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    GRMN
    Earnings call· Dec 2024(Q4 FY24)

    GARMIN LTD GRMN

    Feb 19, 2025 Source

    Executive summary

    Garmin Q4 FY24 — Record Revenue Across All Segments

    Garmin concluded a remarkable 2024 with record Q4 and full-year consolidated revenue, driven by broad-based strength across all five segments and robust product demand. The company's strong performance, particularly in wearables, led to significant operating margin expansion and a proposed 20% dividend increase. While the Auto OEM segment faces a softened outlook for 2025, Garmin remains focused on innovation and market share gains, anticipating continued growth across its diversified portfolio.

    Highlights

    5

    • Consolidated revenue increased 23% to $1.82 billion, a new fourth quarter record.

    • Achieved growth and record revenue in each of the 5 business segments.

    • Operating income increased 52% year-over-year to $516 million.

    • Operating margin expanded over 500 basis points to 28.3%.

    • Pro forma EPS of $2.41, up 40% over the prior year.

    Concerns

    3

    • Auto OEM 2025 revenue outlook lowered by $140 million from prior expectations due to softening automaker outlook.

    • Aviation operating income decreased 7% year-over-year to $211 million, primarily due to increased R&D spending.

    • Free cash flow of $399 million in Q4 2024, an $18 million decrease from the prior year quarter.

    Guidance & targets

    13
    CategoryTargetConfidence
    Consolidated Revenue
    approximately $6.8 billion
    high materiality
    High
    Annual Dividend
    $3.60 a share
    medium materiality
    High
    Fitness Revenue Growth
    approximately 10%
    medium materiality
    High
    Outdoor Revenue Growth
    approximately 10%
    medium materiality
    High
    Aviation Revenue Growth
    approximately 5%
    medium materiality
    High
    Marine Revenue Growth
    approximately 4%
    medium materiality
    High
    Auto OEM Revenue Growth
    approximately 7%
    medium materiality
    Medium
    Free Cash Flow
    approximately $1.1 billion
    medium materiality
    High
    Capital Expenditures
    approximately $350 million
    medium materiality
    High
    Gross Margin
    approximately 58.7%
    medium materiality
    High
    Operating Margin
    approximately 25%
    medium materiality
    High
    Pro Forma Effective Tax Rate
    approximately 16.5%
    low materiality
    High
    Pro Forma Earnings Per Share
    approximately $7.80
    high materiality
    High

    Segment performance

    8
    SegmentRevenueYoYQoQMargin
    Fitness
    Achieved record revenue for the year, driven by robust demand for running, cycling, and wellness products, and strong contributions from advanced wearables. Operating income more than doubled year-over-year.
    Gross Margin: 58% (480 bps improvement YoY)Operating Margin Expansion: 1000 bps YoY
    		$1.77 billion32%—Operating Income $483 million, Operating Margin 27%
    Outdoor
    Delivered strong revenue growth, primarily driven by adventure watches following the launch of the fenix 8 series. Gross and operating margins improved significantly due to lower product costs and favorable mix.
    Gross Margin: 67% (340 bps improvement YoY)Operating Margin Expansion: 550 bps YoY
    		$1.96 billion16%—Operating Income >$700 million, Operating Margin 36%
    Aviation
    Revenue growth driven by both OEM and aftermarket product categories. Operating income decreased 7% year-over-year primarily due to increased R&D spending for new products and aircraft platform certifications.
    Gross Margin: 75%
    		$877 million4%—Operating Income $211 million, Operating Margin 24%
    Marine
    Exceeded $1 billion in revenue for the first time, with growth primarily driven by the 2023 acquisition of JL Audio. Organically, the segment grew 6%, outperforming the broader market and strengthening its leadership position.
    Organic Growth (ex-JL Audio): 6%Gross Margin: 55% (180 bps improvement YoY)Operating Margin Expansion: 240 bps YoY
    		$1.1 billion17%—Operating Income increased 32%, Operating Margin 22%
    Auto OEM
    Revenue growth primarily driven by domain controllers. All remaining BMW models were equipped with Garmin domain controllers, paving the way for maximum potential revenue from the BMW program in 2025. Operating loss narrowed for the year.
    Gross Margin: 18%Operating Loss Narrowed
    		$611 million44%—Operating Loss $39 million
    EMEA
    Achieved strong growth in both Q4 and full year, primarily driven by the strength of wearables and consumer market performance.
    		—31%34%—
    Americas
    Achieved double-digit growth in both Q4 and full year.
    		—16%17%—
    APAC
    Achieved double-digit growth in both Q4 and full year.
    		—12%18%—

    Operational metrics

    23
    Pro Forma EPS
    $2.4140% increase YoY
    Q4 FY24

    Represents a 40% increase over the prior year's pro forma EPS.

