Garmin Ltd.

Hello, and thank you for standing by. My name is Bella, and I will be your conference operator today. At this time, I would like to welcome everyone to Garmin Limited fourth quarter 2024 earnings 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 the star, then the number one on your telephone keypad. To withdraw your question, press star 1 again. I would now like to turn the conference over to Terri Sack, Director of Investor Relations. You may begin.

Good morning. We would like to welcome you to Garmin Limited's fourth quarter 2024 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 information 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 repurchases, market shares, product introductions, foreign currency, tariff impacts, 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, Terry, and good morning, everyone. As announced earlier today, Garmin delivered another quarter of outstanding financial results as our products continue to resonate with customers. Consolidated revenue increased 23% to $1.82 billion, a new fourth quarter record, and we achieved growth and record revenue in each of our five business segments. Gross margin expanded 100 basis points to 59%. Operating income increased 52% year-over-year, and operating margin expanded over 500 basis points to 28%, reflecting both improved gross margin and operating leverage. This resulted in pro forma EPS of $2.41, up 40% over the prior year. 2024 was a remarkable year of growth and achievement for Garmin. While we were optimistic at the beginning of 2024, we consistently outperformed even our highest expectations throughout the entire year. We achieved growth in every segment, resulting in record segment revenue and record consolidated revenue. 2024 was also a year of historical significance, marking our 35th year in operation. Since we were founded in 1989, we have delivered more than 300 million navigation and communication devices, including more than 18 million delivered in 2024. Consolidated revenue increased 20% to $6.3 billion. Gross margin expanded over 100 basis points to nearly 59%. Operating income increased 46% nearly 1.6 billion dollars and operating margin came in at 25 percent we believe our performance is the direct result of our robust product portfolio looking ahead we have many product launches planned for 2025 that will further strengthen our portfolio with some representing new categories for garments With this in mind, we anticipate 2025 consolidated revenue will increase approximately 8% to $6.8 billion. Also, our strong results and positive outlook give us confidence to propose an annual dividend of $3.60 a share, reflecting a 20% increase over the prior dividend amount, which will be considered by shareholders at the upcoming annual meeting. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first I'll provide remarks on the performance of each business segment. Starting with Fitness 2024 was an exciting year as demand for running, cycling, and wellness products has been robust, and new customers are embracing the healthy, active lifestyles our brand represents. We experienced growth in every product category, led by strong contributions from advanced wearables. For the year, fitness revenue increased 32% to $1.77 billion. Gross margin was 58%, a 480 basis point improvement over the prior year, primarily driven by lower product cost and favorable mix. Operating income more than doubled year-over-year to $483 million. And operating margin expanded approximately 1,000 basis points to 27%, reflecting both improved gross margin and operating leverage. During the quarter, we launched Lilly 2 Active, our smallest GPS-enabled smartwatch featuring an elegant design and up to nine days of battery life in smartwatch mode. Looking ahead, we anticipate another strong year for the fitness segment with many new product introductions planned throughout the year. With this in mind, we expect fitness revenue to increase approximately 10% for the year. The outdoor segment delivered a strong year of product achievements and revenue growth. 2024 revenue increased 16% to $1.96 billion. driven primarily by adventure watches following the launch of the highly successful Phoenix 8 series. Gross margin was 67%, 340 basis point improvement over the prior year, primarily driven by lower product cost and favorable mix. Operating income exceeded $700 million, and operating margin expanded 550 basis points to 36%. reflecting both improved gross margin and operating leverage. We are strategically focused on creating growth opportunities by introducing new product categories and penetrating new markets. During the quarter, we launched two products that are rising to the definition of a halo product because they are changing the game in their respective markets. The first product I want to mention is the Approach R50. which is the only portable golf launch monitor with a built-in simulator. It features a 10-inch color touchscreen display and includes a preloaded database of more than 43,000 golf courses that can be played on the course or