Garmin Ltd. (GRMN)

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Garmin Ltd. (GRMN)

Q1 2009 Earnings Call Transcript

May 6, 2009 11:00 am ET


Kerri Thurston – Manager, IR

Cliff Pemble – President and COO

Kevin Rauckman – CFO and Treasurer


Vivek Arya – Merrill Lynch

Jeff Evanson – Dougherty

Amir Rozwadowski – Barclays Capital

Mark Sue – RBC Capital Markets

John Bright – Avondale Partners

Reik Read – Robert Baird

Scott Sutherland – Wedbush Morgan Securities

Paul Coster – J.P. Morgan

Thomas Lee – Goldman Sachs



Good morning, and welcome to today’s webcast. All lines have been placed on mute and this event will be recorded. There will be a verbal Q&A session at the end of today’s presentation. At that time, the operator will instruct you on how to ask a live question. (Operator instructions) Again, today’s event is being recorded. We’ll pause for a moment to initiate the recording. Ladies and gentlemen, please standby. Welcome to the first quarter 2009 earnings call for Garmin Limited. At this time, I would now like to turn the event over to Kerri Thurston. Please go ahead.

Kerri Thurston

Good morning, we’d like to welcome you to Garmin Limited’s first quarter 2009 earnings call. Please note that a copy of the press release concerning this earnings call is available at Garmin’s Investor Relation site on the internet at

Additionally, this call is being broadcast live on the Internet. Please note that this webcast does include slides which can be viewed during the call. An archive of the webcast will be available until June 8, 2009 and the telephone recording will be available two business days following this call.

A transcript to this call will be available on the Web site within 48 hours under the events calendar task. This earnings call includes projections and other forward-looking statements regarding Garmin Limited and its business. Any statements regarding our future financial position, revenues, earnings, market share, product introductions, future demand for our products, and objectives are forward-looking statements.

The forward-looking events and circumstances discussed in this earnings call may not occur and actually results may differ materially as the result of risk factors affecting Garmin. Information concerning those risk factors is contained in our Form10-K for the fiscal year until December 27th, 2008 filed with the Securities and Exchange Commission.

Attending today’s call on behalf of Garmin Limited are Dr. Min Kao, Chairman and Chief Executive Officer; Cliff Pemble, President and Chief Operating Officer; Kevin Rauckman, Chief Financial Officer and Treasurer; and Andrew Etkind, General Counsel. The presenters for this morning’s call are Cliff Pemble and Kevin Rauckman.

At this time, I’d like to turn the all over to Cliff Pemble.

Cliff Pemble

Good morning! As you’ve read from our press release this morning, Garmin announced first quarter results that reflect the very difficult macroeconomic conditions facing the company. As we noted in February, we expected 2009 to be the most difficult year in our history and has definitely started out that way.

Against this backdrop we do see positives in our financial performance. While revenues fell 34%, our consolidated gross margins were 45% as higher-margin business segments contributed a higher percentage of revenue. EPS while down significantly, was $0.25 per share, excluding the effects of foreign currency. And we were able to generate $286 million of free cash flow and remain at that (inaudible). From a business perspective, we have continued to outpace the competition as our global PND market share increased 2% in fourth quarter to 37%. And our North American market share remained above 50%.

Our outdoor fitness segment posted year-over-year revenue growth of 13%, driven by growth in the fitness category. We also increased our penetration at OEMs across the marine, automotive, and aviation segments, as OEMs recognized the strength and value of our product offering. I’ll discuss this in further detail in a few minutes.

Reviewing our business by segment, in the automobile segment our revenue declined 43% in the first quarter, as retailers around the world had been reducing there inventory levels. We also experienced a steep, but we believe temporary decline in ASP as price protection was offered major retailers to help clear inventories. On a sell end basis North American units declined 5% year-over-year. But the declines in Europe were much steeper at 32% year-over-year.

The outdoor fitness segment continued to post growth with revenues up to 13% over the prior year. Our product lineup in both outdoor and fitness continues to outperform the competition, resulting in further market share gains and penetration. Revenues from our aviation segment decline 31% in the quarter much as we anticipated going into the year. The decline was across the entire product line impacting OEM, retrofit, and portable products.

And finally, revenues from the marine segment declined 32% as we faced the on going downturn affecting the entire marine industry. On the positive side, we have secured a number of new OEM relationships, which will help offset the revenue declines in the retail side of the marine business.

While the over all economic news has been mostly negative, we do see some positive indications. For example, on the automobile segment, it is important to note that the retail sell trough in them in the North American market continue to grow on a year-over-year basis. As retail inventory levels have reached a low point, we expect to sell in to the channels to trend more inline with sell through. This combined with improving AST’s will positively impact revenues and margins in this segment going forward. We do expect a full year decline in units in Europe due to the market maturity and economic slow down affecting that region.

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