Garmin Ltd. third quarter revenue was $729 million, up 79% from $408
million in third quarter 2006. Outdoor/Fitness segment revenue
increased 24% to $88 million and the marine segment revenue increased
17% to $48 million. Diluted earnings per share increased 57% to 88
cents from 56 cents a year ago. Excluding foreign exchange, EPS
increased 78% to 89 cents from 50 cents
All geographic areas
experienced significant growth with North America revenue at $454
million compared to $265 million, up 71%. Europe revenue was $227
million compared to $120 million, up 89%. Asia revenue was $48 million
compared to $23 million, up 109%. Revenue from the automotive/mobile
segment continued to become a larger portion of total company revenues
when compared with the same quarter in 2006, at 71% of total revenues.
Year-to-Date 2007 Financial highlights:
-- Total revenue of $1.96 billion, up 69% from $1.16 billion year-to-date
2006
-- Automotive/Mobile segment revenue increased 109% to $1.34 billion in
year-to-date 2007
-- Aviation segment revenue increased 30% to $224 million in year-to-date
2007
-- Outdoor/Fitness segment revenue increased 10% to $225 million in year-
to-date 2007
-- Marine segment revenue increased 21% to $170 million in year-to-date
2007
-- All geographic areas experienced significant growth:
- North America revenue was $1.23 billion compared to $700 million, up
76%
- Europe revenue was $631 million compared to $400 million, up 58%
- Asia revenue was $101 million compared to $63 million, up 60%
-- Diluted earnings per share increased 64% to $2.50 from $1.52 in year-
to-date 2006; excluding foreign exchange, EPS increased 68% to $2.48
from $1.48 in the same period in 2006.
Business highlights:
-- Strong sales in our automotive/mobile segment continue to exceed our
expectations and drive our increased guidance for the remainder of
2007.
-- Aviation and marine segment results put them on track to meet or exceed
earlier full year guidance for these segments. Given improving sales
in our outdoor/fitness segment, we continue to anticipate this segment
will reach our full year guidance with seasonally strong holiday sales.
-- 2.69 million units sold in the third quarter of 2007, up 119% from the
same quarter in 2006; year-to-date units sold increased 97% from the
same period in 2006.
-- Completed the initial build-out of our third Taiwan manufacturing
facility, increasing the number of production lines from 31 to 37, and
production capacity at the end of the third quarter to an annual run
rate of approximately 16 million units. Expansion of our R&D and
other office space in Taiwan continues.
-- Expansion of our North American warehouse in Olathe, Kansas continues,
with expected completion in Q1 2008.
-- We continued to work to increase our retail penetration and broaden our
distribution as retailers laid the groundwork for the upcoming holiday
selling season. Our initial order book for the holiday season is
strong, as PNDs are positioned to be a popular item during the holiday
season.
-- Due diligence work continues on previously announced acquisitions of
distributors in Spain, Italy, and Denmark. These activities are part
of our ongoing efforts to improve our market share in Europe.
Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:
“Garmin
experienced a solid third quarter. Our continued strong growth in the
automotive/mobile segment demonstrated that our products are well-
positioned to take advantage of the growing interest in portable
navigation devices. Independent market research indicates we have
maintained a strong leadership position in North America with
approximately fifty percent PND market share, and our market position
in Europe continues to improve as well.”
Garmin believes it is
prepared to meet the growing demand for products. Garmin has increased
manufacturing capacity and grown total inventories over $200 million
since the end of the second quarter of 2007. The order book is strong,
and Garmin believes its strategy of extensive market segmentation will
drive positive results.
The aviation segment continued to grow
steadily during the quarter. Positive response to WAAS and GMX200
product offerings and growth in the sale of G1000 cockpit continued. In
the third quarter Garmin announced additional wins for the G1000
cockpit for future Cessna Caravan, Socata TBM 850 as well as the new
PiperJet and a G1000 retrofit for the King Air 200/B200. Also during
the 3rd quarter, Cessna announced that the new G300 cockpit display
system was selected for its new Skycatcher light sport aircraft. Garmin
continues to believe the aviation segment is positioned to meet 2007
guidance.
