Garmin Ltd.

Good morning, ladies and gentlemen, and welcome to the Garmin Limited Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone. As a reminder, this conference might be recorded. I would now like to turn the conference over to your host, Ms. Teri Sek. Ma'am?

Good morning. We would like to welcome you to Garmin Limited's second quarter 2020 earnings call. Please note that the earnings, press release, and related slides are available at Garmin's investor relations site on the Internet at www.garmin.com. An archive of the webcast and related transcripts will also be available on our website. 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, gross margins, operating margins, future dividends, market shares, product introductions, future demand for our products and plans and objectives, and the future impact of actual or potential cyber attacks are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K, and second quarter 2020 Form 10-Q, filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means that results could change at any time and any statement about the impact of COVID-19 on the company's business results and outlook is the best estimate based on the information available as of today's date. Presenting on behalf of Garmin Limited this morning are Cliff Pimble, President and Chief Executive Officer, and Doug Besson, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pimble.

Thank you, Terri, and good morning, everyone. As announced earlier today, Garmin reported strong second quarter financial results during a period of extreme uncertainty created by the COVID-19 pandemic. As reported last time, the onset of the coronavirus pandemic and measures taken to control the spread of the virus had a significant impact on the economy, on retailers, and on consumers. The month of April was particularly challenging for every business, including Garmin. However, conditions steadily improved, and we ended the quarter with significant growth momentum. Consolidated revenue came in at $870 million, down only 9% on a year-over-year basis. We experienced strong growth from certain online channels, including Garmin.com, which partially offset weakness from retailers who were disrupted during the early phases of the pandemic. We also delivered strong profitability. Gross margin was 59.3%. Operating margin was 21.7%, with operating income of $188 million for the quarter. This resulted in GAAP EPS of $0.96 and pro forma EPS of $0.91 for the quarter. Doug will provide additional financial details in a moment, but first I'd like to make a few remarks on the performance of our business segments. Starting with the fitness segment, revenue increased 17%, driven by strong consumer interest in health and fitness. Sales of advanced wearables and cycling products were very strong in the quarter. Growth and operating margins were 53% and 24% respectively. We recently acquired Firstbeat Analytics, our longtime partner and leading provider of physiological analytics technology for health, fitness, and athletic performance. This acquisition will help us achieve even greater levels of innovation that will benefit consumers. Looking forward, we expect that the interest in health and fitness will remain very strong. We are ready to seize this opportunity with a great lineup of new products, with more new products on the way. Looking next at marine, revenue increased 4% as boating and fishing became popular pastimes during the pandemic. Many boat builders were idle during the quarter, which tempered our growth. but retail sales were very strong, led by chartplotters and panoptic sonars. Gross and operating margins were 59% and 28% respectively. During the quarter, we launched Quaddix Solar, our first marine smartwatch featuring solar charging technology. Looking forward, interest in our marine products remains very strong. We anticipate an extended marine season this year, as boaters maximize their time on the water and boat builders work through production backlogs. Additionally, we intend to leverage our compelling product lineup to capture additional market share. Turning next to the outdoor segment, revenue decreased 2%. Weakness in traditional handheld categories was mostly offset by growth in adventure watches. Gross margin and operating margin were 65% and 33%, respectively. We recently incorporated solar charging technology into the Fenix 6, the 6S, the Instinct line, and Tactics Delta smartwatches. The Instinct Solar sets a new standard in low-power technology by achieving unlimited smartwatch operation using only the energy harvested from the sun. We expect that our solar harvesting technology will be a significant differentiator for us in the smartwatch market. Interest in adventure and outdoor activity remains very strong. We are ready to seize this opportunity with a great lineup of recently introduced products with more new products and new categories on the pay. Turning next to the aviation segment, revenue decreased 31%. as the pandemic created economic uncertainty that negatively impacted OEM partners and retrofit activity. In addition, sales of ADS-B products rapidly declined, as we expected, after the U.S. mandate passed and the market matured. Gross and operating margins were 73% and 12%, respectively. During the quarter, Autoland was certified, marking the beginning of a new era for general aviation safety technology. Autoland is already available and flying on the Piper M600 and Daher TBM 940, and additional certifications are on the way. For the remainder of the year, we anticipate aviation will continue to face challenging headwinds. However, we remain confident in the long-term outlook for the segment. as interest in general aviation remains high, and we are prepared with a strong lineup of products for every aircraft application. In addition, we believe that advanced safety technologies such as Autoland will make general aviation accessible to more people, which in turn is expected to grow the market. Finally, for the auto segment, revenue decreased 46% as automakers idled their factories and driving activity decreased significantly. Gross margin was 47%, with an operating loss of $10 million in the quarter, driven by the investment we were making to complete several significant programs. Specialty RV and truck categories were a bright spot during the quarter. We launched several products, including new diesel navigators with oversized displays and enhanced routing features, and our new RV890 navigator. designed specifically for the needs of the RV and camping lifestyle. Looking forward, we anticipate that revenue from OEM products will grow in the back half of the year as we complete several OEM programs. Additionally, we continue to invest in specialty products and expect to enter new market verticals soon. And finally, most of you are aware of the recent cyber attack that led to a network outage affecting much of our website, and consumer-facing applications. We immediately assessed the nature of the attack and started remediation efforts. We have no indication that any customer data was accessed, lost, or stolen. Additionally, the functionality of Garmin products was not affected other than the ability to access some online services. Critical affected business systems have been restored, and we expect to restore remaining systems in the coming days. We appreciate the patience and kind words of support we've received from customers and friends during this challenge. So that concludes my remarks. Next, Doug will walk us through additional details on financial results. Doug?

