Garmin - Earnings Call - Q2 2025

Executive Summary

• Record Q2 results: revenue $1.81B (+20% YoY), gross margin 58.8%, operating margin 26.0%, GAAP EPS $2.07, pro forma EPS $2.17; raised FY25 guidance to revenue ~$7.1B and pro forma EPS ~$8.00.
• Significant beat vs consensus: revenue $1.81B vs $1.70B*, pro forma EPS $2.17 vs $1.90*; broad-based strength with double-digit growth in every segment; fitness led at +41% YoY.
• Segment growth guidance raised: Fitness to +25%, Aviation to +7%, Marine to +5%, Auto OEM to +10%; Outdoor maintained at +10%.
• Catalysts: MYLAPS acquisition to integrate race-day timing with Garmin devices; Autoland certified for Cirrus SR G7+; SmartCharts launched; new Forerunner 570/970 and Venu X1 driving advanced wearables demand.

What Went Well and What Went Wrong

What Went Well

• Fitness outperformance: +41% revenue YoY to $605M, margins 60% gross/33% operating; “advanced wearables” drove strength, including new Forerunner 570/970 and Venu X1.
• Margin expansion: gross margin 58.8% (from 57.3%), operating margin 26.0% (from 22.7%), operating income +38% YoY to $472M; CEO: “double-digit growth in every segment”.
• Guidance raise despite tariff headwinds: FY25 revenue ~$7.1B, pro forma EPS ~$8.00; CFO noted tariffs impact offset by FX and mitigations; effective tax rate raised to 17.5%.

What Went Wrong

• Free cash flow compression: Q2 FCF $127M vs $218M prior year; management cited inventory build to support demand and mitigate tariffs.
• Auto OEM margin pressure: segment gross margin 17% and operating loss of $10M despite +16% revenue; continued investment ahead of next major program ramp in 2H26.
• FX and tariffs create mixed effects: FX benefited top-line, but stronger New Taiwan dollar pressured product costs; OpEx as % of sales expected to increase ~30 bps in FY25.

Transcript

Speaker 4

Thank you for standing by and welcome to the Garmin Ltd. second quarter 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you'd like to ask a question during this time, simply press STAR followed by the number one on your telephone keypad. If you would like to withdraw your question again, press STAR one. Thank you. I'd now like to turn the call over to Teri Seck, Director of Investor Relations. You may begin.

Speaker 6

Good morning. We would like to welcome you to Garmin Ltd.'s second quarter 2025 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. This earnings call includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding our future financial position, revenues, segment growth rates, earnings, gross margins, operating margins, future dividends or share repurchases, market shares, product introductions, foreign currency, tariff impacts, 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-Q and in our Form 10-K filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Ltd. 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.

Speaker 5

Thank you Teri and good morning everyone. As announced earlier today, Garmin delivered another quarter of outstanding financial results with strong growth in consolidated revenue, operating profit and earnings. Consolidated revenue increased 20% exceeding $1.8 billion which is a new second quarter record and we experienced double-digit sales growth in every business segment. Gross and operating margins expanded to 58.8% and 26% respectively, resulting in record second quarter operating income of $472 million, up 38% year over year, and pro forma EPS of $2.17, up 37% year over year. Yesterday we announced the acquisition of MYLAPS, a global market leader in timing and performance analysis for athletic, motorsports and equestrian competition. MYLAPS supports an impressive customer base including the Boston Marathon, Ironman and Formula One Racing to name just a few.

We believe that the combination of Garmin devices with MYLAPS timing and race management technology will provide a comprehensive experience for our passionate customers from training to race day while also expanding our addressable market. We are very excited to welcome the MYLAPS team to Garmin and look forward to all that we can accomplish together.

We are very pleased with our results.

So far in 2025 which have exceeded our expectations. From our vantage point, consumers have been resilient and demand for our highly differentiated products has been robust. Given our strong performance, we are updating our full year guidance. We now anticipate revenue of approximately $7.1 billion and pro forma EPS of $8 per share. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first I'll provide a few remarks on the performance of each business segment. Starting with Fitness, revenue increased 41% to $605 million with growth led by strong demand for advanced wearables. Gross and operating margins expanded to 60% and 33% respectively, resulting in operating income of $198 million. During the quarter we launched the Forerunner 570 and Forerunner 970 with new training features and personalized training plans from Garmin Coach for running and triathlons.

