Garmin’s fourth-quarter sales rise 3% on strength in the marine sector
Garmin, ltd. reported earnings and sales above Wall Street estimates in the fourth quarter ended Dec. 25. Sales increased 3% in the quarter. Marine segment sales were up 14%, while Fitness segment sales were flat and outdoor sales were down 8%.
Fourth quarter 2021 highlights include:
- Record consolidated revenue of $1.39 billion, a 3% increase over the prior year quarter with three of the his double-digit growth segments;
- Gross and operating margins were 55.5% and 22.6%, respectively;
- Operating profit of $315 million, down 15% from the prior year quarter;
- GAAP EPS was $1.48 and pro forma EPS was $1.55;
- Garmin Descent Mk2i dive computer and Descent T1 transmitter named one of the biggest innovations of 2021 by popular science
- Named supplier of the year by Embraer for the seventh consecutive year;
- Garmin Surround View Camera System Receives Dame Design Award;
- Recently announced the acquisition of Vesper Marine, a provider of marine communications equipment and services; and
- Launch of the Garmin DriveSmart series of portable car navigators with a range of large screens up to 8 inches.
Adjusted profit of $1.55 topped Wall Street’s consensus estimate of $1.41. Sales of $1.39 billion came out just ahead of analysts’ expectations of $1.37 billion.
Highlights of fiscal year 2021 include:
- Sixth consecutive year of revenue growth with each of the his five segments posting double-digit growth over the previous year;
- Record consolidated revenue of $4.98 billion, a 19% increase over the prior year;
- Gross margin of 58.0% compared to 59.3% the previous year;
- Operating margin of 24.5% compared to 25.2% the previous year;
- Record operating profit of $1.22 billion, up 16% year-on-year; and
- GAAP EPS was $5.61 and pro forma EPS was $5.82, a growth of 13% over pro forma EPS in the prior year.
Presentation of the management From Cliff Pemble, President and Chief Executive Officer
“2021 was another remarkable year, as demand for our products drove strong double-digit annual revenue growth in each of our five segments. We enter 2022 with a great range of recently introduced products and have more exciting product launches planned throughout the year. I am very proud of what we have achieved in 2021 and look forward to the opportunities and challenges of the new year,” Pemble said.
Fitness segment revenue was flat in the fourth quarter at $470.1 million, as growth in advanced wearables was offset by lower cycling product sales. Gross and operating margins were 49% and 22%, respectively, resulting in operating profit of $104 million. During the quarter, Garmin announced multi-year sponsorship deals at the high school and college level to showcase the power and utility of its running watches. Garmin also recently released its Connect Fitness 2021 report which showed double-digit growth in nearly every activity category.
Outdoor segment revenue fell 8% in the fourth quarter to $378.2 million, primarily due to component constraints that limited the number of orders Garmin could fulfill for its traditional handhelds and its dog products. Gross and operating margins were 65% and 37%, respectively, resulting in operating profit of $142 million. the Garmin Descent Mk2i dive computer and Descent T1 transmitter featuring its subwave sonar-based communication were named one of the biggest innovations of 2021 by popular science.
Aviation segment revenue increased 13% in the fourth quarter to $177.6 million, mainly driven by the OEM category. Gross profit and operating margins were 73% and 25%, respectively, which translated into an operating profit of $45 million. During the quarter, the G3000 integrated cockpit was selected by Heart Aerospace for the ES-19 all-electric regional airliner. Garmin also announced additional certifications for its GFC 500/600 autopilot, bringing the performance and safety-enhancing benefits of its flight control technology to more aircraft models. Also during the quarter, Embraer awarded Garmin its seventh consecutive Supplier of the Year award. Over the past decade, Embraer has presented Garmin with a total of 12 vendor awards in various categories, including electrical and electronic systems, technical operator support, electromechanical systems and hardware operator support, recognizing its achievements in design, manufacture and support. cockpit solutions.
Maritime segment revenue rose 14% in the fourth quarter to $196.5 million, with growth across multiple categories, driven by strong demand for its chartplotters. Gross profit and operating margins were 54% and 20%, respectively, resulting in operating profit of $39 million. During the quarter, Garmin launched the GPSMAP 79 Marine Handheld Series, equipping browsers with easy-to-use navigation tools. He also launched the GMR Fantom range, a dome radar, offering a wide range of 20 feet to 48 nautical miles, improved target detection and features to improve situational awareness on the water. Also during the quarter, its Panoramic view camera system received the 2021 Dame Design Award.
Automotive segment revenue increased 21% in the fourth quarter to $169.2 million, driven by growth in automotive OEM programs and consumer automotive products. Gross margin was 36% and Garmin reported an operating loss of $15 million in the quarter, due to continued investment in automotive OEM programs. During the quarter, Garmin began shipments of the new Drive line of navigators for the consumer market, bringing larger screens and more connected features to its customers.
Additional financial information
Total operating expenses in the fourth quarter were $457 million, an increase of 9% over the prior year. Research and development increased by 11%, mainly due to engineering personnel costs. Selling, general and administrative expenses increased by 10%, mainly due to personnel costs and information technology costs. Advertising expenses were in line with the prior year quarter.
Effective tax rate in the fourth quarter of 2021 was 7.4% compared to GAAP effective tax rate of 14.8% and pro forma effective tax rate(1) 12.0% in the prior year quarter. The year-over-year decrease in the pro forma effective tax rate is mainly explained by the provisions for uncertain tax position recorded in the prior year.
In the fourth quarter of 2021, Garmin generated approximately $49 million in free cash flow(1), and paid a quarterly dividend of approximately $129 million. Garmin ended the quarter with cash and marketable securities of approximately $3.1 billion.
Directions for the 2022 financial year
Garmin forecasts full-year 2022 revenue of approximately $5.5 billion, an increase of approximately 10% over 2021, and a pro forma effective tax rate of approximately 10.5 %.