Garmin Ltd.

Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Garmin Limited first quarter 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Terri Sack, Director of Investor Relations. You may begin your conference.

Good morning. We would like to welcome you to Garmin Limited's first quarter 2023 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, segment growth rates, earnings, gross margins, operating margins, future dividends or share purchases, market shares, product introductions, 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 or 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, filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of 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 Humble.

Thank you, Terri, and good morning, everyone. As reported earlier today, consolidated first quarter revenue came in at $1.15 billion, which is down 2% from the prior year. Four of our five business segments posted double-digit revenue growth driven by new product introductions and solid demand trends, which mostly offset an expected decline in outdoor. Gross margin improved to 56.9%, driven primarily by lower freight costs. We generated $197 million in operating income, down 14% from the prior year, and operating margin came in at 17.2%. We feel positive about our first quarter results, which are consistent with the expectations we communicated in February. As such, we are maintaining the full year guidance issued in February, calling for revenue of $5 billion and EPS of $5.15. It's important to remember that Q1 is typically the lowest seasonal quarter of our financial year, and much of the year lies ahead of us. Our diversified business model offers many different paths to achieve our goals, and we believe we are on track to do just that. Before turning the call over to Doug, I'll provide highlights by segment and a summary of what we see ahead. Starting with fitness, return to growth, with revenue increasing 11% to $245 million, driven by strong demand for advanced wearables, especially running watches, introduced during the past year. Growth and operating margins were 49% and 4%, respectively, resulting in improved year-over-year operating income of $11 million. During the quarter, we launched the 402.65 and 409.65, which combine advanced training metrics, recovery insights, and everyday health stats with a vibrant sunlight-readable AMOLED display that does not sacrifice battery life. Moving to outdoor, revenue decreased 27%. to $329 million, primarily due to year-over-year declines in the Adventure Watch category as we passed the one-year anniversary of the highly successful Fenix 7, Epyx, and Instinct 2 launch. Gross and operating margins were 62% and 23%, respectively, resulting in operating income of $77 million. Our Adventure Watches are known for their rugged dependability, long battery life, and rich biosensing capabilities that enable their use in demanding applications. During the quarter, we announced that the Phoenix 7 will be worn on the upcoming Polaris Dawn spaceflight mission to provide insights into the impact of space travel on the human body. Also during the quarter, we launched new handheld devices with the introduction of the GPS Map 67 series and E-TREX SE. These versatile handhelds offer longer battery life, improved positional accuracy, and global communication via in-reach satellite technology. We recently announced the Drive53 GPS Navigator, featuring a high-resolution capacitive touchscreen display, a fresh new design, and built-in traffic options to simplify the drive. We also announced the Zumo XT2, a rugged motorcycle navigator that's built for adventure with a larger and brighter 6-inch sunlight-readable display. We expected the first quarter of the year to be challenging in comparison to the outstanding performance of the prior year. We believe these trends will moderate as we introduce new products throughout the remainder of the year. Looking next at the aviation segment, revenue increased 22% to $214 million, with contributions from both OEM and aftermarket product categories. Growth and operating margins were strong at 72% and 27%, respectively, resulting in operating income of $58 million. During the quarter, we announced additional certifications for our GFC autopilots, which expands our addressable market, bringing the performance and safety-enhancing benefits of our flight control technology to more aircraft models. We also recently attended the Embraer Suppliers Conference, where we were named best supplier in the categories of systems as well as services and support for our G3000 flight deck in the Phenom 100EV and 300E aircraft. In addition, we were named the best of the best supplier to the entire Embraer organization. We also received an Operational Excellence Award from Airbus Helicopters. These prestigious awards are an affirmation of our reliable performance during the supply chain crisis and reflect our strong commitment to providing the best products and outstanding service to our customers. I'm very proud of what our aviation team has accomplished. and believe there is much more we can achieve in this market. We are pleased with how our aviation segment has performed so far this year. The supply chain disruptions of the prior year appear to be mostly behind us, while demand for new aircraft and retrofit systems remains resilient. The marine segment delivered another quarter of impressive results, with revenue increasing 10% to $279 million primarily due to the timing of spring promotions. Gross and operating margins were 54% and 26%, respectively, resulting in operating income of $72 million. During the quarter, we expanded our strong lineup of chart plotters with the introduction of the ECHOMAP UHD2 series, which are preloaded with premium Garmin Navionics Plus cartography and offer wireless data sharing of live sonar and navigation information with other chartplotters on the boat. Also during the quarter, we were recognized as the leader in navigation and sonar categories by Best Marine Electronics and Technology, and for the fifth consecutive year received a 2023 Top Product Award from Boating Industry Magazines. Moving finally to the auto OEM segment, revenue increased 11% to $81 million, primarily driven by increased shipments of domain controllers to BMW. Gross margin was 28%, and we recorded an operating loss of $20 million, driven by ongoing investments as new programs move into production. During the quarter, we began deliveries of domain controllers for the 2024 BMW X5 and X6 from our Olathe, Kansas facility, which represents an important milestone in expanding our manufacturing capability to serve world-class automakers. We also expanded our footprint in the two-wheel market with the launch of an entertainment system for additional models of Yamaha Sport touring motorcycles. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?

