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Edited Transcript of GRMN earnings conference call or presentation 1-May-19 2:30pm GMT

Q1 2019 Garmin Ltd Earnings Call

SCHAFFHAUSEN May 21, 2019 (Thomson StreetEvents) -- Edited Transcript of Garmin Ltd earnings conference call or presentation Wednesday, May 1, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Clifton Albert Pemble

Garmin Ltd. - President, CEO & Director

* Douglas Gerard Boessen

Garmin Ltd. - CFO, Principal Accounting Officer & Treasurer

* Teri Seck

Garmin Ltd. - Manager of IR

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Conference Call Participants

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* Benjamin James Bollin

Cleveland Research Company - Senior Research Analyst

* Charles Lowell Anderson

Dougherty & Company LLC, Research Division - VP and Senior Research Analyst

* Erik William Richard Woodring

Morgan Stanley, Research Division - Research Associate

* Ivan Philip Feinseth

Tigress Financial Partners LLC, Research Division - Director of Research

* Jeangul Chung

JP Morgan Chase & Co, Research Division - Analyst

* Nikolay Todorov

Longbow Research LLC - Analyst

* Richard Frank Valera

Needham & Company, LLC, Research Division - Senior Analyst

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Presentation

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Operator [1]

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Good day, ladies and gentlemen, and welcome to the Garmin Limited's First Quarter 2019 Earnings Conference Call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to turn the conference over to Teri Seck, Manager of Investor Relations. Ma'am, you may begin.

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Teri Seck, Garmin Ltd. - Manager of IR [2]

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Good morning. We would like to welcome you to Garmin Limited's First Quarter 2019 Earnings Call.

Please note that the earnings press release and related slides are available at Garmin's Investor Relations site on the internet at www.garmin.com/stock. An archive of the webcast and related transcript will also be available on our website.

In the first quarter of fiscal 2019, we refined the methodology used to allocate certain selling, general and administrative expenses to the segments. The composition of segments did not change. Prior year amounts are presented as they were originally reported as it is not practical to accurately restate prior period activity in accordance with the refined allocation methodology.

For comparative purposes, we had included in the appendix of this webcast an estimate of the segment operating income impact if the refined allocation methodology would have been used in 2018 for both the 13 weeks ended March 31, 2018, and the 52 weeks ended December 29, 2018. There was no change to either the consolidated SG&A expenses nor the consolidated operating income.

This earnings call includes projections and other forward-looking statements regarding Garmin Limited and its business. In these statements regarding our future financial position, revenues, earnings, gross and operating margins and future dividends, market shares, product introduction, future demand for our products and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur, and actual results could differ materially as a result of risk factors affecting Garmin.

Information concerning these risk factors is contained in our Form 10-K filed with the Securities and Exchange Commission.

Presenting on behalf of Garmin Limited this morning are Cliff Pemble, President and Chief Executive Officer; and Doug Boessen, Chief Financial Officer and Treasurer.

At this time, I would like to turn the call over to Cliff Pemble.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [3]

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Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin reported record revenue for the first quarter of 2019 with growth in operating income and EPS.

Consolidated revenue came in at $766 million, up 8% over the prior year. Revenue for marine, aviation, fitness and outdoor collectively increased 12% year-over-year.

Gross margin was 59% compared to 60% in the prior year. Operating margin was 19.8% and operating income grew 6% over the prior year. This resulted in GAAP EPS of $0.74. Pro forma EPS was $0.73, up 7% over the prior year.

We are encouraged by our first quarter results. Since Q1 represents the lowest seasonal quarter of our financial year and much of the year remains ahead of us, we are maintaining the guidance issued in February.

Before moving onto segment highlights, I want to mention the recognition we received recently from Forbes, who ranked Garmin as one of the top 5 best employers in America. Speaking on behalf of all Garmin employees, we are truly honored to receive this recognition. Garmin employees are passionate about what we do and we share a deep commitment to serving our customers and each other. Of the many qualities that make Garmin a great place to work, it's the commitment of our employees that sets us apart.

Moving next to our segment highlights. Revenue in the marine segment increased 18% on strong demand for chartplotters and Panoptix LiveScope sonars. Gross margin was 58% and operating margin improved to 19%. During the quarter, we announced the ECHOMAP ultra series, combining built-in Panoptix LiveScope compatibility with new mapping content. Also in our first year as their exclusive electronic supplier, we were named the 2018 supplier of the year by Independent Boat Builders Incorporated, the boating industry's largest purchasing cooperative. It's an honor to be recognized by the IBBI. And I want to thank our marine team for delivering superior products, service and support to our customers.

