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GARMIN LTD (GRMN)·Q1 2025 Earnings Summary

Executive Summary

  • Record Q1 revenue of $1.54B (+11% YoY) with record operating income; gross margin 57.6% (-50 bps YoY) and operating margin 21.7% (+10 bps YoY). GAAP EPS $1.72; pro forma EPS $1.61 .
  • Versus S&P Global consensus, revenue slightly beat while EPS (pro forma/normalized) missed: Revenue $1,535.1M actual vs $1,528.7M estimate*; Primary EPS $1.61 actual vs $1.68 estimate* .
  • FY25 guidance updated: Revenue raised to ~$6.85B (from $6.80B), gross margin trimmed to 58.5% (from 58.7%), operating margin to 24.8% (from 25.0%), pro forma EPS maintained at $7.80; tax rate 16.5% unchanged .
  • Key narrative: tariff headwinds (~$100M cost) offset by FX tailwinds (~40% non-USD revenue) and mitigations; demand remains solid (Marine softer); subscription initiatives (Connect+) reinforce LT monetization optionality .

Estimates marked with * are values retrieved from S&P Global.

What Went Well and What Went Wrong

  • What Went Well

    • Broad-based growth: 3 of 5 segments delivered double-digit growth (Outdoor +20%, Fitness +12%, Auto OEM +31%); record Q1 operating income $333M (+12% YoY) .
    • Strategic execution and wins: Pilatus selected G3000 PRIME for PC-12 PRO and PC-7 MKX; named Supplier of the Year by Cirrus and IBBI, highlighting Aviation/Marine franchise strength .
    • Subscription catalyst: Launch of Garmin Connect+ premium plan with AI-based “Active Intelligence” insights; management emphasizes long-term strategy for premium features without removing existing free functionality .

  • What Went Wrong

    • Marine softness: Revenue -2% YoY due to timing of promotions; some demand caution embedded; management expects flat 2025 revenue for Marine .
    • EPS miss vs Street (normalized): Pro forma EPS $1.61 below S&P Global Primary EPS consensus $1.68*, despite revenue beat .
    • Tariff overhang: Assumes ~$100M cost impact prior to mitigations; mix of baseline 10% tariffs on non-U.S. manufactured goods (incl. Taiwan) and incremental 145% on direct China imports; introduces uncertainty and modest demand risk .

Financial Results

Consolidated summary (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($USD)$1,586,022,000 $1,822,560,000 $1,535,099,000
Gross Margin %60.0% 59.3% 57.6%
Operating Income ($USD)$437,475,000 $516,082,000 $332,824,000
Operating Margin %27.6% 28.3% 21.7%
GAAP Diluted EPS ($)$2.07 $2.25 $1.72
Pro forma Diluted EPS ($)$1.99 $2.41 $1.61
Free Cash Flow ($USD)$219,411,000 $399,188,000 $380,726,000

Q1 2025 vs S&P Global consensus

MetricConsensus*ActualResult
Revenue ($USD)$1,528,709,000*$1,535,099,000 Beat
Primary EPS ($)$1.6769*$1.61 Miss

Estimates marked with * are values retrieved from S&P Global.

Segment performance (YoY)

SegmentNet Sales Q1 2024 ($USD)Net Sales Q1 2025 ($USD)YoY %Operating Income (Loss) Q1 2024 ($USD)Operating Income (Loss) Q1 2025 ($USD)Q1 2025 Seg. GM%Q1 2025 Seg. Op%
Fitness$342,892,000 $384,722,000 +12% $68,133,000 $77,712,000 57% 20%
Outdoor$366,193,000 $438,496,000 +20% $106,950,000 $128,788,000 64% 29%
Aviation$216,855,000 $223,114,000 +3% $52,134,000 $48,356,000 75% 22%
Marine$326,736,000 $319,438,000 -2% $87,692,000 $86,865,000 58% 27%
Auto OEM$128,973,000 $169,329,000 +31% $(16,499,000) $(8,897,000) 18% N/A

