Garmin reported sales grew 9 percent in the first quarter ended March 26. Sales gains of 50 percent in its Outdoor segment and 21 percent in its Marine segment offset a decline of 28 percent in its Fitness segment.

Highlights for the first quarter of 2022 include:

  • Record consolidated revenue of $1.17 billion, a 9 percent increase over the prior-year quarter, with three segments posting double-digit growth;
  • Gross and operating margins were 56.5 percent and 19.5 percent, respectively;
  • Operating income of $229 million, an 8 percent decrease compared to the prior-year quarter;
  • GAAP EPS was $1.09, and pro forma EPS was $1.11;
  • Updated to its line of outdoor adventure watches; and
  • Released LiveScope Plus, a high-resolution live sonar for the fishing market.

Results were in line with Wall Street’s consensus estimates, calling for EPS of $1.10 on sales of $1.14 billion.

Executive overview from Cliff Pemble, president and CEO, said, “We delivered another quarter of growth and record revenue in an increasingly complex and challenging business environment. High freight costs and component supply challenges persist while new headwinds emerge, such as the strengthening of the U.S. dollar and the uncertainty created by Russia’s invasion of Ukraine. In this dynamic environment, we remain focused on creating highly differentiated products that excite our customers and lead to success.”

Fitness
Revenue from the Fitness segment decreased by 28 percent in the first quarter. All categories declined, but the weakness is primarily attributable to the normalization of demand for cycling products from the pandemic-driven levels in the prior year. Gross and operating margins were 48 percent and 0 percent in the quarter, respectively, resulting in $1 million of operating income. The Garmin Connect platform contains sizeable health insights covering Garmin’s device users. Using anonymized data from Garmin Connect showed that sleep-conscious consumers experience lower stress levels during the day. Garmin also provided insights on the link between modest activity levels and lower resting heart rate, which is an indicator associated with improved cardiac health. These insights are made possible by biosensors and algorithms in Garmin wearables.

Outdoor
Revenue from the Outdoor segment grew 50 percent in the first quarter due to increased demand for adventure watches. Gross and operating margins were 64 percent and 39 percent, respectively, resulting in $149 million of operating income. During the quarter, Garmin announced an update of its lineup of adventure watches, including its Fēnix 7 and the Instinct 2, which include versions that can operate indefinitely through solar power.

Aviation
Revenue from the Aviation segment grew 1 percent in the first quarter, primarily driven by growth in the OEM category. Gross and operating margins were 73 percent and 23 percent, respectively, resulting in $40 million of operating income. During the quarter, Garmin launched the D2 Mach 1, an aviator smartwatch with an AMOLED display, and the D2 Air X10, which combines aviation features with voice functionality, allowing pilots to take calls and use a compatible smartphone voice assistant. Garmin also announced added certifications for its GFC 500/600 autopilot.

Marine
Revenue from the marine segment grew 21 percent in the first quarter, with growth across multiple categories led by demand for its chartplotters. Gross and operating margins were 51 percent and 23 percent, respectively, resulting in $59 million of operating income. During the quarter, Garmin launched the LiveScope Plus with enhanced resolution, clearer images and improved target separation. Also, its LiveScope technology helped Garmin-sponsored fishing pro Jason Christie win the 2022 Bassmaster Classic.

Auto
Revenue from the Auto segment grew 11 percent during the first quarter, driven by growth in OEM and consumer products. The gross margin was 38 percent, and Garmin recorded an operating loss of $20 million in the quarter, driven by ongoing investments in auto OEM programs. During the quarter, Garmin launched the Instinct 2 Dēzl edition smartwatch for professional truckers.

Additional Financial Information
Total operating expenses in the fourth quarter were $434 million, an 11 percent increase over the prior year. Research and development increased by 11 percent, primarily due to engineering personnel costs. Selling, general and administrative expenses increased 11 percent, driven by personnel-related expenses and information technology costs. Advertising increased 10 percent over the prior-year quarter, primarily due to higher spending in the outdoor and marine segments.

The effective tax rate in the first quarter was 10.3 percent compared to 12.2 percent in the prior-year quarter. The year-over-year decrease in the effective tax rate is primarily due to increased U.S. tax deductions and credits.

In the first quarter of 2022, Garmin generated approximately $126 million of free cash flow and paid a quarterly dividend of approximately $129 million. Garmin ended the quarter with cash and marketable securities of approximately $3.0 billion.

2022 Fiscal Year Guidance
Garmin said it maintains its 2022 guidance for revenue of approximately $5.5 billion and pro forma EPS of $5.90.