Thanks, Cliff. Good morning, everyone. I begin by reviewing our second quarter financial results through the comments from the balance sheet, cash flow statement, and taxes. Posts of revenue of $870 million for second quarter represent a 9% decrease year-over-year Post margin was 59.3%, 100 basis point decrease in the prior year. Operating expense to percentage of sales was 37.6%, 420 basis point increase in the prior year. Operating income was $188 million, a 26% decrease year-over-year. Operating margin was 21.7%, 510 basis point decrease in the prior year. Our GAAP EPS was 96 cents, performing EPS Next, we look at our second quarter revenue by segment. We achieved revenue of $870 million with two of our five segments posting growth, led by the fitness segment with strong revenue growth of 17%. As seen on the charts, we have a diversified business model from both a segment and geography perspective. Looking at our year-to-date revenue for the first six months of 2020, Our consolidated revenue is flat through the prior year, with three of our segments posting growth, led by Fitness, with 20% growth, and Marine, with 12% growth. By geography, EMEA is up 6%, and America is flat compared to the prior year. Looking next, operating expenses. Our second-core operating expenses increased by $8 million, or 2%. Research and development increased $17 million year-over-year, primarily due to investments and engineering resources. Advertising expenses decreased approximately $12 million for the prior year quarter due to lower media spent. SG&A increased $3 million compared to the prior year quarter, primarily due to increases in personnel-related expenses. A few highlights on the balance sheet, cash flow statement, and taxes. We ended the quarter with cash, marketable securities, approximately $2.7 billion, and no debt. Accounts receivable increased sequentially to $524 million, but decreased significantly year-over-year in line with second quarter sales. Inventory balance increased on both a sequential year-over-year basis through our strategy to increase data supply, support increasingly diversified product lines, timing of product launches, and transition to a higher percentage of ocean shipments compared to air. During the second quarter of 2020, we generated a free cash flow of $142 million, a $62 million increase over the prior year quarter. During the second quarter of 2020, we reported an effective tax rate of 6.8%. Excluding the impact of a $14 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, the former effective tax rate was 14% compared to 18.9% prior to your quarter. Decreases primarily due to intellectual property migration transaction. To conclude, there are four remarks. May, could you please open the line for Q&A?