Thanks, Cliff. Good morning, everyone. I begin by reviewing our first quarter financial results, provide comments on the balance sheet, cash flow statement, and taxes. Posted revenue of $1,147,000,000 for the first quarter, representing a 2% decrease year-over-year. Gross margin was 56.9%, reporting basis point increase in the prior quarter. Increase was primarily due to lower rate costs. Operating expense percentage of sales was 39.7%, 270 basis point increase. Operating income was $197 million, 14% decrease. Operating margin was 17.2%, 230 basis point decrease. Our GAAP EPS was $1.05, and pro forma EPS was $1.02. Next, look at our first quarter revenue by segment and geography. In the first quarter, we achieved double-digit growth in four or five segments, led by the aviation segment with strong growth of 22%, followed by the fitness and OEM segments with 11% growth, and the marine segment with 10% growth. The outdoor segment declined 27%, primarily due to lower revenue from adventure watches as they compare against the strong first quarter 2022 launches. By geography, 7% growth in Americas was more than offset by a 12% decline in APAC and a 10% decline in EMEA. Both were negatively impacted by foreign exchange rates during the quarter. Looking next at operating expenses. First quarter operating expense increased by $22 million for 5%. Research and development increased approximately $12 million year-over-year, primarily due to engineering personnel costs. S&A increased approximately $13 million per prior quarter, primarily due to increases in personnel-related expenses, information technology costs. For advertising expense, decreased approximately $4 million, primarily due to lower co-op advertising. A few highlights from the balance sheet, cash flow statement, and taxes. We ended the quarter with cash and marketable securities approximately $2.7 billion. count receivable increased year-over-year to decrease sequentially to $611 million following the seasonally strong fourth quarter. Inventory increased year-over-year to decrease sequentially to approximately $1.5 billion as it came to work to optimize inventory levels. We anticipate 2023 ending inventory balance to be relatively flat year-over-year with expected declines in our consumer inventory are offset by expected increases associated with growth in our auto EM business. In the first quarter of 2023, we generated a free cash flow of $232 million, a $106 million increase than prior to your quarter, primarily due to lower use of cash and purchases of inventory. Our capital expenditures for the first quarter of 2023 were $47 million, approximately a $13 million lower than prior to your quarter. For the first quarter of 2023, we paid dividends of approximately $140 million. Also, we purchased $41 million of company stock and approximately $53 million remaining at quarter end of the share purchase program, which is authorized through December 2023. We put an effective tax rate of 8.8% compared to 10.3% prior to quarter. Decreasing the effective tax rate is primarily due to favorable income mix and tax jurisdiction. concludes our formal remarks. Rob, please open the line for Q&A.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. And your first question comes from the line of George Wang from Barclays. Your line is open.

Hey, guys. Maybe you can unpack if there's any change to the segment guidance for this year. In the last quarter, you guys talk about the kind of guidance revenue by segment. For example, still expecting growth for the outdoor kind of MSD growth for the industrial. Just curious if there's any update on that.

