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    GRMN
    Earnings call· Mar 2025(Q1 FY25)

    GARMIN Q1 FY25 earnings call GRMN

    Apr 30, 2025 Source

    Executive summary

    Garmin Q1 FY25 — Record Revenue and Operating Income with Strong Wearables Demand

    Garmin delivered record first-quarter results, driven by strong demand for wearables and automotive OEM products, despite a dynamic global trade environment. The company updated its full-year guidance to reflect Q1 performance, incorporating an estimated $100 million tariff impact largely offset by favorable foreign currency and planned mitigations, maintaining its EPS outlook. Management remains optimistic due to its diversified business model and product lines.

    Highlights

    5

    • Consolidated revenue increased 11% to $1.54 billion, a new Q1 record.

    • Record first quarter operating income of $333 million, up 12% year-over-year.

    • Pro forma EPS of $1.61, up 13% year-over-year.

    • Fitness segment revenue increased 12% to $385 million, led by advanced wearables, with Garmin being the only global smartwatch provider that grew in 2024.

    • Outdoor segment revenue increased 20% to $438 million, driven primarily by adventure watches.

    Concerns

    4

    • Estimated $100 million of increased costs from tariffs in FY25.

    • Marine segment revenue decreased 2% to $319 million, primarily due to timing of promotions and continued market softness.

    • Gross margin decreased 50 basis points year-over-year to 57.6% due to segment mix.

    • Full-year 2025 operating margin guidance lowered to approximately 24.8% from 25%.

    Guidance & targets

    12
    CategoryTargetConfidence
    Full year 2025 revenue
    approximately $6.85 billion
    high materiality
    High
    Full year 2025 gross margin
    approximately 58.5%
    high materiality
    High
    Full year 2025 operating margin
    approximately 24.8%
    high materiality
    High
    Full year 2025 pro forma effective tax rate
    16.5%
    medium materiality
    High
    Full year 2025 pro forma EPS
    approximately $7.80
    high materiality
    High
    Full year 2025 Fitness segment revenue growth
    15%
    medium materiality
    High
    Full year 2025 Outdoor segment revenue growth
    10%
    medium materiality
    High
    Full year 2025 Aviation segment revenue growth
    5%
    medium materiality
    High
    Full year 2025 Marine segment revenue
    flat versus the prior year
    medium materiality
    High
    Full year 2025 Auto OEM segment revenue growth
    7%
    medium materiality
    High
    Full year 2025 free cash flow
    approximately $1.1 billion
    high materiality
    High
    Full year 2025 capital expenditures
    approximately $350 million
    medium materiality
    High

    Segment performance

    5
    SegmentRevenueYoYQoQMargin
    Fitness
    Growth led by strong demand for advanced wearables.
    Operating income: $78 millionGross margin: 57%Only global smartwatch provider that grew in 2024, reflecting increased market share
    		$385 million12%—20% operating margin
    Outdoor
    Growth driven primarily by adventure watches.
    Operating income: $129 millionGross margin: 64%inReach SOS report highlighting Garmin Response in >200 countries/territories and >210 languages
    		$438 million20%—29% operating margin
    Aviation
    Driven by growth in OEM product categories.
    Operating income: $48 millionGross margin: 75%Pilatus aircraft announced new PC-12 Pro featuring G3000 Prime flight deckPilatus also selected G3000 Prime for PC-7 MKX military training aircraftNamed Supplier of the Year by Cirrus Aircraft
    		$223 million3%—22% operating margin
    Marine
    Primarily due to timing of promotions and continued softness in the overall market.
    Operating income: $87 millionGross margin: 58%Named 2025 Supplier of the Year for the second consecutive year by Independent Boat Builders, Inc.
    		$319 million-2%—27% operating margin
    Auto OEM
    Growth primarily driven by increased shipments of domain controllers to BMW.
    Gross margin: 18%Increased shipments of domain controllers to BMWHonda Motor Company announced 50th anniversary Gold Wing motorcycle featuring complete infotainment solution from Garmin
    		$169 million31%—operating loss narrowed to $9 million

    Operational metrics

    25
    Consolidated Revenue
    $1.54 billion11% increase year-over-year
    Q1 FY25

    a new first quarter record

    Gross Margin
    57.6%50 basis point decrease from the prior quarter
    Q1 FY25

    Decrease was primarily due to segment mix.

