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?