Garmin Ltd. fourth quarter total revenue of $611 million, up 92% from $319 million in fourth quarter 2005. Earnings per share increased 105% to 82 cents from 40 cents in 2005; excluding foreign exchange, EPS increased 102% to 87 cents from 43 cents in 2005.
Auto/mobile segment revenue increased 173% to $445 million in fourth quarter 2006. Outdoor/fitness segment revenue increased 16% to $80 million in fourth quarter 2006. Marine segment revenue declined 10% to $25 million in fourth quarter 2006. Aviation segment revenue increased 3% to $61 million in fourth quarter 2006.
All geographic areas experienced solid growth: North America revenue was $393 million compared to $211 million, up 86%; Europe revenue was $194 million compared to $93 million, up 109%; Asia revenue was $24 million compared to $15 million, up 60%
Fourth quarter 2006 results include a $0.07 favorable impact to earnings per share due to credits achieved by reaching higher unit volume levels during the period
- Strong holiday season, solid sell-through, leaving channel inventories clean
- Inventory drawn down significantly, as anticipated
- Margins improved through contributions from increased production volumes and operating leverage across the business
- Manufacturing facilities fulfilled strong holiday demand for product effectively and efficiently, with no component shortages
- Two million units sold in the fourth quarter of 2006, up 100% from the same quarter in 2005
- Seasonal promotion campaigns and product displays, multi-media advertising, and cooperative advertising activities stimulated sales to improve GRMN's position in the U.S. and increased brand awareness in Europe
FY 2006 Financial Highlights:
- Total revenue of $1.77 billion, up 73% from $1.03 billion in fiscal 2005
- Auto/mobile segment revenue increased 170% to $1.1 billion in 2006
- Outdoor/fitness segment revenue increased 20% to $285 million in 2006
- Marine segment revenue increased 5% to $167 million in 2006
- Aviation segment revenue increased 2% to $233 million in 2006
- All geographic areas experienced solid growth:
- North America revenue was $1.1 billion compared to $661 million, up 66%
- Europe revenue was $593 million compared to $316 million, up 88%
- Asia revenue was $87 million compared to $50 million, up 74%
- Earnings per share increased 64% to $2.35 from $1.43 in 2005; excluding foreign exchange, EPS increased 72% to $2.35 from $1.37 in 2005
- Introduced over 70 new products in 2006, expanding our portable automotive product line and refreshing a number of product categories across all of our business segments
- 5.4 million units sold in 2006, up 80% from 2005, raising the Company's total to over nineteen million units shipped to date, an important benchmark of the strength of the Garmin brand
- Created innovative and exciting portable automotive navigation products which drove triple-digit growth in this segment, allowing Garmin to command a #1 market share position in the U.S. and a solid #2 market share position in Europe
- Expanded relationships with car rental companies to seven of the eight major rental car companies in the U.S., increasing brand awareness and creating important product trial opportunities among prospective customers
- Expanded leadership role as a partner with motorcycle manufacturers and enthusiasts, providing both custom solutions and full-featured off-the-shelf products for the aftermarket
- Solidified our position as the leader in GPS-enabled fitness devices with the introduction of the Edge bicycle product and the updated ForeRunner product
- Completed our first very light jet certification, the Cessna Mustang, and continued to expand technologies like WAAS, RADAR, and digital autopilot, further increasing our leadership position in the integrated cockpit market for general aviation
- Expanded advertising campaigns and better product positioning in U.S. retailers strengthened our leadership position in the face of growing competition
- Expansion of sales and marketing resources and aggressive advertising campaigns resulted in greater brand awareness, improving market share, and broader distribution in Europe
- Opened our first retail store in Chicago's premier shopping district, the Magnificent Mile, in time to participate in the holiday shopping season
Executive Overview from Dr. Min Kao, Chairman and Chief Executive Officer:
“2006 was truly a remarkable year for Garmin. We are delighted to have introduced over 70 innovative new products. These products — which include many automotive, recreational, fitness, marine, and aviation products — have been enthusiastically received by the market. We also look forward to our customers' reactions to exciting products we have scheduled for delivery in early 2007.