Ladies and gentlemen, if you have a question at this time, please press the star and then the number one key on your touchtone telephone. If your question has been answered, you wish to remove yourself from the queue, please press the pound key. We have our first question from the line of Paul Chung. Your line is now open.

Hi, thanks for taking my questions. So just on aviation, you mentioned, you know, a long recovery here, and you do have, you know, tough comps on ADS-B to end the year. You know, but do you think we've kind of troughed into Q in your view, and Are you seeing any kind of uptick in demand in July? And then on the margins, looks like your gross margins are pretty steady from the last quarter. What can you do kind of on the OpEx side in the near term to kind of shore up profitability there? And, you know, any one-time items kind of hitting aviation or mostly just lower revenue impact?

Yeah, good morning, Paul. You know, definitely we've seen improvements in the sales across all the segments from April, including aviation. As I mentioned, it does take a little more time for that market to recover, but we're very optimistic about the future there. And definitely those trends, I think, are continuing as we move into July, and we expect it to do so throughout the end of the year. In terms of margins, particularly the operating margin side of things, We do have, because of the lower volumes, we do have some additional overhead expenses that are being absorbed in the business. But as trends continue to improve over time, we would expect those to wash out.

And then how big is the Autoland opportunity in your view and kind of respective impact on growth and margins?

I think as a feature or as a category, it's It's an incremental adder, but what we see is that Autoland is a unique technology differentiating for us that helps our system stand out compared to others in the market. Consequently, we see it as a significant differentiator for our entire cockpit system line.

Okay, and then my last question, just on tax, what was the contribution in the quarter? And, you know, did you see some uptick in demand kind of given shelter in place around the globe? And, you know, any update on how the business is kind of scaling in the U.S.? Thank you.

We're including tax now within what we call the cycling category. So the results that we talked about, the increased interest in cycling is definitely there. Tax is a part of that, as well as our cycling head unit. There was a lot of interest in these products and continues to be with a lot of people focusing on indoor activities, and the backlogs are very strong, so we're working to catch up with demand. Thank you. Thank you.

Next question is from the line of Nick Todorov. Your line is now open.

Yeah, thanks. Thanks for taking the question. Hi, guys, and congrats on great execution and results. Thank you. Cliff, can you talk about the sustainability of, especially on the consumer-facing markets, the fitness, the outdoors, and maybe a little bit in the marine? Obviously, I think a lot of investors have expected the stimulus in North America and part of Europe has drove a lot of you know money in the pockets of the consumers and that has helped spending and discretionary items but how do you see that demand sustaining into the second half and any color you can give us on how you're thinking about the September quarter directionally I know you're not guiding but typically seasonally has been down now obviously is a much more unique situation so how are you thinking of sequential performance in September quarter overall that would be helpful

Yeah, so the stimulus, I suppose when people have more money, they do spend it, which is the intent of the program. I would say, though, that as we look forward and there's uncertainty around what stimulus or how much it would be, we still see a lot of interest from retailers and excitement around things coming up in the second half, so we believe that with their indications, plus what we're hearing back from consumers, that the product categories that we're in are the ones where people will spend their money. In terms of September, we don't comment in terms of forward guidance. As I mentioned in my remarks, we did exit the quarter with strong momentum, and we're continuing to experience that, and so we're focusing on making sure that we can fill all of the demand for the quarter and also for the back half of the year.

Okay, and on the fitness gross margin, very strong given, I believe, you know, you had a little bit more, you were a little bit more aggressive on the discounting to drive consumer demand, which actually paid off. But when you talked about strength in cycling, are you guys seeing also in addition to tax maybe a little bit more contribution from your traditional cycling outdoor products? and that is a strong contributor to that gross margin essentially staying flat year over year. Is that a way to think about it?

Well, there's always product mix that comes into the overall gross margin for a segment. We definitely saw increased sales of tax, which we've remarked in the past is at about a category average or slightly below, and then we also saw strong sales of of other products which are category average or above. So in general, the extra products and tax certainly didn't hurt us, and the promotional activities were targeted, and the mix of sales between retailers and online was such that we came out very well in the quarter.

