Garmin Q2 2025 Earnings Call Transcript

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Provided by Quartr
July 30, 2025

Key Takeaways

  • Positive Sentiment: Garmin reported record Q2 revenue of $1.815 billion, up 20% year-over-year, with operating income of $472 million (+38%) and pro forma EPS of $2.17 (+37%).
  • Positive Sentiment: The company raised its full-year guidance to approximately $7.1 billion in revenue and $8.00 in pro forma EPS, up from prior targets of $6.85 billion and $7.80.
  • Positive Sentiment: Fitness segment revenue jumped 41% to $605 million, driven by new advanced wearables like the Forerunner 570/970 and Venue X1, prompting an upgraded 25% growth forecast.
  • Neutral Sentiment: Garmin announced the acquisition of MyLabs to combine race timing and management technology with its devices, aiming to enhance the end-to-end competition experience and expand its addressable market.
  • Negative Sentiment: Inventory rose to approximately $1.8 billion to hedge against tariffs, contributing to a $91 million year-over-year decrease in free cash flow to $127 million in Q2.
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Earnings Conference Call
Garmin Q2 2025
00:00 / 00:00

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Operator

Thank you for standing by, and welcome to the Garmin Limited Second 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. Thank you. I'd now like to turn the call over to Teri Seck, Director of Investor Relations. You may begin.

Teri Seck
Teri Seck
Director - IR at Garmin

Good morning. We would like to welcome you to Garmin Limited's second quarter twenty twenty five earnings call. Please note that the earnings press 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 - 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 shares, 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 Pimble, 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 Pimble.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin delivered another quarter of outstanding financial results with strong growth in consolidated revenue, operating profit, and earnings. Consolidated revenue increased 20%, exceeding $1,800,000,000, which is a new second quarter record, and we experienced double digit sales growth in every business segment. Gross and operating margins expanded to 58.826%, respectively, resulting in record second quarter operating income of $472,000,000, up 38% year over year, and pro form a EPS of $2.17, up 37% year over year. Yesterday, we announced the acquisition of MyLabs, a global market leader in timing and performance analysis for athletic, motorsports, and equestrian competition.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

MyLabs supports an impressive customer base, including the Boston Marathon, Ironman, and Formula One racing, to name just a few. We believe that the combination of Garmin devices with MyLabs timing and race management technology will provide a comprehensive experience for our passionate customers from training to race day while also expanding our addressable market. We are very excited to welcome the MyLabs team to Garmin and look forward to all that we can accomplish together. We are very pleased with our results so far in 2025, which have exceeded our expectations. From our vantage point, consumers have been resilient, and demand for our highly differentiated products has been robust.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Given our strong performance, we are updating our full year guidance. We now anticipate revenue of approximately $7,100,000,000 and pro form a EPS of eight dollars per share. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first, I'll provide a few remarks on the performance of each business segment. Starting with fitness, revenue increased 41% to $605,000,000 with growth led by strong demand for advanced wearables. Gross and operating margins expanded to 6033%, respectively, resulting in operating income of $198,000,000.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

During the quarter, we launched the Forerunner five seventy and Forerunner nine seventy with new training features and personalized training plans from Garmin Coach for running and triathlons. These new devices have been enthusiastically embraced by the market and helped drive the remarkable second quarter financial performance of the segment. We also launched the new Venue x one with an ultrathin case and class leading two inch display, resulting in a sleek, lightweight design that is easy to read and packed with our most popular features. Also during the quarter, we launched several new category defining products, including the index sleep monitor, the Tacx Alpine Gradient Simulator, and the Variaview bike headlight with an integrated four k resolution camera. Given the first half performance of the fitness segment and the continued demand we are expecting for our advanced wearables, we are raising our revenue growth estimate to 25% for the year.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Moving to outdoor. Revenue increased 11% to $490,000,000 with growth driven primarily by adventure watches. Gross and operating margins expanded to 6632%, respectively, resulting in operating income of $158,000,000. During the quarter, we launched the Instinct three tactical edition with a bright AMOLED display and metal reinforced bezel, a built in LED flashlight, and support for popular new activities such as rucking. Also during the quarter, we launched new tread all terrain navigators that offer larger touch screens and additional mapping options to enrich off road adventures.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

