The paragraph is an introduction to Garmin Ltd.'s fourth quarter 2024 earnings call. The conference operator, Bella, initiates the call by explaining the procedure for asking questions. Teri Seck, Director of Investor Relations, welcomes participants and mentions that the earnings press release and slides are available on Garmin's Investor Relations site. The call will include forward-looking statements, and risk factors are outlined in the company's SEC Form 10-K filings. Presenters Cliff Pemble, President and CEO, and Doug Boessen, CFO and Treasurer, will lead the call.

In the paragraph, Cliff Pemble from Garmin reports strong financial results for 2024, with a 23% increase in consolidated revenue for the fourth quarter, reaching $1.82 billion, and a record annual revenue of $6.3 billion. Gross margin improved, and operating income saw a significant increase. Garmin's performance, attributed to a robust product portfolio, led to growth across all business segments and a historical achievement of more than 18 million devices delivered in the year. Looking forward, Garmin plans new product launches in 2025, expecting an 8% revenue increase. Due to strong performance, Garmin proposes a 20% dividend increase for shareholders.

The paragraph provides an overview of the financial performance and outlook for two business segments: fitness and outdoor. In 2024, the fitness segment saw significant growth, with revenue increasing 32% to $1.77 billion, driven by demand for running, cycling, and wellness products. The segment also experienced improvements in gross margin and operating income. A key product launch was the Lilly 2 Active smartwatch. Looking ahead, a 10% revenue growth is anticipated for the fitness segment. The outdoor segment also had a strong performance, with a 16% revenue increase to $1.96 billion, largely due to the success of the Phoenix 8 adventure watches. This segment saw improvements in gross margin and operating income, and the company plans to further expand by introducing new product categories and markets.

During the quarter, two groundbreaking products were launched: the Approach R50, a portable golf launch monitor with a simulator and a database of over 43,000 golf courses, and the Descent X50i, a large-format dive computer with a rugged design and advanced features. The company anticipates a 10% revenue growth for the year thanks to its strong outdoor product lineup. In the aviation sector, revenue rose by 4% to $877 million, although operating income fell by 7% due to increased R&D spending. Notable achievements include being named number one in aviation product support for the 21st year and celebrating the founders' induction into the National Aviation Hall of Fame. The focus on aviation safety continues with innovations like envelope protection and emergency autoland.

The paragraph discusses recent achievements and growth in two segments: aviation and marine. In aviation, new safety technology earned a prestigious award, and the G3000 Prime flight deck was selected for new aircraft models, with expectations for revenue growth in 2025. In the marine segment, revenue increased 17% to surpass $1 billion due to the JL Audio acquisition, with a 6% increase excluding JL Audio. The segment saw improved gross margins and operating income, and received several industry awards for innovation and safety.

During the quarter, JL Audio received an Innovation Award for its Pavilion line of outdoor home speakers. Despite a soft marine market, Garmin expects marine revenue to increase by 4% for the year and has seen a significant revenue increase in its auto OEM segment, largely due to growth in domain controllers, with a 44% increase in revenue to $611 million. Garmin's collaboration with BMW and new program wins position it for future revenue growth, with expectations of a 7% increase by 2025. Doug Boessen then takes over to discuss the financial results, noting a 23% year-over-year revenue increase for the fourth quarter, totaling $1.823 billion.

The paragraph highlights the financial performance of a company, showing strong improvements in several metrics. Gross margin increased by 100 basis points to 59.3% due to lower product costs, while operating expenses as a percentage of sales decreased significantly. Operating income rose 52% year-over-year to $516 million, with an operating margin of 28.3%. GAAP and pro forma EPS were $2.25 and $2.41, respectively, representing a 40% increase from the prior year. Total revenue for the full year was $6.197 billion, a 20% increase, while operating income and margin also saw substantial growth. Revenue growth was robust across all geographic regions, particularly in the EMEA region with 34%. The fitness segment led segment growth with 31%. Operating expenses in the fourth quarter rose by 8%, driven by increased research and development and SG&A expenses. Overall, the company reported record consolidated revenue growth of 20% and record revenue across its five segments.

The paragraph discusses financial highlights for the company. In the fourth quarter of 2024, end cash and marketable securities were $3.7 billion, with accounts receivable rising due to strong sales, and inventory levels increasing to $1.5 billion. Free cash flow for the quarter was $399 million, a slight decrease from the previous year, while the full year free cash flow was $1.2 billion, an increase of $56 million. The company expects $1.1 billion in free cash flow for 2025 and plans $350 million in capital expenditures to support growth. Dividends paid in 2024 totaled $572 million, with a planned $0.60 increase in annual dividends from June 2025. Additionally, $62 million was spent on share repurchases, with $238 million remaining authorized through 2026. The effective tax rate for 2024 was 16.7%, up from the previous year's 8.5%, due to changes in Switzerland's tax rate, and is expected to be 16.5% in 2025.

The paragraph outlines the financial guidance for a company's full-year 2025, with an estimated revenue of approximately $6.8 billion, representing an 8% increase from 2024. The company expects gross margins to remain steady at about 58.7%, and the operating margin is anticipated to be around 25%, similar to 2024 levels. The pro forma effective tax rate is expected to be about 16.5%. As a result, the company forecasts pro forma earnings per share of $7.80, a 6% rise over 2024. The paragraph concludes with a transition to a Q&A session, where Joseph Cardoso from JPMorgan asks about the key drivers of the company's fitness segment, specifically regarding market share gains, customer acquisition, and pricing, along with contributions to the 2025 growth forecast. Cliff Pemble responds by noting that the fitness performance was strong across various product lines.

