Garmin Q1 2025 Earnings Call Transcript

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Provided by Quartr
April 30, 2025
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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Garmin Limited First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I will now hand today's call over to Teri Seck, Director of Investor Relations. Please go ahead.

Teri Seck
Teri Seck
Director of IR at Garmin

Good morning. We would like to welcome you to Garmin Limited's first quarter twenty twenty five earnings call. Please note that the earnings release and related slides are available at Garmin's Investor Relations site on the Internet at www.garmin.com/stock. An archive of the webcast and related transcript will also be available on our website. This earnings call includes projections and other forward looking statements regarding Garmin Limited and its business.

Teri Seck
Teri Seck
Director of IR at Garmin

Any statements regarding our future financial position, revenues, segment growth rates, earnings, gross margins, operating margins, future dividends or share repurchases, market share, product introductions, foreign currency, tariff impacts, future demand for our products and plans and objectives are forward looking statements. The forward looking events and circumstances discussed in this earnings call may not occur and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10 Q and in our Form 10 ks filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Limited this morning are Cliff Pemble, President and Chief Executive Officer and Doug Besson, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you, Teri, and good morning, everyone. As announced earlier today, Garma delivered outstanding financial results during the first quarter of twenty twenty five in a continuation of the positive business trends we've been experiencing over the longer term. Consolidated revenue increased 11% to $1,540,000,000 a new first quarter record with three business segments delivering double digit growth. Gross and operating margins were fifty seven point six percent and twenty one point seven percent respectively, resulting in record first quarter operating income of $333,000,000 up 12% year over year and pro form a EPS of $1.61 up 13% year over year. We're off to a great start, and we are very pleased with these results.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

While it is not our normal practice, we are updating our full year 2025 guidance to reflect first quarter results and our current assessment of markets and the global trade environment. Doug will discuss our financial results and updated guidance in greater detail in a few minutes. But first, I'll provide remarks on tariffs followed by an update for each business segment. The global trade environment is very dynamic due to recent changes in US trade policy, which is affecting every business, especially those with extensive global supply chains. It appears that higher tariffs and more complex trade structures will be a normal part of business going forward.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

While the situation remains fluid, we have established assumptions about tariff structures that are most likely to impact Garmin and have reassessed our 2025 guidance using these assumptions. It's important to note that approximately 25% of our revenue is generated in The U. S. Market from products manufactured outside of The U. S, primarily in Taiwan.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Our assumptions include a 10% baseline tariff on all products manufactured outside of The U. S, including those manufactured in Taiwan. Many of our products are temporarily exempt from tariffs, but we have not assumed any benefit from these temporary exemptions, reflecting conservatism in our assumptions. We will benefit from these exemptions as long as they remain in place. We are also assuming an incremental 145% tariff on products and materials imported into The U.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

S. Directly from China. While we do not source a significant amount of material directly from China for U. S. Production, the reciprocal tariff amplifies the impact.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

The current trade environment has weakened the U. S. Dollar relative to other currencies, which benefits our revenue and margin. Approximately 40% of our revenue is generated in non U. S.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Dollar currencies, and we expect the benefit to partially offset the direct impact of tariffs. We are pursuing mitigations, some of which have already been established, while others will take more time. We are not ruling anything out, and we intend to be strategic and selective with these actions. Given the current trade environment and potential impact on consumers, our guidance assumes a modest reduction of demand moving forward. Using these assumptions, we estimate the growth impact from tariffs on our 2025 results prior to any mitigations will be approximately $100,000,000 of increased costs.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