We are pleased with the performance of the Outdoor segment so far this year. Looking forward, we expect growth to moderate as we pass the one year anniversary of the highly successful Phoenix eight launch. With this in mind, we are maintaining our revenue growth estimate of 10% for the year. Looking next at Aviation. Revenue increased 14% in the second quarter to $249,000,000 with growth contributions from both OEM and aftermarket product categories.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Gross and operating margins expanded to 7425%, respectively, resulting in operating income of $63,000,000. During the quarter, Embraer recognized Garmin as the top supplier in the electrical and electronic systems category for the tenth consecutive year, validating the long term investments we have made creating innovative products and building strong relationships with our customers. We're also preparing for the future with game changing new products and features, such as the recently announced g 5,000 Prime integrated flight deck for part 25 aircraft and the addition of FAA Datacom to the GTN seven fifty x I navigator, which expands the availability of modern digital communications to the aftermarket. We also launched SmartCharts, which has the potential to be one of the most disruptive new products for aviation in quite some time. Using smart charts, pilots can see their position on context specific georeferenced charts, making instrument approaches much more intuitive and easier to fly.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Also during the quarter, we announced that Garmin Autoland was certified for the Cirrus SRG seven plus series, becoming the first piston powered aircraft equipped with this award winning safety system. Given the first half performance of the aviation segment, we are raising our revenue growth estimate to 7% for the year. Turning to the marine segment. Revenue increased 10% to $299,000,000 with growth across multiple categories led primarily by chartplotters. Gross and operating margins were 5521%, respectively, resulting in operating income of $63,000,000 During the quarter, we launched the GPSMAP 15x3 chart plotters with an ultra wide display that offers as much display area as two separate nine inch chart plotters, making information easier to read while maximizing the use of space in the instrument panel.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Also during the quarter, we launched the Quadix eight, our most advanced purpose built smartwatch for mariners. The marine market has easily surpassed our lowered expectations, demonstrating resilience and stability in an otherwise dynamic macroeconomic environment. Given our first half performance and the current trends in the market, we are raising our revenue growth estimate to 5% for the year. And moving finally to the Auto OEM segment, revenue increased 16% to $170,000,000 with growth driven primarily by increased shipments of domain controllers to BMW. Gross margin was 17%, and the operating loss narrowed from the prior year to $10,000,000 We recently shipped our one millionth BMW domain controller from our US manufacturing facility, demonstrating our capability as a respected tier one supplier to the North American automotive market.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

We also continue to make progress on the launch of our next significant auto OEM program in the 2026. Given the first half performance of the auto OEM segment, we are raising our revenue growth estimate to 10% for the year. 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'd begin by reviewing our second quarter financial results, provide comments on the balance sheet, cash flow statement, taxes and updated guidance. We posted revenue of $1,815,000,000 for the second quarter, representing a 20% increase year over year. Gross margin was 58.8%, 150 basis point increase from the prior year quarter. Increase was primarily due to product mix. During the quarter, the cost impact from tariffs was not significant.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

It was more than offset by higher revenue associated with the weakness of the US dollar relative to other major currencies. Operating expense as a percentage of sales was 32.8%, 108 basis point decrease. Operating income was $472,000,000 38% increase. Operating margin was 26%, three thirty basis point increase from prior year quarter. Our GAAP EPS was $2.7 Pro form a EPS was $2.17 Next, we'll look at second quarter revenue by segment and geography.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