    Operating Expense as % of Sales
    35.9%50 basis point decrease
    Q1 FY25
    Operating Income
    $333 million12% increase
    Q1 FY25

    record first quarter operating income

    Operating Margin
    21.7%comparable to the prior year quarter
    Q1 FY25
    Pro Forma EPS
    $1.6113% up year-over-year
    Q1 FY25
    GAAP EPS
    $1.72
    Q1 FY25
    Revenue Growth
    23%YoY
    Q1 FY25
    Revenue Growth
    9%YoY
    Q1 FY25
    Revenue Growth
    4%YoY
    Q1 FY25
    Research and Development Expense
    $26 millionincreased approximately
    Q1 FY25

    primarily related to personnel-related expenses

    SG&A Expense
    $22 millionincreased approximately
    Q1 FY25

    primarily related to personnel-related expenses

    Cash and Marketable Securities
    $3.9 billion
    as of Q1 FY25 end

    ended the quarter with

    Accounts Receivable
    $787 millionincreased year-over-year but decreased sequentially
    as of Q1 FY25 end

    due to strong sales, but decreased sequentially to $787 million following the seasonally strong fourth quarter.

    Inventory
    $1.6 billionincreased year-over-year sequentially
    as of Q1 FY25 end
    Capital Expenditures
    $40 millionapproximately $7 million higher than prior year quarter
    Q1 FY25
    Dividends Paid
    $145 million
    Q1 FY25
    Stock Repurchased
    $27 million
    Q1 FY25
    Remaining Share Repurchase Authorization
    $210 million
    as of Q1 FY25 end
    Reported Effective Tax Rate
    14.5%compared to 15.6% in the prior year quarter
    Q1 FY25

    The decreased in the current quarter is primarily due to increased tax benefits from stock-based compensation.

    Tariff Impact (Cost Increase)
    $100 million
    FY25

    estimate the growth impact from tariffs on our 2025 results prior to any mitigations will be approximately $100 million of increased costs.

    Revenue from non-U.S. dollar currencies
    40%
    Q1 FY25

    Approximately 40% of our revenue is generated in non-U.S. dollar currencies

    Baseline Tariff Assumption
    10%
    FY25

    assumptions include a 10% baseline tariff on all products manufactured outside of the U.S., including those manufactured in Taiwan.

    Incremental Tariff Assumption (China)
    145%
    FY25

    assuming an incremental 145% tariff on products and materials imported into the U.S. directly from China.

    Demand Reduction
    modest reduction
    FY25

    Our guidance assumes a modest reduction of demand moving forward due to the current trade environment and potential impact on consumers.

    Industry KPIs

    2
    MetricValueDetails
    Tariff trade impact by segment$100 millionUSD
    Segment revenue operating income mixConsolidated revenue $1.54BUSD

    Product announcements

    4
    ProductTypeDetails
    Garmin Connect+launch
    vívoactive 6launch
    Instinct 3 Adventure watch serieslaunch
    Force Pro trolling motorlaunch

    Deals & partnerships

    4
    Pilatus aircraftPilatus aircraft announced the new PC-12 Pro, featuring our G3000 Prime flight deck

    Pilatus also selected the G3000 Prime for the PC-7 MKX military training aircraft demonstrating versatility to serve both civilian and military applications.

    Cirrus AircraftNamed Supplier of the Year by Cirrus Aircraft

    reflecting our commitment to create the best products and provide outstanding service to our customers.

    Independent Boat Builders, Inc.Named 2025 Supplier of the Year for the second consecutive year by Independent Boat Builders, Inc.

    for providing outstanding service, support and dedication to its owner network.

    Honda Motor CompanyHonda Motor Company announced the 50th anniversary model of the iconic Gold Wing motorcycle, featuring a complete infotainment solution from Garmin.

    Honda Motor Company announced the 50th anniversary model of the iconic Gold Wing motorcycle, featuring a complete infotainment solution from Garmin.

    Risks & headwinds

    5
    Increased costs from tariffs2025

    $100 million of increased costs

    Mitigation: expected benefit from foreign exchange and planned mitigations offset the impact of tariffs on earnings.

