Garmin today announced results for the company’s fiscal year and quarter ended 27 December 2014.
Garmin’s fitness division posted revenue growth of 70% in the quarter. According to the company this confirms the strength of its product portfolio across a broad spectrum of price points and categories. Gross margin for fitness products in the quarter remained strong at 61%; while operating margin declined to 29% due to aggressive spending on advertising and point of sale displays.
Garmin noted, ‘This investment allowed us to establish a solid market share position and retail presence in the growing activity tracker market in just our first year serving the category. We will further leverage these investments to drive growth in 2015. We believe that fitness will again be the largest contributor of growth in 2015, and we have launched important new products at CES to strengthen our position in the segment.’
New products include the vívoactive and vívofit 2. The vívoactive is a GPS-enabled smartwatch that delivers capabilities for those with an active lifestyle, while vivofit 2 adds a backlight and vibration alert to the already popular vívofit.
Garmin added, ‘With these exciting products and new things yet to come in cycling and running, we enter 2015 with high expectations for continued success.’
Highlights in the quarter included:
- Total revenue of US$803 million in fourth quarter 2014 with non-automotive/mobile segments of outdoor, fitness, aviation and marine delivering 58% of total revenues
- Gross and operating margins of 54% and 22%, respectively
- Gained market share across a broad range of product categories including activity trackers and PNDs (Personal Navigation Devices)
Highlights for the fiscal year included:
- Total revenue of US$2,871 million in 2014 with non-automotive/mobile segments of outdoor, fitness, aviation and marine growing a combined 23% over 2013 and contributing 57% of total revenue
- Gross and operating margins of 56% and 24%, respectively, improving from 2013 levels
- Continued diversification of revenue and profitability sources as Garmin entered new product categories, broadened its range of offerings and grew market share
- Returned US$602 million of cash to shareholders with quarterly dividends totaling US$360 million and share repurchases of US$242 million
Offering up an executive overview, Cliff Pemble, Garmin’s President and Chief Executive Officer said “Through an intense focus on innovation and execution, we posted four consecutive quarters of revenue and pro forma EPS growth in 2014. We have redefined our earnings power as a company and further diversified our operating profit base.”
He continued, “I am pleased with everything that we have accomplished in 2014. Yet, we recognize that significant opportunities and challenges lie ahead of us. We will not be complacent. We believe that we are well positioned to gain share in categories that we are currently serving, while also launching products into new categories in the future. 2014 serves as a solid foundation from which to build and we plan to do just that.”
In 2014, Garmin generated US$528 million of free cash flow and returned over 100% of it to shareholders via a dividend and share repurchase program. The company ended the fourth quarter with cash and marketable securities of almost US$2.8 billion.
In 2015, Garmin expects revenue of approximately US$2.9 billion – as growth in the fitness, marine and aviation segments should offset ongoing declines in the PND market. This level of revenue assumes a EUR/USD exchange rate of 1.15, which created a material year-over-year headwind when compared to the average rate of 1.33 in 2014.
Garmin expects gross margins to remain relatively stable at approximately 56% due to the anticipated segment and product mix. Operating margins are forecasted to decline slightly to 23% due primarily to ongoing research and development investment. Though currency volatility is expected to slow revenue growth in 2015, Garmin noted, ‘”e do not want to forgo growth in our R&D investment which could negatively impact both current and future product development plans.’
