Garmin Ltd. (NASDAQ:GRMN) is a leading worldwide provider of wireless devices, many of which feature Global Positioning System (GPS) navigation, and applications designed for active lifestyles. The company is organized into five operating segments: fitness, outdoor, aviation, marine, and auto OEM. Garmin's products are sold through a variety of indirect distribution channels, including a large worldwide network of independent retailers, dealers, distributors, installation and repair shops, and original equipment manufacturers (OEMs), as well as directly through the company's online webshop, subscriptions for connected services, and its own retail stores.

Financials

In the fiscal year ended December 30, 2023, Garmin reported annual net income of $1,289,636,000, annual revenue of $5,228,252,000, annual operating cash flow of $1,376,265,000, and annual free cash flow of $1,181,237,000. The company's diversified business model and strong execution have enabled it to deliver impressive financial results, even in the face of macroeconomic challenges.

Recent Quarterly Performance

Looking at the company's most recent quarterly performance, Garmin reported outstanding results in the first quarter of 2024. Consolidated revenue increased 20% year-over-year to a new first quarter record of $1.38 billion, with four of the five segments delivering double-digit growth. Gross margin expanded to 58.1%, and operating margin increased to 21.6%, resulting in record first quarter operating income of $298 million, up 51% year-over-year. This strong performance translated to pro forma EPS of $1.42, up 39% over the prior year.

Segment Performance

The fitness segment led the way, with revenue increasing 40% to $342.9 million, driven by broad-based growth across all product categories and strong demand for advanced wearables. Gross and operating margins in the fitness segment improved to 57% and 20%, respectively, resulting in operating income of $68.1 million.

The outdoor segment also delivered impressive results, with revenue increasing 11% to $366.2 million, primarily driven by wearable products. Gross and operating margins in the outdoor segment improved to 66% and 29%, respectively, resulting in operating income of $107 million.

The aviation segment reported a 2% increase in revenue to $216.9 million, driven by growth in OEM product categories. Gross margin improved to 75%, and operating margin was 24%, resulting in operating income of $52.1 million.

In the marine segment, revenue increased 17% to $326.7 million, primarily driven by the acquisition of JL Audio. Excluding JL Audio, revenue increased approximately 3% in the first quarter. Gross and operating margins improved to 55% and 27%, respectively, resulting in operating income of $87.7 million.

The auto OEM segment reported a 58% increase in revenue to $129 million, with growth primarily driven by increased shipments of domain controllers to BMW. Gross margin was 18%, and the segment recorded an operating loss of $16.5 million.

Geographic Performance

Geographically, Garmin achieved double-digit growth in all three regions, led by a 30% increase in EMEA, followed by 17% growth in the Americas and 12% growth in APAC.

Outlook

Looking ahead, Garmin's management has not updated the company's guidance since the previous quarter, as the first quarter is typically the lowest seasonal quarter of the financial year. However, the company has highlighted that the timing of new product releases, both last year and this year, will be a factor in creating some noise between the quarters.

Conclusion

Garmin's strong performance in the first quarter of 2024 is a testament to the company's diversified business model, innovative product portfolio, and effective execution. With a solid financial position, including a cash and marketable securities balance of approximately $3.3 billion as of the end of the first quarter, Garmin is well-positioned to continue investing in product development, strategic acquisitions, and shareholder returns through dividends and share repurchases.

Overall, Garmin's impressive first quarter results, coupled with its diversified revenue streams, strong market positions, and healthy financial condition, make it a compelling investment opportunity in the technology sector.