In the second quarter, we achieved double digit growth in all five of our segments, led by the fitness segment with outstanding growth of 41%. By geography, we achieved double digit growth in all three of our regions, led by 25% growth in EMEA, followed by 19% growth in Americas and 16% growth in APAC. Looking next, operating expenses. Second quarter operating expense increased by $74,000,000 or 14%. Research and development increased approximately $34,000,000 SG and A increased approximately $40,000,000 compared to prior year quarter.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Both increases were primarily due to personnel related expenses. A few highlights on the balance sheet, cash flow statement, and taxes. We ended the quarter with cash and marketable securities of approximately $3,900,000,000 Accounts receivable increased both year over year and sequentially to approximately $1,000,000,000 following the seasonally strong sales in the second quarter. Inventory increased year over year sequentially to approximately $1,800,000,000 We are executing our strategy to increase the inventory of certain product lines, support strong customer demand, as well as mitigate the effects of potential increases in tariffs. During the second quarter twenty twenty five, we generated free cash flow of $127,000,000 $91,000,000 decrease from the prior year quarter, primarily due to an increase in inventory.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Capital expenditures for the second quarter twenty twenty five were approximately $46,000,000 approximately $9,000,000 higher than the prior year quarter. We expect full year 2025 free cash flow to be approximately $1,200,000,000 with capital expenditures of approximately $350,000,000 During the 2025, we paid dividends of approximately $173,000,000 and purchased $67,000,000 of company stock. At quarter end, we had approximately $143,000,000 remaining in the share purchase program which authorized through December 2026. We reported an effective tax rate of 16.5% compared to 17.9% in the prior year quarter. The decrease in effective tax rate is primarily due to the release of tax reserves.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Turning next to our full year guidance. We estimate revenue of approximately $7,100,000,000 compared to our previous guidance of $6,850,000,000 We expect gross margin to be approximately 58.5%, which is consistent with our previous guidance. We expect the impact from tariffs to be lower than we previously estimated. However, this favorable impact will be offset by unfavorable foreign currency impacts on product costs due to strengthening of the Taiwan dollar. We expect our operating margin to be approximately 24.8%, consistent with our previous guidance.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Also, we expect a pro form a effective tax rate of 17.5% compared to our previous guidance of 16.5%, which incorporates the impact from the new US tax bill. We expect the new tax bill will result in a decrease in US tax deduction to credits in 2025, primarily due to the change in capitalization requirements of certain R and D costs. Expected pro form a earnings per share is approximately $8 per our previous guidance of $7.8 Concludes our formal remarks. Rob, could you please open the line for Q and A?

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Joseph Cardoza Your line is open.

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

Hey, thank you and good morning everyone. Maybe just for my first question, obviously had another strong fitness performance this quarter. I'm trying to get a sense of the outperformance though, particularly as it relates to any potential influences from channel fill? You obviously talked about a lot of new products in the quarter. And then potentially any pull forward that you might have visibility into and whether that is having any impact on the back half outlook. And then I have a quick follow-up. Thank you.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Good morning, Joe. In terms of channel fill, there's always some channel fill impact when a new product comes out, but we have a broad product line, so it was not a significant factor in driving outperformance. And in terms of pulling forward of of demand, we really don't see any of that happening. Retailers aren't willing to take big bets on inventory, and they also have credit limits that are in place that from from exceeding limits that we set. So we feel like the the channel is well managed.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

We also monitor the registration of our products, and we can compare our sell in versus sell out, and and we really don't see any signs of of stockpiling.

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

Got it. And I appreciate the color there, Cliff. And then maybe for the second question, just relative to the full year outlook, the implied second half growth for revenue and gross profit is roughly in the 10% range, plus or minus, depending on revenue or gross profit you're looking at there. But you're guiding operating profit dollars to be flat. Can you maybe just flesh that out a bit? Like what are the drivers, that's kind of leading to this like a little bit atypical leverage that we're used to seeing from Garmin? And then just maybe just stacking on to that question, any can you guys size what you're now embedding for tariffs and then FX relative to the full year guide? Thank you.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Sure. So I'll give you a little bit, background on the, operating expense assumptions. And these are for the full year as a percentage of sales. And we are expecting that to increase about 30 basis points, maybe about 10 basis points in r and d and 20 basis points in s g and a. And that r and d increase is primarily due to, headcount increases as well as normal merit.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

That's primarily, you know, to develop, new features, innovation, and new products. Then as it relates to SG and A, you know, that's going up primarily to, build in the infrastructure for that growth. A few additional items are driving, operating expense, primarily in the back half here, one of which is foreign currency impacts. And we talked about the foreign currency impacts on the top line revenue, but also there will be increases, in expenses due to those foreign currency impacts. Also, you know, we recently announced the acquisition of MyLabs.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

So we'll have the additional expenses relating to MyLabs in in the back half. And, also, you know, given our strong performance we have, you know, we have, increased performance based compensation in there. Another one, due to the increased revenue, is due to, coop advertising that we do have. You know, as it relates to, tariffs, you know, we're currently assuming basically the current, rates that are effective for that. Our tariff estimate is lower, now today than it was, you know, in April primarily because of change in some of those tariffs as well as, you know, not having a, tariff on wearables, from that standpoint.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

And that's really offset, you know, in the gross margin line item by unfavorable, impact on our gross margin due to the strength in the Taiwan dollar, which will increase our product costs that we have in that standpoint. And then as it relates to FX, overall, you know, the FX, you know, has moved during the year. So right now we're expecting, you know, FX on a top line revenue, you know, to be a favorable item, as it was here in q two for us.

