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Garmin Ltd. (GRMN) Q1 2019 Earnings Call Transcript

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Garmin Ltd.  (NASDAQ: GRMN)
Q1 2019 Earnings Call
May. 01, 2019, 10:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen and welcome to the Garmin Limited First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. (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.

Teri Seck -- Manager-Investor Relations

Good morning. We would like to welcome you to Garmin Limited 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 segment. The composition of segments did not change. Prior year amounts are presented as they were originally reported, as it is not applicable to accurately restate prior period activity in accordance with the refined allocation methodology.

For comparative purposes, we have 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 31st 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. Any statements regarding our future financial position, revenues, earnings, gross and operating margins and future dividends, market shares, product introduction, future demand for our product 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.

Cliff Pemble -- President and Chief Executive Officer

Thank you, Teri and good morning, everyone. As announced earlier today, Garmin reported record revenue for the first quarter of 2019, with growth and 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're 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 five Best employers in America.

Speaking on behalf of all Garmin employees, we're 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 an exclusive electronic supplier, we were named the 2018 Supplier of the Year by Independent Boat Builders incorporated, the boating industries 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 GPS175, GNX375 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. After recent Embraer Suppliers Conference, we were named Supplier of the Year for electrical systems. This is the tenth 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 two sizes, the Forerunner 245 with optional music storage and the Forerunner 945 which has it off. Using these smart marches 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're cooperating with the University of Kansas on research to better understand how variables 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 growth and operating margins of 63% and 27% respectively. During the quarter, we introduced MARQ, a collection of five 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 touch screen display and smartwatch 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 clearview behind your 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 one 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?

Douglas Gerard Boessen -- Chief Financial Officer and Treasurer

Thanks, Cliff. Good morning, everyone. Let me begin by reviewing our first quarter financial results and maybe comments on the balance sheet, cash flow statement and taxes. We posted a 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, 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 quarter. Looking next the first quarter revenue and operating income chart. Collectively, Marine, Aviation, Fitness and Outdoor segments contributed 83% of total revenue for the first quarter 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 illustrated, 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 $60(ph) 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 prepared 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 effective tax rate of 15.7%, compared to 16% in the prior quarter.

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

Questions and Answers:

Operator

Thank you. (Operator Instructions) Our first question comes from Ben Bollin with Cleveland Research. Your line is open.

Benjamin Bollin -- Cleveland Research -- Analyst

Good morning, everyone. Thanks for taking my question. 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.

Cliff Pemble -- President and Chief Executive Officer

Yeah, so in terms of mix, Ben, we saw strong sales of our vivomove HR line, as well as our vivoactive 3. So those were drivers of mix toward 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 is unpredictable. So we don't really know on the future what additional things we might face, but we view it as a 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.

Benjamin Bollin -- Cleveland Research -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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 toward 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.

Benjamin Bollin -- Cleveland Research -- Analyst

Thank you.

Cliff Pemble -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Rich Valera with Needham & Company. Your line is open.

Richard Valera -- Needham & Company -- Analyst

Thank you. 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? Thank you.

Cliff Pemble -- President and Chief Executive Officer

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 is like any other arrangement where we sell a product and they pay us for it.

Richard Valera -- Needham & Company -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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.

Richard Valera -- Needham & Company -- Analyst

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 the next year post the mandate?

Cliff Pemble -- President and Chief Executive Officer

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 that trajectory is still strong for this year, although toward the back half of the year, there could be some tailing off of the growth rates. We do see that in 2020 that the market will probably continue somewhat because we don't think that every air plane that wants to be equipped will be, but we'll have to see how that goes as we reach that point.

Richard Valera -- Needham & Company -- Analyst

Okay. Thank you.

Cliff Pemble -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Charlie Anderson with Dougherty & Company. Your line is open.

Charlie Anderson -- Dougherty & Company LLC -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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

Charlie Anderson -- Dougherty & Company LLC -- Analyst

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. Thanks.

Douglas Gerard Boessen -- Chief Financial Officer and Treasurer

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 the different dynamics, we took a look at by allocating our administrative expenses where we thought to each one of our segments. So yes there are incremental additional expenses being allocated to Aviation.

Charlie Anderson -- Dougherty & Company LLC -- Analyst

Okay. Great. Thanks so much.

Cliff Pemble -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Paul Coster with JPMorgan. Your line is open.

Paul Chung -- JP Morgan -- Analyst

Hi. Thanks. This is Paul Chung on for Coster. Thanks for taking my questions. So, I've a couple on Marine, where you're kind of seeing pockets of growth, whether it's region products subset to the boating market. And then given the strong start for both Marine and Aviation for the years, how is your outlook for 10% growth for both segments changed at all?

Cliff Pemble -- President and Chief Executive Officer

Yes, so in terms of Marine growth and trying to add little more color to that I would say it's strong globally, particularly it's strong here in the US 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 toward 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, but that's what we're anticipating and that's why we're just holding back a little bit.

Paul Chung -- JP Morgan -- Analyst

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 six points of growth for Fitness, but has -- have you now changed that you closed the acquisition? Thank you.

Cliff Pemble -- President and Chief Executive Officer

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 preameterized basis it's very positive to our Fitness segment on a cash-flow basis.

Paul Chung -- JP Morgan -- Analyst

Thank you.

Cliff Pemble -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Nik Todorov from Longbow. Your line is open.

Nikolay Todorov -- Longbow Research -- Analyst

Hey, guys. Good morning. First of all (technical difficulty). Just on Aviation, my sense is that results came a little better than expected, maybe can you talk from your aftermarket OEM, what surprises you saw this quarter? And then secondly, some of your competitors have talked about the pricing environment given the 5% capacity, maybe you could comment on that as well if you see anything different there?

