Garmin Ltd. (NASDAQ:GRMN) Q2 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 10:30 am ET

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Garmin Ltd. (NASDAQ:GRMN) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Good morning, ladies and gentlemen, and welcome to the Garmin Limited's Second Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference might be recorded.

I would now like to turn the conference over to your host, Ms. Teri Seck. Ma'am?

Executive
Teri Seck

Good morning. We would like to welcome you to Garmin Limited's second quarter 2020 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 transcripts will also be available on our website.

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 margins, operating margins, future dividends, market shares, product introductions, future demand for our products, and plans and objectives, and the future impact of actual or potential cyberattacks 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 then contained in our Form 10-K and second quarter 2020 Form 10-Q filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means the results could change at any time and any statement about the impact of COVID-19 on the company's business results and outlook is the best estimate based on the information available as of today's date.

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 Clift Pemble.

Executive
Clifton Pemble

Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin reported strong second quarter financial results during a period of extreme uncertainty created by the COVID-19 pandemic. As reported last time, the onset of the coronavirus pandemic and measures taken to control the spread of the virus had a significant impact on the economy, on retailers and our consumers. The month of April was particularly challenging for every business, including Garmin. However, conditions steadily improved, and we ended the quarter with significant growth momentum.

Consolidated revenue came in at $870 million, down only 9% on a year-over-year basis. We experienced strong growth from certain online channels, including Garmin.com, which partially offset weakness from retailers who were disrupted during the early phases of the pandemic. We also delivered strong profitability. Gross margin was $59.3%. Operating margin was 21.7% with operating income of $188 million for the quarter. This resulted in GAAP EPS of $0.96 and pro forma EPS of $0.91 for the quarter.

Doug will provide additional financial details in a moment. But first, I'd like to make a few remarks on the performance of our business segments. Starting with the Fitness segment, revenue increased 17%, driven by strong consumer interest in health and fitness. Sales of advanced