Looking next at aviation. Revenue increased 17%, driven by growth in both aftermarket and OEM product categories. Gross and operating margin remained strong at 75% and 34%, respectively. During the quarter, we delivered the new G1000 NXi upgrade for the Citation Mustang, which is the first business jet to adopt our G1000 system.

We announced compelling new products such as the GPS 175, GNX 375 and the G3X Touch, which expand the addressable market for our retrofit systems.

Our aviation team was also recognized as an outstanding supplier to the industry. At the recent Embraer Suppliers Conference, we were named Supplier of the Year for electrical systems. This is the 10th supplier award we received from Embraer, and again, reflects the strength of our products, service and support. I want to thank our aviation team for their deep commitment to being the very best.

Looking next at fitness. Revenue increased 9%, driven primarily by strong growth in our wearable categories. Gross margin was 50% and operating margin was 10% in the quarter. Margins decreased due to a combination of factors, including lower selling prices and a shift in mix as certain products in our consumer wellness categories experienced significant year-over-year growth.

In early April, we completed the acquisition of Tacx, expanding our reach into the indoor cycling and training market. Yesterday, we announced a fully refreshed line of running watches with the Forerunner 45 in 2 sizes, the Forerunner 245 with optional music storage and the Forerunner 945, which has it all. These new smart watches offer features that will appeal to a broad range of running enthusiasts.

Also, we announced the availability of our menstrual cycle tracking feature. This new feature was developed by Garmin women focusing on the special needs of those who are highly active. This feature will help women make connection between their current cycle phase, physical and emotional symptoms and their overall well-being. We also announced that we are cooperating with the University of Kansas on research to better understand how wearables and the biometric data they produce can help women manage and improve their health.

Moving to outdoor. Revenue increased 7% on strength across multiple product categories. The outdoor segment generated strong gross and operating margins of 63% and 27%, respectively. During the quarter, we introduced MARQ, a collection of 5 premium smart tool watches. These watches were created from our active lifestyle DNA to inspire adventurers in flying, racing, sailing, exploring and sports performance.

Also, we recently announced the Approach S40, a stylish golf watch, featuring a color touchscreen display and smart watch capabilities.

Looking finally at the auto segment. Revenue decreased 10% for the quarter due to the ongoing decline of the PND market, partially offset by growth in certain specialty product lines. Our global PND market share remains very strong. Gross margin was 45% and operating margin improved to 6%.

During the quarter, we launched the BC 40, a new wireless backup camera that's easy to install and provides drivers with a wide clear view behind their vehicle.

Also during the quarter, we announced that BMW selected us as their lead design and production partner of entertainment modules for the BMW group, validating us as a Tier 1 supplier to the world's most respected brands. I congratulate our automotive team and thank them for their hard work and dedication in securing this win.

That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?

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Douglas Gerard Boessen, Garmin Ltd. - CFO, Principal Accounting Officer & Treasurer [4]

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Thanks, Cliff. Good morning, everyone. I begin by reviewing our first quarter financial results, move to comments on the balance sheet, cash flow statement and taxes.

We posted revenue of $766 million in the first quarter, representing 8% increase year-over-year. Gross margin was 59%, 100 basis point decrease from the prior year. Operating expense as a percentage of sales was 39.2%, 80 basis point decrease from the prior year. Operating income was $151 million, a 6% increase year-over-year.

Operating margin was 19.8%, relatively consistent to the prior year. Our GAAP EPS was $0.74, our pro forma EPS was $0.73.

Next, we'll look at the first quarter revenue by segment. We achieved record first quarter revenue of $766 million. Consolidated revenue grew 8%, led by double-digit growth in both marine and aviation. Also, both the fitness and outdoor segments achieved solid growth during the quarter. On a combined basis, marine, aviation, fitness and outdoor were up 12% compared to the prior year quarter.

Looking next, the first quarter revenue and operating income charts. Collectively, marine, aviation, fitness and outdoor segments contributed 83% of total revenue in the first quarter of 2019 compared to 80% in the prior year quarter. Marine grew from 16% to 17%, aviation grew from 21% to 22% and fitness grew from 23% to 24%.

You can see from the charts, it illustrate our profit mix by segment. Marine, aviation, fitness and outdoor segments collectively delivered 95% of operating income in the first quarter of 2019 compared to 98% in the first quarter of 2018.