The paragraph discusses Garmin's product dynamics and future outlook. It highlights that Garmin is experiencing growth, particularly in wearables, with many new customers contributing to market share gains. Looking towards 2025, Garmin expects a similar trend with a 10% growth outlook. There's a focus on operating margin guidance, which may see a slight decline in operating leverage compared to historical figures. Doug Boessen mentions that while gross margins are expected to remain consistent, operating expenses as a percentage of sales may increase by 30 basis points due to increased R&D investments aimed at fostering innovation and upcoming product launches.

In the discussion, Doug Boessen explains that while outdoor fitness and aviation sectors are expected to grow as a percentage of revenue into 2025, the overall gross margin is anticipated to remain consistent due to various influencing factors such as product mix and component costs. Boessen notes little change in gross margin by segment. Cliff Pemble attributes the strong performance in EMEA to success in the wearables and consumer market, where they are the second-largest player, benefiting from strong market dynamics compared to being third in the Americas.

In the paragraph, Cliff Pemble discusses the margin expectations for the auto OEM business, indicating a mid-teens gross margin and mid-single digits operating margin as their targets. He highlights successful future business wins, including a significant one set for 2027, which supports this outlook. Erik Woodring from Morgan Stanley then asks about changes in the 2025 revenue outlook, originally set at $800 million, given the softened market conditions and the large 2027 win. He seeks clarity on factors affecting the 2025 outlook beyond market conditions and guidance on the growth trajectory bridging 2025 to 2027.

In the provided paragraph, Cliff Pemble discusses a revision of financial expectations for 2025, indicating a $140 million reduction in the outlook due to a weakening market for higher-end automakers in China. Despite the global market generally being weak, no other factors significantly influence this forecast. Looking ahead, Pemble anticipates growth in 2025, a potential dip in 2026, and a resurgence in 2027. Erik Woodring queries about the company's conservative stance on 2024 revenue projections, noting they exceeded expectations. Cliff acknowledges that 2024 performed better than anticipated and confirms a pragmatic approach towards 2025 projections.

The paragraph discusses the company's approach to revenue and profitability, particularly in relation to its auto OEM segment. The company is focused on being pragmatic and confident in its projections, acknowledging that a significant portion of its revenue is seasonal and occurs in the latter half of the year. Erik Woodring thanks Cliff for these insights, and George Wang from Barclays asks about the profitability outlook for the auto OEM business. Cliff Pemble responds that achieving profitability in the auto OEM segment is a goal, but it's a dynamic sector influenced by customer fluctuations. The company reports results on a GAAP basis, and the auto OEM segment, while possibly not matching industry profitability metrics, still contributes significantly to covering corporate costs.

The paragraph discusses the company's achievements in manufacturing and supply chain efficiencies by leveraging their substantial volume of 18 million units annually, leading to attractive cost savings. In a Q&A, George Wang inquires about any recent changes in consumer behavior and product sell-through, particularly concerning flagship products and the outdoor sector. Cliff Pemble responds, stating that the sell-in and sell-through rates are well-matched, the retail channels are not overstocked, and consumer registration and product embracement remain strong, despite acknowledging some consumer pressure. Overall, the company feels positive about their current position.

In the paragraph, David MacGregor from Longbow Research questions Cliff Pemble about the factors contributing to lower product costs beyond just operating leverage from unit volume growth. Cliff Pemble explains that increased production has led to efficiencies in the production line, supply chain, and component purchasing due to higher volumes, emphasizing the benefits of scale. In response to a question about tariffs, Cliff Pemble acknowledges potential exposure due to manufacturing and automotive partnerships but notes that the situation is unpredictable and subject to change.

The paragraph discusses a conversation between David MacGregor and Cliff Pemble about the potential supply chain impacts on their company, although they currently do not foresee any major issues. Ivan Feinseth then asks about two new products, the Approach golf simulator and the Descent diving computer, inquiring if they are aimed at professional markets. Cliff Pemble responds that both products attract a broad range of customers, with the Descent diving computer particularly appealing to serious enthusiasts, including professional and work divers, while the Approach golf simulator also garners interest from golf pros and schools.

The paragraph discusses the broad appeal of the R50 product, highlighting its versatility for indoor use during bad weather and on actual golf courses, attracting a wide customer range. Ivan Feinseth notes that the product offers features at a more affordable price compared to similar items. Cliff Pemble talks about the positive feedback received for their innovative "unified cabin" display showcased at CES, indicating ongoing interest despite it being a futuristic concept. This technology is aimed at influencing the future of automotive design, although it might not appear in an actual car soon. Lastly, there's a brief transition to a new speaker, Noah Zatzkin from KeyBanc Capital Markets, who will ask questions regarding the marine industry.

In the industry, 2024 was challenging, with new boat retail in the US declining by nearly 10% and new boat shipments dropping over 20%. Despite this, the company achieved 6% organic growth, indicating significant market share gains. The product mix is more than half retail aftermarket, with a growing portion in OEM. While the market is currently stable, no significant rebounds or declines are expected without other catalysts. The company remains optimistic about building on this stabilization and potentially outperforming if the market improves. The call ended with a reminder that the Investor Relations team is available for follow-up.

This summary was generated with AI and may contain some inaccuracies.