Executive Overview from Cliff Pemble, President and Chief Executive Officer:
“We have had a great start to 2014 with revenue, operating income and pro forma EPS growth; yet, we realize that we cannot be complacent,” said Cliff Pemble, president and chief executive officer (CEO) of Garmin Ltd. “The markets that we serve are dynamic and competitive so we must capitalize on our strong portfolio of products in 2014 while also identifying new opportunities and innovations that will provide future growth potential.”
The outdoor segment posted revenue growth of 10% in the quarter with all major categories contributing to growth. Gross and operating margins within the segment remained strong at 61% and 28%, respectively, in the quarter. We continued to build on our broad portfolio of outdoor products with the introduction of the fēnix™ 2 and the PRO series of dog collars in the quarter. The fēnix 2 builds off the success of its predecessor with the addition of advanced fitness training features and smartphone connectivity. The PRO series of dog collars takes proven Tri-Tronics® design and offers new functionality for the sport dog market. In addition, we launched advertising and sponsorships to support the VIRB™ action cameras. We are determined to win market share in the category with our innovative products and future enhancements.
The fitness segment posted revenue growth of 38% in the quarter with the Forerunner® 220 and 620 continuing to make strong contributions and a solid mid-quarter launch for vívofit. Both gross and operating margins improved to 64% and 33%, respectively, as mix shifted to new products and sales growth outpaced research and development and advertising growth. We are excited about the strong market reception for our new products and recognize that innovation and design are key to winning and retaining customers in the rapidly growing, but crowded, fitness and wellness markets. We bring years of experience to the market and we are committed to being the leader for both athletes and novices. With the athlete in mind, we introduced the Edge® 1000 recently. This high-end cycling computer combines our best-in-class features of legacy products with a large capacitive touch screen display, real-time competitive segment capabilities and smartphone connectivity.
The aviation segment posted revenue growth of 19% in the quarter with both OEM and aftermarket contributing to revenue improvement. The gross and operating margins in aviation were strong at 74% and 30%, respectively. During the quarter, we continued to enhance our portfolio of products with the addition of portable weather receivers, angle of attack technology and radar altimeter solutions. In addition, we announced the G3X Touch with five OEM partners offering the avionics solution in thirteen models, and we expanded our relationship with Cessna offering the G3000 in the updated CJ3+ and Alpine Edition CJ2+.
The marine segment posted revenue growth of 19% as the year ago quarter was particularly weak and demand improved for our line-up of new products including autopilot solutions, chartplotters, and radars. Gross margins improved year-over-year to 52% in the quarter with product mix shifting toward new products with higher margin profiles. Operating margins improved significantly in the quarter with improved research and development efficiency following the delivery of many new products in the past year. There is much work ahead as we continue to innovate, gain market share and improve our profitability.
The automotive/mobile segment posted a revenue decline of 4% as PND sales continued to decline as we expected but were partially offset by amortization of previously deferred revenue and growing OEM revenues. Gross and operating margins in the quarter were 47% and 13%, respectively, representing an improvement over the prior year due to the amortization of high margin deferred revenue. Though PND volumes are expected to decline throughout 2014, we are pleased with our market share and profitability in the industry. In addition, many of our niche categories, like dash cams and RV units, are helping to offset the PND volume decline. Finally, the OEM market remains a key focus and area of investment that we believe will generate opportunities for future growth.
Additional Financial Information:
Total operating expenses in the quarter were $210 million, a 7% increase from the prior year. Research and development investment increased 10% driven by aviation, fitness and outdoor growth to support new product initiatives while marine and automotive/mobile declined. Advertising also increased 10% as we launched campaigns to support new products in outdoor and marine. Selling, general and administrative expense increased by 4% but declined as a percentage of sales in the quarter.
The effective tax rate in first quarter 2014 was 16.6% compared to 11.6%, on an adjusted basis, in the prior year due to the retroactive research and development credit recognized in first quarter 2013.
In the first quarter, we generated $56 million of free cash flow (see attached table for reconciliation of this non-GAAP measure) which is consistent with our expectations. We continued to return cash to shareholders with our quarterly dividend of approximately $88 million and our share repurchase activity which totaled $33 million in the current quarter. We have $208 million remaining in the share repurchase program authorized through December 31, 2014. We ended the quarter with cash and marketable securities of over $2.8 billion.
As announced in February, the Board will recommend to the shareholders for approval at the annual meeting to be held on June 6, 2014 a cash dividend in the amount of $1.92 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 quarterly installments.
While results in first quarter exceeded our expectations, it is historically the seasonally weakest quarter of the year and much of the year still lies in front of us. Due to these factors, we will update guidance following second quarter as has been our past practice.