Looking next at operating expenses. Our first quarter operating expense increased by $16 million or 6%. Research and development increased $4 million year-over-year due to investments in engineering resources. Our advertising expense increased approximately $3 million year-over-year and represented 3.6% of sales, consistent with the prior year quarter.

SG&A was up $10 million or 16.5% of sales, consistent with prior quarter. The increase was primarily due to legal-related costs and personnel-related expenses.

A few highlights on the balance sheet, cash flow statement and taxes. We ended the quarter with cash and marketable securities of approximately $2.7 billion. Accounts receivable decreased sequentially to $453 million following a seasonally strong fourth quarter. Inventory balance increased on a sequential and year-over-year basis as we prepare for the seasonally strong second quarter upcoming product launches.

During the first quarter of 2019, we generated free cash flow of $134 million, $53 million decrease from the prior year quarter. Also during the quarter, we paid dividends of $201 million, which includes both the December 2018 and March 2019 payments.

During the first quarter of 2019, we reported an effective tax rate of 15.7% compared to 16% in the prior year quarter.

This concludes our formal remarks. Shannon, can you please open the line for Q&A?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Ben Bollin with Cleveland Research.

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Benjamin James Bollin, Cleveland Research Company - Senior Research Analyst [2]

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I wanted to start in the fitness business. Could you talk a little bit about the mix overall? What drove the higher mix of kind of wellness devices in the quarter? What were the incremental legal expenses within that business in the quarter? And does that persist? And then any thoughts on margin trajectory through the year with new products launching. And then I have a follow up.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [3]

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Yes. So in terms of mix, Ben, we saw strong sales of our vívomove HR line as well as our vívoactive 3. So those were drivers of mix towards the consumer wellness categories. In terms of legal, we wouldn't comment on specifics other than to say we wouldn't expect a repeat of some of these. But again, the environment's unpredictable, so we don't really know in the future what additional things we might face, but we view at as somewhat of a onetime thing.

And in terms of margin trajectory, depending on how the mix goes, we would probably still anticipate some downward pressure on overall fitness margins, probably in the low- to mid-50s range, but that will depend on, again, the overall product mix and the sales trajectory of some of those product lines.

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Benjamin James Bollin, Cleveland Research Company - Senior Research Analyst [4]

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Okay. And within outdoor, any thoughts you have on the initial interest for MARQ? Or how you feel about the current lineup and what MARQ does to the overall TAM as you move into these higher price point products?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [5]

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Well, we feel like the initial interest in MARQ has been very encouraging. So we're now starting to deliver those devices into the field. So we'll start to see some impact from that. In terms of what it does to our overall product line, I think it expands our reach towards the upper end of the watch market in terms of where we're at today, obviously, not the upper end of where watches are in total. But for us, it expands our reach and we feel very good about it. We received high marks in terms of the design of the product and the materials we've selected. So we feel very good about it.

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Operator [6]

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Our next question comes from Rich Valera with Needham & Company.

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Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [7]

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I was hoping you could comment on the BMW deal and sort of how you'll get paid on that? And what you'll actually get paid on?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [8]

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Well, I think maybe you're referring to some capitalized costs, so that's basically an agreement that we have to be able to recover some of our R&D costs that go into that project and those will be capitalized as we go along. But in terms of -- once we reach the production point, then it's like any other arrangement where we sell a product and they pay us for it.

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Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [9]

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Yes. I guess the question was what exactly will you be selling them, software, hardware? If you could kind of just give us a sense of the magnitude of what will be going into each vehicle.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [10]

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Well, it's the main media computing modules that go into every vehicle and it drives the instrument cluster as well as the center stack. And in some configurations, it will also drive infotainment in the backseat.

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Richard Frank Valera, Needham & Company, LLC, Research Division - Senior Analyst [11]

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Got it. And then just on aviation. If you can kind of give us an update on your thoughts on the ADS-B, one, the sort of contribution this year and then how you think about that going into next year post the mandate?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [12]

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Well, we don't break it out by categories but it is generating growth. It's not the only growth driver though in the overall aviation segment because we're also seeing strong demand for retrofit systems, integrated cockpit systems as well as display systems and GPS systems that go in the cockpit. We think the trajectory is still strong for this year. Although towards the back half of the year, there could be some tailing off of the growth rates. We do see that in 2020, the market will probably continue somewhat because we don't think that every airplane that wants to be equipped will be, but we'll have to see how that goes as we reach that point.