The marine segment also showed steady growth, as
customer interest i new marine products and cartography continued to
drive revenues for the quarter. While typical marine segment revenues
decline sequentially in third and fourth quarter each year, results
remain seasonally strong. Garmin continues to believe the marine
segment is positioned to meet 2007 guidance.
Third quarter
revenue for outdoor/fitness segment was strong compared to the year ago
quarter. Increased sales generated by the new Astro dog tracking
product, as well as new eTrex and Rino products with high-sensitivity
GPS drove this growth. We see continued growth opportunities for this
segment and believe the outdoor/fitness segment is positioned to meet
our 2007 guidance for the segment.”
Financial overview from Kevin Rauckman, Chief Financial Officer:
“Our
financial results for the third quarter were strong and in line with
our expectations. Our retail orders are strong, and we look forward to
a solid 2007 holiday season,” said Kevin Rauckman, chief financial
officer of Garmin Ltd. “Our revenue and earnings per share during the
quarter grew 79% and 57% respectively, exceeding our expectations.
Excluding the impact of foreign exchange, EPS for the quarter grew 78%,
from 50 cents to 89 cents.”
Gross margin for the overall
business declined modestly in the third quarter, down 180 basis points
from the year-ago quarter. The automotive/mobile segment gross margin
improved 70 basis points during the quarter due to a seasonal,
favorable product mix shift towards higher-margin North American
product, and PND pricing declined more slowly than we expected. The
aviation segment also improved 180 basis points as a function of
favorable product mix. Gross margin for the marine segment declined 50
basis points during the quarter when compared to the year-ago quarter
as a function of product mix, and the outdoor/fitness segments declined
320 basis points, reflecting a product mix shift and the transition of
the eTrex product line.
Operating margin remained relatively
stable, declining just 30 basis points from the year-ago quarter. This
stability reflected an anticipated decline in gross margin offset by
operating leverage as revenues outpaced increased spending in
advertising and research and development expenses during the quarter.
While Garmin is pleased with these results, Garmin anticipates more
significant margin compression during the fourth quarter of 2007.
Garmin
also generated $117 million of free cash flow in the third quarter of
2007, resulting in a cash and marketable securities balance of $1.03
billion at the end of the quarter.”
Fiscal 2007 Outlook
Garmin remains optimistic about the future success of the business and is updating guidance as follows:
-- We anticipate overall revenue to exceed $2.9 billion in 2007, and
earnings per share to exceed $3.40.
-- We anticipate segment revenue growth rates for our automotive/mobile,
aviation, marine, and outdoor/fitness segments to be 90%, 30%, 20%, and
10%, respectively
-- We anticipate operating margins to be approximately 27% for the full
year 2007
-- Our effective tax rate should remain approximately 13%
Announcement of Management Appointment
Given
anticipated ongoing business growth, Cliff Pemble will be assuming the
new positions of Chief Operating Officer (COO) and President of Garmin
Ltd. In addition, he will assume direct supervision of all North
American Garmin subsidiaries, including Garmin AT, Dynastream, and
Digital Cyclone. Dr. Kao will continue in his role as Chairman and CEO
of Garmin Ltd. but will now be able to devote more time to business
development, strategic planning, and the development of our
Asia-Pacific business initiatives.
Announcement of Intent to Make an Offer to Acquire all the Outstanding Shares in Tele Atlas N.V.
Early
this morning Garmin announced its intention to make an offer to acquire
all the outstanding shares in Tele Atlas N.V. Advanced mapping data is
an essential ingredient for the continued growth of the navigation
industry and this acquisition provides a means for Garmin to contribute
more broadly to the development and growth of this market.