These new devices have been enthusiastically embraced by the market and helped drive the remarkable second quarter financial performance of the segment. We also launched the new Venu X1 with an ultra thin case and class leading 2 inch display resulting in a sleek lightweight design that is easy to read and packed with our most popular features. Also during the quarter we launched several new category defining products including the Index Sleep Monitor, the Tacx Alpine Gradient Simulator and the VariaView Bike Headlight with an integrated 4K resolution camera. Given the first half performance of the fitness segment and the continued demand we are expecting for our advanced wearables, we are raising our revenue growth estimate to 25% for the year. Moving to outdoor, revenue increased 11% to $490 million with growth driven primarily by Adventure watches.

Gross and operating margins expanded to 66% and 32% respectively, resulting in operating income of $158 million. During the quarter we launched the Instinct 3 Tactical Edition with a bright AMOLED display and metal reinforced bezel, a built in LED flashlight and support for popular new activities such as rucking. Also during the quarter we launched new Tread All-Terrain Navigators that offer larger touchscreens and additional mapping options to enrich off road adventures. We are pleased with the performance of the outdoor segment so far this year. Looking forward we expect growth to moderate as we pass the one year anniversary of the highly successful Fenix 8 launch. With this in mind, we are maintaining our revenue growth estimate of 10% for the year. Looking next at aviation, revenue increased 14% in the second quarter to $249 million with growth contributions from both OEM and aftermarket product categories.

Gross and operating margins expanded to 74% and 25% respectively, resulting in operating income.

Of $63 million.

During the quarter, Embraer recognized Garmin as the top supplier in the electrical and electronic systems category for the 10th consecutive year, validating the long term investments we have made creating innovative products and building strong relationships with our customers. We're also preparing for the future with game changing new products and features such as the recently announced G5000 Prime integrated flight deck for Part 25 aircraft and the addition of FAA Datacom to the GTN 750Xi Navigator, which expands the availability of modern digital communications to the aftermarket. We also launched Smart Charts, which has.

The potential to be one of the.

Most disruptive new products for aviation in quite some time. Using Smart Charts, pilots can see their position on context specific georeferenced charts, making instrument approaches much more intuitive and easier to fly. Also during the quarter we announced that Garmin Autoland was certified for the Cirrus SRG 7 Series, becoming the first piston powered aircraft equipped with this award winning safety system. Given the first half performance of the aviation segment, we are raising our revenue growth estimate to 7% for the year. Turning to the marine segment, revenue increased 10% to $299 million with growth across multiple categories led primarily by chart plotters. Gross and operating margins were 55% and 21% respectively, resulting in operating income of $63 million.

During the quarter we launched the GPSMAP 153x3 Chartplotters with an ultra wide display that offers as much display area as two separate 9 inch chart plotters, making information easier to read while maximizing the use of space in the instrument panel. Also during the quarter we launched the Quatix 8, our most advanced purpose built smartwatch for mariners. The marine market has easily surpassed our lowered expectations, demonstrating resilience and stability in an otherwise dynamic macroeconomic environment. Given our first half performance and the current trends in the market, we are raising our revenue growth estimate to 5%.

For the year.

Moving finally to the auto OEM segment. Revenue increased 16% to $170 million with growth driven primarily by increased shipments of domain controllers to BMW. Gross margin was 17% and the operating loss narrowed from the prior year to $10 million. We recently shipped our 1 millionth BMW domain controller from our US manufacturing facility, demonstrating our capability as a respected tier one supplier to the North American automotive market. We also continue to make progress on the launch of our next significant auto OEM program in the second half of 2026. Given the first half performance of the auto OEM segment, we are raising our revenue growth estimate to 10% for the year. That concludes my remarks. Next, Doug will walk you through additional details on our financial results.

