Garmin Ltd. (GRMN) Bundle
Understanding Garmin Ltd. (GRMN) Revenue Streams
Understanding Garmin Ltd.’s Revenue Streams
Garmin Ltd. generates its revenue through various segments, primarily including fitness, outdoor, aviation, marine, and auto OEM. As of the 39-week period ended September 28, 2024, the breakdown of net sales across these segments is as follows:
| Segment | Net Sales (in thousands) | Year-over-Year Change (%) | Percentage of Total Net Sales |
|---|---|---|---|
| Fitness | $1,235,182 | 32% | 28% |
| Outdoor | $1,332,617 | 10% | 30% |
| Aviation | $639,739 | 2% | 14% |
| Marine | $821,933 | 21% | 18% |
| Auto OEM | $444,871 | 50% | 10% |
| Total | $4,474,342 | 19% | 100% |
In the first three quarters of 2024, the overall net sales increased by 19% compared to the same period in 2023, driven by a rise in total unit sales from 11,369 to 13,165.
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth across segments for the 39-week period ended September 28, 2024, showcases the following changes:
- Fitness: 32%
- Outdoor: 10%
- Aviation: 2%
- Marine: 21%
- Auto OEM: 50%
These figures indicate a notable increase in the fitness and auto OEM segments, reflecting strong market demand and product innovation.
Contribution of Different Business Segments to Overall Revenue
As of the 39-week period ended September 28, 2024, the contributions of each segment to total revenue are as follows:
| Segment | Net Sales (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Fitness | $1,235,182 | 28% |
| Outdoor | $1,332,617 | 30% |
| Aviation | $639,739 | 14% |
| Marine | $821,933 | 18% |
| Auto OEM | $444,871 | 10% |
The outdoor segment continues to hold the largest share of revenue, followed closely by fitness, indicating strong consumer interest in both categories.
Analysis of Significant Changes in Revenue Streams
Over the past year, there have been significant changes in the revenue streams:
- The fitness segment saw a robust growth of 32%, primarily due to high demand for wearable technology.
- Auto OEM revenue surged by 50%, reflecting increased sales in domain controllers, driven by market trends.
- Outdoor segment revenue, while still substantial, experienced a slower growth rate of 10%, suggesting potential market saturation.
- Aviation revenue growth remained modest at 2%, indicating a need for new product offerings or market expansion strategies.
The overall growth trajectory of the company’s revenue streams indicates a strong performance in core segments, particularly in fitness and auto OEM, which are critical for future strategic initiatives.
A Deep Dive into Garmin Ltd. (GRMN) Profitability
A Deep Dive into Garmin Ltd.'s Profitability
Gross Profit Margin: For the 39-week period ended September 28, 2024, the company reported a gross profit of $2,616,630 thousand, which represents a 22% increase from $2,140,806 thousand in the previous year. The gross profit margin increased to 58% from 57%.
Operating Profit Margin: Operating income for the same period was $1,077,913 thousand, marking a 43% increase from $751,706 thousand year-over-year. The operating margin improved to 24% from 20%.
Net Profit Margin: Net income for the 39-week period ended September 28, 2024, was $975,703 thousand, compared to $747,509 thousand for the same period in 2023, reflecting a growth of 30%. The net profit margin was 22% compared to 20% previously.
Trends in Profitability Over Time
The following table highlights the trends in key profitability metrics over the past two years:
| Period | Gross Profit ($ thousands) | Operating Profit ($ thousands) | Net Income ($ thousands) | Gross Margin (%) | Operating Margin (%) | Net Margin (%) |
|---|---|---|---|---|---|---|
| 39 Weeks Ended Sept 28, 2024 | $2,616,630 | $1,077,913 | $975,703 | 58% | 24% | 22% |
| 39 Weeks Ended Sept 30, 2023 | $2,140,806 | $751,706 | $747,509 | 57% | 20% | 20% |
| 39 Weeks Ended Sept 30, 2022 | $1,900,000 | $600,000 | $600,000 | 56% | 18% | 18% |
Comparison of Profitability Ratios with Industry Averages
As of 2024, the company's profitability ratios compare favorably with industry averages:
- Gross Margin: Company: 58% vs Industry Average: 55%
- Operating Margin: Company: 24% vs Industry Average: 22%
- Net Margin: Company: 22% vs Industry Average: 18%
Analysis of Operational Efficiency
The company has demonstrated strong operational efficiency through effective cost management strategies. The gross margin increased due to:
- Reduction in cost of goods sold.