Okay. And then moving to free cash flow, I mean, I think this is the second strongest free cash flow in the second quarter in a while. How should we think about the full year free cash flow or any thoughts on resuming the buyback?

Yeah. So as it relates to a free cash flow in Q2, you know, we saw there was some year-over-year improvement in some working capital items there. So as we saw, you know, the receivables receipts were higher, you know, year-over-year just due to the lower receipts. demand that we had in Q2 being lower from that standpoint. At this point in time, we're not providing any forward-looking guidance for a free cash flow. And at this point in time, we do not have plans for any stock buyback.

Okay, and last question for me. I think, Cliff, you mentioned that you expect some new verticals to enter in auto. I wonder if that's on the OEM side. I know you have a lot of opportunities there on the P&D side. What makes you most excited? I know you're generally not commenting on any future products, but any kind of hints will be helpful.

Yeah, I think we're moving fastest in innovative new products and new verticals on the consumer side across our business. And, again, I get excited about all of the products that we're doing across the business. I think we have some great things coming, and I think we're very excited about those. Okay, got it. Thanks, guys. Good luck. Thanks, Nick.

Next question is from the line of Ben Pollin. Your line is now open.

Good morning, everyone. Thanks for taking the question. I hope everyone's doing well. I wanted to start, could you provide a little bit of color about where you think channel inventory is? Cliff, you mentioned in the marine segment, the boat builders were idle and that maybe constrained some supply or demand in the quarter. Could you address what you're seeing there and then also in the broader wearables and any other categories where you're seeing maybe an imbalance in channel inventory out there?

Yeah, so I would say in general, at the channel level, we think things are in balance or even possibly lean at this point. We watch very closely the real-time pull-through of our products through registrations that we have. And so consequently, we can definitely see the trends in the retail side of things and compare that to what we see in the channel and what we're shipping into the channel. So we're We're seeing a lot of strength on the consumer side of things. It's definitely not backing up in the channel, and if anything, it's a little lean. From the boat builder side, they're not necessarily a source of inventory. They take products as they need them. But on the retail side of marine, sales have been very strong, and we've been working hard with our retail partners on the marine side to keep up with the demand.

Okay. Another question I had, Doug, could you share any updates on where you are from a factory perspective? I believe there's some new facilities associated with tax. And then you've talked a little bit about, you know, this BMW tier one facility. You know, where are you on the ramp in these facilities? Any thoughts on the timing and, you know, the capital outlay associated with those through the course of this year into next year?

Yeah. So basically I would say that, uh, First, both of those facilities you mentioned, the tax manufacturing facility that we have in Europe as well as the OEM manufacturing facility in Europe, both of those are on plan. So we expect both of those to be up and running here later in the year. And actually things are going well from those. And those will be basically, especially from the tax standpoint, that will help us out because of the increased demand. We're seeing our tax products to meet some of that demand. At this point in time, we're not providing any full forward-looking guidance on any CapEx.

Okay. Last question is, could you talk a little bit about how you are treating the broader COVID situation with employees, where they're working, the mix of maybe at your facilities versus at their homes, how that's coming back online, and then Any influence that's had on OpEx to date, maybe lower OpEx levels with less people, less travel, things like that? And then any thoughts on, you know, how permanent this might be looking forward?

Yeah, so we have been very careful as we've gone through this process to try to maintain a very safe workplace. At the beginning, we had most of our people at home Of course, as a production and distribution business, there are certain people that always have to be here, but for the most part, they were at home. We've since transitioned to about a third of our associates being on site, and we've implemented protocols as we work here in our buildings across the world, really, for keeping safety. We're anticipating that this is a long-term deal. We're not rushing anything. to get people back, but at the same time, we're also trying to focus on rotating people in and out of the facility to get them with their teammates to be able to interact and enjoy the dynamic environment that we have here at Garmin. In terms of OpEx impact, it's difficult to quantify, but I would say there's increased pressure for expenses, of course, as we provided more benefits for our associates to be able to manage some of the difficulties they've had in their personal life with schools and and family members and also concerns for their own health. But in general, we feel like that's manageable, and we're happy, and we're very pleased, actually, with how we've been able to work through this crisis so far.

