Garmin Reports Second Quarter 2012 Results with Revenue and EPS Growth; Raises Full Year EPS Guidance

Recent Business Highlights:

  • Posted third consecutive quarter of revenue and operating income growth.
  • Sold 3.9 million units in second quarter 2012, a 4% increase over second quarter 2011.
  • Expanded our global PND market share with approximately 70% share in the U.S. market and ongoing improvement in most European countries.
  • Announced our new relationship with Bombardier on the Learjet 70* and Learjet 75*, Part 25 aircraft which will utilize the G5000 integrated avionics system.
  • Expanded our OEM relationship with Cessna to include their most recently announced model, the Part 25 Citation Longitude, utilizing the G5000 integrated avionics system.
  • Continued to enhance our offerings to the motorcycle market with the zūmo® 350 LM with new features like a service history log.
  • Launched the Garmin Swim™, a training watch specifically designed for swimmers and Garmin’s first entry in the market.
  • Introduced the fēnix™, a wristwatch for outdoorsmen that has comprehensive navigation and tracking functionalities along with traditional altitude, barometer, and compass functionality.

Executive Overview from Dr. Min Kao, Chairman and Chief Executive Officer:

“In the second quarter of 2012 we again posted strong revenue, unit volumes, and operating income even though the global economy is still difficult,” said Dr. Min Kao, chairman and chief executive officer of Garmin Ltd. “We have had a great first half; yet, we remain cautious given the macroeconomic dynamics facing each of our segments. Based on our first half performance, we are narrowing our full year revenue guidance to $2.75 - $2.80 billion. This represents the high end of our prior range with improvement in auto/mobile and outdoor offset by the remaining segments. We are increasing our EPS guidance to $2.70 - $2.85 due to the outstanding margins in the first half. Overall, we believe we are executing well in both the current environment and in preparation for long-term sustained growth.

The outdoor segment posted revenue growth of 24% in the quarter. Growth was driven by our golf line-up, dog tracking and training, and our recently refreshed eTrex® series. During the quarter, we introduced our latest outdoor product, the fēnix wristwatch. This product offers both a feature-rich experience for the outdoorsman and also a classic style for everyday use.

The fitness segment posted revenue growth of 5% in the quarter compared against strong performance in 2011 driven by promotional activity on the Forerunner® 305 and the launch of the Forerunner 610. In the current quarter, new products such as the high-end Forerunner 910XT sold well and drove margin expansion for the fitness segment. In late June, we introduced the Garmin Swim – targeting a new niche for us in the fitness market. The product has already been well-received in the swimming community. We anticipate growth rates will improve in the second half of 2012 as we launch new products for the holiday season to drive further market penetration.

The aviation segment posted revenue growth of 4% as we experienced improvement with our OEM partners offset by weakness in the aftermarket. Overall, the market continues to be depressed and we do not anticipate any significant level of improvement in the back half of 2012. On a positive note, we were pleased to be selected by Bombardier to be the avionics provider for the upcoming Learjet 70 and Learjet 75, Part 25 aircraft slated to begin deliveries in 2013, with the G5000 integrated cockpit system. In the quarter, we also announced our tenth model at Cessna, the Part 25 Citation Longitude, which will also incorporate the G5000 system. The backlog of certifications over the next few years is significant and should contribute to improved revenue growth rates beyond 2012.

In the marine segment, revenues declined 14% year-over-year while improving 21% sequentially as marine season began in earnest. The year-over-year decline is primarily attributable to a significant global slowdown in marine activity. The marine market continues to be affected by weak economic conditions, and we anticipate that the market will remain difficult throughout 2012. We continue to focus on the long-term opportunities that are developing with our broad portfolio of offerings in both the OEM and aftermarket space.

Looking finally at the auto/mobile segment, we posted revenue growth of 8% as we continued to gain market share in the declining PND category and the net impact of deferred revenue was approximately $46 million less than in the prior year. The PND market has remained resilient in the face of much competition but we still anticipate year over year industry-wide unit declines of 10-15%. We will continue to focus on what has worked so well for us in this market – share gains and profitability. ”

Financial Overview from Kevin Rauckman, Chief Financial Officer:

“Strong revenue and operating income growth continued, driven by revenue growth and margin expansion in our auto/mobile, outdoor and fitness segments,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “We are pleased with our first half execution but also recognize that the macroeconomic situation creates some level of uncertainty so we will continue to be diligent in managing our resources to optimize long-term opportunities and performance.

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