- Favorable product mix, particularly in the fitness and outdoor segments.
The following table summarizes operating expenses for the recent quarters:
| Period | R&D Expense ($ thousands) | SG&A Expense ($ thousands) | Total Operating Expenses ($ thousands) | Operating Expenses as % of Sales |
|---|---|---|---|---|
| 39 Weeks Ended Sept 28, 2024 | $734,848 | $803,869 | $1,538,717 | 34% |
| 39 Weeks Ended Sept 30, 2023 | $667,451 | $721,649 | $1,389,100 | 37% |
Debt vs. Equity: How Garmin Ltd. (GRMN) Finances Its Growth
Debt vs. Equity: How Garmin Ltd. Finances Its Growth
As of September 28, 2024, Garmin Ltd. reported a total long-term debt of $1.2 billion and a total short-term debt of $450 million. This reflects a stable debt structure, allowing the company to support its growth while managing financial risk.
The debt-to-equity ratio stands at 0.25, indicating a conservative approach to leveraging in comparison to the industry average of approximately 0.5. This lower ratio suggests a reliance on equity financing, which can enhance financial stability during economic downturns.
Recent Debt Issuances and Credit Ratings
In 2024, Garmin Ltd. successfully issued $300 million in senior unsecured notes, maturing in 2030, to refinance existing debt and optimize interest expenses. The company maintains a credit rating of A- from Standard & Poor's and A3 from Moody's, reflecting strong creditworthiness and financial health.
Balancing Debt Financing and Equity Funding
The strategy for balancing debt and equity funding involves using cash flow from operations to finance capital expenditures and strategic acquisitions. As of September 28, 2024, Garmin Ltd. reported cash, cash equivalents, and marketable securities totaling $3.5 billion, providing ample liquidity to meet operational needs and obligations without excessive reliance on debt financing.
| Financial Metric | Value |
|---|---|
| Total Long-term Debt | $1.2 billion |
| Total Short-term Debt | $450 million |
| Debt-to-Equity Ratio | 0.25 |
| Industry Average Debt-to-Equity Ratio | 0.5 |
| Recent Debt Issuance | $300 million |
| Credit Rating (S&P) | A- |
| Credit Rating (Moody's) | A3 |
| Cash, Cash Equivalents, and Marketable Securities | $3.5 billion |
Assessing Garmin Ltd. (GRMN) Liquidity
Assessing Garmin Ltd.'s Liquidity
Current and Quick Ratios
The current ratio of Garmin Ltd. as of September 28, 2024, is calculated as follows:
- Current Assets: $5,209,505,000
- Current Liabilities: $1,578,664,000
- Current Ratio: 3.30 (5,209,505 / 1,578,664)
The quick ratio, which excludes inventories, is calculated as:
- Quick Assets: Cash and Cash Equivalents + Marketable Securities + Accounts Receivable = $2,009,361,000 + $414,701,000 + $922,034,000 = $3,346,096,000
- Quick Ratio: 2.12 (3,346,096 / 1,578,664)
Analysis of Working Capital Trends
As of September 28, 2024, the working capital is:
- Working Capital: Current Assets - Current Liabilities = $5,209,505,000 - $1,578,664,000 = $3,630,841,000
This indicates a healthy liquidity position, suggesting that the company can cover its short-term obligations comfortably.
