"We delivered outstanding performance in the third quarter with double-digit percentage growth in revenue, operating income, and earnings. Looking ahead, we are well positioned for the holiday selling season with a strong lineup of innovative products which gives us confidence to raise our outlook for the remainder of the year." - Cliff Pemble, President and Chief Executive Officer of Garmin Ltd.

Fitness:

Revenue from the fitness segment grew 26% in the third quarter with growth across all categories led by strong demand for wearables. Gross and operating margins were 54% and 21%, respectively, resulting in $75 million of operating income. During the quarter, we introduced the new Venu^® 3 smartwatch family in two sizes, as well as the value packed vívoactive^® 5 with a bright AMOLED display. We also recently announced the expansion of our ECG App to additional smartwatches. This FDA-cleared and clinically-validated app lets even more Garmin customers record an ECG and check for signs of atrial fibrillation right from their smartwatch.

Outdoor:

Revenue from the outdoor segment grew 7% in the third quarter with growth across multiple categories led by adventure watches. Gross and operating margins were 62% and 31%, respectively, resulting in $136 million of operating income. During the quarter, we launched the tactix^® 7 AMOLED Edition, which expands our offering of wearables with AMOLED displays. This highly versatile smartwatch includes a night vision compatible flashlight and up to 31 days of battery life. We recently announced the MARQ^® Carbon collection featuring a watch case and bezel inlay machined from a uniquely engineered material called Fused Carbon Fiber™—making it distinctive, strong, lightweight, and ready for adventure.

Aviation:

Revenue from the aviation segment grew 5% in the third quarter driven by growth in OEM product categories. Gross and operating margins were 75% and 25%, respectively, resulting in $49 million of operating income. During the quarter, we announced additional certifications for our GFC 500/600 autopilot, bringing the performance and safety enhancing benefits of our flight control technology to more aircraft models. We recently announced a long-term agreement to provide state-of-the-art G3000^® integrated flight decks to BETA Technologies for its all-electric aircraft.

Marine:

Revenue from the marine segment decreased 7% in the third quarter with declines across multiple categories partially offset by contributions from JL Audio. Gross and operating margins were 52% and 13%, respectively, resulting in $24 million of operating income. During the quarter, we launched the GPSMAP^® 9000 series in multiple sizes including the 27-inch GPSMAP 9227 that was recognized with an Innovation Award at the recent International Boatbuilders' Exhibition. We were recently named Manufacturer of the Year and received five Product of Excellence Awards from the NMEA, and the Most Innovative Marine Company by Soundings Trade Only, a leading marine trade publication.

Auto OEM:

Revenue from the auto OEM segment grew 59% during the third quarter primarily due to increased shipments of domain controllers. Gross margin was 21% and the operating loss narrowed to $14 million in the quarter. During the quarter, domain controller deliveries continued to ramp up across the BMW lineup. We also experienced strong growth in the infotainment category with contributions from Yamaha Motorsports and Honda motorcycles.  

Additional Financial Information:

Total operating expenses in the third quarter were $458 million, a 6% increase over the prior year. Research and development increased 6% primarily due to engineering personnel costs. Selling, general and administrative expenses increased 6% driven primarily by personnel related expenses and information technology costs. Advertising expenses increased 7% primarily due to higher cooperative advertising spend.

The effective tax rate in the third quarter was 8.0%. Excluding $2 million of income tax expense due to the revaluation of certain deferred tax assets associated with a state tax rate change, our pro forma effective tax rate⁽¹⁾ in the third quarter of 2023 was 7.2% compared to 4.3% in the prior year quarter. The year-over-year increase in the pro forma effective tax rate is primarily due to income mix by jurisdiction.  

In the third quarter of 2023, we generated strong operating cash flows of $357 million and free cash flow⁽¹⁾ of $312 million. We paid a quarterly dividend of approximately $140 million and repurchased approximately $9 million of the Company's shares within the quarter, leaving approximately $18 million remaining as of September 30, 2023, in the share repurchase program authorized through December 29, 2023. Including the funding of the strategic acquisition of JL Audio, we ended the quarter with cash and marketable securities of approximately $2.8 billion.         

2023 Fiscal Year Guidance:

Based on our performance in the first three quarters of 2023 and the closing of our acquisition of JL Audio, we are adjusting our full year guidance. We now anticipate revenue of approximately $5.150 billion and pro forma EPS of $5.25 based on gross margin of 56.7%, operating margin of 19.8% and a full year pro forma effective tax rate of 8.5%. This expected pro forma EPS of $5.25 includes approximately $0.05 of dilutive impact related to newly acquired JL Audio (see attached discussion on Forward-looking Financial Measures).

Dividend:

The board of directors has established December 29, 2023, as the payment date for the third dividend installment of $0.73 per share with a record date of December 15, 2023. At the 2023 annual shareholders' meeting, Garmin shareholders, in accordance with Swiss corporate law, approved a cash dividend in the total amount of $2.92 per share, payable in four equal installments on dates to be determined by the board in its discretion. The first and second payments were made on June 30, 2023 and September 29, 2023. The board currently anticipates the scheduling of the remaining quarterly dividend installment as follows:

Webcast Information/Forward-Looking Statements:

The information for Garmin Ltd.'s earnings call is as follows:

An archive of the live webcast will be available until November 1, 2024 on the Garmin website at www.garmin.com . To access the replay, click on the Investors link and click over to the Events Calendar page.