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 percent over the prior year, with fitness, outdoor, marine and aviation collectively growing 20 percent over the year ago quarter and contributing 70 percent of total revenue;
- Gross margin expanded to 57.0 percent compared to 54.2 percent in the prior year quarter, and operating margin expanded to 24.7 percent compared to 21.5 percent in the prior year quarter;
- GAAP EPS was $0.85, a 18 percent improvement over the prior year, and pro forma EPS was $0.87, a 21 percent improvement over the prior year;
- Garmin’s wearable offerings continued to expand in the quarter as the company introduced and shipped the Forerunner 735XT, vivosmart HR+, and vivomove; and
- Garmin’s Connect IQTM 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.
“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 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.”
The marine segment posted solid second quarter revenue growth of 8 percent, driven by Garmin’s 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 percent while operating margin increased to 26 percent resulting in operating income growth of 19 percent.
Total operating expenses in the quarter were $262 million, a 4 percent increase from the prior year. Research and development investment increased 5 percent, with growth primarily focused on aviation and active lifestyle products in fitness and outdoor. Advertising decreased 3 percent, driven primarily by year-over-year decreases in auto and marine, partially offset by increases in fitness and outdoor advertising to support wearables. Selling, general and administrative expense increased by 6 percent, and is relatively flat as a percent of sales.
The effective tax rate in the second quarter of 2016 was 21.0 percent, which is comparable to the effective tax rate of 20.6 percent in the prior year quarter.
In the second quarter 2016, Garmin generated $135 million of free cash flow.
The company continued to return cash to shareholders with a quarterly dividend of approximately $97 million and our share repurchase activity, which totaled more than $25 million in the second quarter. Garmin has approximately $123 million remaining in the share repurchase program authorized through Dec. 31, 2016, and expect to repurchase as business and market conditions warrant. The company ended the quarter with cash and marketable securities of about $2.4 billion.