However, our 2025 pro form a EPS is unchanged at $7.8 as the expected benefit from foreign exchange and planned mitigations offset the impact of tariffs on earnings. While the current trade environment has created headwinds and increased uncertainty in the market, we remain optimistic because of our strong product lines and the resilience of our vertically integrated, highly diversified business model. Turning now to business updates, starting with Fitness. Revenue increased 12% to $385,000,000 with growth led by strong demand for advanced wearables. According to the latest data provided by IDC, we were the only global smartwatch provider that grew in 2024, reflecting increased market share.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Gross and operating margins were 5720%, respectively, resulting in operating income of $78,000,000 During the quarter, we announced Garmin Connect Plus, a premium service offering AI based health and fitness insights, enhanced live tracking and exclusive achievement badges. We recently announced the Vivoactive six, our newest health and fitness smartwatch with an even brighter AMOLED display, more than 80 preloaded sports apps and access to Garmin Coach training plans. Given the first quarter performance of the fitness segment and the expected benefit from foreign currency shifts, we are raising our revenue growth estimate to 15% for the year. Moving to Outdoor. Revenue increased 20% to four thirty eight million dollars with growth driven primarily by adventure watches.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Gross and operating margins were 6429% respectively, resulting in operating income of $129,000,000 During the quarter, we launched several new products across multiple categories, including wearable for adventure sports, dive and golf. One noteworthy launch is the new Instinct three adventure watch series, which now includes versions with a bright AMOLED display. We also released our annual 2024 inReach SOS report highlighting the importance of Garmin response, which coordinates emergency response services in more than 200 countries and territories and supports rescue efforts in more than two ten languages. The emergency response coordination center is an important part of what differentiates our inReach SOS service from others. We are pleased with the strong performance of the outdoor segment so far this year.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Looking forward, we expect growth to moderate as we reach the anniversary of the highly successful Phoenix eight launch and considering the possibility that economic uncertainty could reduce demand for certain products. With these things in mind, we are maintaining our revenue growth estimate of 10% for the year. Looking next at Aviation, revenue increased 3% in the first quarter to $223,000,000 driven by growth in OEM product categories. Growth in operating margins were seventy five percent and twenty respectively, resulting in operating income of $48,000,000 During the quarter, Pilatus Aircraft announced the new PC-twelve Pro featuring our G3000 Prime flight deck, which with deliveries expected to begin later this year. Pilatus also selected the g 3,000 prime for the PC seven MKX military training aircraft, demonstrating versatility to serve both civilian and military applications.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

The G 3,000 Prime flight deck is truly extraordinary and significantly raises the bar for modern cockpit system technology. We were also named Supplier of the Year by Cirrus Aircraft, reflecting our commitment to create the best products and provide outstanding service to our customers. Given the first quarter performance of the Aviation segment, we are maintaining our 5% revenue growth estimate for 2025. Turning to the Marine segment. Revenue decreased 2% to $319,000,000 primarily due to the timing of promotions.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Gross and operating margins improved to 5827%, respectively, resulting in operating income of $87,000,000 During the quarter, we launched the ForcePro trolling motor with multiband GPS for improved control, reverse thrust capability, and a built in sonar transducer. Also during the quarter, we were named 2025 Supplier of the Year for the second consecutive year by Independent Boat Builders Incorporated for providing outstanding service, support and dedication to its owner network. Given the first quarter performance of the Marine segment and continued softness in the overall market, we now expect 2025 revenue will be flat versus the prior year. And moving finally to the Auto OEM segment, revenue increased 31% to $169,000,000 with growth primarily driven by increased shipments of domain controllers to BMW. Gross margin was 18%, and the operating loss narrowed to $9,000,000 During the quarter, Honda Motor Company announced the fiftieth anniversary model of the iconic Goldwing motorcycle featuring a complete infotainment solution from Garmin.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Given the first quarter performance of the auto OEM segment, we are now maintaining our 7% revenue growth estimate for 2025. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Thanks, Cliff. Good morning, everyone. I'll begin by reviewing our first quarter financial results by comments on the balance sheet, cash flow statement, taxes and updated guidance. We posted revenue of $1,535,000,000 for the first quarter, representing 11 increase year over year. Gross margin was 57.6%, fifty basis point decrease from the prior year quarter.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

The decrease was primarily due to segment mix. Operating expense as a percentage of sales was 35.9%, fifty basis point decrease. Operating income was $333,000,000 a 12% increase. Operating margin was 21.7% compared with the prior year quarter. Our GAAP EPS was $1.72 Pro form a EPS was $1.61 Next, we'll look at our first quarter revenue by segment and geography.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

