Garmin Ltd. (Nasdaq: GRMN – News) announced results for the first quarter ended April 1, 2017.
Highlights for the first quarter 2017 include:
- Total revenue of $639 million, growing 2 percent over the prior year, with marine, outdoor, aviation and fitness collectively growing 12 percent over the prior year quarter and contributing 75 percent of total revenue
- Gross margin improved to 58.3 percent compared to 54.5 percent in the prior year quarter
- Operating margin improved to 18.2 percent compared to 16.6 percent in the prior year quarter
- Operating income grew 12 percent
- GAAP EPS was $1.26 and pro forma EPS was $0.52
- Began shipping the highly anticipated fēnix 5 adventure watch series, with three watch designs appealing to a broader range of wrist sizes and style preferences
- Launched the Forerunner 935 multisport watch, and introduced the vívosmart 3 with all – day stress tracking
“We continued our trend of consolidated revenue growth led by double digit growth in our marine, outdoor and aviation segments,” said Cliff Pemble, president and chief executive officer of Garmin Ltd. “The fitness segment declined slightly due to the rapidly maturing market for basic activity trackers. However, demand for advanced wearables remains strong. Our product development pipeline is robust and we look forward to launching compelling new products throughout the remainder of the year.”
The marine segment posted revenue growth of 26 percent driven by Garmin’s lineup of chartplotters, fishfinders and entertainment products. Gross margin increased year-over-year to 57 percent with product mix shifting toward new products with higher margin profiles. Operating margin improved to 17 percent, resulting in 76 percent operating income growth. During the first quarter of 2017, Garmin started shipping our new touchscreen and keyed chartplotter combo offerings in our popular GPSMAP product line, with positive customer reception. The company said it remains focused on innovations and achieving market share gains within the inland fishing category.
Total operating expenses in the quarter were $256 million, an 8 percent increase from the prior year. Research and development increased 13 percent driven by aviation and advanced wearable products in fitness and outdoor.
Selling, general and administrative expenses increased 7 percent driven primarily by legal related expenses and information technology costs. Advertising was relatively flat year over year.
In the first quarter of 2017, Garmin reported a $150 million income tax benefit. Excluding the $169 million income tax benefit due to the revaluation of certain Switzerland deferred tax assets, the company’s pro forma effective tax rate for the first quarter of 2017 was 21.3 percent compared to an effective tax rate of 18.1 percent in the prior year. The year-over‐year increase in the pro forma effective tax rate is primarily due to the company’s election in February 2017 to align certain Switzerland corporate tax positions with evolving international tax initiatives.
In the first quarter of 2017, Garmin generated $95 million of free cash flow. The company continued to return cash to shareholders with its quarterly dividend of approximately $96 million and its share repurchases activity, which totaled approximately $28 million in the first quarter of 2017. Garmin has approximately $47 million remaining in the share repurchase program authorized through December 31, 2017, and expect to repurchase company stock as business and market conditions warrant. The company ended the quarter with cash and marketable securities of approximately $2.3 billion.