    Pro Forma EPS
    $7.3932% increase YoY
    FY24

    Represents a 32% increase over the prior year's pro forma EPS.

    Capital Expenditures
    $194 millionconsistent YoY
    FY24

    Full year 2024 capital expenditures were consistent with the prior year.

    Cash and Marketable Securities
    $3.7 billion
    Q4 FY24

    Balance at the end of the fourth quarter.

    Accounts Receivable
    $983 millionincreased sequentially and YoY
    Q4 FY24

    Balance at the end of the fourth quarter, due to strong sales.

    Inventory Balance
    $1.5 billionincreased YoY
    Q4 FY24

    Balance at the end of the fourth quarter.

    Share Repurchase Program Remaining Authorization
    $238 million
    Q4 FY24

    Amount remaining in the share repurchase program at year-end.

    Dividends Paid
    $572 million
    FY24

    Total dividends paid during 2024.

    Share Repurchases Executed
    $62 million
    FY24

    Cash used to repurchase company shares during 2024.

    Pro Forma Effective Tax Rate
    16.7%vs 8.5% prior year
    FY24

    Increase primarily due to the increase in the combined Switzerland tax rate in response to global minimum tax requirements.

    Total Devices Delivered (Cumulative)
    300 million
    since 1989

    Total navigation and communication devices delivered since the company's founding.

    Devices Delivered
    18 million
    FY24

    Total devices delivered in 2024.

    Marine Organic Revenue Growth
    6%
    FY24

    Growth excluding the impact of the JL Audio acquisition.

    Auto OEM Gross Margin Target
    mid-teens
    long-term

    Long-term target for the Auto OEM business.

    Auto OEM Operating Margin Target
    mid-single digits
    long-term

    Long-term target for the Auto OEM business.

    Research and Development Expense Increase
    $22 million
    Q4 FY24

    Increase in R&D expenses primarily due to personnel-related expenses.

    SG&A Expense Increase
    $19 million
    Q4 FY24

    Increase in SG&A expenses primarily due to personnel-related expenses.

    Operating Expense as % of Sales
    30.9%440 bps decrease YoY
    Q4 FY24

    Operating expense as a percentage of sales decreased by 440 basis points.

    Operating Expense as % of Sales
    33.4%320 bps decrease YoY
    FY24

    Operating expense as a percentage of sales decreased by 320 basis points for the full year.

    Gross Margin
    59.3%100 bps increase YoY
    Q4 FY24

    Gross margin increased primarily due to lower product cost.

    Gross Margin
    58.7%120 bps increase YoY
    FY24

    Gross margin increased primarily due to lower product cost for the full year.

    Operating Margin
    28.3%540 bps increase YoY
    Q4 FY24

    Operating margin increased by 540 basis points from the prior year.

    Operating Margin
    25.3%240 bps increase YoY
    FY24

    Operating margin increased by 240 basis points for the full year.

    Industry KPIs

    2
    MetricValueDetails
    Tariff trade impact by segment—
    Segment revenue operating income mixRecord revenue in all 5 segments

    Product announcements

    5
    ProductTypeDetails
    Lily 2 Activelaunch
    Approach R50launch
    Descent X50ilaunch
    G3000 PRIME integrated flight deckmilestone
    Unified Cabinroadmap

    Deals & partnerships

    4
    JL AudioAcquisition contributing to Marine segment revenue growth.

    The 2023 acquisition of JL Audio contributed to the Marine segment's 17% revenue growth in FY24, helping it exceed $1 billion for the first time.

    Textron AviationSelection of G3000 PRIME integrated flight deck for new aircraft model.

    Textron Aviation announced the selection of Garmin's G3000 PRIME integrated flight deck for the Citation CJ4 Gen3 aircraft.

    BETA TechnologiesSelection of G3000 PRIME integrated flight deck for new electric aircraft.

    BETA Technologies selected the G3000 PRIME for its ALIA electric, conventional takeoff and landing aircraft, which conducted its inaugural flight during the quarter.