Cliff Pemble -- President and Chief Executive Officer

So Nik, 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 could maybe try to restate it or help us out a little bit there.

Nikolay Todorov -- Longbow Research -- Analyst

Sorry about. Can you hear me?

Cliff Pemble -- President and Chief Executive Officer

Incrementally better.

Nikolay Todorov -- Longbow Research -- Analyst

Sorry. Can you hear me better now?

Cliff Pemble -- President and Chief Executive Officer

It's better now. Thank you.

Nikolay Todorov -- Longbow Research -- Analyst

Okay. Sorry about it. 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 aftermarket side? And secondly, can you comment if you see any changes in the pricing environment and 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.

Cliff Pemble -- President and Chief Executive Officer

Yeah. 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 thing that helped us in Q1, but in general we still feel very positive about the OEM environment. In terms of pricing in 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.

Nikolay Todorov -- Longbow Research -- Analyst

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?

Cliff Pemble -- President and Chief Executive Officer

It was basically in January.

Nikolay Todorov -- Longbow Research -- Analyst

Okay. Okay. Got it. And Doug, can you comment on what are 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?

Douglas Gerard Boessen -- Chief Financial Officer and Treasurer

No, we are consistent with that outlook for the full-year. So, we had about 100 basis points increase for total operating expenses. We expect advertising as 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. And 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.

Nikolay Todorov -- Longbow Research -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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

Nikolay Todorov -- Longbow Research -- Analyst

Okay, guys. Thanks, good luck.

Cliff Pemble -- President and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from Ivan Feinseth with Tigress Financial Partners. Your line is open.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

Thank you. Thank you for taking my call and congratulations on another great quarter and being named one of the top five places to work.

Cliff Pemble -- President and Chief Executive Officer

Thanks, Ivan.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

I have a few product questions and platform questions. First, at this year's Connect IQ Developer Conference, like 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.

Cliff Pemble -- President and Chief Executive Officer

Yeah, so our Connect IQ Summit was actually very, very good. We had strong attendance same as the previous year. 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 is 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.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

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 a flick of formalized e-commerce process on the platform?

Cliff Pemble -- President and Chief Executive Officer

Yeah, so we're evolving the platform to be able to support monetization. And as you say right now, it's not strongly linked in terms of helping our app developers that we're working on a roadmap that gets us there. And I think in the coming year we should have improvements.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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

Ivan Feinseth -- Tigress Financial Partners -- Analyst

And as far as product line, are you looking to launch a refresh to Zumo or what is your thoughts on the Zumo Line?

Cliff Pemble -- President and Chief Executive Officer

Well, the Zumo Line is an integral part of our overall PND line up. And so we have a strong roadmap there as we do in the other areas as well, Truck RV.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

And then like the Garmin Connect 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?

Cliff Pemble -- President and Chief Executive Officer

Yeah, we invested some effort in understanding OBD connections to the vehicle. And of course on our OEM side, we have a lot of excess to the vehicle in terms of can buses and things. But in terms of aftermarket diagnostics, it's somewhat of a crowded market. And so we've 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.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

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.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

Thank you. 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 US and the marketing strategy behind it?

Cliff Pemble -- President and Chief Executive Officer

Yeah, 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 at Garmin company. In terms of our specific product focus, our emphasis 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 US 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.

Ivan Feinseth -- Tigress Financial Partners -- Analyst

Thank you very much. Congratulations again.

Cliff Pemble -- President and Chief Executive Officer

Thanks, Ivan.

Operator

Thank you. Our next question comes from Erik Woodring with Morgan Stanley. Your line is open.

Erik Woodring -- Morgan Stanley -- Analyst

Hey, guys. Congrats on the quarter. Good morning. I just want to get at first quarter revenue growth of 8% was strong, but in the past you've talked about how the revenue of product launches and new product launches will essentially help accelerate 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?

Cliff Pemble -- President and Chief Executive Officer

Yeah. 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.

Erik Woodring -- Morgan Stanley -- Analyst

Okay. Thanks. 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 dry line PND that was launched? Or was there something else that contributed, any puts and takes in understanding any puts and takes would be helpful there. Thank you.

Cliff Pemble -- President and Chief Executive Officer

Drive certainly helped, that was a selling 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 TV and motorcycle areas. And that helps 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.

Erik Woodring -- Morgan Stanley -- Analyst

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

Cliff Pemble -- President and Chief Executive Officer

Well hard to say, again we're waiting to see more data as we experienced 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.

Erik Woodring -- Morgan Stanley -- Analyst

Okay. Great. Thank you for -- thank you for the time.

Cliff Pemble -- President and Chief Executive Officer

Yeah, thanks, Erik.

Operator

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

Teri Seck -- Manager-Investor Relations

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

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. Have a wonderful day.

Duration: 33 minutes

Call participants:

Teri Seck -- Manager-Investor Relations

Cliff Pemble -- President and Chief Executive Officer

Douglas Gerard Boessen -- Chief Financial Officer and Treasurer

Benjamin Bollin -- Cleveland Research -- Analyst

Richard Valera -- Needham & Company -- Analyst

Charlie Anderson -- Dougherty & Company LLC -- Analyst

Paul Chung -- JP Morgan -- Analyst

Nikolay Todorov -- Longbow Research -- Analyst

Ivan Feinseth -- Tigress Financial Partners -- Analyst

Erik Woodring -- Morgan Stanley -- Analyst

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