Garmin Earnings up 59%

Garmin announced some impressive earnings on their business, with total sales up 79% and earnings up 59% over year ago. The sales growth was driven primarily by 118% growth in the automobile segment, which now accounts for 71% of total revenues (or about $517Million in the quarter). Sales grew in all regions, 71& in North America, 89% in Europe, and 109% in Asia.

Our retail orders are strong, and we look forward to a solid 2007 holiday season,” said Kevin Rauckman, chief financial officer of Garmin Ltd. Well there you go; hang on for a rocking holiday season at the GPSLodge.

More from the press release below…

Third Quarter 2007 Financial highlights:

Total revenue of $729 million, up 79% from $408 million in third quarter 2006

Automotive/Mobile segment revenue increased 118% to $519 million in third quarter 2007

Aviation segment revenue increased 27% to $74 million in third quarter 2007

Outdoor/Fitness segment revenue increased 24% to $88 million in third quarter 2007

Marine segment revenue increased 17% to $48 million in third quarter 2007

All geographic areas experienced significant growth:

North America revenue was $454 million compared to $265 million, up 71%

Europe revenue was $227 million compared to $120 million, up 89%

Asia revenue was $48 million compared to $23 million, up 109%

Revenue from our automotive/mobile segment continued to become a larger portion of total company revenues when compared with the same quarter in 2006, at 71% of total revenues.

Diluted earnings per share increased 57% to $0.88 from $0.56 in third quarter 2006; excluding foreign exchange, EPS increased 78% to $0.89 from $0.50 in the same quarter in 2006.

Year-to-Date 2007 Financial highlights:

Total revenue of $1.96 billion, up 69% from $1.16 billion year-to-date 2006

Automotive/Mobile segment revenue increased 109% to $1.34 billion in year-to-date 2007

Aviation segment revenue increased 30% to $224 million in year-to-date 2007

Outdoor/Fitness segment revenue increased 10% to $225 million in year-to-date 2007

Marine segment revenue increased 21% to $170 million in year-to-date 2007

All geographic areas experienced significant growth:

North America revenue was $1.23 billion compared to $700 million, up 76%

Europe revenue was $631 million compared to $400 million, up 58%

Asia revenue was $101 million compared to $63 million, up 60%

Diluted earnings per share increased 64% to $2.50 from $1.52 in year-to-date 2006; excluding foreign exchange, EPS increased 68% to $2.48 from $1.48 in the same period in 2006.

Business highlights:

Strong sales in our automotive/mobile segment continue to exceed our expectations and drive our increased guidance for the remainder of 2007.

Aviation and marine segment results put them on track to meet or exceed earlier full year guidance for these segments. Given improving sales in our outdoor/fitness segment, we continue to anticipate this segment will reach our full year guidance with seasonally strong holiday sales.

2.69 million units sold in the third quarter of 2007, up 119% from the same quarter in 2006; year-to-date units sold increased 97% from the same period in 2006.

Completed the initial build-out of our third Taiwan manufacturing facility, increasing the number of production lines from 31 to 37, and production capacity at the end of the third quarter to an annual run rate of approximately 16 million units. Expansion of our R&D and other office space in Taiwan continues.

Expansion of our North American warehouse in Olathe, Kansas continues, with expected completion in Q1 2008.

We continued to work to increase our retail penetration and broaden our distribution as retailers laid the groundwork for the upcoming holiday selling season. Our initial order book for the holiday season is strong, as PNDs are positioned to be a popular item during the holiday season.

Due diligence work continues on previously announced acquisitions of distributors in Spain, Italy, and Denmark. These activities are part of our ongoing efforts to improve our market share in Europe.

Executive overview from Dr. Min Kao, Chairman and Chief Executive Officer:
“Garmin experienced a solid third quarter. Our continued strong growth in the automotive/mobile segment demonstrated that our products are well-positioned to take advantage of the growing interest in portable navigation devices. Independent market research indicates we have maintained a strong leadership position in North America with approximately fifty percent PND market share, and our market position in Europe continues to improve as well.

