- Revenue Growth: Consolidated revenue of $1.815 billion, up 20% year over year.
- Operating Income: Record second quarter operating income of $472 million, up 38% year over year.
- Fitness Segment Growth: 41% increase to $605 million, driven by strong demand for advanced wearables.
- Margins Expansion: Gross margin of 58% and operating margin of 26%, reflecting strong profitability.
- Updated Guidance: Full-year revenue guidance raised to $7.1 billion with pro forma EPS of $8 per share.
Business Segments Performance
The company's growth was driven by strong performance across all its business segments. The fitness segment saw a 41% increase in revenue, driven by strong demand for advanced wearables like the Forerunner 570 and 970. The aviation segment also saw growth, with a revenue growth estimate of 7% for the year. The marine market remains soft, but Garmin is delivering growth by providing innovative products and taking share in those categories.
Guidance and Outlook
The company is updating its full-year guidance, anticipating revenue of approximately $7.1 billion and pro forma EPS of $8 per share. The company expects growth to moderate in some segments, but is raising its revenue growth estimate for the fitness segment to 25% for the year. According to the management, "the company believes it is entering a new higher revenue growth paradigm, with auto OEM no longer a headwind but a tailwind to growth."
Valuation and Financials
At current prices, Garmin trades at a P/E ratio of 26.85, a P/B ratio of 5.18, and a P/S ratio of 6.23. The company's EV/EBITDA multiple is 21.2, and it offers a dividend yield of 1.44%. The company's free cash flow yield is 2.68%, and it has a ROIC of 17.56% and an ROE of 19.82%. With a net debt to EBITDA ratio of -1.01, the company has a healthy balance sheet.
Growth Strategy and Opportunities
The company's growth algorithm has evolved over the past ten years, with the emergence of the wearable market and the company's high levels of innovation and differentiation in its product lines driving growth. Garmin sees opportunities in all its segments, particularly in creating unique products that competitors aren't interested in or haven't thought of. The acquisition of MyLabs, a global market leader in timing and performance analysis for athletic, motorsports, and equestrian competition, is expected to contribute to the company's growth.