By Thomas J. Ryan
Fitness segment revenues for Garmin grew 17.1 percent in the quarter to $294.6 million. Said Cliff Pemble, president and CEO on a conference call with analysts, “Sales of advanced wearables and cycling products were very strong in the quarter.”
Operating profits in the Fitness segment jumped 42.8 percent to $72.0 million. Gross margin and operating margins were 53 percent and 24 percent, respectively.
Garmin’s Fitness segment launched new Edge cycling products that add performance insights, safety and tracking features to monitor health stats and provide training guidance to its cycling customers. Garmin, also in the quarter, acquired Firstbeat Analytics, a longtime partner and provider of physiological analytics technology for health, fitness and athletic performance. Pemble said, “This acquisition will help us achieve even greater levels of innovation that will benefit consumers. Looking forward, we expect that the interest in health and fitness will remain very strong. We are ready to seize this opportunity with a great lineup of new products with more new products on the way.”
Marine segment revenue grew 4.2 percent to $157.8 million “as boating and fishing became popular pastimes during the pandemic,” said Pemble. Many boatbuilders were idle during the quarter, which tempered growth. Retail sales were “very strong,” led by Chartplotters and Panoptix sonars.
Operating income in the Marine segment was slightly up, to $43.6 million, from $42.7 million a year ago. Gross and operating margins were 59 percent and 28 percent respectively. During the quarter, the Marine segment launched Quatix Solar, its first marine smartwatch featuring solar charging technology. Said Pemble, “Looking forward, interest in our marine products remains very strong. We anticipate an extended marine season this year as boaters maximize their time on the water and boat builders work through production backlogs. Additionally, we intend to leverage our compelling product lineup to capture digital market share.”
Revenue from the Outdoor segment decreased 2.0 percent to $206.2 million in the quarter as weakness in traditional handheld categories was mostly offset by growth in adventure watches. Operating profit modestly eroded 5.5 percent to $67.4 million. Gross margin and operating margins were 65 percent and 33 percent respectively.
Pemble said the Outdoor segment recently incorporated solar charging technology into the Fenix 6, the 6S, the Instinct line and Tactix Delta smartwatches. Pemble said, “The Instinct solar sets a new standard in low power technology by achieving unlimited smartwatch operation using only the energy harvested from the sun. We expect that our solar harvesting technology will be a significant differentiator for us in the smartwatch market.”
The two segments hardest hit by the pandemic were the Aviation segment, where sales declined 31 percent to $126.1 million; and the Auto segment, where revenues tumbled 46 percent to $85.1 million.
Companywide, total revenue of $870 million represented a 9 percent year-over-year decrease. Sales levels were well above Wall Street’s average forecast of $658.78 million. By geography, the Americas was down 10 percent, EMEA was down 1 percent and APAC was off 23 percent.
Gross margin and operating margin were 59.3 percent against 60.3 percent a year ago and 21.7 percent against 26.8 percent, respectively.
Reported earnings were $184.2 million, or 96 cents a share, down from $223.7 million, or $1.17 a year ago. On a Pro-forma basis, earnings fell 21.4 percent to $173.7 million, or 91 cents, from $220.9 million, or $1.16, a year ago. Results were well above Wall Street’s average target on an adjusted basis of 39 cents.
Pemble said the month of April “was particularly challenging for every business including Garmin. However, conditions steadily improved, and we ended the quarter with significant growth momentum.” He added that the company “experienced strong growth from certain online channels, including Garmin.com, which partially offset weakness from retailers disrupted during the early phases of the pandemic.”
Asked about the Firstbeat acquisition in the Q&A session, Pemble said Firstbeat will continue to work with customers outside of Garmin. He said, “I think there could be various adjustments on different priorities that they have. They have a lot of activity with research and different things, of course, but, in general, I would see that the technology would continue to be evolved and innovated for the benefit of customers.”
Asked about the solar technology, Pemble said Garmin has no limitations as to where it can extend the technology. He said, “I think it’s best suited in environments where the devices are already naturally low power designs because solar technology while it’s exciting, it’s still very challenging to collect enough energy from the sun to do some of the things that the more advanced wearables do. But, in general, it will continue to evolve. We’ll continue to improve it, improve the efficiency and make it a real differentiator for Garmin.”
Asked about the likelihood the healthy demand will continue for its Fitness, Outdoor and Marine categories, Pemble said, “As I said in my remarks, we definitely see continued opportunity through the year in those categories, particularly as people are very interested in health, wellness, fitness, outdoor activity, and adventure. So, those are very strong products. The Fenix solar and Instinct solar is resonating very well. And, of course, I think, consumers are excited about what will happen in the back half as retailers start to get back to normal in terms of promotions and holidays.”