Release Date: April 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Garmin Ltd (GRMN, Financial) reported a record first quarter revenue of $1.54 billion, marking an 11% increase year-over-year.
• Three business segments achieved double-digit growth, with the auto OEM segment leading at 31%, followed by outdoor at 20%, and fitness at 12%.
• Gross and operating margins were strong at 57.6% and 21.7%, respectively, resulting in a record operating income of $333 million, up 12% year-over-year.
• The company launched several new products, including the Instinct 3 adventure watch series and the Force Pro trolling motor, enhancing its product portfolio.
• Garmin Ltd (GRMN) maintained its full-year pro forma EPS guidance at $7.80, despite potential tariff impacts, due to expected foreign exchange benefits and planned mitigations.

Negative Points

• The marine segment experienced a 2% revenue decline, attributed to the timing of promotions and continued market softness.
• The current global trade environment, particularly tariffs, poses a significant challenge, with an estimated $100 million gross impact on 2025 results.
• Approximately 25% of Garmin Ltd (GRMN)'s revenue is generated in the US from products manufactured outside the US, making it vulnerable to tariff changes.
• The company anticipates a modest reduction in demand due to the current trade environment and economic uncertainties.
• The auto OEM segment, despite strong growth in Q1, is expected to see moderated growth due to the anniversary of new model introductions and potential impacts from tariffs on carmakers.

Q & A Highlights

Q: Are you observing any indications of potential demand pulling at your customers due to the volatile tariff situation? A: Clifton Pemble, President and CEO, stated that there are no indications of weakness or overstocking by retailers. The demand for Garmin's products remains strong, and there is no imbalance in the channel or consumer behavior due to trade concerns.

Q: What prompted the launch of Garmin Connect Plus, and how has the customer reception been so far? A: Clifton Pemble explained that the development of AI-based insights prompted the launch of Connect Plus. The response has been positive, and Garmin is focusing on long-term success rather than short-term metrics.

Q: Can you disaggregate the demand weakness and FX tailwinds in the full-year guidance? A: Clifton Pemble mentioned that while FX impacts are clear, demand shifts and mitigations are harder to disaggregate. Garmin is including a modest decrease in demand in their guidance, but overall, they expect a net zero impact due to mitigations and FX benefits.

Q: How is Garmin prioritizing mitigation tools to limit the impact of tariffs, and will this affect your global footprint? A: Clifton Pemble stated that all options are on the table, including sourcing actions and pricing adjustments. Garmin's global footprint is seen as a benefit, and there are no plans for significant changes to their vertical integration strategy.

Q: Could you provide more detail on the timing of mitigation actions and their impact on margins? A: Douglas Boessen, CFO, explained that the timing of tariffs, existing inventory, and mitigation efforts will all influence Q2 results. Garmin is working to implement mitigations as soon as possible, but there are many moving parts to consider.

Q: What is the outlook for the marine segment, and how do promotions affect it? A: Clifton Pemble noted that a major promotion shifted from Q1 to Q2, affecting the timing of inventory purchases. This shift is expected to influence Q2 performance, but overall, Garmin anticipates a flat revenue year for the marine segment.

Q: How does Garmin view consumer demand in the second half of the year, given the current economic environment? A: Clifton Pemble expressed that while there is no crystal ball, current indications show no change in consumer behavior. Garmin is including a slight possibility of demand weakening but remains optimistic due to their diverse product offerings.

Q: Will Garmin report subscription and software revenue as a separate line item in the future? A: Clifton Pemble stated that Garmin will report these revenues separately once they reach 10% of consolidated revenues.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.