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
Executive
Clifton Albert Pemble

for the underwater adventurer. Descent has been well received, and we are excited for the opportunities we have in this new product category.

Also, we recently announced the tactix Charlie, a tactical-themed smartwatch with unique features such as night vision compatibility and Jumpmaster mode for skydivers. Looking next to fitness. Revenue increased 20%, driven primarily by growth in the advanced wearable category. Gross margin improved to 58% due to product mix. Operating income improved to 20%, resulting in operating income growth of 81%.

During the quarter, we began shipping the Forerunner 645M, our first GPS running watch with integrated music and mobile payments. We recently announced several new cycling products, including the Edge 130 and the Edge 520 Plus. The Edge 130 is an entry-level cycling computer packed with features, and the Edge 520 Plus offers advanced mapping and navigation capabilities. We also announced the Varia RTL510, the latest in our series of products that focus on cycling safety.

We hosted our second annual Connect IQ Developer Summit, bringing together application developers and business partners to participate in hands-on workshop with our product managers and our engineers. The momentum behind Connect IQ is accelerating, with more than 54 million Connect IQ downloads to more than 8 million compatible devices shipped since inception.

And finally, just yesterday, we announced the collaboration with the University of Kansas Medical Center on multiple research projects exploring the use of wearable technology for the early detection of underreported health conditions such as sleep apnea and atrial fibrillation.

Turning next to aviation. Revenue increased 19%, driven by broad-based strength across the market. Gross and operating margins remained strong at 75% and 33%, respectively, resulting in operating income growth of 25% over the prior year. During the quarter, we started delivering our new TXi flight decks, including the version for the helicopter market. We also announced the first flight of the Citation XLS with the G5000 integrated avionics fleet. This represents a significant step forward on our path to certification.

Looking next at the marine segment. Revenue increased 9%, driven by our recent acquisition of Navionics. Excluding Navionics, our revenue was essentially flat year-over-year due to unfavorable weather conditions that have delayed the start of the boating season and due to the challenging comparisons in the first quarter of 2017, when our marine segment grew 26%. Gross margin improved to 59%, while operating margin declined to 12%. During the quarter, we announced the GCV 20, an ultrahigh definition sonar offering high-resolution imaging at greater depths.

Also, we were selected as the exclusive marine electronics supplier to the Independent Boat Builders cooperative known as IBBI. IBBI is the boating industry's largest purchasing cooperative and is comprised of a 19-member network of leading brands. Beginning in 2019, members of the IBBI will get direct access to our full line of marine electronics.

Looking finally at the auto segment. Revenues were down 12% for the quarter due to the ongoing decline of the PND market, partially offset by growth in