    BMWEquipping remaining BMW models with Garmin domain controllers.

    During the year, all remaining BMW models were equipped with Garmin domain controllers, completing the rollout for the program.

    Risks & headwinds

    4
    Softening outlook of major automakers2025

    2025 Auto OEM revenue outlook lowered by $140 million from prior expectations.

    Mitigation: Securing new program wins for the future, including a major program expected to enter production in 2027.

    Soft marine market conditionsOngoing

    Marine market remains soft, new boat retail in the U.S. down close to 10%, new boat shipments down over 20%.

    Mitigation: Continued share gains, outperforming the broader market, and anticipating recovery and growth from a stabilized level.

    Increased R&D spending impacting Aviation operating incomeFY24

    Aviation operating income decreased 7% year-over-year.

    Mitigation: R&D investments are for developing new products and certifying new aircraft platforms, expected to accelerate growth in 2025.

    Potential tariff impactsUncertain

    Not quantified, but acknowledged as 'exposure everywhere'.

    Mitigation: Supply chain positioned to minimize impact, with most operations out of the way of current attention. No major impacts anticipated at this moment.

    What to watch in Q1 FY25

    5

    Auto OEM Revenue Trajectory

    2026, 2027
    Current7% growth guided for 2025
    TargetDip in 2026, then growth in 2027

    Why it matters

    The Auto OEM segment is a growth area, and its future trajectory will significantly impact overall revenue and profitability, especially with new program ramps.

    as we look forward, to the 2027, we do expect, as we are anticipating growth here in 2025 that 2026 could dip a little and then as we ramp into 2027, grow again.

    Q&A highlights

    6

    What are the key drivers for Fitness segment growth (refresh, share gains, pricing) and how are these variables embedded in the 2025 guidance?

    Fitness performance was broad-based, with many new customers coming to Garmin and benefiting from market share gains, driving results. The 2025 outlook for 10% growth is pragmatic but strong, with similar dynamics expected.

    “we're seeing many more new customers coming to Garmin and we're benefiting from market share gains, which is driving our results. Looking forward to 2025, we really see more of the same.”

    asked by Joseph Cardoso · answered by Clifton Pemble

    2 min read5 chapters

    Detailed Narrative

    01

    Product Portfolio and Innovation

    Garmin continues to strengthen its product portfolio with strategic launches across segments. In Q4, new products included the Lily 2 Active smartwatch, the Approach R50 portable golf launch monitor with a built-in simulator, and the Descent X50i large-format dive computer. The company also highlighted the G3000 PRIME integrated flight deck's selection by Textron Aviation and BETA Technologies, and showcased its futuristic Unified Cabin display at CES, demonstrating capabilities for future automotive applications.

    02

    Market Share Gains and Consumer Demand

    The company reported robust demand and market share gains, particularly in the wearables market, driving strong Fitness segment growth. In EMEA, Garmin is a strong #2 player in wearables. The Marine segment also outperformed the broader market, strengthening Garmin's position as the world's largest consumer marine electronics company, despite a soft overall market. Management noted that their customer base appears resilient, with sell-in and sell-through well-matched and healthy retail channel inventory levels.

    03

    Operational Efficiency and Scale Benefits

    Garmin attributed its improved gross margins and lower product costs to increased production volumes and operational efficiencies. The combined volume of over 18 million units delivered in 2024 provides significant leverage in its supply chain and component purchasing, leading to cost savings that benefit all segments. This scale allows for more efficient utilization of investments and production lines.

    04

    Auto OEM Strategic Progress

    Despite a softened outlook for major automakers, the Auto OEM segment made significant progress. All remaining BMW models were equipped with Garmin domain controllers, paving the way for maximum potential revenue from the BMW program in 2025. The company also secured additional program wins, including its largest to date for 2027, and is preparing for its next major production ramp, aiming for mid-teens gross margins and mid-single-digit operating margins for the segment.

    05

    Dividend Increase and Shareholder Returns

    Reflecting strong results and a positive outlook, Garmin's management proposed a 20% increase in its annual dividend to $3.60 per share, or $0.90 per share quarterly, subject to shareholder approval. This increase underscores the company's confidence in its future performance and its commitment to returning capital to shareholders. In 2024, the company paid $572 million in dividends and repurchased $62 million in shares.

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