Garmin Ltd. raised its full-year revenue and EPS guidance after reporting second-quarter results that topped expectations. Sales grew 14 percent in the quarter, supported by gains of 28 percent in its Fitness segment and 26 percent in its Marine segment.

Second Quarter 2024 Highlights

  • Consolidated revenue of $1.51 billion, a 14 percent increase compared to the prior year quarter;
  • Gross and operating margins of 57.3 percent and 22.7 percent, respectively;
  • Operating income of $342 million, a 20 percent increase compared to the prior year quarter;
  • GAAP EPS of $1.56 and pro forma EPS of $1.58, representing 9 percent growth in pro forma EPS over the prior year quarter; and
  • Shipped one millionth domain controller to Auto OEM customers

President and CEO Cliff Pemble offered the following overview: “Garmin delivered another impressive quarter of growth in revenue and operating profit, made possible by an innovative product lineup and the strength of our diversified business model.  We are pleased with our results so far in 2024, which have exceeded our expectations and gave us the confidence to raise our full-year revenue and EPS guidance.

Second Quarter Results

  • In the quarter, sales grew 14 percent to $1.51 billion from $1.32 billion a year ago. Analysts’ consensus estimate had been $1.48 billion.
  • Gross margins narrowed to 57.3 percent from 57.5 percent.
  • Operating margin improved to 22.7 percent from 21.5 percent.
  • Earnings rose 4 percent to $1.56 a share on a reported GAAP basis, up from $1.50 a share a year ago.
  • On an adjusted non-GAAP basis, earnings increased 9 percent to $1.58 from $1.45 a year ago, surpassing analysts’ consensus estimate of $1.45.

Segment Performance

  • Revenue from the Fitness segment increased 28 percent in the second quarter, primarily driven by wearables growth. Gross and operating margins were 57 percent and 25 percent, respectively, resulting in $108 million of operating income. Garmin said, “During the quarter, we launched the Edge 1050 premium cycling computer with a vivid color touchscreen display, a built-in speaker for audible feedback and Garmin Pay contactless payments.”
  • Revenue from the Outdoor segment decreased 2 percent in the second quarter, primarily due to declines in adventure watches. Gross and operating margins were 65 percent and 31 percent, respectively, resulting in $136 million of operating income. During the quarter, Garmin launched the Approach Z30 smart laser range finder with the Range Relay feature, which sends distance measurements to a compatible Garmin smartwatch or the Garmin Golf smartphone app. Garmin also launched its first cellular-based dog tracking collar, Alpha LTE.
  • Revenue from the Aviation segment was relatively flat in the second quarter, driven by growth in OEM product categories offset by declines in aftermarket product categories. Gross and operating margins were 74 percent and 23 percent, respectively, resulting in $50 million of operating income.
  • Revenue from the Marine segment increased 26 percent in the second quarter, primarily driven by the acquisition of JL Audio. Gross and operating margins were 54 percent and 22 percent, respectively, resulting in $60 million of operating income. Garmin said it recently expanded the Force Kraken trolling motor series, adding a 48-inch shaft length to accommodate a broader range of boats. The segment also introduced the Panoptix PS-22 Ice Fishing Bundle, a portable live sonar solution for winter fishing. Garmin also reported that Independent Boat Builders, Inc. selected the company as its exclusive marine electronics and audio supplier through 2029.
  • Revenue from the Auto OEM segment increased 41 percent during the second quarter primarily driven by growth in domain controllers. Gross margin was 16 percent and the operating loss decreased to $12 million.

Additional Financial Information
Total operating expenses in the second quarter were $521 million, a 10 percent increase over the prior year. R&D increased by 8 percent, primarily due to engineering personnel costs. SG&A expenses increased 11 percent, driven mainly by personnel-related costs, including the impact of the acquisition of JL Audio.

The effective tax rate in the second quarter was 17.9 percent, compared to 8.9 percent in the prior year quarter. The year-over-year increase was primarily due to the increase in the combined federal and cantonal Switzerland statutory tax rate in response to global minimum tax requirements.

In the second quarter of 2024, Garmin generated operating cash flows of $255 million and free cash flow of $218 million. Garmin paid a quarterly dividend of approximately $144 million and repurchased $10 million of the company’s shares within the quarter, leaving roughly $290 million remaining as of June 29, 2024 in its share repurchase program authorized through December 2026. Garmin ended the quarter with cash and marketable securities of approximately $3.4 billion.

2024 Fiscal Year Guidance
Garmin adjusted its full-year guidance based on its performance in the first half 2024. The company now expects revenues to be approximately $5.95 billion and pro forma EPS of $6.00 based on a gross margin of 57.0 percent, operating margin of 21.3 percent and a full-year effective tax rate of 16.0 percent. Previously, guidance called for revenue of approximately $5.75 billion and pro forma EPS of $5.40.

Image courtesy Garmin