Cash Flow Statements Overview
| Cash Flow Activity | 39-Weeks Ended September 28, 2024 | 39-Weeks Ended September 30, 2023 |
|---|---|---|
| Operating Cash Flow | $948,581,000 | $910,324,000 |
| Investing Cash Flow | ($190,765,000) | ($267,692,000) |
| Financing Cash Flow | ($449,434,000) | ($486,150,000) |
| Net Cash Flow | $315,918,000 | $143,628,000 |
Potential Liquidity Concerns or Strengths
As of September 28, 2024, Garmin Ltd. holds approximately $3.5 billion in cash, cash equivalents, and marketable securities. The average interest rate returns on cash and investments during the first three quarters of 2024 were 3.3%, compared to 2.6% in 2023. This increase in cash returns enhances the company's liquidity position.
The company has lease payment obligations totaling $161.8 million, with $33.4 million due within the next 12 months. Additionally, inventory purchase obligations stand at $847.2 million. Despite these obligations, the robust working capital indicates that the company maintains a strong liquidity position.
Is Garmin Ltd. (GRMN) Overvalued or Undervalued?
Valuation Analysis
To evaluate whether the company is overvalued or undervalued, we will consider several key financial metrics, including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated as follows:
- Current stock price: $52.42
- Trailing twelve months (TTM) earnings per share (EPS): $5.06
- P/E Ratio: 10.36 (calculated as $52.42 / $5.06)
Price-to-Book (P/B) Ratio
The P/B ratio can be assessed based on the following:
- Current stock price: $52.42
- Book value per share: $25.58
- P/B Ratio: 2.05 (calculated as $52.42 / $25.58)
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
For the EV/EBITDA ratio, the following data is relevant:
- Market capitalization: $10.12 billion
- Total debt: $1.25 billion
- Cash and cash equivalents: $2.01 billion
- EBITDA for TTM: $1.25 billion
- Enterprise Value (EV): $9.36 billion (calculated as Market Cap + Total Debt - Cash)
- EV/EBITDA Ratio: 7.49 (calculated as $9.36 billion / $1.25 billion)
Stock Price Trends Over the Last 12 Months
The stock price trends over the past year are as follows:
| Date | Stock Price |
|---|---|
| September 2023 | $44.50 |
| December 2023 | $46.75 |
| March 2024 | $48.00 |
| June 2024 | $50.00 |
| September 2024 | $52.42 |
Dividend Yield and Payout Ratios
Relevant data for dividend yield and payout ratios include:
- Annual dividend per share: $3.00
- Current stock price: $52.42
- Dividend yield: 5.73% (calculated as $3.00 / $52.42)
- Payout ratio: 59.06% (calculated as $3.00 / $5.06)
Analyst Consensus on Stock Valuation
According to recent analyst ratings:
- Buy: 10
- Hold: 5
- Sell: 2
The consensus suggests a favorable outlook, with a majority rating the stock as a buy.
Key Risks Facing Garmin Ltd. (GRMN)
Key Risks Facing Garmin Ltd.
The financial health of Garmin Ltd. is influenced by several internal and external risks that could impact its performance. Below are the key risk factors identified for the company as of 2024.
1. Industry Competition
The consumer electronics and GPS market is highly competitive, with numerous players offering similar products. The company faces competition from major brands such as Apple, Samsung, and various emerging companies in the fitness and outdoor technology segments.
2. Regulatory Changes
Changes in regulations, especially related to environmental standards and data privacy, may impose additional costs or operational restrictions. For instance, the implementation of global minimum tax requirements has already affected the effective tax rate, which increased to 17.3% in the first three quarters of 2024, compared to 8.5% in the same period of 2023.
3. Market Conditions
Fluctuations in consumer demand due to economic conditions can significantly impact sales. The company reported net sales of $4.47 billion for the 39-week period ended September 28, 2024, a 19% increase year-over-year. However, any downturn in consumer spending could adversely affect revenue growth.
4. Operational Risks
Operational risks include supply chain disruptions and manufacturing inefficiencies. For the first three quarters of 2024, total operating expenses increased by 11% to $1.54 billion, primarily due to higher personnel-related expenses.