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Operator [13]

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Our next question comes from Charlie Anderson with Dougherty & Company.

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Charles Lowell Anderson, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst [14]

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Just going back to the wearables and some of the gross margins you're seeing there. I know, Cliff, you've had sort of a multiyear trend of people going maybe more upmarket on wearables as opposed to downmarket. I wonder if we're seeing a reversal of that trend at all or this is just a function of where we are point in time on the product cycle. And then I've got a follow-up.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [15]

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Well, actually, in the tracker category, it is people going upmarket because they're moving towards the higher end vívomove HR as opposed to a basic tracker band. It so happens that the margins on those products are lower than the headline of fitness. So depending on mix, of course, that impacts the overall segment margin.

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Charles Lowell Anderson, Dougherty & Company LLC, Research Division - VP and Senior Research Analyst [16]

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Okay. Great. And then just a housekeeping question for Doug. I noticed in the Q that we did see that reclassification of SG&A a little bit more to aviation, a little bit less to marine. I wonder if you could just walk us through the basis behind that change.

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Douglas Gerard Boessen, Garmin Ltd. - CFO, Principal Accounting Officer & Treasurer [17]

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Sure. Actually, it's refining our methodology for the general administration expenses. And as time goes by, there's evolution of our different segments, different dynamics with it, some of which relating to Olathe facility expansion here, some of which is aviation becoming a bigger piece of our business international. So looking at all those different dynamics, we took a look at allocating our administrative expenses where we thought to each one of our segments. So yes, there are incremental additional expenses being allocated to aviation.

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Operator [18]

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Our next question comes from Paul Coster with JP Morgan.

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Jeangul Chung, JP Morgan Chase & Co, Research Division - Analyst [19]

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This is Paul Chung on for Coster. So I've a couple. On marine, where you're kind of seeing pockets of growth, whether it's region, products, subsets of the boating market. And then given the strong start for both marine and aviation for the year, how's your outlook for 10% growth for both segments changed at all?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [20]

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Yes. So in terms of marine growth and trying to add a little more color to that, I would say it's strong globally. Particularly, it's strong here in the U.S. market. A large majority of our revenue is generated in the Americas market. And so products like Panoptix LiveScope and our chartplotters are driving some significant growth there.

In terms of our outlook for both marine and aviation, as we mentioned we're not ready to think about guidance yet because it's still early in the year, but we're encouraged by the results we've seen in both of those segments. I would say as I mentioned earlier in aviation that towards the back half of the year, we would naturally expect that the growth rates of ADS-B might come down a bit as the rush of people that are trying to get into the installed tapers off a bit. That's what we're anticipating and that's why we're just holding back a little bit.

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Jeangul Chung, JP Morgan Chase & Co, Research Division - Analyst [21]

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Got you. And then my follow-up is on Tacx. What's your go-to market strategy there? Can you give some more details on margins, revenues? I think you mentioned maybe 6 points of growth for fitness, but has that view now changed that you closed the acquisition?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [22]

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There are really no changes in terms of go-to market. They are the market leader particularly in the European region and so we expect to continue to capitalize on that strength. And we see opportunities for growth in the Americas and Asia where they're less represented. So we're working hard to implement those sales strategies right now. In terms of margins, it's fairly consistent with the overall headline margins of fitness, so we don't anticipate really any impact there. There will be allocation of the purchase price to fitness, so that will impact some of the operating margins. But on a preamortized basis, it's very positive to our fitness segment on a cash flow basis.

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Operator [23]

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Our next question comes from Nick Todorov with Longbow.

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Nikolay Todorov, Longbow Research LLC - Analyst [24]

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First, apologize for any background noise. Just on aviation, my sense is that results came a little bit better than expected. Maybe can you talk from aftermarket OEM, what surprises you saw in the quarter? And then secondly, some of your competitors have talked about the pricing environment, given the supply constraint (inaudible) . Maybe if you can comment on that (inaudible)?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [25]

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So Nick, sorry to say, but your call quality was kind of challenging, so I'm not sure that we've really tracked your question. I don't know if you can maybe try to restate it or help us out a little bit there.

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Nikolay Todorov, Longbow Research LLC - Analyst [26]

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Sorry about that. Can you hear me?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [27]

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That's incrementally better.

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Nikolay Todorov, Longbow Research LLC - Analyst [28]

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Sorry. Can you hear me better now?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [29]

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It's better now. Thank you.