Yeah, as we mentioned, George, we're not changing our guidance. We're reaffirming what we said in February. The first quarter, as we mentioned, is the lowest seasonal quarter of our year. So there's a lot of the year left in front of us. So it's our practice to reevaluate more closer to the Q2 timeframe.

Okay, thanks. And also, just quick follow-up on outdoor, you know, weaker than expected. Can you unpack kind of, you know, any sort of cyclical versus structural from the weakness in the 1Q, or is it just a function of tougher compare from a year ago? You know, and can you give any commentary on the channel inventory kind of across wearables and outdoor. Thanks.

Yeah, I think it was very difficult to predict what the outdoor performance would be because our Q1 of 2022 was so amazingly strong with the incredible launch of the Fenix 7, the Epics, and the Instinct. So it was a little hard to predict, but we feel like the general trend was in line with what we expected. I think it's important to note that from a cyclical point of view, we're always introducing new products, and so we expect as the year goes on, our performance will moderate and improve as those new products come out. And then in general, I would say from the market standpoint and also the channel inventory, we don't see anything out there that's concerning. We have fantastic products that people want, and the inventory and the channel appears to be at the correct levels.

Okay, thanks. Your next question comes from the line of Ben Bowen from Cleveland Research. Your line is open.

Good morning, everyone. Thanks for taking the question. Cliff, I wanted to, the first question for you, could you share any thoughts you have about the auto OEM opportunity with BMW, how you expect that to ramp through the course of the year, and then any thoughts you have on the gross margin and operating margin profile of the business as it gets larger. And then I have a follow-up.

Okay. Yeah, I think last quarter, Ben, we kind of outlined that we expect a significant ramp over the next two to three years to the awarded business that we have from BMW and others. Throughout this year, we, of course, expect that the ramp will accelerate into the back half as the new models are introduced and we begin deliveries from three different factory locations around the world to BMW's expanding model line that carries our products. In terms of the gross margin, operating margin profile, we've mentioned before this is more typical auto OEM structured business, so we would expect gross margins from the segment to gravitate towards the high double digits, high teens rather, you know, 19, 20 percent operating margin and then gross margin and then operating margin would be more in line with the mid to high single digits.

Okay. The other question, you touched on inventory and outdoor. Could you share any thoughts you have about channel inventory levels in some of the categories that have been maybe more lean, marine, aviation, where do you think inventory levels are there? And any thoughts on where that goes? And then a second question around this, maybe a little bit, have you seen any observations that you could share around smaller go-to-market partners and how they're managing financing, either for working capital or their own operations? And that's it for me. Thanks.

Yeah, I think what we're seeing in marine and aviation is as the supply chain issues have abated, definitely inventories in the channel are getting better. We did struggle some in marine last year quite a bit in aviation where we were able to kind of manage the situation to make sure that we kept all of our partners going. Things are certainly much better, and we see that inventories and the reflection of of the past few orders are coming down to more healthy levels. In terms of those smaller partners, we really don't see any concern in terms of them and their financial situations or their working capital. There's always exceptions, but in general, it seems like the partners we work with have healthy businesses.

Thanks, Glenn. Your next question comes from the line of David McGregor from Longbow Research. Your line is open.

Yes, good morning, everyone. Maybe just to pick up on that auto OEM for starters, when we spoke last quarter, you expected a flat first quarter and then a significant inflection upwards in the second quarter. First quarter up 11%, a good number there, but Are you seeing incremental business? Has there been a revision in the production schedules or something that would drive that better than expected result? Or was this primarily timing and pull forward?

Yeah, David, I would probably say right now it's mostly timing as carmakers ramp up their new model years. And we'll see some variation from quarter to quarter as they adjust their plans. They are navigating a very complex supply chain, so sometimes things vary up and down, but we try to be flexible and roll with what they need from us.

Okay. If I could just ask about the marine business then. We talked about that briefly a moment ago. I guess I'm just interested in what you're seeing in terms of order patterns early in the season. You mentioned that inventories seem to be in good balance. I'm just wondering about retail sell through and anything you're seeing there and then just replenishment orders that may be coming in and give you some perspective on what to expect in the next couple of quarters.