Great. Thank you, and best of luck in the back half.

Thank you, Ben.

Next question is from the line of Will Power. Your line is now open.

Oh, great, thanks. Yeah, I guess a couple of questions. First, we need to come back to one of the earlier questions or remarks, you know, as we move almost into August here from July. I mean, any reason to think that, you know, the trends you've seen in fitness, outdoor, marine, you know, shouldn't continue, you know, through Q3? I mean, it sounds like you exited on a really strong note, and I assume that's continuing. Just want to kind of confirm that first.

Yeah, as I said in my remarks, we definitely see continued opportunity through the year in those categories, particularly as people are very interested in health, wellness, fitness, and outdoor activity and adventure. So those are very strong products. The Phoenix Solar, Instinct Solar, is resonating very well. And, of course, I think consumers are excited about what will happen in the back half as retailers start to get back to normal in terms of promotions and holidays.

Okay, and then second question, just thinking about, you know, supply chain and I guess probably inventory too. I mean, anything you call out on the supply chain front in terms of constraints or concerns in terms of, you know, components for products. And then the second piece is, you know, as you look at the fitness category in particular, you know, I know a lot of retailers have struggled to keep as many bicycles in as they'd like. There's been, as we know, you know, strong, you know, retail demand on that front. Has that extended to your products, or are there any issues with respect to having an inventory on hand for retailers on the cycling front?

Yeah, so supply chain-wise, I think early in the pandemic, the focus was on supply chain continuity and maintaining the flow of components we needed for our business. As the pandemic evolved, of course, then everyone worried about the economic downturn. As things have come back, if anything, where we've had challenge in supply chain is keeping up with the demand, and that's part of what we've mentioned in terms of gross margin. The freight costs were higher as we worked to get products in place for retailers and opportunities that needed them. Specifically around cycling, definitely that has been an area of constraint when it comes to product availability, especially in Tax products, again, we have a strong backlog of those. And also with cycling computers and those kinds of products, we are spending more on air freight as we try to get those into place at retailers. Cycling activities have been very popular with customers.

Okay, maybe just your last question. As you look at the geographic breakdown, APAC a bit weaker than the other two regions. And that's a region that, you know, I guess should be returning to normal more quickly or should happen in Q2. Just to be interested in the color there, what's the mix difference maybe that's driving the relatively weaker performance in Asia-Pac versus the other areas?

Yeah, APAC has performed very differently from the Western markets. I think the pandemic and the concern over the pandemic was, much stronger there than in some of the other regions, especially at first, and so they've taken longer to come back. Each country has its own story, but of course China has been a significant factor, as well as larger countries like Thailand as well. So APAC kind of is a different narrative from the other geographies. In America, I would say that aviation impacted us more there than the consumer side of things. So America's performance, I feel, was very good. And a similar story in Europe, although aviation's impact is lower there, but still was an impact. But in general, when you exclude that, I'm very pleased with the performance of those geographies.

Great. Thank you.

Next. Next in line is Charlie Anderson. Your line is now open.

Yeah, thank you for taking my questions and congrats on a great quarter. I wanted to start with aviation, Cliff. I recall last quarter you had some comments about potentially in aviation you could see some benefit there because of routes cut from commercial aviation. I wonder if maybe you could just update us on your long-term thoughts on aviation and Do you still think there'll be benefits created by the pandemic as it relates to the portions of the market you participate in? And then I've got to follow up.