During the first quarter, we achieved double digit growth in three of our pipe segments led by the auto OEM segment, 31% growth, followed by the outdoor segment with 20% growth, the fitness segment with 12% growth. By geography, we achieved growth in all three regions led by 23% growth in EMEA, followed by 9% growth in APAC, 4 Percent growth in Americas. Looking next on operating expenses. First quarter operating expense increased by $48,000,000 or 10%. Research and development increased approximately $26,000,000 SG and A increased approximately $22,000,000 compared to prior year quarter.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Both increases are primarily related to personnel related expenses. A few highlights on the balance sheet, cash flow statement and taxes. Ended the quarter with cash, marketable securities approximately $3,900,000,000 Accounts receivable increased year over year due to strong sales, but decreased sequentially to $787,000,000 on a seasonally strong fourth quarter. Inventory increased year over year sequentially to approximately $1,600,000,000 In the first quarter twenty twenty five, we generated free cash flow of $381,000,000 20 1 million dollars decrease from prior year quarter. Capital expenditures for the first quarter of twenty twenty five were $40,000,000 probably $7,000,000 higher than prior year quarter.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

We still expect full year 2025 free cash flow to be approximately $1,100,000,000 capital expenditures approximately $350,000,000 In the first quarter of twenty twenty five, we paid dividends of approximately $145,000,000 purchased $27,000,000 of company stock. At quarter end, we had approximately $210,000,000 remaining in the share repurchase program, which authorized through December 2026. Reported effective tax rate 14.5% compared to 15.6% in the prior year quarter. Decrease in the current quarter is primarily due to increased tax benefits from stock based compensation. Turning next to our full year guidance.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

We estimate revenue of approximately $6,850,000,000 compared to our previous guidance of $6,800,000,000 Increase is primarily due to the expected net favorable foreign currency impacts, partially offset by modest weakening of demand. Point of reference for the foreign currency impact, approximately 40% of our sales denominated non U. S. Dollar currencies and the euro is about half of the non U. S.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Dollar currencies, resulting in a benefit to revenue when the U. S. Dollar weakens relative to other major currencies. We expect gross margin to be approximately 58.5%, just 20 basis points lower than our previous guidance to be 8.7% to an estimated $100,000,000 of increased costs from tariffs, mostly offset by expected favorable foreign currency impacts and planned mitigations. We expect an operating margin of approximately 24.8% compared to our previous guidance of 25%.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Also, we expect pro form a effective tax rate of 16.5% to unchanged from our previous expectations. This results in expected pro form a earnings per share of approximately $7.8 which consists of our previous guidance. This concludes our formal remarks. Tamika, can you please open the line for Q and A?

Operator

Your first question is from the line of Joseph Cardoso with JPMorgan.

Joseph Cardoso
Joseph Cardoso
Vice President, Equity Research at JP Morgan

Good morning. Thank you for the details and the question here. Maybe for my first one, in the prepared remarks you talked about a modest demand reduction But if we take a step back, just curious as we look across the first quarter trends across your segments and perhaps even the second quarter trends today, are you observing any indications of potential demand pulling at your customers as they possibly attempt to build inventory to derisk kind of this volatile tariff situation? And then I have a follow-up.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. Nick, good morning, Joseph. I I think at this point, we have not seen any indications of weakness. We we already mentioned that the marine market has has been somewhat soft, and and that's been fairly consistent. I think if anything, you know, with the real time pulse on our registrations, the the, the demand for our products and the registrations, which we really mean sell through, has been, very strong.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

There's no indication that retailers are stocking or overstocking of products, and there's a natural limitation there because they have limited capital they can, deploy on inventory and also credit limits, are in place as well. So so in general, I don't I don't see that the the channel or the the consumers are out of balance because of the trade concerns.

Joseph Cardoso
Joseph Cardoso
Vice President, Equity Research at JP Morgan

Nope. Got it. That's great to hear. And then maybe switching away from tariffs, you know, it was great to see the release of Connect Plus. But I guess, Cliff, you know, why now?

Joseph Cardoso
Joseph Cardoso
Vice President, Equity Research at JP Morgan

You know, in past discussions, at least anecdotally, there appear to be some reservations about finding the right value to essentially end up charging your customers. So I guess, what capabilities or or what developments prompted you to kinda launch this at this time? And then, obviously, early days, but curious if you can provide any initial indications around customer reception, interaction with Connects Plus that, you know, might be indicative of, you know, increasing appetite to use the app, etcetera. Just curious if there's anything you can share on that front as well.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. I think we've been saying for a while that that, we are evaluating opportunities to have a premium offering on on Garmin Connect. And I think the the developments of of AI and particularly around AI based insights for our users was was one of those things that we felt was important to recognize the value for the investment that it takes to do. And so we felt like it was the right time, and we do have a very strong user base. You know, Connect Plus is certainly doesn't, isn't required for for users, and we're not taking any features away from people that they've had.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

We still have a strong commitment to develop, Garmin Connect in our devices with with broad features that are available to everyone. But certain ones, we, will likely reserve, for premium offerings. And so far, the response has been positive. We're not measuring success in terms of, the short term. This is a long term thing for us, a very important part of our our fitness segment going forward.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

So we're going to, build on where we started.