Webcast Information/Forward-Looking Statements:
The information for Garmin Ltd.’s earnings call is as follows:
|When:||Wednesday, April 30, 2014 at 10:30 a.m. Eastern|
|How:||Simply log on to the web at the address above or call to listen in at 800-274-0251|
An archive of the live webcast will be available until June 25, 2014 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. Any statements regarding the Company’s estimated earnings and revenue for fiscal 2014, the Company’s expected segment revenue growth rate, margins, new products to be introduced in 2014 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 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 28, 2013 filed by Garmin with the Securities and Exchange Commission (Commission file number 0-31983). A copy of Garmin’s 2013 Form 10-K can be downloaded from http://www.garmin.com/aboutGarmin/invRelations/finReports.html.
Garmin, Tri-Tronics, Forerunner and Edge are registered trademarks and G3X, fēnix, VIRB and vivofit 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.
|Garmin Ltd. And Subsidiaries|
|Condensed Consolidated Statements of Income (Unaudited)|
|(In thousands, except per share information)|
|March 29,||March 30,|
|Cost of goods sold||252,387||255,824|
|Selling, general and administrative expense||89,873||86,269|
|Research and development expense||96,164||87,689|
|Total operating expense||210,465||196,207|
|Other income (expense):|
|Foreign currency gains (losses)||12,814||(8,348||)|
|Total other income (expense)||22,098||1,708|
|Income before income taxes||142,467||81,634|
|Income tax provision (benefit):||23,649||(7,032||)|
|Net income per share:|
|Weighted average common|
|Garmin Ltd. And Subsidiaries|
|Condensed Consolidated Balance Sheets|
|(In thousands, except share information)|
|March 29,||December 28,|
|Cash and cash equivalents||$||1,136,691||$||1,179,149|
|Accounts receivable, net||427,457||564,586|
|Deferred income taxes||67,792||69,823|
|Prepaid expenses and other current assets||54,999||55,243|
|Total current assets||2,387,495||2,595,636|
|Property and equipment, net||417,164||414,848|
|Noncurrent deferred income tax||87,524||88,324|
|Noncurrent deferred costs||38,384||41,157|
|Other intangible assets, net||216,260||219,494|
|Liabilities and Stockholders' Equity|
|Salaries and benefits payable||58,166||59,794|
|Accrued warranty costs||25,016||26,767|
|Accrued sales program costs||31,245||50,903|
|Accrued royalty costs||7,901||64,538|
|Accrued advertising expense||12,643||19,448|
|Other accrued expenses||73,911||65,657|
|Deferred income taxes||1,974||989|
|Income taxes payable||36,009||38,043|
|Total current liabilities||697,108||905,304|
|Deferred income taxes||1,750||1,758|
|Non-current income taxes||141,723||140,933|
|Non-current deferred revenue||144,664||171,012|
|Shares, CHF 10 par value, 208,077,418 shares authorized and issued;|
|194,773,186 shares outstanding at March 29, 2014|
|and 195,150,102 shares outstanding at December 28, 2013||1,797,435||1,797,435|
|Additional paid-in capital||80,837||79,263|
|Accumulated other comprehensive income||35,302||38,041|
|Total stockholders' equity||3,752,370||3,659,706|
|Total liabilities and stockholders' equity||$||4,738,914||$||4,879,603|
|Garmin Ltd. And Subsidiaries|
|Condensed Consolidated Statements of Cash Flows (Unaudited)|
|March 29,||March 30,|
|Adjustments to reconcile net income to net cash|
|provided by operating activities:|
|(Gain) loss on sale of property and equipment||(617||)||36|
|Provision for doubtful accounts||(189||)||727|
|Deferred income taxes||5,942||1,493|
|Unrealized foreign currency gains||(15,334||)||(495||)|
|Provision for obsolete and slow moving inventories||3,384||6,033|
|Stock compensation expense||6,325||5,438|
|Realized loss (gain) on marketable securities||1,544||(1,073||)|
|Changes in operating assets and liabilities:|
|Other current and non-current assets||(1,591||)||(49,321||)|
|Other current and non-current liabilities||(80,011||)||(100,784||)|
|Income taxes payable||(1,053||)||(14,053||)|
|Net cash provided by operating activities||71,173||59,363|
|Purchases of property and equipment||(15,537||)||(11,616||)|
|Proceeds from sale of property and equipment||609||12|
|Purchase of intangible assets||(1,111||)||(347||)|
|Purchase of marketable securities||(298,695||)||(258,604||)|
|Redemption of marketable securities||223,786||270,925|
|Proceeds from repayment (advances) on loan receivable||94,507||(18,324||)|
|Change in restricted cash||3||(1||)|
|Net cash provided by (used in) investing activities||3,562||(17,955||)|
|Purchase of treasury stock under share repurchase plan||(32,986||)||-|
|Purchase of treasury stock related to equity awards||(58||)||(62||)|
|Proceeds from issuance of treasury stock related to equity awards||1,107||1,474|