As we head into the holiday season, we believe we are prepared to meet the growing demand for our products. We have increased our manufacturing capacity and grown total inventories over $200 million since the end of the second quarter of 2007. Our order book is strong, and we believe our strategy of extensive market segmentation using both our popular nüvi and c-series product offerings will drive positive results. Useful content and competitive features integrated into reliable, easy-to-use products at attractive price points are what customers want - and what they receive when they choose Garmin.

Our aviation segment continued to grow steadily during the quarter. Positive response to our WAAS and GMX200 product offerings and growth in the sale of our G1000 cockpit continued. In the third quarter we announced additional wins for our G1000 cockpit for future Cessna Caravan, Socata TBM 850 as well as the new PiperJet and a G1000 retrofit for the King Air 200/B200. Also during the 3rd quarter, Cessna announced that our new G300 cockpit display system was selected for its new Skycatcher light sport aircraft. We continue to believe the aviation segment is positioned to meet our 2007 guidance for this segment.

Our marine segment also showed steady growth, as customer interest in our revolutionary new marine products and cartography continued to drive revenues for the quarter. While typical marine segment revenues decline sequentially in third and fourth quarter each year, results remain seasonally strong. We continue to believe the marine segment is positioned to meet our 2007 guidance.

Third quarter revenue for our outdoor/fitness segment was strong compared to the year ago quarter. Increased sales generated by the new Astro dog tracking product, as well as new eTrex and Rino products with high-sensitivity GPS drove this growth. We see continued growth opportunities for this segment and believe the outdoor/fitness segment is positioned to meet our 2007 guidance for the segment.”

Financial overview from Kevin Rauckman, Chief Financial Officer:
“Our financial results for the third quarter were strong and in line with our expectations. Our retail orders are strong, and we look forward to a solid 2007 holiday season,” said Kevin Rauckman, chief financial officer of Garmin Ltd. “Our revenue and earnings per share during the quarter grew 79% and 57% respectively, exceeding our expectations. Excluding the impact of foreign exchange, EPS for the quarter grew 78%, from $0.50 to $0.89.
Gross margin for the overall business declined modestly in the third quarter, down 180 basis points from the year-ago quarter. The automotive/mobile segment gross margin improved 70 basis points during the quarter due to a seasonal, favorable product mix shift towards higher-margin North American product, and PND pricing declined more slowly than we expected. The aviation segment also improved 180 basis points as a function of favorable product mix. Gross margin for the marine segment declined 50 basis points during the quarter when compared to the year-ago quarter as a function of product mix, and the outdoor/fitness segments declined 320 basis points, reflecting a product mix shift and the transition of the eTrex product line.

Operating margin remained relatively stable, declining just 30 basis points from the year-ago quarter. This stability reflected an anticipated decline in gross margin offset by operating leverage as revenues outpaced increased spending in advertising and research and development expenses during the quarter. While we are pleased with these results, we anticipate more significant margin compression during the fourth quarter of 2007.
We also generated $117 million of free cash flow in the third quarter of 2007, resulting in a cash and marketable securities balance of $1.03 billion at the end of the quarter.”
Fiscal 2007 Outlook
We remain optimistic about the future success of our business and our ability to serve customers and distributors around the world. With this in mind, we are updating our guidance as follows:

We anticipate overall revenue to exceed $2.9 billion in 2007, and earnings per share to exceed $3.40.

We anticipate segment revenue growth rates for our automotive/mobile, aviation, marine, and outdoor/fitness segments to be 90%, 30%, 20%, and 10%, respectively

We anticipate operating margins to be approximately 27% for the full year 2007

Our effective tax rate should remain approximately 13%

Announcement of Management Appointment
Given our anticipated ongoing business growth, Cliff Pemble will be assuming the new positions of Chief Operating Officer (COO) and President of Garmin Ltd. In addition, he will assume direct supervision of all North American Garmin subsidiaries, including Garmin AT, Dynastream, and Digital Cyclone. Dr. Kao will continue in his role as Chairman and CEO of Garmin Ltd. but will now be able to devote more time to business development, strategic planning, and the development of our Asia-Pacific business initiatives.

November 2, 2007

Garmin Earnings up 59%