|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|
In his keynote at @ThingsExpo, Chris Matthieu, Director of IoT Engineering at Citrix and co-founder and CTO of Octoblu, focused on building an IoT platform and company. He provided a behind-the-scenes look at Octoblu’s platform, business, and pivots along the way (including the Citrix acquisition of Octoblu).
Nov. 29, 2015 12:00 PM EST Reads: 517
In his General Session at 17th Cloud Expo, Bruce Swann, Senior Product Marketing Manager for Adobe Campaign, explored the key ingredients of cross-channel marketing in a digital world. Learn how the Adobe Marketing Cloud can help marketers embrace opportunities for personalized, relevant and real-time customer engagement across offline (direct mail, point of sale, call center) and digital (email, website, SMS, mobile apps, social networks, connected objects).
Nov. 29, 2015 11:45 AM EST Reads: 319
The buzz continues for cloud, data analytics and the Internet of Things (IoT) and their collective impact across all industries. But a new conversation is emerging - how do companies use industry disruption and technology enablers to lead in markets undergoing change, uncertainty and ambiguity? Organizations of all sizes need to evolve and transform, often under massive pressure, as industry lines blur and merge and traditional business models are assaulted and turned upside down. In this new da...
Nov. 29, 2015 11:30 AM EST Reads: 268
In recent years, at least 40% of companies using cloud applications have experienced data loss. One of the best prevention against cloud data loss is backing up your cloud data. In his General Session at 17th Cloud Expo, Sam McIntyre, Partner Enablement Specialist at eFolder, presented how organizations can use eFolder Cloudfinder to automate backups of cloud application data. He also demonstrated how easy it is to search and restore cloud application data using Cloudfinder.
Nov. 29, 2015 10:00 AM EST Reads: 198
The Internet of Everything is re-shaping technology trends–moving away from “request/response” architecture to an “always-on” Streaming Web where data is in constant motion and secure, reliable communication is an absolute necessity. As more and more THINGS go online, the challenges that developers will need to address will only increase exponentially. In his session at @ThingsExpo, Todd Greene, Founder & CEO of PubNub, exploreed the current state of IoT connectivity and review key trends and t...
Nov. 29, 2015 09:45 AM EST Reads: 449
Two weeks ago (November 3-5), I attended the Cloud Expo Silicon Valley as a speaker, where I presented on the security and privacy due diligence requirements for cloud solutions. Cloud security is a topical issue for every CIO, CISO, and technology buyer. Decision-makers are always looking for insights on how to mitigate the security risks of implementing and using cloud solutions. Based on the presentation topics covered at the conference, as well as the general discussions heard between sessi...
Nov. 29, 2015 09:15 AM EST Reads: 341
We all know that data growth is exploding and storage budgets are shrinking. Instead of showing you charts on about how much data there is, in his General Session at 17th Cloud Expo, Scott Cleland, Senior Director of Product Marketing at HGST, showed how to capture all of your data in one place. After you have your data under control, you can then analyze it in one place, saving time and resources.
Nov. 29, 2015 08:45 AM EST Reads: 212
With all the incredible momentum behind the Internet of Things (IoT) industry, it is easy to forget that not a single CEO wakes up and wonders if “my IoT is broken.” What they wonder is if they are making the right decisions to do all they can to increase revenue, decrease costs, and improve customer experience – effectively the same challenges they have always had in growing their business. The exciting thing about the IoT industry is now these decisions can be better, faster, and smarter. Now ...
Nov. 29, 2015 08:00 AM EST Reads: 267
The cloud. Like a comic book superhero, there seems to be no problem it can’t fix or cost it can’t slash. Yet making the transition is not always easy and production environments are still largely on premise. Taking some practical and sensible steps to reduce risk can also help provide a basis for a successful cloud transition. A plethora of surveys from the likes of IDG and Gartner show that more than 70 percent of enterprises have deployed at least one or more cloud application or workload. Y...
Nov. 29, 2015 07:00 AM EST Reads: 496
Continuous processes around the development and deployment of applications are both impacted by -- and a benefit to -- the Internet of Things trend. To help better understand the relationship between DevOps and a plethora of new end-devices and data please welcome Gary Gruver, consultant, author and a former IT executive who has led many large-scale IT transformation projects, and John Jeremiah, Technology Evangelist at Hewlett Packard Enterprise (HPE), on Twitter at @j_jeremiah. The discussion...
Nov. 29, 2015 06:45 AM EST Reads: 741
Too often with compelling new technologies market participants become overly enamored with that attractiveness of the technology and neglect underlying business drivers. This tendency, what some call the “newest shiny object syndrome” is understandable given that virtually all of us are heavily engaged in technology. But it is also mistaken. Without concrete business cases driving its deployment, IoT, like many other technologies before it, will fade into obscurity.
Nov. 29, 2015 06:00 AM EST Reads: 375
Discussions of cloud computing have evolved in recent years from a focus on specific types of cloud, to a world of hybrid cloud, and to a world dominated by the APIs that make today's multi-cloud environments and hybrid clouds possible. In this Power Panel at 17th Cloud Expo, moderated by Conference Chair Roger Strukhoff, panelists addressed the importance of customers being able to use the specific technologies they need, through environments and ecosystems that expose their APIs to make true ...
Nov. 29, 2015 06:00 AM EST Reads: 553
Microservices are a very exciting architectural approach that many organizations are looking to as a way to accelerate innovation. Microservices promise to allow teams to move away from monolithic "ball of mud" systems, but the reality is that, in the vast majority of organizations, different projects and technologies will continue to be developed at different speeds. How to handle the dependencies between these disparate systems with different iteration cycles? Consider the "canoncial problem"...
Nov. 29, 2015 05:00 AM EST Reads: 460
The Internet of Things is clearly many things: data collection and analytics, wearables, Smart Grids and Smart Cities, the Industrial Internet, and more. Cool platforms like Arduino, Raspberry Pi, Intel's Galileo and Edison, and a diverse world of sensors are making the IoT a great toy box for developers in all these areas. In this Power Panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists discussed what things are the most important, which will have the most profound...
Nov. 29, 2015 04:30 AM EST Reads: 484
Container technology is shaping the future of DevOps and it’s also changing the way organizations think about application development. With the rise of mobile applications in the enterprise, businesses are abandoning year-long development cycles and embracing technologies that enable rapid development and continuous deployment of apps. In his session at DevOps Summit, Kurt Collins, Developer Evangelist at Built.io, examined how Docker has evolved into a highly effective tool for application del...
Nov. 29, 2015 04:00 AM EST Reads: 376