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GARMIN LTD (GRMN)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 delivered record revenue of $1.82B (+23% YoY) and margin expansion (gross 59.3%, operating 28.3%), driving pro forma EPS of $2.41 (+40% YoY) and operating income of $516M (+52% YoY) .
  • GAAP EPS fell 20% YoY to $2.25 due to lapping sizable discrete tax benefits in Q4 2023; pro forma tax rate rose to 15.6% as Switzerland statutory rates increased with global minimum tax requirements .
  • 2025 guidance initiated: revenue $6.80B (+8%), gross margin ~58.7%, operating margin ~25.0%, pro forma EPS ~$7.80, pro forma tax rate ~16.5% .
  • Board will recommend a 20% dividend increase to $3.60 per share (four quarterly payments of $0.90), a potential stock support catalyst, alongside many product launches planned in 2025 .

What Went Well and What Went Wrong

What Went Well

  • Broad-based growth: all five segments posted Q4 revenue growth (Outdoor +29%, Fitness +31%, Auto OEM +30%, Aviation +9%, Marine +5%), and consolidated revenue +23% YoY .
  • Margin expansion from scale and mix: gross margin improved to 59.3% (+100 bps YoY) and operating margin to 28.3% (+530 bps YoY); management cited lower product costs and operating leverage across segments .
  • New products resonating: launched Approach R50 golf launch monitor and Descent X50i large-format dive computer; Outdoor segment operating margin ~40% in Q4 and >$700M OI for FY as halo products drive demand .

What Went Wrong

  • GAAP EPS declined YoY to $2.25 (from $2.82) due to the absence of prior-year discrete tax benefits; pro forma effective tax rate increased to 15.6% vs 9.0% in Q4 2023 (pro forma) .
  • Auto OEM remained loss-making in Q4 (operating loss $9M; gross margin 17%); profitability still targeted mid-teens gross and mid-single-digit operating over time .
  • Industry softness in Marine and auto OEM macro backdrop (particularly higher-end automakers in China) temper near-term growth expectations despite share gains and OEM traction .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Billions)$1.48 $1.51 $1.59 $1.82
GAAP Diluted EPS ($)$2.82 $1.56 $2.07 $2.25
Pro forma Diluted EPS ($)$1.72 $1.58 $1.99 $2.41
Gross Margin (%)58.3% 57.3% 60.0% 59.3%
Operating Margin (%)23.0% 22.7% 27.6% 28.3%
Operating Income ($USD Millions)$340 $342 $437 $516

Segment Net Sales and YoY

SegmentQ4 2023 ($USD Millions)Q4 2024 ($USD Millions)YoY Change
Fitness$412.1 $539.3 +31%
Outdoor$486.4 $629.4 +29%
Aviation$217.1 $236.9 +9%
Marine$239.9 $251.3 +5%
Auto OEM$127.0 $165.7 +30%
Total$1,482.5 $1,822.6 +23%

KPIs

KPIQ2 2024Q3 2024Q4 2024
Operating Cash Flow ($USD Millions)$255.3 $258.0 $483.9
Free Cash Flow ($USD Millions)$218.2 $219.4 $399.2
Cash & Marketable Securities ($USD Billions)~$3.4 ~$3.5 ~$3.7
Share Repurchases ($USD Millions)$10 $20 $33
Effective Tax Rate (%)17.9% 17.9% 15.6%
Dividend Paid in Quarter ($USD Millions)~$144 ~$144 ~$144

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025N/A (new)~$6.80B Initiated
Gross MarginFY 2025N/A~58.7% Initiated
Operating MarginFY 2025N/A~25.0% Initiated
Pro forma Effective Tax RateFY 2025N/A~16.5% Initiated
Pro forma EPSFY 2025N/A~$7.80 Initiated
Annual Dividend per Share2025/26 cycle$3.00 (2024 approved) $3.60 (recommendation) Raised (+20%)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Product portfolio strength & launchesEdge 1050 cycling; broad wearables growth fēnix 8 AMOLED; Enduro 3; inReach Messenger Plus Approach R50; Descent X50i; robust lineup into 2025 Accelerating innovation; halo products in Outdoor
Gross margin drivers57.3%; mix/product cost benefits 60.0%; leverage across segments 59.3%; CFO expects consolidated GM ~flat in 2025; mix and component costs key Sustained strength; prudent 2025 GM outlook
EMEA regional outperformanceEMEA +18% Q2 EMEA +40% Q3 EMEA +34% Q4; strong #2 in wearables in key EMEA markets Continued leadership and share gains
Auto OEM trajectory+41% revenue; operating loss $12M +53% revenue; op loss narrowed to $1M +30% revenue; op loss $9M; 2025 revenue outlook reduced due to automaker softness; margin target mid-teens GM, mid-single-digit OM Growth continues; profitability delayed by macro
Marine industry+26% revenue (JL Audio) +22% revenue +5% revenue; market stabilizing; share gains persist Soft but stabilizing; share gains cushion
Tariffs/macro——Tariff exposure monitored; supply chain positioned to minimize impact; no guidance changes for tariffs Watchful; no quantified impact
R&D investmentR&D +8% YoY; investment for growth R&D +12% YoY 2025 OM guidance reflects ~30 bps higher OpEx from R&D to support launches Increasing to sustain product cadence
Health ecosystem1,000+ research studies supported Garmin Health Summit; training updates 2024 Connect Fitness Report; continued health & wellness emphasis Expanding health data and features