    Modest reduction of demand due to trade environment and potential impact on consumersmoving forward (FY25)

    modest reduction of demand

    Mitigation: Our guidance assumes a modest reduction of demand moving forward.

    Softness in the overall Marine marketQ1 FY25 and continued

    decreased 2% to $319 million (Q1 revenue)

    Mitigation: now expect 2025 revenue will be flat versus the prior year (adjusted guidance)

    Economic uncertainty reducing demand for certain Outdoor productslooking forward

    directional

    Mitigation: maintaining our revenue growth estimate of 10% for the year (factored into conservative guidance)

    Carmakers softening views on production due to tariff impacts on their customersgoing forward

    directional

    Mitigation: our outlook reflects their input as well in terms of the number of cars they will make (factored into Auto OEM guidance)

    What to watch in Q2 FY25

    5

    Tariff impact on gross margin

    Next quarter (Q2 FY25) and full year FY25
    CurrentQ1 GM 57.6% (down 50bps YoY); FY25 GM guide 58.5% (down 20bps from prior)
    TargetStabilization or improvement in gross margin, effective mitigation of $100M tariff cost.

    Why it matters

    Tariffs are a significant headwind, and effective mitigation is crucial for profitability.

    We expect gross margin to be approximately 58.5%, which is 20 basis points lower than our previous guidance of 58.7% to an estimated $100 million of increased costs from tariffs, mostly offset by expected favorable foreign currency impact🌐s and planned mitigations.

    Q&A highlights

    7

    Is Garmin observing any demand pull-forward or retailer inventory build-up to de-risk the tariff situation?

    Management has not seen indications of weakness or overstocking by retailers. Demand (sell-through) remains strong, and retailers have natural limitations on inventory capital and credit.

    “I think at this point, we have not seen any indications of weakness. We already mentioned that the Marine market has been somewhat soft, and that's been fairly consistent. I think if anything, with the real-time pulse on our registrations, the demand for our products and the registrations, which really means sell-through has been very strong.”

    asked by Joseph Cardoso · answered by Clifton Pemble

    2 min read5 chapters

    Detailed Narrative

    01

    Impact of Tariffs and Trade Environment

    Garmin is navigating a dynamic global trade environment with recent changes in U.S. trade policy. The company assumes a 10% baseline tariff on products manufactured outside the U.S. (primarily Taiwan) and an incremental 145% tariff on direct imports from China. These assumptions lead to an estimated $100 million in increased costs for FY25, though this is expected to be offset by favorable foreign exchange impact🌐s and planned mitigations, maintaining the pro forma EPS outlook.

    02

    Strategic Mitigation Efforts

    Management is evaluating a broad range of mitigation strategies, including detailed sourcing actions, optimizing manufacturing locations, pricing adjustments, and overall cost structure management. These efforts are being assessed case-by-case, with some short-term actions already in progress and longer-term optimizations planned. The company's global footprint is seen as a benefit in this environment, enabling it to serve diverse markets effectively.

    03

    Garmin Connect+ Launch and Strategy

    Garmin launched Connect+, a new premium service offering AI-based health and fitness insights, enhanced live tracking, and exclusive achievement badges. This initiative was prompted by advancements in AI and the desire to recognize the value of investments in such features. While not required for all users, it represents a long-term strategic move for the Fitness segment, with initial customer reception being positive.

    04

    Marine Segment Softness and Promotional Timing

    The Marine segment experienced a 2% revenue decrease in Q1 FY25, attributed primarily to the timing of📎 promotions. A major national retailer promotion that occurred in Q1 2024 shifted to Q2 in 2025, impacting the quarterly comparison. Management also noted continued softness in the overall marine market, leading to a revised full-year revenue outlook of flat growth for the segment.

    05

    Auto OEM Growth Drivers and Moderation

    The Auto OEM segment saw significant 31% revenue growth in Q1 FY25, primarily driven by increased shipments of domain controllers to BMW. This strong performance resulted from additional models brought online in the prior year. The company expects this growth to moderate as these model anniversaries pass and carmakers adjust production due to tariff impact🌐s on their customers, leading to a maintained 7% full-year growth estimate.

    AI-generated summary of the company’s earnings call. Not investment advice.