Speaker 0

Doug thanks Cliff. Good morning everyone. I'd like to begin by reviewing our second quarter financial results. Provide comments on the balance sheet, cash flow statement, taxes, updated guidance. We post a revenue of $1,815,000,000 for second quarter representing a 20% increase year over year. Gross margin was 58.8%, 150 basis point increase. The prior quarter increase was primarily due to product mix. During the quarter the cost impact from tariffs was not significant, was more than offset by higher revenue associated with the weakness of the US dollar relative to other major currencies. Operating expense as a percentage of sales was 32.8%, 108 basis point decrease. Operating income was $472 million, 38% increase. Operating margin was 26%, 330 basis point increase. A prior year quarter our GAAP EPS was $2.07. Pro forma EPS was $2.17. Next we'll look at second quarter revenue by segment and geography.

In the second quarter we achieved double digit growth in all five our segments led by the fitness segment with outstanding growth of 41%. By geography we achieved double digit growth in all three of our regions led by 25% growth in EMEA, followed by 19% growth in Americas and 16% growth in APAC. Looking next at operating expenses, second quarter operating expense increased by $74 million or 14%. Research and development increased approximately $34 million. SG&A increased approximately $40 million compared to prior year quarter. Both increases were primarily due to personnel related expenses. A few highlights on the balance sheet, cash flow statement, and taxes. We ended the quarter with cash and marketable securities approximately $3.9 billion. Accounts receivable increased both year over year and sequentially to approximately $1 billion.

Following the seasonally strong sales, the second quarter inventory increased year over year and sequentially to approximately $1.8 billion. We are executing our strategy to increase the inventory of certain product lines, support strong customer demand, as well as mitigate the effects of potential increases in tariffs. During the second quarter 2025 we generated free cash flow of $127 million, $91 million decrease from the prior year quarter, primarily due to an increase in inventory. Capital expenditures for the second quarter 2025 were approximately $46 million, approximately $9 million higher than a prior year quarter. We expect full year 2025 free cash flow to be approximately $1.2 billion. Capital expenditures of approximately $350 million. During second quarter 2025, we paid dividends of approximately $173 million and purchased $67 million of company stock. At quarter end we had approximately $143 million remaining.

The share purchase program, which authorized December 2026, report an effective tax rate of 16.5% compared to 17.9% in the prior quarter. The decrease in effective tax rate is primarily due to the release of tax reserves. Turning next to our full year guidance, we estimate revenue of approximately $7.1 billion compared to our previous guidance of $6.85 billion. We expect gross margin to be approximately 58.5% consistent with our previous guidance. We expect the impact from tariffs to be lower than we previously estimated. However, this favorable impact will be offset by unfavorable foreign currency impacts on product costs due to strengthening of the New Taiwan dollar. We expect our operating margin to be approximately 24.8% consistent with our previous guidance. Also expect a pro forma effective tax rate of 17.5% compared to our previous guidance of 16.5% which incorporates the impact from the new US tax bill.

We expect the new tax bill will result in a decrease in US tax deductions and credits in 2025 primarily due to change in capitalization requirements of certain R&D costs. Expected pro forma earnings per share is approximately $8.00 for our previous guidance of $7.80. That concludes our formal remarks. Rob, can you please open the line for Q and A?

Speaker 4

Thank you. We will now begin the question and answer session. If you would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press Star one. Again, your first question comes from the line of Joseph Lima Cardoso from JP Morgan. Your line is open.

Hey, thank you and good morning everyone. Maybe just for my first question. Obviously had another strong fitness performance this quarter. I'm trying to get a sense of the outperformance though, particularly as it relates to any potential influences from channel fill. You obviously talked about a lot of new products in the quarter and then potentially any pull forward that you might have visibility into and whether that is having any impact on the back half outlook, and then I have a quick follow up. Thank you.

Speaker 5

Good morning Joe. In terms of channel fill, there's always.

Some channel fill impact when a new product comes out. We have a broad product line so it was not a significant factor in driving outperformance. In terms of pulling forward of demand, we really do not see any of that happening. Retailers are not willing to take big bets on inventory and they also have credit limits that are in place that prevent exceeding limits that we set. We feel like the channel is well managed. We also monitor the registration of our products and we can compare our sell in versus sell out and we really do not see any signs of stockpiling.

Got it. Appreciate the color there, Cliff. Maybe for this second question, just relative to the full year outlook, the implied second half growth for revenue and gross profit is roughly in the 10% range, plus or minus, depending on revenue or gross profit you're looking at there. You're guiding operating profit dollars to be flat. Can you just flesh that out a bit, like what are the drivers that's kind of leading to this, like a little bit atypical leverage that we're used to seeing from Garmin? Just maybe stacking on to that question, can you guys size what you're now embedding for tariffs and then FX relative to the full year guide?

