Garmin Beats on Q1 Earnings; Margins Shrink Amid High Freight Cost, Component Supply Crisis

Garmin Ltd GRMN reported first-quarter FY22 revenue growth of 9% year-on-year to $1.17 billion, beating the consensus of $1.12 billion.
Revenue from Fitness declined 28% Y/Y to $220.9 million, Outdoor rose 50% Y/Y to $384.6 million, Aviation improved 1% Y/Y to $174.8 million, Marine jumped 21% Y/Y to $254.1 million, and Auto sales grew 11% Y/Y to $138.3 million.
Margins: The gross margin contracted 330 bps to 56.5% as costs surged 18.4% Y/Y. The operating margin contracted 380 bps to 19.5% as expenses increased 11% Y/Y.
Proforma EPS of $1.11 is in-line with the consensus.
Net cash provided by operating activities totaled $185.6 million with $126 million in free cash flow. It held $3 billion in cash and equivalents.
CEO Cliff Pemble said, "High freight cost and component supply challenges persist while new headwinds emerge, such as the strengthening of the U.S. dollar and the uncertainty created by Russia's invasion of Ukraine."
Stock buyback: The Board of Directors authorized the Company to repurchase up to $300 million of the Company's shares through December 29, 2023.
Outlook: Garmin reaffirmed its FY22 revenue of $5.5 billion, below the consensus of $5.47 billion.
Garmin reiterated proforma EPS of $5.90, below the consensus of $6.02.
Price Action: GRMN shares traded lower by 0.55% at $109.39 on the last check Wednesday.

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