Garmin’s Q2 Revenues Climb 53 Percent

Garmin Ltd.’s earnings increased significantly in the second quarter as sales jumped 53 percent. Among segments, Fitness grew 40 percent, Outdoor climbed 57 percent and Marine gained 66 percent. Garmin strongly raised its outlook for the year.

“Strong demand for active lifestyle products continued, and we experienced solid recovery within our aviation and auto segments resulting in record revenue and profits in the second quarter,” said Pemble. “We are very pleased with the results we have delivered thus far, giving us the confidence to raise our full-year 2021 revenue and EPS guidance.”

Revenue from the fitness segment grew 40 percent in the second quarter driven by strong demand for its cycling and advanced wearable products. Gross margin and operating margins were 54 percent and 28 percent, respectively, resulting in 62 percent operating income growth. During the quarter, Garmin launched the Forerunner 945 LTE, bringing safety and real-time tracking features to its GPS running smartwatch. This watch is designed to allow runners to send for help, if necessary, and stay connected without their phones. In addition, Garmin celebrated Global Running Day with the launch of the Forerunner 55, a smartwatch that encourages all runners to run.

Revenue from the outdoor segment grew 57 percent in the second quarter with growth across all categories led by strong demand for adventure watches. Gross margin and operating margins were 64 percent and 38 percent, respectively, resulting in 81 percent operating income growth. During the quarter, Garmin launched Descent Mk2S, a smartwatch featuring multiple dive modes, multisport training and smart features. Garmin also debuted its children’s book, “Women of Adventure: Being Brave in a Big World,” featuring six stories from its Women of Adventure series.

Revenue from its Aviation segment grew 43 percent in the second quarter with contributions from the OEM and aftermarket product categories. Gross margin and operating margins were 73 percent and 28 percent, respectively, resulting in 226 percent operating income growth. During the quarter, Garmin Autoland won the Robert J. Collier Trophy, for the world’s first autonomous system designed to activate during an emergency to safely fly and land an aircraft without human interaction. Garmin also announced the acquisition of AeroData, a provider of performance data solutions for commercial aircraft.

Revenue from the Marine segment grew 66 percent in the second quarter with growth across multiple categories, led by strong demand for its chartplotters. Gross margin and operating margins were 58 percent and 34 percent, respectively, resulting in 106 percent operating income growth. During the quarter, Garmin announced the integration of its displays on Mercury-powered boats which can receive engine performance data via Mercury’s SmartCraft Connect gateway, which enables monitoring of up to four engines simultaneously. Garmin launched the MSC 10 marine satellite compass, a GPS-based navigation tool with multi-band GNSS and a fully integrated attitude and heading reference system for accurate GPS-derived heading and position on the water. Also, with the assistance of its innovative marine electronics, Hank Cherry, a Garmin-sponsored angler, won the Bassmaster Classic.

Revenue from the auto segment grew 74 percent during the second quarter driven by both auto OEM programs and consumer auto products. Gross margin was 43 percent, and Garmin recorded an operating loss of $8 million in the quarter driven by investments in auto OEM programs. During the quarter, it launched the dezl OTR500, truck navigator that adds PrePass weigh station bypass notifications to save drivers time, fuel and money. Also, Garmin launched its first connected dashcam with automatic video storage and live view monitoring options.

Additional Financial Information
Total operating expenses in the second quarter were $410 million, a 25 percent increase over the prior year. Research and development increased by 21 percent, primarily due to engineering personnel costs across all segments. Selling, general and administrative expenses increased 26 percent, driven primarily by personnel-related expenses and information technology costs. Advertising increased 47 percent driven primarily by higher spend in the fitness and outdoor segments.

The effective tax rate in the second quarter of 2021 was 14.8 percent.

In the second quarter of 2021, Garmin generated approximately $120 million of free cash flow and paid a quarterly dividend of approximately $117 million. Garmin ended the quarter with cash and marketable securities of approximately $3.2 billion.

2021 Guidance
Based on its strong performance in the first half of 2021, Garmin is updating its full-year guidance. Garmin now anticipates revenue of approximately $4.9 billion with projected growth in all segments. Garmin anticipates its full-year pro forma EPS will be approximately $5.50 based on a gross margin of approximately 58.5 percent, operating margin of approximately 23.8 percent and a full-year pro forma effective tax rate of approximately 11.5 percent.

The updated guidance calls for:

• Overall revenues to reach $4.9B against guidance of $4.6B previously;
• Gross Margin to reach 58.5 percent versus 59.2 percent previously;
• Operating Margin to reach 23.8 percent against 23.5 percent previously;
• Tax Rate to be 11.5 percent compared with guidance of 10.5 percent previously;
• EPS to reach $5.50 against expectations of $5.15 previously;

Growth among segments are now expected to be:

• Fitness: 17 percent against 10 percent previously;
• Outdoor: 17 percent against 10 percent previously;
• Aviation: 10 percent against 5 percent previously;
• Marine: 27 percent against 15 percent previously;
• Auto: 15 percent against 5 percent previously.