Speaker 4

Thank you.

Speaker 0

Sure. So give you a little bit background on the operating expense assumptions and these are for the full year as a percentage of sales. Now we are expecting that to increase about 30 basis points, maybe about 10 basis points in R&D and 20 basis points in SG&A. And that R&D increase is primarily due to headcount increases as well as normal merit as primarily to develop new features, innovation and new products. As it relates to SG&A that's going up primarily to build in the infrastructure for that growth. A few additional items are driving operating expense primarily in the back half here, one of which is a foreign currency impact. We talked about the foreign currency impacts on the top line revenue but also there will be increases in expenses due to those foreign currency impacts. Also we recently announced the acquisition of MYLAPS.

So we'll have the additional expenses relating to MYLAPS in the back half. Also given our strong performance we have, you know, we have increased performance based compensation in there. Another one due to the increased revenue is due to co-op advertising that we do have. As it relates to tariffs, you know, we're currently assuming basically the current rates that are effective for that. Our tariff estimate is lower now today than it was, you know, in April, primarily because of change in some of those tariffs as well as, you know, not having a tariff on wearables from that standpoint. That's really offset, you know, when the gross margin line item by unfavorable impact on a gross margin due to the strength of a New Taiwan dollar which will increase our product costs. That we have standpoint.

As it relates to FX overall, you know, the FX, you know, has moved during the year. Right now we're expecting, you know, FX on a top line revenue, you know, to be a favorable item as it was here in Q2 for us.

Nope. Very clear. Doug, thank you, thank you for all that color there. Really appreciate it.

Absolutely.

Speaker 4

Your next question comes from the line of Erik Woodring from Morgan Stanley. Your line is open. Great.

Speaker 1

Thanks so much for taking my question, guys. I have two, maybe Cliff, I'll start with you. And just, you know, taking a very big step back, looking at your growth CAGR over the last 10 years, you know, revenue growth has been in and around 7-8%. EPS has been, call it 11 or 12%, clear leverage in the model. You know what's interesting about this year is that, you know, both last year and this year you're clearly outperforming that growth rate. But there is some deleverage in the model which you just kind of explained. But I guess my big picture question is, do you believe that Garmin is entering kind of this new higher revenue growth paradigm, especially as auto OEM is not the headwind that it once was, but in fact a tailwind to growth.

Can you maybe just unpack how you're thinking about Garmin's growth algorithm relative to history? If there is kind of a true structural change in that growth rate today relative to history. And then a quick follow up please.

Thanks.

Speaker 5

Yeah, I think we've made a lot of progress and evolution in our company over the past 10 years. In the past 10 years, the wearable market has emerged and blossomed. While we're a smaller market share player, we're gaining share and the market is relatively stable. That's been a really good opportunity for us. We entered that market because we believed that we had something to offer there. We have high levels of innovation and differentiation in our product lines that we believe would drive growth. We continue to see that as an opportunity. All over the company and in our segments we see opportunities in every one of them. Consequently, we're simply running as fast as we can towards those opportunities. Especially when it involves creating unique products that either our competitors aren't interested in or haven't thought of.

We try to be a class leader when it comes to both existing product categories and creating new product categories. We're excited, optimistic about the future. We believe that there's more work to be done and we'll continue investing and working hard to achieve it.

Speaker 1

Okay, all right, that's super helpful. Maybe as a follow up, you know, we've seen Garmin make some relatively significant price hikes across a number of different kind of smart wearable products over the last, let's call it year plus. What have you learned about the elasticity of demand of your customer base? And how does that inform your or Garmin's ability to maybe take more price in the future? How should we think about the relative pricing power of the consumer wearables business?

Speaker 2

Please.

Thank you.

Speaker 5

I probably would take exception to significant price hikes in the past year. What we've done is we've introduced new product lines with new features that can command a higher price point because they do more for the customer. We aren't necessarily moving prices on existing categories of products and existing SKUs. We're doing innovation. We're creating new utility for the customer that they're willing to step up and pay for. Unique products innovation is something that customers always love and we've been successful in doing that. In terms of elasticity, I think when we introduce a product at the higher end, you know, our strategy is to continue to push and promote the products that it overlaps with and ultimately replaces.

