Garmin Reports Second Quarter Revenue and EPS Growth; Raises Guidance (2016)

July 27, 2016 07:00 AM Eastern Daylight Time

SCHAFFHAUSEN, Switzerland--([Πρέπει να είστε εγγεγραμμένοι και συνδεδεμένοι για να δείτε αυτόν το σύνδεσμο.])--Garmin Ltd. (Nasdaq: GRMN – News) today announced results for the second quarter ended June 25, 2016.

Highlights for the second quarter 2016 include:

• Total revenue of $812 million, growing 5% over the prior year, with fitness, outdoor, marine and aviation collectively growing 20% over the year ago quarter and contributing 70% of total revenue
  
• Gross margin expanded to 57.0% compared to 54.2% in the prior year quarter, and operating margin expanded to 24.7% compared to 21.5% in the prior year quarter
  
• GAAP EPS was $0.85, a 18% improvement over the prior year, and pro forma EPS⁽¹⁾ was $0.87, a 21% improvement over the prior year
  
• Our wearable offerings continued to expand in the quarter as we introduced and shipped the Forerunner® 735XT, vivosmart® HR+, and vivomove^TM
  
• Our Connect IQ^TM store offers over 2,000 apps, watch faces, and widgets for select Garmin wearables and has delivered over 13 million downloads to customers since its inception in early 2015
  

(in thousands,		13-Weeks Ended											26-Weeks Ended
except per share data)		June 25,				June 27,				Yr over Yr			June 25,				June 27,				Yr over Yr
			2016				2015 (2)			Change				2016				2015 (2)			Change
Net sales		$	811,609			$	773,830			5	%		$	1,435,648			$	1,359,224			6	%
Fitness			212,855				158,649			34	%			355,273				289,644			23	%
Outdoor			133,096				108,621			23	%			229,923				181,436			27	%
Marine			111,599				103,713			8	%			194,479				168,010			16	%
Aviation			108,331				102,266			6	%			214,647				200,327			7	%
Auto			245,728				300,581			-18	%			441,326				519,807			-15	%
Gross profit %			57.0	%			54.2	%						55.9	%			56.2	%
Operating profit %			24.7	%			21.5	%						21.2	%			20.5	%
GAAP diluted EPS		$	0.85			$	0.72			18	%		$	1.31			$	1.07			22	%
Pro forma diluted EPS (1)		$	0.87			$	0.72			21	%		$	1.36			$	1.26			8	%

(1) See attached table for reconciliation of non-GAAP measures including pro forma diluted EPS.

(2) Action camera related net sales for the 13-weeks and 26-weeks ended June 27, 2015 have been recast from the Outdoor segment to the Auto segment to conform to the current year presentation.

Executive Overview from Cliff Pemble, President and Chief Executive Officer:
“We achieved strong results in the second quarter of 2016 with each business segment delivering solid performance,” said Cliff Pemble, president and chief executive officer (CEO) of Garmin Ltd. “Fitness and outdoor achieved impressive revenue and profit growth driven by our strengthening position in the wearables market. Aviation and marine also delivered revenue and profit growth while auto remains a solid base of profit contributions to the overall business. I am pleased with our performance in the first half of 2016 which gives us confidence to raise our guidance for the full year.”
Fitness:
The fitness segment posted robust revenue growth of 34% in the quarter driven by wearable devices. Gross margin was consistent year-over-year at 56% while operating margin improved to 25% from 21% in the prior year. During the quarter, we began shipping the previously announced vivoactive® HR and vivofit® 3 activity trackers as well as the Forerunner® 735XT, a lightweight multi-sport-capable running watch, the vivosmart® HR +, our smart activity tracker with GPS, and vivomove^TM, a fashionable analog watch with activity tracking features and a one year battery life.
Outdoor:
The outdoor segment posted robust revenue growth of 23% driven by wearable devices and a full quarter contribution of our recently acquired DeLorme products. Gross and operating margin was 64% and 36% respectively, an improvement over a year ago resulting in a 31% increase in operating income. Our recently introduced Approach® X40 began shipping late in the quarter and is generating positive customer response by bringing golf specific features to an activity tracker band. Also, we recently broadened our handheld product line with the introduction of the Oregon® 700 series of handheld GPS units featuring a redesigned GPS antenna, smart notifications and automatic uploads.
Marine:
The marine segment posted solid second quarter revenue growth of 8% driven by our strong lineup of chart plotters, fish finders, and entertainment systems. Growth was driven by market share gains in the inland fishing category. Gross margins increased year-over-year to 58% while operating margin increased to 26% resulting in operating income growth of 19%.
Aviation:
The aviation segment posted revenue growth of 6% in the quarter despite ongoing softness in the overall aviation market. Our solid performance was driven by growth in OEM sales as well as Automatic Dependent Surveillance Broadcast (ADS-B) systems. Both the gross margin and operating margin were strong at 74% and 28%, respectively, and improved compared to the year ago quarter resulting in a 13% increase in operating income.
Auto:
The auto segment recorded revenue decline of 18% primarily due to the ongoing PND market contraction and headwinds caused by additional revenue deferrals associated with certain auto OEM products. Gross and operating margins improved to 46% and 16%, respectively. We continue to make inroads with automakers and have recently been recognized at the 2016 Beijing Auto Show as the factory-installed Original Equipment Digital Video Recorder (OE DVR) solution in the new Peugeot 3008.

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