Joseph Cardoso
Joseph Cardoso
Vice President, Equity Research at JP Morgan

Nope. Fair enough. Appreciate the color. Thanks, guys.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you.

Operator

Your next question is from the line of Eric Woodring with Morgan Stanley.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Great. Thanks so much for taking my questions guys. Good morning. Cliff, just maybe two quick clarification points. Is there any way for the full year calendar 2025 guide that you can kind of disaggregate how much demand relative weakness you are baking in versus how much of a tailwind the U.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

S. Dollar is? Obviously, your total revenue guide went up slightly, but just trying to understand how much demand weakness are you kind of embedding versus how much FX tailwinds, are you now embedding? And then a quick follow-up. Thank you.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Hey. Good morning, Eric. We provided quite a bit of color in terms of the FX part. So that's one that's, fairly easy for everyone to understand. I think when you get, below that in terms of demand shifts as well as mitigations, it's very hard to disaggregate.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

And so we're not providing additional color on that. But in terms of just our overall feeling on demand, we're we don't feel like there's really any shift at all. We're just including the possibility of a modest decrease. So not very much. And for the most part, all of our mitigations plus the FX benefit goes to the bottom line as a net zero impact.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

That's perfect. You, that kind of segues into my next question, which is a bit broader and gets at this kind of mitigation point that you're making, Cliff. I'd love if you could just share a little bit more color on if we think short term, what type of mitigation tools are you prioritizing to limit the impact of tariffs? And then bigger picture or longer term, you guys are one of the only consumer electronics companies that has wholly owned facilities that does all of your own manufacturing. Does the current tariff landscape get you to rethink that at all or your geographic footprint?

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Any changes I realize it's still early and there's a lot of volatility here, but any influence that this current policy could have on how you are thinking about your supply and assembly exposure? Thanks so much.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

In terms of mitigations, I think everything is on the table as I mentioned and we're considering all of them. There's no one size fits all and we're not taking a broader approach to mitigations across all of our segments and all of our product lines. We're evaluating every everything case by case. There are shorter term term things that we can do in terms of of sourcing actions, and some of these things were actually, in progress before, any of the current trade situation started to evolve. And so we'll get the benefit of those actions we were already taken.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

But in general, we're doing what we can in the short term and then we'll continue to work on the longer term mitigations to optimize our overall results. In terms of our global footprint, actually, a global footprint is a benefit right now, not a detriment. As we mentioned, 25% of our revenue is generated in The U. S. From products manufactured outside of The U.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

S. So 75% of our products, go elsewhere. And so a global footprint is required, in order to be able to serve all of the markets. There are some product considerations that we could make in terms of where optimize our overall supply chains and results. But in general, I would not expect to see a big shift in terms of our overall global footprint and our vertical integration strategy.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Okay. That's that's super clear. Thank you for all that color, Cliff. Good luck, guys.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you.

Operator

Your next question is from the line of David MacGregor with Longbow Research.

Joseph Nolan
Associate Analyst at Longbow Research

Hi. Good morning. This is Joe Nolan on for David. I just had a quick question on the shape of the year a little bit. Just in 2Q, I was wondering if there's gonna be any sort of lag from mitigation actions, if those maybe will have some impact on margins as they take time to work their way into the system, and just how that progresses through the remainder of the year as the timing of the mitigation actions.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Oh, yeah. So as it relates to the, mitigations, you know, we'll actually as Cliff mentioned, we'll, put those in place, you know, when we think it's appropriate with those. But a few things that we have to, you know, think about, you know, as q two is, you know, one of which is, you know, timing of when the tariffs are in place. Also have to consider, you know, the inventory that we do have on hand. So we do have inventory on hand that doesn't have the tariffs.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

There'll be in the timing in there also. So what I'm saying is there's, you a lot of puts and takes, you know, that really take place in that q two, from that standpoint. We're doing everything we can to, you put things, you know, in place, as soon as we can, you know, to mitigate it as soon as we can, but there's lot of different moving parts in there between inventory, the mitigation efforts that are taking place, in there too as well as, you know, when the tariffs are in place in there too.