We have a 1, 2 strategy where we can promote products that have been in the market a while and play on the value side while at the same time offering new products with innovation and at higher price points.

Speaker 1

Okay, super helpful. Maybe Doug, just one clarification. Question was just confirming that within the calendar 2025 guide, both overall and at the segment level, the acquisition that you announced over Nice is fully included in that guide. That would not be incremental. Just wanted to get that one clarification.

Speaker 0

Yeah, MYLAPS is actually factored into guidance from the top line as well as the expenses.

Speaker 4

Correct.

Speaker 1

Okay, super. Thanks so much guys.

I appreciate it.

Speaker 5

Thank you.

Speaker 4

Your next question comes from the line of Jordan Lyonnaise from Bank of America. Your line is open.

Hey, good morning.

Speaker 1

Thank you for taking the question. Could you guys talk a little bit more about MYLAPS? What you're seeing the opportunity is where you're expecting synergies just across the segments.

Speaker 5

MYLAPS is a company that specializes in timing of competitive events, whether they're running events, triathlons, auto racing, or even horse racing. Their equipment and their services are very critical, especially to some of those high visibility events that are out there. There's a significant overlap with their market interest and our interest in terms of particularly the running and triathlon cycling racing events. Today, users of our products do a lot of training and then when they go to race day, they use our devices, but the official timing is somewhat separate and disconnected from the devices that they're using during the race. We see an opportunity to merge the experiences from the training that takes place leading up to an event through the actual participation in the event itself.

We can do it in a dynamic and integrated way because we now have access to both the on-race information as well as the official timing information.

Got it.

Speaker 1

Thank you so much.

Speaker 4

Your next question comes from the line of Ivan Philip Feinseth from Tigris Financial Partners. Your line is open.

Speaker 2

Thanks for taking my question and congratulations on another great quarter. I have two questions. Recently, Health Secretary RFK has been very outspoken talking about his vision for smart wearables as an integral part of helping people manage their health. What are your thoughts and, you know, the opportunities you see for Garmin because you have a diverse line of wearables with a lot of proprietary measurements as well as, you know, the Connect app and the Garmin health platform?

Speaker 5

Our thoughts are one of excitement. You know, we have always believed in the utility of wearable devices to help people observe and manage their health. You can't change what you can't measure. Wearables play an integral part of that. We are really excited about the fact that we have a very diverse product line. There is not one size fits all for every customer. Instead, we offer a range of things that appeals to somebody's lifestyle and their goals. I think it presents a significant opportunity for us. Of course, we are at the forefront in terms of sensor measurements and creating health metrics for people that are useful and actionable. We believe there is a lot of opportunity going forward.

Thanks.

Speaker 2

My second question is the next big thing in smart wearables is glasses that a lot of people believe they will be as ubiquitous as cell phones and watches. What do you see as your opportunity, especially for a lot of the ones that are on the market right now, that do not have screens in the display that is being talked about coming to integrate your data from your watch into that for, let's say, when you're running? Also, a while back you did make a device that clipped onto glasses that kind of created a heads up display into a pair of glasses. What are your thoughts on opportunities in that area?

Speaker 5

I think it remains to be seen. You know, glasses have come and gone once and the utility and the concerns around the use of those in public have always come up in the context. I'd say it's a wait and see thing. I think people want choices when it comes to things they wear, including watches and glasses. There may be some special use cases for those. In general we believe that the utility of wearable is still very strong.

Speaker 2

Thanks and congratulations again.

Speaker 5

Thank you.

Speaker 4

Your next question comes from a line of Tim Long from Barclays. Your line is open.

Thank you. Two. Also, if I could first, maybe if you could touch a little bit on fitness category, any color you have on the strength there, how it's looking from kind of repeat users or new install base for Garmin, if you have any color there. Then secondly, if you could just dig into Europe, you highlighted pretty strong growth there. It's been several quarters of outperformance. Maybe dig into what's driving that and how sustainable that growth can be there. Thank you.

Speaker 5

Okay, in terms of fitness categories, all.