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

Nope. Very clear, Doug. Thank you. Thank you for all that color there. Really appreciate it.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Yeah. Absolutely.

Operator

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

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

Great.

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

Thanks so much for taking my question guys. I have two. Maybe Cliff, I'll start with you and just taking a very big step back. Looking at your growth CAGR over the last ten years, revenue growth has been in and around 7% to 8%, EPS has been, call it, 11% or 12%, clear leverage in the model. What's interesting about this year is that both last year and this year is you're clearly outperforming that growth rate.

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

But there is some deleverage in the model, which you just kind of explained. But I guess my big picture question is, do you believe that Garmin is entering kind of this new higher revenue growth paradigm, especially as auto OEM is not the headwind that it once was, but in fact a tailwind to growth. Can you maybe just unpack how you're thinking about Garmin's growth algorithm relative to history? And if there is kind of a true, you know, structural change in that growth rate, you know, today relative to history? And then a quick follow-up, please. Thanks.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Yeah. I think, you know, we've we've made a lot of progress and evolution in our company over the the past ten years. In the past ten years, the wearable market has emerged and and blossomed. And while we're a smaller market share player, we're gaining share, and the market is relatively stable. So that's been a really good opportunity for us.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

We entered that market because we believed that we had something to offer there, and we have high levels of innovation and, you know, differentiation in our product lines that we believe would drive growth. So we continue to see that as an opportunity. But all over the the company and in our segments, we see opportunity opportunities in every one of them. And and so, consequently, we're we're simply running as fast as we can towards those opportunities and especially when it involves creating unique products that that either our competitors aren't interested in or haven't thought of. And we try to be a class leader when it comes to both existing product categories and creating new product categories.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

So, you know, we're we're excited, optimistic about the future. We believe that there's more work to be done, and we'll continue investing and working hard to achieve it.

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

Okay. All right. No, that's super helpful. And then maybe as a follow-up, because we've seen Garmin make some relatively significant price hikes across a number of different kind of smart wearable products over the last, let's call it year, year plus. What have you learned about the elasticity of demand of your customer base?

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

And how does that inform, you know, your Garmin's ability to to maybe take more price in the future? How how should we think about the relative pricing power, of the consumer wearables business, please? Thank you.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Well, I probably would take exception to significant price hikes in the past year. What we've done is we've introduced new product lines with new features that can command a higher price point because they do more for the customer. So we aren't necessarily, you know, moving prices on on existing categories of products and existing, SKUs. We're we're, doing innovation. We're we're, creating new utility for the customer that they're willing to step up and pay for.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

So unique products, innovation is something that customers always love, and, we've been successful, in doing that. In terms of elasticity, you know, I think when we introduce a a product, at the higher end, you know, our strategy is to continue to push and promote the products that it overlaps with and ultimately replaces. So we have a one two strategy where we can promote products that have been in the market a while and play on the value side while at the same time offering new products with innovation and at higher price points.

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

Okay. Super helpful. And then maybe, Doug, just one clarification question, which just confirming that within the calendar 'twenty five guide, both overall and at the segment level, the acquisition that you announced overnight is fully included in that guide. That would not be incremental. Just wanted to get that one clarification.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Yeah. MyLabs is actually factored into guidance from the top line as well as the expenses. Correct.

Erik Woodring
Erik Woodring
MD - Equity Research at Morgan Stanley

Okay. Super. Thanks so much, guys. I appreciate it.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Thank you.

Operator

Your next question comes from the line of Jordan Leonez from Bank of America. Your line is open.

Jordan Lyonnais
Jordan Lyonnais
Equity Research Associate at Bank of America

Hey, good morning. Thank you for taking the question. Could you guys talk a little bit more about What you're seeing the opportunity is? Where you're expecting synergies just across the segments?