|Tax benefit from issuance of equity awards||2,199||258|
|Net cash used in financing activities||(117,591||)||(174,286||)|
|Effect of exchange rate changes on cash and cash equivalents||398||(4,862||)|
|Net decrease in cash and cash equivalents||(42,458||)||(137,740||)|
|Cash and cash equivalents at beginning of period||1,179,149||1,231,180|
|Cash and cash equivalents at end of period||$||1,136,691||$||1,093,440|
|Garmin Ltd. And Subsidiaries|
|Revenue, Gross Profit, and Operating Income by Segment (Unaudited)|
|13-Weeks Ended Mar 29, 2014|
|13-Weeks Ended Mar 30, 2013|
|Garmin Ltd. And Subsidiaries|
|Revenue by Geography (Unaudited)|
|Mar 29,||Mar 30,||Yr over Yr|
EMEA - Europe, Middle East and Africa; APAC - Asia Pacific
Non-GAAP Financial Information
Pro Forma net income (earnings) per share
Management believes that net income per share before the impact of foreign currency translation gain or loss and income tax adjustments that materially impact the effective tax rate due to completion of tax audits and/or expiration of statutes is an important measure. The majority of the Company’s consolidated foreign currency gain or loss result from transactions involving the Euro, the British Pound Sterling and the Taiwan Dollar and from the exchange rate impact of the significant cash and marketable securities, receivables and payables held in U.S. dollars at the end of each reporting period by the Company’s various non-U.S. subsidiaries. Such gain or loss is required under GAAP because the functional currency of the subsidiaries differs from the currency in which various assets and liabilities are held. However, there is minimal cash impact from such foreign currency gain or loss. The Company’s income tax expense is periodically impacted by material reserve releases related to completion of audits and/or the expiration of statutes effecting prior periods. Thus, reported income tax expense is not reflective of the income tax expense that is incurred related to the current period earnings. The release of other uncertain tax position reserves, amounting to approximately $6 million in the first quarter of 2014, has not been included as pro forma adjustments in the following presentation of pro forma net income as such amounts have been considered immaterial, tend to be more recurring in nature and are comparable between periods. Accordingly, earnings per share before the impact of foreign currency translation gain or loss and income tax adjustments that materially impact the effective tax rate due to completion of tax audits and/or expiration of statutes permits a consistent comparison of the Company’s operating performance between periods.
|Garmin Ltd. And Subsidiaries|
|Net income per share (Pro Forma)|
|(in thousands, except per share information)|
|Mar 29,||Mar 30,|
|Net Income (GAAP)||$||118,818||$||88,666|
|Foreign currency (gain) / loss, net of tax effects||($10,687||)||$||7,377|
|Income tax benefit due to completion of tax audits|
|and/or expiration of statutes||-||($16,536||)|
|Net income (Pro Forma)||$||108,131||$||79,507|
|Net income per share (GAAP):|
|Net income per share (Pro Forma):|
|Weighted average common shares outstanding:|
Free cash flow
Management believes that free cash flow is an important financial measure because it represents the amount of cash provided by operations that is available for investing and defines it as operating cash flow less capital expenditures for property and equipment.
|Garmin Ltd. And Subsidiaries|
|Free Cash Flow|
|Mar 29,||Mar 30,|
|Net cash provided by operating activities||$||71,173||$||59,363|
|Less: purchases of property and equipment||($15,537||)||($11,616||)|
|Free Cash Flow||$||55,636||$||47,747|
The best-practices for building IoT applications with Go Code that attendees can use to build their own IoT applications. In his session at @ThingsExpo, Indraneel Mitra, Senior Solutions Architect & Technology Evangelist at Cognizant, provided valuable information and resources for both novice and experienced developers on how to get started with IoT and Golang in a day. He also provided information on how to use Intel Arduino Kit, Go Robotics API and AWS IoT stack to build an application tha...
Jul. 23, 2016 01:00 PM EDT Reads: 785
Is your aging software platform suffering from technical debt while the market changes and demands new solutions at a faster clip? It’s a bold move, but you might consider walking away from your core platform and starting fresh. ReadyTalk did exactly that. In his General Session at 19th Cloud Expo, Michael Chambliss, Head of Engineering at ReadyTalk, will discuss why and how ReadyTalk diverted from healthy revenue and over a decade of audio conferencing product development to start an innovati...