Joseph Nolan
Associate Analyst at Longbow Research

Got it. Okay. And then just another quick one. In Marine, you mentioned the timing of promotions. If you could just provide any detail on that and if that's expected to be a headwind into the second quarter as well?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

I think in, 2024, we we had a major promotion with with a a national retailer, where inventory was was bought in in the first quarter for those promotions. And, that promotion will occur this year. It did did occur in the second quarter, and and inventory was purchased slightly later. So it's really a shift in terms of a single promotional event. And we would expect, you know, some of those dynamics to ripple into the second quarter when it comes to our overall performance.

Joseph Nolan
Associate Analyst at Longbow Research

Got it. Okay. That's helpful. Thanks. I'll pass it on.

Operator

Your next question is from the line of George Wang with Barclays.

George Wang
Vice President at Barclays Investment Bank

Hey guys, thanks for taking my question. Just kind of take a step back kind of for high level, philosophically, how to think about consumer demand backdrop in the second half, kind of puts and takes with the fluidity of the situation given ever changing tariff policy. I'm just curious like given diverse portfolio and sort of a more a premium approach for the garment, especially on the wearables and finish side, whether, you know, it's a bit more shielded and the kind of full, you know, you noted, I mean, you took down the demand as a precaution measure. Just curious, you know, how to frame the kind of upside versus downside the risk for the consumer demand as we heading to second half, you know. And if you don't talk about cliff, for the second half, you know, that's probably more of a consensus.

George Wang
Vice President at Barclays Investment Bank

But we really haven't seen any real data points. Just curious if you have any other color to add.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. I I thank you for the question. I think no one has a a crystal ball into what the consumer will do. As I mentioned earlier, you know, so far the indications are no no change in terms of behaviors. Our demand for our products is still very strong.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

But we're including the possibility that it could weaken some. I think people would probably say we're ignoring the risk if we didn't do that. So consequently, we've included some conservatism around that. But I think in in terms of your point about about the diversity of our our company and our product lines, I think we offer unique products. And when when people want to have a product like what we offer, we believe that they they probably will step up and and buy it.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

And so, consequently, we're not we're not factoring in significant changes in terms of overall demand, just a little bit of incremental softness.

George Wang
Vice President at Barclays Investment Bank

Okay. Great. And and just to kind of segue, quickly, just in terms of, you know, the division measures, you know, I understand that you guys are not, specifically, you know, telegraphing the the specific measures, but but, you know, I I think a small price raise could be on the bulkhead just as a consensus. Just curious how you think about the pricing power for Garmin products given pretty strong following. I feel like that could be one of the easiest ways just to spike on the low single digit to 5¢ price rates.

George Wang
Vice President at Barclays Investment Bank

So so do you think, you know, that that's something kind of in the ballpark and, know, if if you have higher pricing, you know, do you think kind of hundred million gross impact from TAVR could be understated just all else be equal? Just curious like whether you can potentially walk up the guidance for the balance of '25 if you kind of will have pricing so they, you know, follow through and there's some other, you know, cost cuts, etcetera.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. I think that's a a very good question. Just one point of clarification. There there will always be a gross impact from from tariffs because there's always a cost. So the real question is how can you mitigate it?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

And your specific question is about how we can mitigate through pricing actions. As I mentioned, everything's on the table, so we're evaluating pricing not broadly, but but specifically in context of each market and and product line. I can't say, you know, what we're going to do in specific circumstances, but there are cases where where definitely there's there's room to have different pricing and there's other cases because they're it's more competitive and and and difficult to increase prices. So we're managing it case by case. And, of course, we'll use the opportunities where we can, but otherwise, we're going to make sure that we maintain our market share and optimize our overall profit dollars in this environment.

George Wang
Vice President at Barclays Investment Bank

Okay. Great. Just quickly if I can squeeze in. Just just in terms shifting to auto OEM margin profile, you know, are you guys are sticking to to the medium term model for auto OEM, in terms of the the the gross margin, the OPM margins? Or do you think the tariffs and the macro is slightly, you know, pushing out the breakeven for the business?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

I think we're we're still modeling the the high teens 20% gross margin level factor for auto OEM, and there's a lot of noise around around how tariffs will be applied. In in this market, we're also working very closely with our partners to to see cost recoveries for any additional cost that we have on the tariff side of things. And so, in general, we're staying with our model because we believe there's there's a few more levers there that we can, manage.