I think that the promotions and retail activity that we've had so far in 2023 have been very successful. It shows that there's a lot of enthusiasm on the part of customers to obtain the latest technology, and people are certainly excited by the promotions and the ability to obtain the products they want at lower prices. So we feel like that's going very well. In terms of other indicators in the market, I think there's some areas of the OEM market that are starting to slow down a bit in terms of where they were at a very torrid pace that typically tends to be in the lower end boat ranges. Inventories are starting to be more healthy so people can actually buy some of those off of a lot now. But the mid to upper range of the market where a lot of the boats are built to order There's still many back orders, as we understand it, from our partners, and they're still taking orders for those products. So we feel like there's still a lot of demand out there for especially the higher-end products.

Okay, that's good color. Thank you for that. Very strong new product introduction calendar here, so congratulations on the progress there. How would you characterize the willingness of retailers to support all that new product introduction with inventory? they seem a little more reticent at this point, or I noticed you pulled back on, you're seeing a pullback in cooperative advertising. So I guess I'm just looking to kind of reconcile a couple of these points.

Yeah, I think the pullback in co-op advertising was not a change in strategy by anyone. It was really just a matter of the sales volume that was being pushed last year in our outdoor segment. So it's squarely, you know, associated with the dynamics of that product launch from last year. But there's no change in the commitment of retailers in terms of carrying these products and getting on board with the exciting launches that we have coming up.

Okay. Last question for me is just on your direct to consumer business growth and what you're seeing there.

We're still seeing strong results from our direct to consumer. We're seeing growth in both online sales as well as subscriptions and services across the business. So we're very excited about that, and we continue to look for ways to differentiate in that area.

Congratulations. Thanks.

Thanks, David.

Our next question comes from a line of Paul Chung from JP Morgan. Your line is open.

Hi. Thanks for taking my question. So just on aviation, you know, very strong performance to kind of start the year. I know there are some push outs into 2Q from 1Q of last year that helped the quarter year on year. But is this the right kind of quarterly run rate of revenues to kind of think about through the year? And can you expand on, you know, both industry trends, which look quite positive for business jets, you know, how pricing has evolved versus volume and kind of expanding wallet share per plan? And then I'll follow up.

Yeah, I think in terms of our performance in Q1 as compared to the last year, last year was somewhat uneven by quarter because of supply chain challenges that we had, so we would expect that to smooth out more this year. You know, we offered our guidance on aviation, and we were able to certainly do well in first quarter. I would remind everyone that second quarter of last year was was also up and down compared to the first quarter because of the supply chain issues. So we see that evening out and right now we feel very comfortable with our guidance and we'll update people after the end of Q2. In terms of the overall market, what we're hearing from our partners is that, again, orders are very strong, tend to be at least even book to bill, sometimes even greater book to bill. So there's a strong backlog out there and still a lot of people looking to obtain either new or recent model business jets, turboprops, and even piston aircraft are in popular demand. So we continue to see good trends in that area.

Okay, great. And then on fitness, you know, on the 965, what's been the – customer feedback there. I know there's been some, you know, some extended wait periods for shipment, so I assume, you know, demand is holding up pretty well, or is there something else going on? Are you seeing, you know, new customers right there, or upgrades from, you know, existing users, given the kind of attractive AMOLED screen? And did you recognize any benefits for the product and product releases in 1Q? And then on the operating margin side, you know, there's a big dip here, similar to last year. What is driving that? I know it's seasonally weaker, but typically has been in that mid-teens to 20% in the past. So will this kind of be a recurring 1Q margin hit in fitness kind of moving forward? Thank you.