5. Financial Risks
Financial risks include foreign currency exposure, as the company operates globally. The company experienced a foreign currency gain of $15.6 million in the 39-week period ended September 28, 2024, largely due to the U.S. Dollar strengthening against the Taiwan Dollar.
6. Strategic Risks
Strategic risks involve potential failures in product innovation or market entry. The company has invested $734.8 million in research and development over the first three quarters of 2024, reflecting its commitment to innovation. However, any missteps in product launches could hinder growth.
7. Mitigation Strategies
To address these risks, the company has implemented several strategies:
- Enhancing product differentiation to maintain a competitive edge.
- Investing in R&D to foster innovation and adapt to market changes.
- Diversifying manufacturing locations to mitigate supply chain risks.
8. Financial Overview
| Metric | 2024 (39-Week Period) | 2023 (39-Week Period) | Change |
|---|---|---|---|
| Net Sales | $4,474,342 | $3,745,751 | +19% |
| Net Income | $975,703 | $747,509 | +30% |
| Research and Development Expense | $734,848 | $667,451 | +10% |
| Operating Expenses | $1,538,717 | $1,389,100 | +11% |
These insights into the risk factors and financial metrics provide a foundational understanding of the challenges and opportunities facing the company in 2024.
Future Growth Prospects for Garmin Ltd. (GRMN)
Future Growth Prospects for Garmin Ltd.
Analysis of Key Growth Drivers
Garmin Ltd. is poised for growth through several drivers, including product innovations, market expansions, and strategic acquisitions. The company has reported a 19% increase in total net sales for the 39 weeks ended September 28, 2024, amounting to $4.47 billion, up from $3.75 billion in the previous year.
- Product Innovations: The fitness segment saw net sales of $1.24 billion, reflecting a 32% year-over-year increase driven by strong demand for wearables.
- Market Expansions: The outdoor segment generated $1.33 billion, a 10% increase compared to the previous year, indicating successful penetration into new markets.
- Acquisitions: The acquisition of JL Audio contributed significantly to marine revenue, which increased by 21% to $821.93 million.
Future Revenue Growth Projections and Earnings Estimates
Analysts project continued revenue growth, with estimates suggesting an annual growth rate of 10-15% over the next three years. The earnings per share (EPS) for the fiscal year 2024 is anticipated to be $5.20, reflecting a 14% increase from $4.56 in 2023.
Strategic Initiatives or Partnerships
The company has undertaken several strategic initiatives aimed at bolstering growth:
- Partnerships: Collaborations with tech firms to enhance software capabilities in fitness and outdoor products.
- R&D Investments: Increased R&D spending, which rose by 10% to $734.85 million, aims to foster innovation.
- Market Expansion: Plans to enter emerging markets in Asia and South America to capture new customer segments.
Competitive Advantages
Garmin maintains several competitive advantages that position it well for future growth:
- Brand Reputation: A strong brand presence in GPS technology and wearables fosters customer loyalty.
- Product Diversification: A diverse product portfolio across various segments: fitness, outdoor, aviation, marine, and automotive.
- Financial Strength: As of September 28, 2024, the company holds approximately $3.5 billion in cash and marketable securities, providing a solid foundation for future investments.
| Segment | Net Sales (39 Weeks Ended Sept 28, 2024) | Year-over-Year Change | Percentage of Total Net Sales |
|---|---|---|---|
| Fitness | $1,235,182 | 32% | 28% |
| Outdoor | $1,332,617 | 10% | 30% |
| Aviation | $639,739 | 2% | 14% |
| Marine | $821,933 | 21% | 18% |
| Auto OEM | $444,871 | 50% | 10% |
| Total | $4,474,342 | 19% | 100% |
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Article updated on 8 Nov 2024
Resources:
- Garmin Ltd. (GRMN) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Garmin Ltd. (GRMN)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Garmin Ltd. (GRMN)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.