Garmin, Ltd. reported sales declined 2 percent in the first quarter ended April 1. A 27 percent sales tumble in its Outdoor segment, tied to challenges anniversarying major launches in the adventure watch category, offset double-digit gains in other segments, including Fitness and Marine.

Highlights for first quarter 2023 include:

  • Consolidated revenue of $1.15 billion, a 2 percent decrease compared to the prior year quarter;
  • Gross margin increased to 56.9 percent, and operating margin was 17.2 percent;
  • Operating income was $197 million, a 14 percent decrease compared to the prior year quarter; and
  • GAAP EPS was $1.05 and pro forma EPS was $1.02.

Cliff Pemble, president and chief executive officer, said, “2023 is off to a good start with four of our five segments posting double-digit revenue growth driven by new product introductions and solid demand trends. We are excited about what lies ahead as we anticipate many more exciting product introductions throughout the remainder of the year.” –

Segment Performance

Fitness
Revenue from the fitness segment grew 11 percent in the first quarter, primarily due to strong demand for Garmin’s advanced wearables. Gross and operating margins were 49 percent and 4 percent, respectively, resulting in $11 million of operating income. During the quarter, Garmin launched the Forerunner 265 and Forerunner 965, Garmin’s first running smartwatches to offer vibrant AMOLED displays.

Outdoor
Revenue from the outdoor segment decreased 27 percent in the first quarter primarily due to year-over-year declines in adventure watches as Garmin passed the one-year anniversary of the successful Fēnix 7, Epix and Instinct 2 launches. Gross and operating margins were 62 percent and 23 percent, respectively, resulting in $77 million of operating income. During the quarter, it launched the GPSMAP 67 Series and eTrex SE handhelds. Garmin recently announced the Drive 53 GPS navigator featuring a high-resolution capacitive touchscreen, new design and traffic options to simplify driving, and the Zūmo XT2 motorcycle navigator with a larger and brighter 6-inch sunlight-readable display.

Aviation
Revenue from the aviation segment grew 22 percent in the first quarter with contributions from both OEM and aftermarket categories. Gross and operating margins were 72 percent and 27 percent, respectively, resulting in $58 million of operating income. During the quarter, Garmin announced additional certifications for Garmin’s GFC autopilots, including the GFC 600 in the King Air 200 series of aircraft. Garmin was recently named Best Supplier to Embraer in the categories of Systems as well as Services and Support.

Marine
Revenue from the marine segment grew 10 percent in the first quarter, primarily due to the timing of spring promotions. Gross and operating margins were 54 percent and 26 percent, respectively, resulting in $72 million of operating income. During the quarter, Garmin expanded the EchoMap UHD2 chartplotter series with touchscreens with keyed assist, high-definition sonar and preloaded Garmin Navionics+ mapping. Garmin was recognized by Best Marine Electronics and Technology and for the fifth consecutive year received a 2023 Top Product award for the EchoMap UHD2 64sv from Boating Industry.

Auto OEM
Revenue from the auto OEM segment grew 11 percent during the first quarter primarily due to increased shipments of domain controllers. Gross margin was 28 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 began production for the 2024 BMW X5 and X6 Domain Controllers in Garmin’s U.S. manufacturing facility. Also during the quarter, Garmin launched an infotainment solution for the 2023 Yamaha Tracer 9GT+, Tracer 7/7GT and the Niken GT sport touring motorcycles.

Additional Financial Information
Total operating expenses in the first quarter were $456 million, a 5 percent increase over the prior year. Research and development increased 6 percent primarily due to engineering personnel costs. Selling, general and administrative expenses increased 7 percent driven primarily by personnel-related expenses and information technology costs. Advertising expenses decreased 11 percent primarily due to lower cooperative advertising.

Operating income fell 13.8 percent to $197.0 million from $228.6 million.

The effective tax rate in the first quarter was 8.8 percent compared to 10.3 percent in the prior-year quarter. The year-over-year decrease in the effective tax rate is primarily due to income mix by jurisdiction.

Net earnings slipped 4.4 percent to $202.3 million, or $1.05 a share, from $211.6 million, or $1.90, a year ago. On an adjusted basis, pro-forma EPS was $1.02 against $1.11 a year ago and ahead of Wall Street’s consensus target of $1.00.

In the first quarter of 2023, Garmin generated approximately $232 million of free cash flow. Garmin paid a quarterly dividend of approximately $140 million and repurchased approximately $41 million of the company’s shares within the quarter, leaving approximately $53 million remaining as of April 1, 2023 in the share repurchase program authorized through December 29, 2023. Garmin ended the quarter with cash and marketable securities of approximately $2.7 billion.

2023 Fiscal Year Guidance
Garmin is maintaining its 2023 guidance calling for revenue of approximately $5.00 billion and pro forma EPS of $5.15.

Photo courtesy Garmin