Garmin, Ltd. reported earnings and sales both topped Wall Street estimates in the fourth quarter ended December 25. Sales grew 3 percent in the quarter. Marine segment sales grew 14 percent while Fitness was flat and Outdoor sales decreased 8 percent.

Highlights for fourth-quarter 2021 include:

  • Record consolidated revenue of $1.39 billion, a 3 percent increase over the prior-year quarter with three of its segments posting double-digit growth;
  • Gross and operating margins were 55.5 percent and 22.6 percent, respectively;
  • Operating income of $315 million, a 15 percent decrease compared to the prior-year quarter;
  • GAAP EPS was $1.48 and pro forma EPS was $1.55;
  • Garmin Descent Mk2i dive computer and Descent T1 transmitter named one of 2021’s greatest innovations by Popular Science
  • Named a supplier of the year by Embraer for the seventh consecutive year;
  • Garmin Surround View Camera System was awarded the Dame design award;
  • Recently announced the acquisition of Vesper Marine, a provider of marine communication equipment and services; and
  • Introduced the Garmin DriveSmart series of portable car navigators with a range of large displays up to 8-inches.

Adjusted earnings of $1.55 topped Wall Street’s consensus estimate of $1.41. Sales of $1.39 billion came out just ahead of analyst expectations of $1.37 billion.

Highlights for fiscal year 2021 include:

  • Sixth consecutive year of revenue growth with each of its five segments posting double-digit growth over the prior year;
  • Record consolidated revenue of $4.98 billion, a 19 percent increase over the prior year;
  • Gross margin of 58.0 percent compared to 59.3 percent in the prior year;
  • Operating margin of 24.5 percent compared to 25.2 percent in the prior year;
  • Record operating income of $1.22 billion, increasing 16 percent over the prior year; and
  • GAAP EPS was $5.61 and pro forma EPS was $5.82, representing 13 percent growth over the prior year pro forma EPS.

Executive Overview From Cliff Pemble, President and CEO
“2021 was another remarkable year as demand for our products led to strong double-digit annual revenue growth in each of our five segments. We are entering 2022 with a great lineup of recently introduced products and have more exciting product introductions planned throughout the year. I am very proud of what we have accomplished in 2021 and look forward to the opportunities and challenges of the new year,” said Pemble.

Fitness
Revenue from the fitness segment was flat in the fourth quarter at $470.1 million, with growth in advanced wearable products offset by reduced sales of cycling products. Gross margin and operating margins were 49 percent and 22 percent, respectively, resulting in $104 million of operating income. During the quarter, Garmin announced multi-year sponsorship agreements at both the high school and collegiate levels to showcase the power and utility of its running watches. Garmin also recently released its 2021 Connect Fitness Report which showed double-digit growth in nearly every activity category.

Outdoor
Revenue from the outdoor segment decreased 8 percent in the fourth quarter to $378.2 million, primarily due to component constraints that limited the number of orders Garmin could fulfill for its traditional handhelds and dog products. Gross margin and operating margins were 65 percent and 37 percent, respectively, resulting in $142 million of operating income. The Garmin Descent Mk2i dive computer and Descent T1 transmitter featuring its sub-wave sonar-based communication were named one of 2021’s greatest innovations by Popular Science.

Aviation
Revenue from the aviation segment grew 13 percent in the fourth quarter to $177.6 million, primarily driven by the OEM category. Gross margin and operating margins were 73 percent and 25 percent, respectively, resulting in $45 million of operating income. During the quarter the G3000 integrated flight deck was selected by Heart Aerospace for the all-electric ES-19 regional airliner. Garmin also announced additional certifications for its GFC 500/600 autopilot, bringing the performance and safety enhancing benefits of its flight control technology to more aircraft models. Also in the quarter, Embraer presented Garmin with its seventh consecutive Supplier of the Year award. Over the past decade, Embraer has presented Garmin with a total of 12 supplier awards across various categories, including Electric and Electronics Systems, Technical Support to Operators, Electro-Mechanical Systems and Material Support to Operator, recognizing its achievement in designing, manufacturing and supporting the flight deck solutions.

Marine
Revenue from the marine segment grew 14 percent in the fourth quarter to $196.5 million with growth across multiple categories led by strong demand for its chartplotters. Gross margin and operating margins were 54 percent and 20 percent, respectively, resulting in $39 million of operating income. During the quarter, Garmin launched the GPSMAP 79 marine handheld series, equipping mariners with easy-to-use navigation tools. It also launched the GMR Fantom range, a dome radar, offering a broad range from 20-feet to 48 nautical miles, improved target detection and features to enhance situational awareness on the water. Also during the quarter, its Surround View Camera System was honored with the 2021 Dame Design award.

Auto
Revenue from the auto segment grew 21 percent during the fourth quarter to $169.2 million driven by growth in both auto OEM programs and consumer auto products. Gross margin was 36 percent, and Garmin recorded an operating loss of $15 million in the quarter driven by ongoing investments in auto OEM programs. During the quarter, Garmin began shipments of the new lineup of Drive navigators for the consumer market, bringing larger displays and more connected features to its customers.

Additional Financial Information
Total operating expenses in the fourth quarter were $457 million, a 9 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 10 percent, driven primarily by personnel-related expenses and information technology costs. Advertising expenses were consistent with the prior year quarter.

The effective tax rate in the fourth quarter of 2021 was 7.4 percent compared to the GAAP effective tax rate of 14.8 percent and pro forma effective tax rate(1) of 12.0 percent in the prior year quarter. The year-over-year decrease in the pro forma effective tax rate is primarily due to uncertain tax position reserves recorded in the prior year.

In the fourth quarter of 2021, Garmin generated approximately $49 million of free cash flow(1), and paid a quarterly dividend of approximately $129 million. Garmin ended the quarter with cash and marketable securities of approximately $3.1 billion.

2022 Fiscal Year Guidance
Garmin expects full-year 2022 revenue of approximately $5.5 billion, an increase of approximately 10 percent over 2021. Garmin expects its full-year pro forma EPS to be approximately $5.90 based upon a gross margin of approximately 57.5 percent, operating margin of approximately 22.8 percent and pro forma effective tax rate of approximately 10.5 percent.

Photo courtesy Garmin