The categories were strong. I would say that advanced wearables, as we mentioned in our comments, was the biggest driver and we did call out running, specifically the 400, 570 and 970. Although running was not really the only driver. We saw strength across all of our products, including what we call our advanced wearables, which is our Venu and vivoactive line. Those were very, very strong. In terms of repeat users versus new users, we're seeing a stronger growth in the new user category. New people coming to Garmin for the first time. We are excited by that. It means that people are recognizing that we offer something different and are coming to us for a solution. In terms of Europe performance, I think if you normalize for FX, you'd probably see that Europe was pretty much in line with the other geographies.

I think FX had part of the responsibility for the outperformance in Europe.

Okay, thank you.

Thank you.

Speaker 4

Your next question comes from the line of David McGregor from Longbow Research. Your line is open.

Hey, good morning, this is Joseph Nolan on for David. The marine market remains relatively soft, but you guys continue to deliver growth there. Can you just talk about some of the factors driving that growth and just what you what's giving you confidence in raising the guide there?

Speaker 5

I think growth in marine, you know, for sure, the market has been a little bit towards the downside. We feel like it's been stabilizing. It has faced a lot more uncertainty as people try to process, especially boat builders, the issues of tariffs that affect.

Them as well as consumer sentiment.

In general, we've seen stable demand for our products. Especially where we're providing products with unique innovation and differentiation, we're seeing people come to Garmin and taking share in those categories as well.

Got it. Okay. On the auto OEM side, you mentioned progressing as planned with the new program. Can you just give us an update on where that stands right now?

As I said, we're making good progress on that. We're in the process of validating our production lines globally to be able to support the new device and the new design and to prove that we can run at scale and deliver the quality. It is a very involved process working with the carmaker and quite a few, you know, test runs, pilot runs, evaluations and feedback that goes into making sure we're ready towards the end of 2026.

Got it. Thanks. I'll pass it on.

Speaker 4

Your next question comes from Alina. Benjamin James Bollin from Cleveland Research. Your line is open.

Good morning, everyone. Thanks for taking the question, Cliff. I was hoping we could start. Could you talk a little bit about how you're thinking about subscription momentum, the materiality, the progress, and what's the right way for us to assess your progress? Is it as simple as looking at the deferred? Is there something else you think we should look at? Curious your thoughts there? I have a follow up for Doug.

Speaker 5

Yeah, I think subscriptions are a growing.

Part of our business. We, of course, have not triggered the 10% threshold to disclose that yet, so we are not providing specifics on it. I would tell you that in every segment, we are looking for opportunities to build subscription and service revenues. Outdoor has been a big driver of.

That with our inReach system.

Fitness has been increasing a lot, both with our kids Bounce Wearable as well as Garmin Connect Plus. Then aviation is another one where we offer subscription services for content for the cockpit that is in growth mode. We are growing across the whole business and of course we are driving towards as much as we can, as much as we can grow there. Until it triggers that 10%, we will not disclose it.

Okay, Doug, a follow up. Just thoughts on working capital management both in 2Q and the balance of the year. Receivables and inventory up decent amount year over year and sequential. You've talked a little bit about the trend there. What you see, how's it going to plan and any thoughts for the balance of the year? That's it for me. Thank you.

Speaker 0

Yeah, you know, as it relates to our working capital, really going as planned, you know, as it relates to inventory, you know, our strategy is to have inventory for our increased customer demand, but also, you know, we've increased inventory to mitigate potential increases in tariffs. You know, there's currently no tariff on wearables and a potential increase in that. That was a strategy to increase the inventory as it relates to receivables. That's primarily, you know, related to the growth in our sales, which is a function of that. Maybe a little timing depending upon, you know, how the sales came in during the month. You know, everything, you know, from working capital is pretty well on plan. You know, from our free cash flow estimate for the year, we're expecting, you know, at $1.2 billion, which is very similar to what it was last year.

We're expecting to have increased operating earnings there. That will probably be offset by increase in inventory. Things are going as planned and we're reacting to the current environment that we're in.

Speaker 4

That concludes our question and answer session. I will now turn the call back over to Teri Seck for some final closing remarks.

Speaker 6

Thank you all for joining us today. As always, Doug and I are available for callbacks and we will all talk to you later. Have a great day. Bye.

Speaker 4

This concludes today's conference call. Thank you for your participation. You may now disconnect.