“We experienced triple digit growth in our automotive product line, clearly demonstrating that our strategy effectively positions us to take advantage of the growing demand for portable navigation devices both in the U.S. and in Europe. We look forward to ongoing success from our broad portfolio of automotive products. Through continuous innovation, we will provide compelling, competitive and creative products like the highly acclaimed nuvi(TM), which provide high-quality navigation coupled with features like traffic, Bluetooth hands-free calling, real-time gas prices, weather, movie times, and more. We have the focus, drive, and commitment to continue our leadership position in the rapidly expanding automotive market through 2007 and beyond.
“Additionally, our outdoor/fitness line continues to show strong growth as we create exciting new products for outdoor and fitness enthusiasts. While our marine and aviation segment revenues were not as strong as we had hoped for in 2006, both segments are well-positioned for strong growth in 2007. Our innovative marine cartography and a new suite of marine products should drive growth in this segment. In addition, as Mustang cockpit shipments, WAAS upgrades, new retrofit products, and other exciting developments unfold in 2007, our aviation segment will once again post solid growth.
“To reach our goals, we have significantly expanded our worldwide marketing and sales efforts. We have also increased our distribution and manufacturing capacities to meet future demand and compete effectively in the global marketplace. In addition, we have recently made three acquisitions that will allow us to continue to develop exciting new technologies and expand distribution of our products.”
Financial Overview from Kevin Rauckman, Chief Financial Officer:
“We are obviously pleased with our financial results for the fourth quarter and fiscal year 2006,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Our revenue and earnings per share during 2006 grew 73% and 64% respectively, exceeding our expectations. Garmin has now completed six years as a public company and has consistently generated top line and bottom line growth, with a 6-year compounded annual growth rate of revenue and earnings per share of 30% and 28%, respectively.
“Our gross and operating margins held strong, exceeding our expectations, coming in at 50% and 31% respectively. We also generated $269 million of free cash flow in 2006, resulting in unrestricted cash and marketable securities balance of $818 million at the end of the fiscal year. Our return on invested capital (ROIC) was 69% during fiscal 2006.”
Garmin management also updated their fiscal 2007 outlook
“We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. General perspective on overall business expectations for 2007, including our four business segments, are:
- “We anticipate overall revenue to exceed $2.5 billion in 2007, and earnings per share to exceed $2.70 assuming an effective tax rate of approximately 15%.
- “We anticipate aviation revenues to grow 20 percent in 2007. Growth is expected to occur within both G1000 OEM and aviation aftermarket shipments.
- “We anticipate marine revenues to grow 20 percent in 2007. Growth will come from our innovative next generation offshore and inland marine cartography that will be introduced across our exciting new marine chartplotter lines.
- “We anticipate outdoor/fitness segment revenues to grow 20 percent in 2007 led by new outdoor products with enhanced features, high sensitivity GPS receivers, expandable memory and unique functionality, like our recently announced dog-tracker product, the Astro. Fitness product enhancements slated for our fitness line and better penetration of targeted fitness markets will drive revenue growth as well.
- “We anticipate automotive/mobile revenues to grow 50 percent in 2007, with declining operating margins due to product mix and a continued transition toward mass market levels.
- “We look forward to introducing many innovative product lines this year. 2007 product introductions began with new auto, outdoor, and wireless products introduced during January's very successful Consumer Electronics Show in Las Vegas.
- “We expect continued expansion of our Jhongli manufacturing facility to meet growing demand for our products in 2007.
- “We will maintain our focus on new opportunities and expansion of distribution throughout Europe; growth will be supported through the recent acquisition of our French distributor, continued improvement of our distribution systems within Europe, and continued emphasis on advertising to enhance awareness of the Garmin brand.”