Garmin raises full-year EPS guidance to $8.15 amid strong double-digit segment growth

Earnings Call Insights: Garmin Ltd. (GRMN) Q3 2025

MANAGEMENT VIEW

* CEO Clifton Pemble announced, "Garmin achieved another quarter of outstanding financial results, reflecting the strength of our unique, highly diversified business model. Consolidated revenue increased 12% to nearly $1.8 billion, which is a new third quarter record, and we experienced strong double-digit revenue growth in three of our business segments."
* Pemble highlighted, "Given our strong year-to-date performance and outlook for the remainder of the year, we are raising our full year EPS guidance. We now anticipate pro forma EPS of $8.15 a share, reflecting in an increase of $0.15 over the prior guidance."
* New product launches included the Edge 550 and 850 cycling computers, Bounce 2 smartwatch for kids, and Venu 4 smartwatch, alongside the fenix 8 Pro smartwatch with satellite and cellular connectivity and a microLED display, and the Blaze equine wellness system.
* Strategic partnerships included a collaboration with King's College London to study women's health during and after pregnancy, with Garmin as the exclusive partner providing wearables technology.
* CFO Douglas Boessen stated, "Posted revenue of $1.77 billion for the third quarter, representing a 12% increase year-over-year. Gross margin was 59.1%, a 90 basis point decrease from the prior quarter. The decrease was primarily due to higher product costs. Operating expense as a percentage of sales was 33.3%, a 90 basis point increase."

OUTLOOK

* Garmin raised its full-year pro forma EPS guidance to $8.15, up from previous $8.00, and reaffirmed revenue guidance of approximately $7.1 billion.
* The company now expects Fitness segment revenue growth of 29% for the year, Outdoor segment revenue growth of 3%, Aviation segment revenue growth of 10%, Marine segment revenue growth of 10%, and Auto OEM segment revenue growth of approximately 8%.
* Boessen reported, "We now expect our operating margin to be approximately 25.2%, which is higher than our previous guidance of 24.8% due to lower operating expenses."

FINANCIAL RESULTS

* Garmin reported consolidated revenue of $1.77 billion for the quarter, with a gross margin of 59.1% and operating income of $457 million.
* Pro forma EPS was $1.99, and GAAP EPS was $2.08.
* Free cash flow generated in the quarter was $425 million, up $206 million from the prior year quarter. Capital expenditures were $60 million.
* The company ended the quarter with $3.9 billion in cash and marketable securities.
* Dividends paid totaled $173 million, share repurchases were $36 million, and $107 million remains in the buyback authorization through December 2026.
* The effective tax rate rose to 21.2% from 17.9% in the prior year, primarily due to new U.S. tax legislation affecting R&D cost capitalization.

Q&A

* Joseph Cardoso, JPMorgan: Asked about the downward revision to Outdoor guidance. CEO Clifton Pemble responded, "The fenix 8 Pro did launch fairly late in Q3, so it didn't have a lot of time to make an impact... the results from the fenix 8 release last year were incredibly strong... maybe our expectations were a little bit too high to begin with."
* Cardoso, JPMorgan: Queried about the drivers of less seasonal gross margin decline. CFO Boessen explained, "That is lower due to higher product costs. Part of that is relating to tariffs... another thing relates to a strengthening of the Taiwan dollar..."
* Erik Woodring, Morgan Stanley: Asked about business cycle phases for Fitness and Outdoor. Pemble replied, "We are a small but growing market share player in the overall wearables market. We have a very broad and strong product line... We see the opportunity to continue to grow with market share gains and innovation in our product lines."
* Timothy Long, Barclays: Asked about channel inventory and Americas performance. Pemble said channel inventory is "healthy and lean," and Americas performance differences were attributed to FX and product cycles.
* Jordan Lyonnais, BofA Securities: Inquired about Auto OEM growth and timing of new programs. Pemble indicated some revenue pressure in 2026 as legacy programs wind down, with new programs expected online in late 2026.
* Joseph Nolan, Longbow Research: Asked about drivers of Fitness growth and new user updates. Pemble noted "strong double-digit growth in those registrations in new products year-over-year."
* Ivan Feinseth, Tigress: Queried about uptake for Blaze and connectivity plan signups. Pemble shared Blaze has "gotten a lot of attention" but will take time to build momentum, and that connectivity products typically see high subscription rates among buyers.
* Benjamin Bollin, Cleveland Research: Asked about Auto OEM warranty costs. Pemble explained it was an isolated issue, now addressed.
* Noah Zatzkin, KeyBanc: Asked about Marine segment guidance and tariffs. Pemble noted the "end market is definitely stabilized, if not really even back on an uptick," and that tariffs are being managed through "short-term adjustments" and supply chain efficiencies.

SENTIMENT ANALYSIS

* Analysts pressed management on guidance revisions, margin trajectory, and segment-specific challenges, reflecting a slightly cautious to neutral tone, especially regarding Outdoor and Auto OEM segments.
* Management maintained a confident stance in both prepared remarks and Q&A, reiterated by Pemble's statements about "momentum entering the important Q4 holiday season" and "delivering another record year of double-digit growth in revenue, operating income and EPS."
* Compared to the previous quarter, the tone was somewhat more measured in discussing Outdoor and Auto OEM, but confidence remained high for Fitness, Marine, and Aviation segments.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year revenue ($7.1 billion) remained consistent, but full-year EPS guidance was raised to $8.15 from $8.00 due to lower operating expenses.
* Fitness segment growth estimates increased to 29% from 25% the previous quarter; Aviation and Marine segment growth estimates were also increased.
* Outdoor segment guidance was reduced to 3% growth from 10% previously, mainly due to tough year-over-year comparisons and the timing of product launches.
* The management tone shifted to a more cautious outlook for Outdoor segment while remaining confident overall.
* Analysts continued to focus on segment-level performance, product cycles, and margin trends, with more probing on Outdoor and Auto OEM segments this quarter.

RISKS AND CONCERNS

* Management cited higher product costs impacting gross margin, with Boessen attributing this to tariffs and currency fluctuations.
* The Outdoor segment faces challenges in achieving back-to-back years of double-digit revenue growth due to tough comparisons and product launch cycles.
* Auto OEM margins were pressured by increased warranty costs from prior period sales, which management described as an isolated issue now resolved.
* Analysts questioned the sustainability of segment growth and the effects of inventory and FX on results.
* Tariffs and new U.S. tax legislation impacting effective tax rate were noted as ongoing risks.

FINAL TAKEAWAY

Management conveyed that Garmin is on track for another record year, raising full-year EPS guidance to $8.15 as double-digit growth in Fitness, Aviation, and Marine segments offset more modest gains and near-term challenges in Outdoor and Auto OEM. The company highlighted the impact of new product launches and expanding partnerships, while maintaining a strong balance sheet and confident strategic outlook for the remainder of 2025.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/grmn/earnings/transcripts]

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