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Nikolay Todorov, Longbow Research LLC - Analyst [30]

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Okay. Sorry about that. So in aviation, the sense is that results came a little bit better than expected. Maybe can you talk about whether you saw some surprises either on the OEM or on the aftermarket side? And secondly, can you comment, if you see any changes in the pricing environment in the aftermarket side? Some of your competitors have talked about some changes, given the supply constraints. I was wondering if you see anything different.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [31]

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Yes. So in terms of aviation and our view there and what we saw, I would say that aftermarket was very strong and that reflects true demand and sell-through to customers that are out there. In terms of OEM, there is some timing-related things that helped us in Q1. But in general, we still feel very positive about the OEM environment. In terms of pricing and aviation, I would say that pricing has been firm. We did go through some pricing increases at the first part of the year, which didn't seem to have any impact in terms of our demand that we're seeing in the segment.

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Nikolay Todorov, Longbow Research LLC - Analyst [32]

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Okay. So do you -- you said you went through some price increases in the first quarter this year or that was last year, I'm sorry?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [33]

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It was basically in January.

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Nikolay Todorov, Longbow Research LLC - Analyst [34]

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Okay. Okay. Got it. And Doug, can you comment on whether some of the changes in OpEx allocation changes your outlook? I believe last quarter you were talking about expecting about 100 basis points increase OpEx as a percent of sales. So has that outlook changed?

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Douglas Gerard Boessen, Garmin Ltd. - CFO, Principal Accounting Officer & Treasurer [35]

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No. We are consistent with that outlook for the full year. So yes, about 100 basis points increase for total operating expenses. We expect advertising as a percentage of sales to be relatively consistent year-over-year and probably about a 50 basis point increase in R&D on a full year basis, then a 50 basis point increase in SG&A on a full year basis. I should also mention the Tacx acquisition. About 25% of that year-over-year increase in operating expenses will be attributed to the Tacx acquisition, which we closed on here in the second quarter.

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Nikolay Todorov, Longbow Research LLC - Analyst [36]

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Okay. And last for me. Automotive gross margin came a little bit stronger than the trend over the last couple of years. Is there anything worth calling out? Was it anything maybe tied to the specialty products that offset some of the PND declines or is there something else?

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Douglas Gerard Boessen, Garmin Ltd. - CFO, Principal Accounting Officer & Treasurer [37]

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Yes. One thing we did see in PND is that we had a new Drive line a PND that was launched here in first quarter. So with that new launch, we did see some improvement relating to our gross margin.

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Operator [38]

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Our next question comes from Ivan Feinseth with Tigress Financial Partners.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [39]

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Congratulations on another great quarter and being named one of the top 5 places to work. I have a few product questions and platform questions. First, at this year's Connect IQ Developer conference, year-over-year, how -- is attendance growing? And what have been some of the topics covered? And I really do like also the new Connect IQ app that organizes the applications.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [40]

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Yes. So our Connect IQ Summit was actually very, very good. We had strong attendance, same as the previous years. So we're not seeing any decrease in the level of interest.

We announced new features for Connect IQ that allows app developers to further leverage the platform, so they can have better access, thorough access to the wireless capabilities of devices. There's great new animation tools that they can use to create more lively apps. So a lot of enthusiasm around the things that we've been doing.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [41]

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Now is there any plans to create a -- like a marketplace, so that those who want to offer apps that they could charge would be able to do that? Because I know there are -- most of the apps are free. Some of the developers say if you'd like to send the money, let's say, through PayPal, you can do it, but is there eventually going to be like a formalized e-commerce process on the platform?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [42]

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Yes. So we're evolving the platform to be able to support monetization. And as you say right now, it's not as strong of a link in terms of helping our app developers, but we're working on a road map that gets us there. And I think in the coming year, we should have improvements.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [43]

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Very good. I love the new product cadence and the number of new cycling computers. My one question is on -- like the zumo line, for example, it connects to the tire monitors. Are you going to be offering the ability to have tire pressure monitors for -- on a bicycle that connects to the cycling computers? I think that's a pretty cool feature.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [44]

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Yes. It's definitely a technology we can leverage in cycling. And so I wouldn't rule it in or out at this point because we're evaluating our road maps, but it is something that we can leverage across multiple product categories.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [45]

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And as far as product line, are you looking to launch a refresh to zumo? Or -- what is your thoughts on the zumo line?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [46]