Yeah, I think, Paul, with regard to the 965 and 265 launches, What we've seen is that the 965 has been surprisingly popular at the top end of the range, so we see customers gravitating there, and the demand has been a little bit stronger than what we had predicted, which means that we're scrambling to catch up on some orders and things. But we're very delighted with that, and it seems to me that coming into Q1 that the running market has been reinvigorated, and we're excited to see And we have some great products to offer there. In terms of user mix, I mean, specifically on those kinds of products, we tend to see kind of a balance of new users versus existing users. But across our wearables, the situation just varies depending on whether it's more of a consumer product, such as our venue series, or more of the specialty products like Forerunner and Phoenix. So, in terms of Q1 benefit, we did see some benefit there on these new products, but certainly as we move into Q2, it should be stronger since we have a full quarter of those products available. And in terms of the profitability, the operating profit specifically in fitness, it is under pressure for a few reasons. Year over year, we are carrying still some excess capacity on the tax side of things, which is impacting our results. as we work through the normalization of that market. And we did have some obsolescence that we took in the segment associated with some raw materials in the tax area, which impacted our results. But our targets for the segment are more of the mid-teens operating profit.

Very helpful. Thank you so much.

Thank you. Your next question comes from the line of Ivan Feinseth from Tigress Financial Partners. Your line is open.

Hi. Thank you for taking my questions, and congratulations on the great cadence of new product launches and the launch of the Phoenix into space.

Thanks, Ivan.

And so on automotive OEM, where could we start to see some of the functionality that is contributed by Garmin into various vehicles?

So as we mentioned, we started shipments for 2024 models of the X5 and the X6. So I guess maybe you have to, in the States, you might have to wait to see some of those vehicles we're delivering in Europe to additional models there and also in China.

Okay, then on a lot of the products you're launching, they're more and more coming with, like, a subscription component. Like, the PlainSync has a subscription component. Where do you see going with that? And also, as far as, like, your robust Connect app that has a lot of functionality to your outdoor and watch products, do you envision at some point creating two tiers, like a paid level above the free level?

Yeah, I think, Ivan, we are strategically focused on creating some recurring revenue across our product lines where we can offer additional value to our customers for content or services that go along with our products. So, PlaneSync and the GDL60 is one example of that. In terms of Connect, as everyone knows, that's a longstanding app and relationship we have with millions of customers that use that every day. As we go forward, we're certainly examining ways that we can provide additional value to those customers as well as revenue opportunities for Garmin. But we're very careful about how we do that because we want to make sure that we don't take anything away from our users and we only provide additional value that that they would be delighted with. So we're looking at that, but it will take some time, I think, before we arrive at the final answer.

And then one last question. On the Connect IQ app platform, what are your thoughts on creating a standardized payment process? Because there are a lot of great apps that are for free, but there are a lot of good apps that have a fee, but the fee is usually direct to the provider rather than, let's say, a standardized process of just paying Garmin, and let's say then you pay the provider.

Yeah, I think Connect IQ certainly has a lot more opportunity to build on what is there with monetization and payment capability. We do have mobile payments on our devices, and we certainly are looking at ways that we can extend that into a broader payment platform on our wearables, but we do have some work to do in order to put all the pieces together there.

All right, thank you and congratulations on a great start to the year. Thanks, Ivan.

Your next question comes from the line of Eric Woodring from Morgan Stanley.

Your line is open. Hey, good morning, guys. Thanks for taking my question. Maybe if we just start on fitness. Realizing you're not updating guidance, but you got into the year down 5%, you started the year up 10%, and the comps are pretty easy throughout the year. I guess I just want to make sure, is there anything that we, are there any kind of like speed bumps that we should think of for the rest of the year that would suggest performance is really going to deteriorate through the year? Or is this just, you know, kind of like you said at the top of the call, Cliff, a bit of a wait and see approach?

Yeah, Eric, I would say that going into 2023, it was very difficult to predict what would be the ongoing effect, especially of the indoor trainer market, which was one of the biggest impacts that we had in fitness last year. So it's going to take some time, obviously, as we move into 2023 to see what the demand trends are. We're really pleased with what's happened so far, definitely ahead of our expectations. And we certainly don't anticipate that things will go down from here, but we need to see more of the year come in before we can decide what we think the 2023 outcome will be.

Okay, super helpful. And then, you know, similar to one of the earlier questions on fitness, but this time on outdoor, obviously tough comparison the first quarter, but we saw some pretty significant operating margin deleverage there. I believe operating margins were down to an all-time outdoor low, and so Can you help us understand what some of those significant margin headwinds are? What is kind of temporary versus permanent? And if a return to kind of like that 30% range is how we should think about normalized operating margins or if that's changed and why?

