Garmin Ltd.

Thank you for standing by and welcome to the Garmin Limited first quarter 2021 earnings call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star then one on your telephone. Please be advised that today's call is being recorded. If you require additional assistance, you may press star then zero to reach an operator. I would now like to hand the call over to Terry Sec, Investor Relations. Please go ahead.

Good morning, everyone. We would like to welcome you to Garmin Limited's first quarter 2021 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 transcript 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 introduction, future demand for our products, and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur in actual results that differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K, 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, 2021 began on a strong note as momentum from 2020 continued into the new year. Consolidated revenue came in at nearly $1.1 billion, up 25% over the prior year, with strong double-digit growth in four of our five business segments. Gross margin was strong at 59.8%. Operating margin increased to 23.3%, and operating income grew 41% to $250 million. This resulted in GAAP EPS of $1.14. Proforma EPS was $1.18, up 30% over the prior year. Before turning the call over to Doug, I'll provide highlights by segment and a summary of what we see ahead. Starting with fitness, revenue increased 38% to $308 million, driven by strong demand for cycling products and advanced wearables. Gross and operating margins were 56% and 24%, respectively. Operating income more than doubled over the prior year to $74 million. During the quarter, we introduced Lilly, a fashion-first smartwatch with exceptional features designed specifically for women. In the cycling market, we launched the Rally Power Meters, including a version for off-road cycling, which is a new product category for us. Moving to outdoor, revenue increased 46% to $256 million. with growth across all product categories led by strong demand for adventure watches. The outdoor segment generated strong growth in operating margins of 67% and 36%, respectively. Operating income nearly doubled over the prior year to $93 million. During the quarter, we launched Enduro, a new adventure watch category built specifically for athletes who demand exceptional battery life for endurance racing. We also expanded the approach family of golf tracking devices with the launch of three new products for golfers of every skill level. Looking next at aviation, revenue decreased 8% to $174 million, driven primarily by reduced contributions from ADS-B products that remained strong in the first quarter of 2020. Excluding the impact from ADS-B, revenue was relatively flat to last year, which is an encouraging signal that the underlying market has stabilized. Growth and operating margins were 73% and 26%, respectively. During the quarter, Autoland was selected as one of seven finalists for the Robert J. Collier Trophy. The Collier Trophy is a prestigious award that recognizes significant achievements in the areas of aeronautics and astronautics. In addition, we recently added several aircraft models to the list of GFC 500 and 600 autopilot certifications, which expands the addressable market for these advanced flight control systems. Looking next at the marine segment, revenue increased 28% to $209 million. Growth and operating margins were 58% and 29%, respectively. Operating income increased 53% over the prior year to $62 million. During the quarter, we experienced strong demand for chart plotters and Panoptix LiveScope sonars from new boat manufacturers and users preparing their boats for the upcoming season on the water. Looking finally at auto revenue, it increased 18% to $124 million, and we experienced growth in both OEM and consumer categories. Gross margin was 39%, and we recorded an operating loss of $24 million, driven by ongoing investments in OEM programs for next-generation vehicles. During the quarter, we entered the power sports market with a full complement of products designed to help recreational off-roaders find their way, stay connected with other riders, control electrical systems on the vehicle, and monitor their surroundings. In summary, Q1 was another record-breaking quarter. We're very pleased with what we've accomplished so far this year, and we continue to see strong demand for our products. Some of you are wondering how this strong performance affects our outlook for the rest of the year. We believe there are two very important factors to consider. First, much of the year remains ahead of us. Q1 is typically the lowest seasonal quarter of our financial year. It's difficult to predict what the remainder of the year will look like based on one period, especially considering the pandemic-driven dynamics of the past year. Second, the electronics industry is experiencing high demand for and short supply of certain electrical components. So far, the impact on us has been minimal due to our inventory strategy and vertically integrated business model. However, the situation is very dynamic, complex, and long-term in nature, and thus difficult to predict how it will evolve. With these things in mind, we're maintaining the guidance issued on February 17, 2021. So that concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?