Yeah, I think my view is still very much in line with that. In fact, I feel like, if anything, many are coming out in the industry supporting that view. We see some of the partners in the charter side of things see a significant uptick in the number of people who are inquiring about and proceeding with charter projects. flights over the concern over exposure on airlines. And I think general aviation definitely has a slower timetable when it comes to reacting to these kinds of demand changes. It's still a very small market, but for sure we're seeing anecdotal evidence of customers being more interested in investing in aircraft and in equipment.

Okay, great. And then for my follow-up, I was sort of curious about go-to-market strategy. You know, I think there was a comment about, you know, Garmin.com helping out. I wonder if you think that's a permanent change or shift in the trajectory of direct-to-consumer as a proportion of your business, or that was more temporary because of, you know, some demand that retailers couldn't fill. And then I'm also curious about advertising spending. It was down – a decent amount from a year ago, and you also got some leverage there. I wonder if there's a permanent change in maybe needing less advertising, or if that was just a function of sort of some of the things that were happening in the quarter.

Yeah, so in terms of go-to-market on the website side of things, I do see that that shift would be longer term in our business, and again, we have a mix of all kinds of retail and product outlet situations, so we work with all of them, but We definitely see that customers are gravitating towards online purchases, whether it's through a partner or through Garmin. And we did see a significant uptick, as we mentioned, in our own web sales, which we view as a positive development. In terms of advertising and what the dynamics are there, there are really two things. There was certainly impact because of the pandemic and everyone just pulling back. because for a while everyone was glued to news channels and websites, staying indoors and not doing much. But as things evolved, that quickly changed, and so we became very strategic in how we spent our advertising money, focusing on digital and social channels as well as co-op opportunities with retailers. I would see that continuing as well as we go forward as the situation remains very dynamic and retailers' plans also are very dynamic.

Okay, great. Thank you so much.

Thank you, Charlie.

Next question is from the line of Ivan Feinseth. Your line is now open.

Thank you. Thank you for taking my questions and congratulations on another great quarter.

Thank you, Ivan.

Congratulations on the First Beat acquisition. Now, some of the other companies that use the technology from First Beat, do they have contracts to license the technology? Are you going to continue to license technology to other firms? Or what is your view on licensing some of your technology? Because you also have great technology in other areas. And have you ever licensed technology to other companies before?

Yeah, Firstbeat has a list of their own customers. Of course, Garmin is one of those and the major one. They will continue those relationships for the most part, and I think there could be various adjustments on different priorities that they have. They have a lot of activity with research and different things, of course, but in general I would see that the technology would continue to be evolved and innovative for the benefit of customers.

Since Autoland is such an innovative and incredible product, do you see a way of leveraging that innovation into automotive OEM, especially in some autonomous vehicle technology? I don't know if you saw that. Ford announced a new partnership with Mobileye, and I know you have a partnership with Ford with the Mustang Mach-EV company. as well as, let's say, working not only with the auto manufacturers, but some of the tech manufacturers like Mobileye or NVIDIA, which makes the drive computer, or even Qualcomm that has a number of autonomous vehicle computers coming out.

I would say that Autoland is solving a unique problem for automakers. the aviation market, and there's a lot of considerations in the technology around how airplanes operate in the airspace system and the nuances of airports and landing and communication and all of those things. So I think it's very specific there. Of course, there's fundamental control technologies that are probably extensible to other areas, but specifically for auto, that problem is much different to solve, and I wouldn't see a lot of overlap there. We do partner with others in the industry as well on some of our OEM products, but we would see ourselves mostly there serving as a component or technology provider as part of a bigger system.

What about extending the solar screen technology to other handhelds like the inReach? That would be another great item to have solar charging.

Solar is a great technology for us that I'm really super excited about, and it has a lot more applications that we can apply it to across our product lines in several segments.

And then without giving specific products and categories, can you give us like an indication, because you speak a lot about new innovative products to come in different categories. Could you give us some idea of these categories and products?

Well, I think Garmin is all about adventure and activity, and so these new products will take us deeper into those kinds of spaces, market spaces and categories.