George Wang
Vice President at Barclays Investment Bank

Great. Great. Thanks again. And congrats again on the strong execution. I will go back to the queue.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you, George.

Operator

Your next question is from the line of Ben Bollin with Cleveland Research.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Good morning, everyone. Thanks for taking the question. Could could you talk a little bit about the relative performance across the geographies? The Americas obviously grew, but a big detail versus last quarter. EMEA continues to really outperform.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Any thoughts on the dynamics you're seeing across geos that are contributing to the relative performance levels? And then I have a follow-up.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yes. The geographies reflect a little bit of where the biggest markets are for some of our segments in The Americas, marine and aviation are the majority of those markets are in the The Americas market area. So the lower performance of growth in in those two segments, of course, influence the Americas region. In EMEA, we're very strong, especially on the wearables side of things and a lot of growth there in terms of our advanced wearable products. So that influenced EMEA as well.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

And finally, auto OEM, with our European deliveries out of our Poland factory to BMW, grew significantly year over year as we put new models into production. And so therefore, that influenced the growth there as well.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Thanks. The other question I had is when you look at the the guidance within fitness, 1Q run rate, bit below how you're guiding the year. Can you talk a little bit how you're thinking about new products or just the the pace rate, that you see that that segment developing over the course of the year? That's it for me. Thank you.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

We expect fitness will have, a bigger benefit from foreign exchange, because of the, the weighting of the revenues, outside of the US dollar. So that's one factor. And then the other thing I would say is that that, we're still, working towards, new product releases this year that will influence our our revenue going forward. And so we're anticipating benefit from new product releases that are coming.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Thank you.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you.

Operator

Your next question is from the line of Ivan Finsup with Tigris Financial Partners.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

Hi. Thank you for taking my question and congratulations on the great results in this difficult economic and global trade environment. Since you keep introducing more and more subscription based products and you have a lot of them now, not only like the, you know, the aviation and marine maps, but, you know, the inReach and now Connect Plus, at what point do you think you would start to report subscription and software revenue as a separate line item?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Well, as you know, we would have to report those as soon as they reach 10% of our consolidated revenue. So when that happens, we'll we'll definitely let you know.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

Okay. Also, you know, congratulations on the Goldwing, infotainment adoption. Does that or is there the opportunity to include like the Zumo radar on as an OEM addition to motorcycles? And do you see any opportunity to start to go into more like advanced rider safety systems?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Well, the radar is is fairly new. So, it's it's just getting out there onto the market. And and, what's really, interesting about the Zoomer radar is it's another example of a product category that we invented and brought to the market. And so it's early days, but I would expect that motorcycle OEMs as well as aftermarket users are are going to embrace that product line, and it'll be part of the market going forward.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

Now on on your forward guidance, which I think was pretty impressive in light of what's going on, is a major portion of that going to be driven by new product introductions or can you give us some color on that?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yes. I can't provide a detail on on what that is, but it's all factored into our our overall outlook. We have a cadence of roughly 100 new product releases every year and 2025 certainly has, a lot of new products that are coming as well as new product categories. And so we're factoring all of that into our outlook.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

All right. Thanks. Congratulations on the great execution again.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thanks Ivan.

Operator

Your next question is from the line of Ron Epstein with Bank of America.

Ron Epstein
Ron Epstein
Analyst at Bank of America

Hey. Yeah. Good morning, guys.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Good morning.

Ron Epstein
Ron Epstein
Analyst at Bank of America

How are you thinking about just getting shipments of product? I mean, my understanding there's freight that's waiting outside of ports. I mean, how are you factoring that in?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Well, I'm not I'm

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

not sure

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

exactly, you know, what the nature of your your question is. We we have been following a normal cadence of of manufacturing and and shipping. And so our shipping consists of a combination of both air and sea freight, and things have been business as usual along those lines.

