Garmin Ltd. (NASDAQ:GRMN) Q1 2018 Earnings Conference Call Transcript

May 02, 2018 • 10:30 am ET

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Garmin Ltd. (NASDAQ:GRMN) Q1 2018 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to Garmin's First Quarter 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be provided at that time. (Operator Instructions) I'd now like to turn the conference over to Teri Seck. Please go ahead.

Executive
Teri Seck

Good morning. We would like to welcome you to Garmin Limited First Quarter 2018 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.

As a reminder, we adopted the new US GAAP revenue standard in the first quarter of 2018. The prior periods presented here have been restated to reflect adoption of this new standard. 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 introductions, 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.

Executive
Clifton Albert Pemble

Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin recorded revenue for the first quarter of 2018 with double-digit growth in revenue, profit and EPS. Consolidated revenue came in at $711 million, up 11% over the prior year. Outdoor, fitness, aviation and marine collectively increased 18% year-over-year and contributed 80% of total revenues.

Gross margin improved year-over-year to 60% due to segment and product mix. Operating margin improved to 20%, while operating income increased 22%. This resulted in GAAP and pro forma EPS of $0.68, with pro forma EPS growth of 31% over the prior year. We are pleased with our first quarter results, which delivered growth in revenue, profits and earnings.

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. Doug will discuss our financial results in greater detail in a few minutes, but first, I'll provide a few remarks on our performance in each business segment.

Starting with outdoor. Revenue increased 24% on strong demand for outdoor wearables. The segment generated strong gross and operating margins of 65% and 30%, respectively, while operating income grew 27% over the prior year. During the quarter, we began shipping the Descent dive watch. Descent brings innovation to the dive computer market by combining smartwatch utility with dive computer functions