Yeah, I think a few thoughts there. Certainly with the major change in the product mix within the segment compared to last year, that impacted our leverage and, of course, the sales coming down as well. So that's one factor. I mean, this is a very happy problem because the segment is very strong, you know, in the upper 20% kind of operating margin. So we would see that improve as we have more new products that get introduced later in the year.

Okay. Perfect. And then I guess the last question, just on the auto OEM business, appreciate all the color that you've provided first there. One thing I wanted to try to square away was gross margins falling from where they are today to call it the high teens, but operating margins increasing from where they are today to implies like a ton of operating leverage in the business. And so Maybe help us gain comfort in why you can see OPEX almost cut more than in half over a span of 12 months, why there's such significant leverage in business in such a short period of time. And that's it from me. Thank you so much.

Well, I think it really relates to the scale as the volumes increase. So we're looking for the revenues and the gross profits to contribute to offset the expenses that are there. So that's our plan based on the committed business that we have.

Super. Thanks so much for the color, guys.

All right. Thank you.

And again, if you would like to ask a question, it's star 1 on your telephone keypad. Your next question comes from the line of Noah Zaskin from KeyBank. Your line is open.

Hi. Thanks for taking my question. You know, I think this is kind of... maybe been touched on a bit, but in terms of outdoor declining 27% in the first quarter, understand seasonality is a component of that. But as we think about the new products launched during the quarter, like how are you thinking about those new products and kind of the cadence of just new launches moving through the year and the kind of ability to lap the anniversary of the Phoenix 7? Thanks.

Yeah, no, I think we'll have a very strong first half of the year with new product introductions. And then we'll be in a good position in the back half to be able to work with promotions and holiday seasons with these products.

Thank you. And then just in general, in terms of the cadence of the different segments in the second quarter, Just any color there as we start to model out. Thank you.

I think we'll be heavily weighted in the front half of the year in terms of introductions in outdoor.

Got it.

And fitness as well? There is probably more, I would say, balanced kind of product introduction calendar for fitness across the year. So we had some obviously in Q1, and we'll have some throughout the remainder of the year, some really exciting products, I think.

Thank you.

Thank you.

And we have a follow-up question from the line of David McGregor from Longbow Research. Your line is open.

Hi. Thanks for taking the follow-up. I just wanted to come back to the comment about lower freight costs, and you attributed the 40 basis points of gross margin improvements of freight, that's, you know, roughly $4 or $5 million by my math, if I've got that correct. Is that how we should think about the benefits in 2Q and going forward until the anniversary's out, or does that savings actually become a more significant number in 2Q and going forward?

Yeah, as it relates to the freight costs being lower, there's really two things that are driving that. First of which is optimizing some of our shipping methods where we're actually shipping a larger percentage of our products ocean versus air. And then secondly is a year over year, there is just a lower freight rates. Now, as it relates to the freight expense as a percent of sales, We expect that to kind of continue the rest of the year. Now, what you have to think about is the comparability of the different quarters as we did see some of those freight rates improve during the year when you think about on a year-to-year basis. But freight rates are a thing that over the first quarter we did see a kind of a benefit on.

Okay. And just a follow-up, I guess, talk about Europe and the Asia PAC and just what you're seeing there in terms of consumer behavior, consumer order patterns. Any color you can provide there would be helpful. Thank you very much.

I think Europe, we've said before, has tended to be a little more impacted by some of the geopolitical and macroeconomic issues that have been going on. But that said, if you even look at it on a constant currency basis, it's It's not bad, and I think certainly Europe is more impacted by the year-over-year dynamics of the Phoenix EPIX launch from last year than other areas. I think Asia is generally, as we expect, I think currency impacts are a factor there, and, of course, also the year-over-year product introduction cycles.

Okay. Thank you very much.

Thank you.

And there are no further questions at this time. Ms. Terry Sack, I turn the call back over to you for some final closing remarks.

Thanks, everyone, for joining us today. As typical, Doug and I are available for callbacks throughout the day. Have a great one. Bye.

This concludes today's conference call. Thank you for your participation. You may now disconnect.