Ron Epstein
Ron Epstein
Analyst at Bank of America

Okay. That that that's good to know. And then can you can you give any more color on the various tools that you're trying to use to mitigate tariffs?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. As I mentioned, you know, everything is on the table. So we're looking at a broad range of things from from, the detailed sourcing level of supply chains, to, you know, where where specific products might be manufactured to, to pricing, to overall cost structures within, the company. So everything is on the table. We're not ruling, anything out.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

We're just simply not providing details on that right now because some of the items depending on the market is more competitively sensitive.

Ron Epstein
Ron Epstein
Analyst at Bank of America

Yes. That makes sense. And then on the aviation side, do you expect any impact there on tariffs, I mean, in terms of maybe some of the electronics that you use?

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Well, there's there's some impact because there's there's always materials that are coming from, outside of The US. And so we factor that into our overall outlook, for aviation. But the impact is is more limited, in aviation. And as you know, we we do most of our manufacturing of aviation products, here in The United States in two different factories in Oregon and Kansas.

Ron Epstein
Ron Epstein
Analyst at Bank of America

Yeah. Yeah. That's great. Alright. Cool.

Ron Epstein
Ron Epstein
Analyst at Bank of America

Thank you very much.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you, Ron.

Operator

Ron.

Operator

Your next question is from Noah Zaskin with KeyBanc Capital Markets.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Hi. Thanks for taking my questions. Maybe first, just on the adjustment to the marine revenue growth outlook. Is that a reflection of kind of a a different view on on kind of the end market versus prior, or what's what's kind of embedded there? Thanks.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. And, again, this is more of just a an empirical view of of could happen to the market and just kind of listening to what customers are are saying without any real data points yet, obviously, because it's very early days. You know, early boat show indications were were very strong. I do think that the shock factor around the tariffs and and the changes that happened so quickly could put some of those customers who were looking at high end boats and and also equipment on pause as they quote, unquote see what happens. We hear that a lot.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

But in general, we we expect that the bell curve of our market where, these products are sold will will continue to function, although we're we're factoring in just a slight amount of softness for this transition time.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Makes sense. And maybe just one more, and apologies if if you've already touched on this. But on the on the auto OEM side, how should we think about kind of the, like, the 31% growth in the quarter, versus kind of the the 7%, unchanged thoughts, for the year? Is it, like, just kind of contract cadence items or, just any thoughts there? Thanks.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Yeah. The the high growth rate in q one is really a result of of still, getting the benefit of the additional models that were brought online last year. So we'll soon anniversary, all of that, and the growth will moderate going forward, as it's really, a a static situation with the number of models and the production rates coming out of BMW. The other, factor is, of course, as you know, carmakers are softening their views as they deal with the impact of tariffs on on their customers. And so so our outlook reflects, their input as well in terms of the number of cars they will make.

Noah Zatzkin
Noah Zatzkin
Vice President & Equity Research Analyst at KeyBanc Capital Markets

Very helpful. Thank you.

Clifton Pemble
Clifton Pemble
President & CEO at Garmin

Thank you.

Operator

At this time, there are no further questions. I will now hand today's call back over to Teri Seck for any closing remarks.

Teri Seck
Teri Seck
Director of IR at Garmin

Thank you all for joining us today. As typical, Doug and I are available for callbacks, and we hope you have a great day. Bye.

Operator

This concludes today's call. Thank you for joining. You may now disconnect your lines.

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Key Takeaways

  • Record Q1 financials: Consolidated revenue rose 11% to $1.54 B, operating income grew 12% to $333 M, and pro forma EPS increased 13% to $1.61.
  • FY25 guidance updated: Revenue guidance raised to about $6.85 B and pro forma EPS held at $7.80, assuming $100 M in tariff costs offset by currency tailwinds and mitigations.
  • Fitness segment acceleration: Q1 fitness revenue climbed 12% to $385 M, full-year growth target lifted to 15%, and Garmin introduced Connect Plus subscription and the Vivoactive 6 smartwatch.
  • Outdoor segment momentum: Revenue jumped 20% to $438 M, annual growth guidance maintained at 10%, with new Instinct 3 AMOLED watches and expanded inReach SOS emergency services.
  • Mixed performance in marine and auto OEM: Marine revenue fell 2% (now expected flat for FY) due to promo timing and market softness, while auto OEM surged 31% to $169 M, maintaining a 7% growth outlook.
AI Generated. May Contain Errors.
Earnings Conference Call
Garmin Q1 2025
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