virtually using a built-in simulator. We also launched the Descent X50i, our first large format dive computer. This device includes a vivid 3-inch color display providing rich information that is readable at a glance, and its rugged design is purpose-built with leak-proof buttons, a sapphire lens, a 20 ATM dive rating, and an integrated backup dive light. Looking ahead, we expect that our strong outdoor product lineup will result in revenue growth of approximately 10% for the year. Looking next at aviation, revenue increased 4% to $877 million, driven by growth in both OEM and aftermarket product categories. Growth and operating margins were 75% and 24%, respectively, resulting in operating income of $211 million, a decrease of 7% year over year. The decrease in operating income is primarily due to increased R&D spending as we develop new products and certify new aircraft platforms. 2024 was a year of milestone accomplishments for aviation. We were named number one in aviation product support for the 21st consecutive year by Professional Pilot Magazine. We also celebrated the legacy of our founders, Gary Burrell and Dr. Minkow upon their induction into the National Aviation Hall of Fame. Aviation safety is once again top of mind after recent tragic accidents that have shocked and saddened everyone. Our strategic focus on aviation safety has resulted in many award-winning innovations designed to save lives, such as envelope protection, safe glide, safe taxi, and emergency auto land. Our most recent safety innovation, runway occupancy awareness technology, was honored with a prestigious Laureate Award from Aviation Week Network as the first available system to warn pilots if other aircraft are occupying an active runway. During the quarter, Textron Aviation announced the selection of our G3000 Prime integrated flight deck for the Citation CJ-4 Gen 3 aircraft. The G3000 Prime was also selected by Beta Technologies for the ILEA electric conventional takeoff and landing aircraft, which conducted its inaugural flight during the quarter. These announcements are the first of many we anticipate as OEMs embrace this highly advanced next generation flight deck. Looking forward, we expect growth to accelerate throughout 2025 as new aircraft platforms enter production and as conditions improve in the aftermarket. With this in mind, we expect aviation revenue will increase approximately 5% for the year. Turning next to the marine segment, revenue increased 17% to nearly $1.1 billion, exceeding the $1 billion threshold for the first time. Growth was primarily driven by new revenue from the 2023 acquisition of JL Audio. Excluding JL Audio, marine revenue increased 6%, outperforming the broader market and strengthening our position as the world's largest consumer marine electronics company. Full year gross margin was 55%, a 180 basis point improvement over the prior year, and was favorably impacted by lower product cost. Operating income increased 32% year over year, and operating margin expanded 240 basis points to 22%, reflecting both improved gross margin and operating leverage. 2024 was also a year of milestone accomplishments for marine, as we were named NMEA manufacturer of the year for the 10th consecutive year, and we were named most innovative marine company by sounding straight only for the second consecutive year. During the quarter, we were recognized with the National Boating Safety Award from Seto Foundation for the fourth consecutive year. Also during the quarter, JL Audio received an Innovation Award for the Pavilion Line of Outdoor Home Speakers from Home Technology Specialists of America. This award validates the outstanding audio performance that the Pavilion Line delivers. As I previously mentioned, Garmin has been consistently outperforming the broader marine market, and we expect to do so again in 2025. The marine market remains soft, but is stabilized at a level from which we can anticipate recovery and growth. With this in mind, we expect marine revenue will increase approximately 4% for the year. Moving finally to the auto OEM segment, revenue increased 44% to $611 million, primarily driven by growth in domain controllers. Gross margin was 18%, and the operating loss narrowed to $39 million for the year. During the year, all remaining BMW models were equipped with Garmin domain controllers, paving the way to achieve our maximum potential revenue from the BMW program in 2025. We also captured additional program wins and made significant progress preparing for our next major program that is expected to enter production in 2027. I'm proud of the progress that we've made in our quest to build a successful auto OEM segment. As many of you know, the outlook of major automakers is softening, which changes the revenue trajectory we previously shared. Even so, we expect 2025 to be another pivotal year of growth and progress towards the profitability stage for this growing business segment. With this in mind, we expect revenue to increase approximately 7% for 2025. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?