3Q 2011: Garmin Reports Sales Down 4% But Increases 2011 Guidance

Garmin yesterday has offered us a paradoxal third quarter financial earnings with a revenue down 4 percent ($667 million) and operating income down 12 percent ($147 million) against the same quarter last year; however its executive team is forecasting an increased financial outlook for the full year.

Full year revenue is now expected to reach $2.6 Billion and pro forma EPS $2.3 to $2.4 against $2 to $2.15 previously expected.

Free cash flow was $174 million in third quarter 2011.

Auto/Mobile segment

The automotive/mobile segment posted a 13% revenue decline in the third quarter, nevertheless “ahead of our expectations“, said Garmin CEO Min Kao. Revenue in this segment was $384 million including $25 million from NAVIGON (representing 2 months of activity as a Garmin subsidiary).

Garmin indicated that the PND market contracted 20% in the US and approximately 10% across EMEA markets in the quarter. Interestingly, these market estimates differ from TomTom’s which saw 12 % decrease in Europe and 28 percent in the U.S.

Garmin said it maintained a U.S market share of more than 60 percent and in the mid 30% range in the five largest markets in Western Europe. Market share gains in Europe are mostly due to the NAVIGON acquisition representing an additional 13% units sales in EMEA.

The average selling price (ASP) in the quarter was relatively stable due to an increase in bundled product offerings (maps, traffic), offset by a decrease in the ASP of comparable models from the prior year.

The reported operating margin for the segment was 15% driven by product mix and the updated deferred revenue model associated with certain bundled products. When adjusted for net deferred revenue and costs associated with bundled products, operating margin would have been 18%.

Outdoor segment

The outdoor segment posted revenue growth of 5% ($95 million) including contributions from the recent acquisition of Tri‐Tronics. “This was slightly below expectation as growth in the quarter was restrained due to the limited availability of new products,“ said Garmin.

Fitness segment

The fitness segment posted revenue growth of 29% ($69 million)with strong results generated by the Forerunner 610 and the Edge 800.

“While we have seen an increasing number of competitors in the fitness market, we have maintained our top position in the GPS‐enabled fitness category by offering a range of products from entry‐level with basic functionality like “how far and how fast” to the high‐end Forerunner 910 for the triathlete market,“ stated Garmin in its press release.


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