Jul. 23, 2016 12:00 PM EDT Reads: 786
With an estimated 50 billion devices connected to the Internet by 2020, several industries will begin to expand their capabilities for retaining end point data at the edge to better utilize the range of data types and sheer volume of M2M data generated by the Internet of Things. In his session at @ThingsExpo, Don DeLoach, CEO and President of Infobright, discussed the infrastructures businesses will need to implement to handle this explosion of data by providing specific use cases for filterin...
Jul. 23, 2016 12:00 PM EDT Reads: 1,085
SYS-CON Events announced today the Kubernetes and Google Container Engine Workshop, being held November 3, 2016, in conjunction with @DevOpsSummit at 19th Cloud Expo at the Santa Clara Convention Center in Santa Clara, CA. This workshop led by Sebastian Scheele introduces participants to Kubernetes and Google Container Engine (GKE). Through a combination of instructor-led presentations, demonstrations, and hands-on labs, students learn the key concepts and practices for deploying and maintainin...
Jul. 23, 2016 11:00 AM EDT Reads: 452
Cloud analytics is dramatically altering business intelligence. Some businesses will capitalize on these promising new technologies and gain key insights that’ll help them gain competitive advantage. And others won’t. Whether you’re a business leader, an IT manager, or an analyst, we want to help you and the people you need to influence with a free copy of “Cloud Analytics for Dummies,” the essential guide to this explosive new space for business intelligence.
Jul. 23, 2016 11:00 AM EDT Reads: 462
So, you bought into the current machine learning craze and went on to collect millions/billions of records from this promising new data source. Now, what do you do with them? Too often, the abundance of data quickly turns into an abundance of problems. How do you extract that "magic essence" from your data without falling into the common pitfalls? In her session at @ThingsExpo, Natalia Ponomareva, Software Engineer at Google, provided tips on how to be successful in large scale machine learning...
Jul. 23, 2016 11:00 AM EDT Reads: 1,126
Early adopters of IoT viewed it mainly as a different term for machine-to-machine connectivity or M2M. This is understandable since a prerequisite for any IoT solution is the ability to collect and aggregate device data, which is most often presented in a dashboard. The problem is that viewing data in a dashboard requires a human to interpret the results and take manual action, which doesn’t scale to the needs of IoT.
Jul. 23, 2016 11:00 AM EDT Reads: 1,803
What does it look like when you have access to cloud infrastructure and platform under the same roof? Let’s talk about the different layers of Technology as a Service: who cares, what runs where, and how does it all fit together. In his session at 18th Cloud Expo, Phil Jackson, Lead Technology Evangelist at SoftLayer, an IBM company, spoke about the picture being painted by IBM Cloud and how the tools being crafted can help fill the gaps in your IT infrastructure.
Jul. 23, 2016 10:45 AM EDT Reads: 1,955
"C2M is our digital transformation and IoT platform. We've had C2M on the market for almost three years now and it has a comprehensive set of functionalities that it brings to the market," explained Mahesh Ramu, Vice President, IoT Strategy and Operations at Plasma, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jul. 23, 2016 10:00 AM EDT Reads: 1,031
"delaPlex is a software development company. We do team-based outsourcing development," explained Mark Rivers, COO and Co-founder of delaPlex Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Jul. 23, 2016 10:00 AM EDT Reads: 1,896
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
Jul. 23, 2016 09:45 AM EDT Reads: 1,723
Traditional IT, great for stable systems of record, is struggling to cope with newer, agile systems of engagement requirements coming straight from the business. In his session at 18th Cloud Expo, William Morrish, General Manager of Product Sales at Interoute, outlined ways of exploiting new architectures to enable both systems and building them to support your existing platforms, with an eye for the future. Technologies such as Docker and the hyper-convergence of computing, networking and sto...
Jul. 23, 2016 09:45 AM EDT Reads: 957
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.
Jul. 23, 2016 09:15 AM EDT Reads: 1,009
Using new techniques of information modeling, indexing, and processing, new cloud-based systems can support cloud-based workloads previously not possible for high-throughput insurance, banking, and case-based applications. In his session at 18th Cloud Expo, John Newton, CTO, Founder and Chairman of Alfresco, described how to scale cloud-based content management repositories to store, manage, and retrieve billions of documents and related information with fast and linear scalability. He addres...
Jul. 23, 2016 09:00 AM EDT Reads: 815
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
Jul. 23, 2016 09:00 AM EDT Reads: 1,919