Management Commentary

  • “2024 was a year of remarkable growth and achievement…record full-year consolidated revenue…record full-year consolidated operating income. We are entering 2025 with continued strong momentum…many product launches planned during the year.” — Cliff Pemble, CEO .
  • “We anticipate 2025 consolidated revenue will increase approximately 8% to $6.8 billion…propose an annual dividend of $3.60 a share, a 20% increase.” — Cliff Pemble .
  • “Operating margin…we're expecting OpEx as a % of sales to be up ~30 bps, driven by R&D investments for innovation and product launches.” — Doug Boessen, CFO .
  • Auto OEM margin profile remains “mid-teens gross margin and mid-single-digit operating margin” over time; largest win enters production in 2027 — Cliff Pemble .
  • EMEA strength driven by wearables; “we’re the strong #2 player in wearables” in major EMEA countries, vs #3 in Americas — Cliff Pemble .

Q&A Highlights

  • Operating margin guidance and R&D: 2025 OM ~25% reflects ~30 bps higher R&D to fund growth; SG&A % of sales expected flat .
  • Gross margin outlook: consolidated GM expected ~flat; mix, component costs, overhead per unit are key variables; no major segment GM changes expected .
  • EMEA performance: Wearables share (#2 in major EMEA markets) driving outperformance; Americas dynamic differs (#3) .
  • Auto OEM: 2025 outlook reduced (~$140M vs prior trajectory) due to automaker softness, particularly higher-end brands in China; margin targets intact; 2027 largest program to ramp .
  • Tariffs: Exposure exists but supply chain positioned to minimize impacts; no guidance adjustments for tariffs given uncertainty .
  • Marine: Industry stabilization with aftermarket >50% of mix; share gains continue; guidance for ~4% growth in 2025 .

Estimates Context

  • Wall Street consensus estimates via S&P Global were unavailable at the time of this analysis due to request limits, so beat/miss vs consensus cannot be assessed for Q4 2024. We will update when SPGI access allows retrieval.

Key Takeaways for Investors

  • Strong execution and margin expansion: Q4 revenue $1.82B (+23% YoY), operating margin 28.3%, pro forma EPS $2.41 (+40% YoY), signaling robust demand and operating leverage .
  • Product cadence and Outdoor leadership: Halo launches (Approach R50, Descent X50i) support high-margin Outdoor; FY Outdoor OI >$700M with 40% Q4 operating margin .
  • Regional mix tailwind: EMEA strength (+34% Q4) and #2 wearables share underpin top-line durability into 2025 .
  • Auto OEM is a medium-term optionality: growth continues but profitability delayed by macro; margin targets reiterated; 2027 program a key catalyst .
  • Capital returns: Board to recommend dividend +20% to $3.60; $238M remains on buyback authorization through 2026, supporting TSR and downside protection .
  • Cash generation: Q4 FCF $399M; FY FCF ~$1.24B; cash/marketable securities ~$3.7B, providing ample flexibility for R&D and M&A .
  • 2025 setup: Guidance implies ~8% revenue growth with GM ~58.7% and OM ~25%; R&D investment modestly lifts OpEx to sustain product momentum, a constructive stance for medium-term thesis .

Appendix: Additional Q4 Press Releases Relevant to Product Momentum

  • Descent X50i: Largest dive computer with 3" color display, SubWave diver-to-diver messaging, air integration, backup dive light; SRP $1,499.99 .
  • Q4 press release references: Approach R50, Lily 2 Active, aviation accolades and G3000 PRIME selections underpin brand strength .