Garmin Ltd.

Thank you for standing by. My name is Bhavesh and I'll be your conference operator today. At this time, I would like to welcome everyone to the Garmin Limited second 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'd like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you'd like to withdraw your question, please press the star followed by the one once again. Thank you. I will now hand the call over to Terri Sec, Director of Investor Relations. You may begin your conference.

Good morning. We would like to welcome you to Garmin Limited's second quarter 2023 earnings call. Please note that the earnings press release and related slides are available at Garmin's investor relations site 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 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. 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 second quarter consolidated revenue of $1.32 billion, up 6% over the prior year, driven by growth in three of our five business segments. Gross and operating margins were 57.5% and 21.5% respectively, and we generated $284 million of operating income in the quarter. GAAP EPS was $1.50, and pro forma EPS came in at $1.45, up 1% over the prior year. We feel positive about our results for the first half of the year, and are updating our full year 2023 guidance accordingly. We now expect revenue of approximately $5.05 billion and EPS of $5.15 per year. Before turning the call over to Doug, I'll provide highlights by segment and an outlook of what we see ahead. Starting with the fitness segment, revenue increased 23% to $335 million, driven by broad-based growth across all product categories. Growth and operating margins were 52% and 16% respectively, resulting in improved year-over-year operating income of $54 million. During the quarter, we launched the Edge 540 and 840 cycling computers, featuring dynamic performance insights advanced mapping capabilities, and solar charging to help cyclists ride longer, smarter, and train more effectively. Given the year-to-date performance and current trends, we now expect fitness revenue to grow approximately 10% for the year. Moving to outdoor, revenue decreased 3% to $448 million. as growth in adventure watches was more than offset by declines in other categories. Growth and operating margins were 63% and 31%, respectively, resulting in operating income of $138 million. During the quarter, we launched our next generation Fenix 7 Pro series with enhanced performance insights, built-in LED flashlights, and additional mapping capabilities. We also launched the EPYX Pro series in three sizes, all with bright AMOLED displays and a built-in LED flashlight. Also during the quarter, we launched the Approach S70 premium golf smartwatch, available in two sizes featuring a bright AMOLED display and with a built-in barometer for a more accurate reading on how each shot is playing. We expected the first half of the year to be challenging in comparison to the outstanding performance of the prior year. Given our year-to-day performance and the timing of the Adventure Watch launches, we now expect outdoor revenue to be approximately flat compared to the prior year.