Probably like, for example, some of the trends from the pandemic, RV sales are on fire. Yesterday, Polaris said they saw unprecedented demand for ATVs and ATVs personal watercraft and bikes, do you see opportunities that we're going to see new products in those categories?

Yeah, we see opportunities across all those kinds of specialty vehicles, and we're working hard to appeal to a new group of customers that are discovering those kinds of activities.

Very good. Thank you. Congratulations again.

Thank you, Ivan.

Next question is from the line of Eric Woodring. Your line is now open.

Thank you, and good morning, guys. Congrats on the quarter. I'm just following up on a few questions from earlier. So first, just to follow up on Ivan's question there, from a design standpoint, are there any inhibitors to you including solar technology in, for example, wearables products? I guess we'll start there, and I have a follow-up.

Yeah, actually, Eric, the solar components now are on our wearables, so the Phoenix line, the Instinct line, the Tactics as well as the QuadX, those are all our smartwatch wearables, and that's where we targeted that technology first.

Right. I meant more on the fitness side, so the Forerunner, any of the Vivos, anything on that end.

Yeah, there's no technical limitation to where it can go. I I think it's best suited in environments where the devices are already naturally low-power designs because solar technology, while it's exciting, it's still very challenging to collect enough energy from the sun to do some of the things that the more advanced wearables do. But in general, it will continue to evolve. We'll continue to improve it, improve the efficiency, and make it a real differentiator for Garmin.

Awesome. Very helpful. And then just as a follow-up, congrats on the Piper M600 Autoland win. I'm just curious, from a high level, we know that in 2008, 2009, aviation was fairly weak. We'd just love to hear what you think, and weak for an extended period of time. Just would love to hear what you think about aviation today during the current crisis relative to that time and any differences you see that you can compare and contrast. And then as a follow-up to that is also just what inning you think we're in with ADS-B. Obviously, the mandate has passed, but if there's any kind of juice left in that tank, thanks.

Yeah, so I would say the similarities to 2008 and 2009 with regard to aviation business performance, in both cases there was an economic shock that impacted the segments. But I think that's probably where the similarity ends. Back in 2008 and 2009, there was a significant oversupply of every kind of business jet. And so as the financial crisis developed and companies were pulling back, individuals were pulling back, there's a lot of used aircraft on the market which impacted valuations. And even to this day, there's probably still impact from that more than 10 years on. I would say that this time, though, one of the positive things that we see is that activity in the light jet side of things, probably light and up to light-medium jet, is still very strong. As I mentioned in an earlier question, that interest around charter and ownership in those class of aircraft is remaining firm. We're excited about that, and we think even in the small aircraft side of things, there's more potential as people consider traveling by private aircraft as opposed to commercial aircraft. And then on your question with ADS-B, what inning are we in? We actually were in extra innings. So we felt like ADS-B performed in terms of overall market adaptation much better than anyone predicted at the very beginning stages. As we go forward, it doesn't mean that we sell zero ADS-B products. We'll continue to sell ADS-B products to new aircraft. Of course, they all need that. Also, in the aftermarket, we expect that competitive systems will be upgraded. That's a market opportunity for us to take share. and, of course, products, repairs, and things that happen that require a new system. So it will be just an ongoing business going forward.

Awesome. Thanks. And if I could just sneak one last one in for Doug. In the past, you've commented on the trajectory of different OPEX lines. Just wondering if you can provide any color there. But that's it for me. Thanks, guys.

Yeah. Regarding operating expense in general, we'll continue to make – investments in our business really to grow that. We know at this time we're not able to provide any detailed, forward-looking guidance on OPEX, but we'll continue to make investments appropriate to drive our business.

Great. Thanks, guys. Congrats on the quarter.

Thank you, Eric.

At this time, I would like to turn it back to the speakers for any further comments.

I'd just like to thank everyone for joining the call today. Doug and I are available for callbacks. Have a great day.

Ladies and gentlemen, this concludes today's conference. Thank you all for your participation and have a wonderful day. You may all disconnect.