KPIs and cash flow

KPIQ1 2024Q1 2025
Operating Cash Flow ($USD)$435,305,000 $420,788,000
Free Cash Flow ($USD)$402,137,000 $380,726,000
Total Operating Expenses ($USD)$503,729,000 $551,721,000
Effective Tax Rate15.6% 14.5%
Cash & Marketable Securities (end of Q)—~$3.9B
Dividend Paid (Q)—~$145M
Share Repurchases (Q)—$27M; ~$210M remaining authorization (through Dec-2026)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025~$6.80B ~$6.85B Raised
Gross MarginFY 202558.7% 58.5% Lowered
Operating MarginFY 202525.0% 24.8% Lowered
Pro forma EPSFY 2025~$7.80 ~$7.80 Maintained
Pro forma ETRFY 202516.5% 16.5% Maintained
Free Cash FlowFY 2025—~$1.1B (company expectation) New detail
Capital ExpendituresFY 2025—~$350M (company expectation) New detail
Fitness revenue growthFY 2025Prior estimate (not disclosed)~15% Raised
Outdoor revenue growthFY 2025~10% (implied maintained)~10% Maintained
Aviation revenue growthFY 2025~5% (implied maintained)~5% Maintained
Marine revenue growthFY 2025Prior view (not quantified)Flat vs 2024 Lowered
Auto OEM revenue growthFY 2025~7% (implied maintained)~7% Maintained
DividendFY 2025Proposed $3.60/share Recommend $3.60/share (vote Jun 6) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3’24 and Q4’24)Current Period (Q1’25)Trend
Tariffs/macroNo tariff framework; strong 2024 momentum; raised FY24 outlook (Q3’24) -; FY24 finished strong; introduced FY25 guide (2/19) .Explicit tariff assumptions: 10% baseline on non-U.S. mfg; 145% on direct China imports; ~$100M cost; FX tailwind (~40% non-USD sales) offsets; modest demand reduction assumed .New headwind offset by FX/mitigations; cautious but confident.
AI/technology initiativesProduct cadence (fenix 8 AMOLED; new features), innovation awards (Q3’24) -.Launched Garmin Connect+ premium plan with AI “Active Intelligence” insights; long-term monetization approach .Building subscription layer; LT revenue optionality.
Product performanceStrong wearables (Outdoor, Fitness) and OEM domain controllers growth in Q3/Q4 - .Outdoor +20%, Fitness +12%; Auto OEM +31% (BMW shipments), Marine -2% (timing) - .Wearables/Auto strength continues; Marine softer.
Regional trendsEMEA outperformance, broad growth in Q3 -.Growth across all regions: EMEA +23%, APAC +9%, Americas +4%; Americas mix impacted by weaker Marine/Aviation growth .EMEA leading; Americas moderated.
R&D executionContinued investment; high margins in Q3/Q4 .OpEx +10% YoY on personnel; several launches (Instinct 3, Montana series, aviation/Marine products) - .Sustained pipeline and expense discipline.
Regulatory/legalN/ANo material updates noted.Stable.
SubscriptionsN/AConnect+ launch; management will disclose subscription/software rev if it reaches 10% of total .Early innings; potential KPI ahead.

Management Commentary

  • “We delivered another quarter of outstanding financial results… we remain optimistic because of the resilience and flexibility our vertically integrated and highly diversified business model offers.” – CEO Cliff Pemble .
  • Tariffs/FX: “~25% of our revenue is generated in the U.S. from products manufactured outside of the U.S.… assumptions include a 10% baseline tariff… [and] incremental 145% tariff on products and materials imported into the U.S. directly from China… ~40% of our revenue is generated in non-U.S. dollar currencies… estimate… ~$100M increased costs… pro forma EPS unchanged at $7.80 as FX and mitigations offset” .
  • Demand: “No indication that retailers are overstocking… sell-through has been very strong… the channel or the consumers are [not] out of balance because of the trade concerns” .
  • Pricing/mitigations: “Everything is on the table… evaluating pricing… case by case… maintain our market share and optimize overall profit dollars” .
  • Segment outlook specifics: Fitness growth estimate raised to ~15% (FX and product pipeline); Outdoor maintained ~10%; Aviation maintained ~5%; Marine now flat; Auto OEM maintained ~7% .

Q&A Highlights

  • Tariff mitigations and cadence: Short-term sourcing actions already underway; timing effects in Q2 include inventory on hand without tariffs; many “puts and takes” as tariffs take effect .
  • Connect+ strategy: AI-based insights are the catalyst for premium tier; success measured long-term; no features removed from free tier; early response positive .
  • Marine dynamics: Q1 down on promotion timing; 2024 national retailer buy-in shifted from Q1 to Q2; softness risk from tariff “shock factor,” hence flat FY view .
  • Geography mix: EMEA outperformance driven by wearables; Americas moderated due to Marine/Aviation mix; Auto OEM European deliveries (Poland, BMW) boosted EMEA .
  • Auto OEM profitability: Medium-term gross margin model high-teens to ~20% intact; working with OEM partners on tariff cost recovery .

Estimates Context

  • Q1 2025 revenue slightly beat S&P Global consensus ($1,535.1M actual vs $1,528.7M estimate*) while normalized EPS missed ($1.61 actual vs $1.68 estimate*) .
  • The EPS miss reflects foreign currency gains excluded from pro forma EPS ($0.11/share impact), per company reconciliation; GAAP diluted EPS was $1.72 .
  • FY25 EPS guide unchanged at $7.80 despite ~$100M tariff cost, supported by FX tailwinds and mitigations; Street may adjust segment growth mix (Marine flat; Fitness up) and margin assumptions (GM 58.5%, OM 24.8%) .

Estimates marked with * are values retrieved from S&P Global.

Key Takeaways for Investors

  • Quality quarter with resilient demand: record Q1 revenue and operating income, broad-based segment growth (ex-Marine), and strong cash generation (FCF ~$381M) provide cushion amid tariff uncertainty .
  • Near-term narrative: revenue beat/normalized EPS miss vs consensus; focus shifts to tariff mitigation pace, FX tailwinds realization, and Q2-Q3 promotion timing (Marine) .
  • Guidance resilient: EPS held at $7.80 despite ~$100M tariff headwind; Street likely to moderate FY margin assumptions to company’s 58.5% GM/24.8% OM and recalibrate segment growth (Marine flat; Fitness up) .
  • Strategic catalysts: Connect+ premium (AI insights) opens recurring revenue lane; watch for subscription disclosure once it approaches 10% of sales threshold .
  • Aviation/Auto OEM sustain LT optionality: multiple OEM wins (Pilatus PC-12 PRO, PC-7 MKX) and BMW domain controllers underpin growth; Auto OEM margin framework intact with partner cost recovery discussions .
  • Capital returns intact: recommended $3.60/share dividend for FY25 and ongoing buybacks ($210M remaining authorization) support TSR in volatile macro .
  • Watch list into next prints: tariff implementation timing/price actions by category, EMEA wearables momentum, Marine demand elasticity, and subscription adoption metrics for Connect+ .