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

MyLabs is a company that specializes in timing of competitive events, whether they're running events, triathlons, auto racing, or even horse racing. And so their equipment and their services are very critical, especially to some of those high visibility events that are out there. There's a significant overlap with their market interest and our interest in terms of particularly the running and triathlon cycling racing events. Today, users of our products do a lot of training. And then when they go to race day, they use our devices, but the official timing is somewhat separate and disconnected from the devices that they're using during the race.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

So we see an opportunity to merge the experiences from the training that takes place leading up to an event through the actual participation in the event itself. And we can do it in a dynamic and integrated way because we now have access to both the on risk information as well as the official timing information.

Jordan Lyonnais
Jordan Lyonnais
Equity Research Associate at Bank of America

Got it. Thank you so much.

Operator

Your next question comes from the line of Ivan Feinseth from Tigris Financial Partners. Your line is open.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

Hi, thanks for taking my question and congratulations on another great quarter. I have two questions. Recently, Health Secretary, RFK has been very outspoken talking about his vision for smart wearables as an integral part of helping people manage their health. And what are your thoughts and you know, the opportunities you see for Garmin because we have a diverse line of wearables with a lot of proprietary measurements as well as, you know, the add the Connect app and the Garmin Health platform?

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Well, our thoughts are one of excitement. You know, we have always believed in the utility of wearable devices to help people observe and manage their health. You can't change what you can't measure, so wearables play an integral part of that. And we're really excited about the fact that we have a very diverse product line, so there's not one size fits all for every customer. Instead, we offer a range of things that appeals to somebody's lifestyle and their goals.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

So so I think it presents a significant opportunity for us. And, of course, we're at the forefront in terms of of sensor measurements and and creating health metrics for people that are useful and actionable. And so we believe there's a lot of opportunity going forward.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

Thanks. My second question is, know, the next big thing in smart wearables is glasses that a lot of people believe they will be as ubiquitous as cell phones and watches. And what do you see as your opportunity in there, especially for a lot of the ones that are on the market right now don't have screens in the display that is being talked about coming to integrate your data from your watch into that for, let's say, when you're running. And also a while back, you did make a device that clipped on to glasses that kind of created a heads up display into a pair of glasses. So what are your thoughts on opportunities in that area?

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Well, I think it remains to be seen. Glasses have come and gone once, and the utility and the the concerns around the use of those in in public have have always come up in in the context. So I'd say it's a wait and see thing. I think people want choices when it comes to things they wear, including watches and glasses. And so there may be some special use cases for those.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

But in general, we believe that the utility of wearable is still very strong.

Ivan Feinseth
Chief Investment Officer at Tigress Financial Partners LLP

All right. Thanks, and congratulations again.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Thank you.

Operator

Your next question comes from the line of Tim Long from Barclays. Your line is open.

Tim long
Tim long
Managing Director at Barclays

Thank you. Two also, if I could. First, maybe if you could touch a little bit on fitness category. Any color you have on the strength there, how it's looking from kind of repeat users or new installed base for Garmin, if you have any color there? And then secondly, if you could just dig into Europe.

Tim long
Tim long
Managing Director at Barclays

You highlighted pretty strong growth there. It's been several quarters of outperformance. Maybe dig into what's driving that and how sustainable that growth can be there. Thank you.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Okay. Yeah, in terms of fitness categories, all the categories were strong. I would say that advanced wearables, as we mentioned in our comments, was the biggest driver. And we did call out running, specifically the April, five seventy, and September. Although running was not really the only driver, we saw strength across all of our products, including what we call our advanced wearables, which is our Venue and Vivo Active Line. So those were very, very strong. In terms of repeat users versus new users, we're seeing a stronger growth in the new user category, so new people coming to Garmin for the first time.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

And so we're excited by that. It means that people are recognizing that we offer something different and are coming to us for a solution. In terms of Europe performance, I think if you normalize for FX, you'd probably see that Europe was pretty much in line with the other geographies. So I think FX had part of the responsibility for the outperformance in Europe.

Tim long
Tim long
Managing Director at Barclays

Okay. Thank you.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Thank you.

Operator

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

Joseph Nolan
Associate Analyst at Longbow Research

Hey, good morning. This is Joe Nolan on for David. The marine market remains relatively soft, but you guys continue to deliver growth there. Can you just talk about some of the factors driving that growth and just what's giving you confidence in raising the guidance there?