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Well, the zumo line is an integral part of our overall PND lineup. And so we have a strong road map there as we do in the other areas as well, truck, RV.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [47]

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And then like the Garmin Mechanic is pretty cool. And have you thought about some kind of other onboard diagnostic port connection to any of your other GPS devices that could incorporate that data into the screen of the GPS?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [48]

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We've invested some effort in understanding OBD connection to the vehicle, and of course, on our OEM side we have a lot of access to the vehicle in terms of the CAN buses and things. But in terms of aftermarket diagnostics, it's somewhat of a crowded market. And so we have struggled to find a place where we can really carve out our own unique niche there. So it's not something that we've been actively pursuing recently.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [49]

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Okay. Understood. And then I love the new MARQ watches. They are beautiful. Can you give some thoughts on unit volume?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [50]

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Well, we don't break out by volume, but I would say as we mentioned in the remarks that the reception has been good. And we're pleased with that. And so we're just at the front end now of delivering those products to market. And we'll have an updated view in the future.

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Ivan Philip Feinseth, Tigress Financial Partners LLC, Research Division - Director of Research [51]

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And also on Tacx, can you give us some thoughts as far as product branding? Are you going to maintain the Tacx name or somehow incorporate the Garmin name with it? Also, do you see any focus on specific products and expanding the product availability into the U.S. and the marketing strategy behind it?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [52]

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Yes. So the Tacx name is very strong, so we want to maintain that. And so the branding will be -- definitely, Tacx is the headline on those products and -- for the website and things we're calling it a Garmin company. In terms of our specific product focus, our emphasis is at Tacx. Tacx's emphasis before we acquired them was that smart trainers and advanced trainers is their specialty. And so we're going to continue investing in that. And then in terms of bringing the product to other markets, we're working very hard to bring it into U.S. distribution now in a more complete way, and so that's ongoing and should be more evident as we move into the back half of the year.

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Operator [53]

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Our next question comes from Erik Woodring with Morgan Stanley.

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Erik William Richard Woodring, Morgan Stanley, Research Division - Research Associate [54]

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I just wanted to get at -- first quarter revenue growth of 8% was strong. But in the past, you've talked about how the ramping of product launches and new product launches will essentially help accelerate that growth in the back half of the year versus the first half. And so with guidance unchanged, I just kind of wanted to reconcile those data points given the outperformance in the first quarter.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [55]

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Yes. So we mentioned in the last call that our product releases were back-half loaded. And I think that's certainly playing out as we're just now getting our new fitness products to market and we'll have more releases as we go through the year. So we'll have to wait and see. We've mentioned before that this quarter is literally the smallest contribution to our overall yearly revenues. So we don't want to get too excited or disappointed on first quarter because there's a lot that lies ahead of us in terms of the overall sales environment and the competitive environment.

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Erik William Richard Woodring, Morgan Stanley, Research Division - Research Associate [56]

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Okay. And then just as my follow up. Auto results. Revenue down 10% was essentially the best performance you've had for that segment since the first quarter of 2016. So just curious, is that just the new Drive line PND that was launched? Or was there something else that contributed? Any puts and takes -- understanding any puts and takes would be helpful there.

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [57]

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Drive certainly helped. That was a sell-in event, although we've heard good remarks from our retailers on the sell-through of that product. So that's one dynamic, but we also saw strong demand for our specialty PNDs, particularly in the truck, RV and motorcycle areas. And that helped a lot. And so that represents really true demand in the market. So we were pleased with the result. And we'll have to wait and see how things go throughout the remainder of the year.

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Erik William Richard Woodring, Morgan Stanley, Research Division - Research Associate [58]

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And just curious, is that a trend you think that could continue? Or is it -- would you call that -- or think of that more as a onetime benefit to the quarter?

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Clifton Albert Pemble, Garmin Ltd. - President, CEO & Director [59]

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Well, hard to say. Again, we're waiting to see more data as we experience the sell-through of the new products especially and as the driving season comes upon us here. So we'll have to wait and see.

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Operator [60]

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Thank you. And I'm showing no further questions at this time. I'd like to turn the call back over to Teri Seck for closing remarks.

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Teri Seck, Garmin Ltd. - Manager of IR [61]

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Thanks, everyone. Doug and I are available for callbacks throughout the day. Have a good one. Bye.

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Operator [62]

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Ladies and gentlemen, this concludes today's conference. Thanks for your participation and have a wonderful day.