Garmin Ltd. recorded Q1 revenues jumped 53% to $492 million as a 110% gain in its Automotive/Mobile segment offset lower sales in its Outdoor/Fitness and Marine segments.
Outdoor/Fitness segment revenue decreased 5% to $60 million in the quarter. Gross margin in the segment remained at 65% during the period, but due to the lower volume, operating margins declined to 35%.
Dr. Min Kao, chairman and CEO, said the outdoor/fitness segment had a “very strong” first quarter in 2006, when the pipeline was full of many new fitness products and a special promotional deal in Europe that drove strong sales. On a conference call, management said it expected the outdoor/fitness segment to grow in the second half, driven by the Astro dog tracking device, and many new products yet to be announced. Among fitness products, Garmin sees strength in the Forerunner product, although Edge, a cycling product, has been weaker than expected. Management said given its slow start, the Outdoor/Fitness segment was at risk of reaching its goal of 20% growth this year.
In the Marine segment, revenue decreased 15% to $43 million in the quarter due to timing of new product introductions. Gross margins decreased to 49% as older product was discounted ahead of new product releases for the upcoming marine selling season. Operating margin in this segment was 26% due to lower volume during the quarter. Garmin said new products have generated strong bookings and the division is “poised to drive strong growth in the second and third quarters.” It continues to expect the Marine segment to grow 20% in fiscal 2007.
Management said the response to new marine products and cartography “has been very positive, with strong initial orders and backlogs.” Garmin began deliveries of its new GMR18 radar system, which it called “the most powerful 18 inch radar system on the market” at a price of just under $1000. Garmin also said its soon-to-be-delivered 4000- and 5000-series products “have generated much enthusiasm, and we anticipate strong orders for these products as well.” Garmin added that its acquisition of the assets of Nautamatic Marine Systems, Inc. will allow it to further expand its suite of marine networking products.
All geographic areas experienced significant growth with North America revenue at $323 million, increasing 60%. Europe revenue was $148 million, up 45%, and Asia revenue was $18 million, up 17%.
Earnings per share increased 60% to 64 cents from 40 cents in the quarter; excluding foreign exchange, EPS increased 37% to 59 cents from 43 cents in the same quarter in 2006.