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

I think growth in marine, for sure, the market has been a little bit towards the downside. We feel like it's been stabilizing. It has faced, you know, a lot more uncertainty as people try to process, especially boat builders, the issues of of tariffs that affect them as well as consumer sentiment. But in general, we've we've seen stable demand for our products. And especially where we're providing products with unique innovation and differentiation, we're seeing people come to Garmin and taking share in those categories as well.

Joseph Nolan
Associate Analyst at Longbow Research

Got it. Okay. And then on the auto OEM side, you mentioned progressing as planned with the new program. Can you just give us an update on where that stands right now?

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Well, as I said, we're making good progress on that. We're in the process of validating our production lines globally to be able to support the new device and the new design and to prove that we can run at scale and deliver the quality. So it's a very involved process working with the carmaker and quite a few, you know, test runs, pilot runs, evaluations, and and feedback that goes into making sure we're ready towards the 2026.

Joseph Nolan
Associate Analyst at Longbow Research

Got it. Thanks. I'll pass it on.

Operator

Your next question comes from the line of Ben Bohn from Cleveland Research. Your line is open.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Good morning, everyone. Thanks for taking the question. Chris, I was hoping we could start. Could you talk a little bit about how you're thinking about subscription momentum, the materiality, the progress, and what's the right way for us to assess your progress? Do we is it as simple as looking at the deferred?

Ben Bollin
Analyst & Partner at Cleveland Research Company

Is there something else you think we should look at? Curious your thoughts there. And then I have a a follow-up for Doug.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Yeah. I think subscriptions are a growing part of our business. We, of course, haven't triggered the 10% threshold to to disclose that yet, so so we aren't providing specifics on it. But I would tell you that in every segment, we're looking for opportunities to build subscription and service revenues. Outdoor has been a big driver of that with our InReach system.

Clifton Pemble
Clifton Pemble
President, CEO & Director at Garmin

Fitness has been increasing a lot, both with our kids bounce wearable as well as Garmin Connect Plus. And then aviation is is another one where we offer subscription services for content for the cockpit that is that is in growth mode. So we're growing across the whole business. And, of course, we're driving towards as much as we can grow there. But until it triggers that 10%, we won't disclose it.

Ben Bollin
Analyst & Partner at Cleveland Research Company

Doug, a follow-up. Just thoughts on working capital management, both in in 2Q and the balance of the year. Receivables and inventory up decent amount year over year and sequential. You've talked a little bit about the trend there. What you see?

Ben Bollin
Analyst & Partner at Cleveland Research Company

How's it going to plan? And and any thoughts for the balance of the year? That's it for me. Thank you.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

Yeah. You know, as it relates to our working capital really going as planned, you know, as it relates to inventory, you know, our strategy is to have inventory for our increased customer demand, but also, we've increased inventory to, mitigate potential increases in tariffs. You know, there's currently no, tariff on wearables and any potential increase in that. So that was a strategy of ours to increase the inventory. As it relates to receivables, that's primarily related to the growth in our sales, which is a function of that, maybe a little timing depending upon how the sales came you know, during the month.

Douglas Boessen
Douglas Boessen
CFO & Treasurer at Garmin

But, you know, everything, you know, from a working capital is, pretty well, on plan. You know, from our free cash flow estimate for the year, we're expecting, you know, at 1,200,000,000.0, which is very similar to what it was last year. We're expecting to have increased operating earnings there that will probably be offset by increase in inventory. But things are going as planned and we're reacting to the current environment that we're in.

Operator

And that concludes our question and answer session. I will now turn the call back over to Teri Sec for some final closing remarks.

Teri Seck
Teri Seck
Director - IR at Garmin

Thank you all for joining us today. As always, Doug and I are available for callbacks and we will all talk to you later. Have a great day. Bye.

Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect.

Executives
Analysts
    • Joseph Cardoso
      Vice President, Equity Research at JP Morgan
    • Erik Woodring
      MD - Equity Research at Morgan Stanley
    • Jordan Lyonnais
      Equity Research Associate at Bank of America
    • Ivan Feinseth
      Chief Investment Officer at Tigress Financial Partners LLP
    • Tim long
      Managing Director at Barclays
    • Joseph Nolan
      Associate Analyst at Longbow Research
    • Ben Bollin
      Analyst & Partner at Cleveland Research Company
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