Garmin Ltd. reported double-digit growth at its Fitness and Outdoor segments in the second quarter that enabled it to blow past Wall Street estimates and raise guidance for the full year.
The company reported total revenue of $812 million, up 5 percent over the prior year, with fitness, outdoor, marine and aviation collectively growing 20 percent over the year-ago quarter and contributing 70 percent of total revenue. Gross margin expanded to 57.0 percent compared to 54.2 percent in the prior year quarter, and operating margin expanded to 24.7 percent compared to 21.5 percent in the prior year quarter.
GAAP EPS was $0.85, an 18 percent improvement over the prior year and 25 percent higher than the $0.65 Wall Street consensus estimate. Pro forma EPS, which excludes the impact of foreign currency translation gains or loss and income tax adjustments, was $0.87, a 21 percent improvement over the prior year.
“Fitness and outdoor achieved impressive revenue and profit growth driven by our strengthening position in the wearables market,” said Cliff Pemble, president and CEO of Garmin Ltd. “Aviation and marine also delivered revenue and profit growth while auto remains a solid base of profit contributions to the overall business.”
The fitness segment posted robust revenue growth of 34 percent in the quarter driven by wearable devices. Gross margin was consistent year-over-year at 56 percent while operating margin improved to 25 percent from 21 percent in the prior year. During the quarter, we began shipping the previously announced vivoactive HR and vivofit 3 activity trackers as well as the Forerunner 735XT, a lightweight multi-sport-capable running watch, the vivosmart HR +, our smart activity tracker with GPS and vivomoveT, a fashionable analog watch with activity tracking features and a one-year battery life.
The outdoor segment posted robust revenue growth of 23 percent driven by wearable devices and a full quarter contribution of recently acquired DeLorme products. Gross and operating margin was 64 percent and 36 percent respectively, an improvement over a year ago, resulting in a 31 percent increase in operating income. Our recently introduced Approach X40 began shipping late in the quarter and is generating positive customer response by bringing golf-specific features to an activity tracker band. Also, we recently broadened our handheld product line with the introduction of the Oregon 700 series of handheld GPS units featuring a redesigned GPS antenna, smart notifications and automatic uploads.
Garmin now anticipates revenue to reach approximately $2.9 billion in 2016 driven primarily by a stronger outlook for its outdoor and fitness segments. Full-year EPS is expected to be approximately $2.50 based on gross margin of about 55 percent, operating margin of about 19 percent and a full-year effective tax rate of about 19.5 percent.
Photo courtesy Garmin
