Garmin Ltd.

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, 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-Q and 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 with strong growth in consolidated revenue, operating profit, and earnings. Consolidated revenue increased 20%. exceeding $1.8 billion, which is a new second quarter record, and we experienced double-digit sales growth in every business segment. Gross and operating margins expanded to 58.8% and 26%, respectively, resulting in record second quarter operating income of $472 million, up 38% year-over-year, and Performa EPS of $2.17, up 37% year over year. Yesterday, we announced the acquisition of MyLabs, a global market leader in timing and performance analysis for athletic, motor sports, and equestrian competition. MyLabs supports an impressive customer base, including the Boston Marathon, Ironman, and Formula One Racing, to name just a few. We believe that the combination of Garmin devices with MyLaps timing and race management technology will provide a comprehensive experience for our passionate customers from training to race day, while also expanding our addressable market. We are very excited to welcome the MyLaps team to Garmin and look forward to all that we can accomplish together. We are very pleased with our results so far in 2025, which have exceeded our expectations. From our vantage point, consumers have been resilient and demand for our highly differentiated products has been robust. Given our strong performance, we are updating our full year guidance. We now anticipate revenue of approximately $7.1 billion and pro forma EPS of $8 per share. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first I'll provide a few remarks on the performance of each business segment. Starting with fitness, revenue increased 41% to $605 million, with growth led by strong demand for advanced wearables. Gross and operating margins expanded to 60% and 33%, respectively, resulting in operating income of $198 million. During the quarter, we launched the 4Runner 570 and 4Runner 970 with new training features and personalized training plans from Garmin Coach for running and triathlons. These new devices have been enthusiastically embraced by the market and helped drive the remarkable second quarter financial performance of the segment. We also launched the new Venue X1 with an ultra-thin case and class-leading 2-inch display, resulting in a sleek, lightweight design that is easy to read and packed with our most popular features. Also during the quarter, we launched several new category-defining products, including the Index Sleep Monitor, the Tacx Alpine Gradient Simulator, and the Variaview Bike Headlight with an integrated 4K resolution camera. Given the first half performance of the fitness segment and the continued demand we are expecting for our advanced wearables, we are raising our revenue growth estimate to 25% for the year. Moving to outdoor, revenue increased 11% to $490 million, with growth driven primarily by adventure watches. Gross and operating margins expanded to 66% and 32%, respectively, resulting in operating income of $158 million. During the quarter, we launched the Instinct 3 Tactical Edition with a bright AMOLED display and metal reinforced bezel, a built-in LED flashlight, and support for popular new activities such as rucking. Also during the quarter, we launched new tread all-terrain navigators that offer larger touchscreens and additional mapping options to enrich off-road adventures. We are pleased with the performance of the outdoor segment so far this year. Looking forward, we expect growth to moderate as we pass the one year anniversary of the highly successful Phoenix 8 launch. With this in mind, we are maintaining our revenue growth estimate of 10% for the year. Looking next at aviation, revenue increased 14% in the second quarter to $249 million with growth contributions from both OEM and aftermarket product categories. Gross and operating margins expanded to 74% and 25% respectively, resulting in operating income of $63 million. During the quarter, Embraer recognized Garmin as the top supplier in the electrical and electronic systems category for the 10th consecutive year. validating the long-term investments we have made, creating innovative products, and building strong relationships with our customers. We're also preparing for the future with game-changing new products and features, such as the recently announced G5000 Prime integrated flight deck for Part 25 aircraft, and the addition of FAA Datacom to the GTN 750xi Navigator, which expands the availability of modern digital communications to the aftermarket. We also launched SmartCharts, which has the potential to be one of the most disruptive new products for aviation in quite some time. Using SmartCharts, pilots can see their position on context-specific georeferenced charts, making instrument approaches much more intuitive and easier to fly. Also during the quarter, we announced that Garmin Autoland was certified for the Cirrus SRG7 Plus series, becoming the first piston-powered aircraft equipped with this award-winning safety system. Given the first half performance of the aviation segment, we are raising our revenue growth estimate to 7% for the year. Turning to the marine segment, revenue increased 10% to $299 million, with growth across multiple categories led primarily by chart plotters. Gross and operating margins were 55% and 21%, respectively, resulting in operating income of $63 million. During the quarter, we launched the GPSMap 15x3 chartplotters with an ultra-wide display that offers as much display area as two separate 9-inch chartplotters, making information easier to read while maximizing the use of space in the instrument panel. Also during the quarter, we launched the Quadix 8, our most advanced purpose-built smartwatch for mariners. The marine market has easily surpassed our lowered expectations, demonstrating resilience and stability in an otherwise dynamic macroeconomic environment. Given our first-half performance and the current trends in the market, we are raising our revenue growth estimate to 5% for the year. And moving finally to the auto OEM segment revenue increased 16% to $170 million with growth driven primarily by increased shipments of domain controllers to BMW. Gross margin was 17% and the operating loss narrowed from the prior year to $10 million. We recently shipped our 1 millionth BMW domain controller from our US manufacturing facility demonstrating our capability as a respected tier one supplier to the North American automotive market. We also continue to make progress on the launch of our next significant auto OEM program in the second half of 2026. Given the first half performance of the auto OEM segment, we are raising our revenue growth estimate to 10% for the year. That concludes my remarks. Next, Doug will walk you through additional details on our financial results.

Doug? Thanks, Cliff. Good morning, everyone. I'd like to begin by reviewing our second quarter financial results. If I had comments on the balance sheet, cash flow statement, taxes, and updated guidance. We posted revenue of $1,815,000,000 for the second quarter, representing a 20% increase year-over-year. Gross margin was 58.8%. 150 basis point increase in the prior quarter. Increase was primarily due to product mix. During the quarter, the cost impact from tariffs was not significant. It was more than offset by higher revenue associated with the weakness of the U.S. dollar relative to other major currencies. Operating expense to percentage of sales was 32.8%, 108 basis point decrease. Operating income was $472 million, 38%. Increase. Operating margin was 26%, 330 basis point increase prior to quarter. Our gap EPS was $2.07. Performing EPS was $2.17. Next, we'll look at second quarter revenue by segment and geography. In the second quarter, we achieved double digit growth in all five of our segments, led by the fitness segment with outstanding growth of 41%. By geography, we achieved double-digit growth in all three of our regions, led by 25 percent growth in EMEA, followed by 19 percent growth in Americas, and 16 percent growth in APAC. Looking next, offering expenses. Second quarter offering expense increased by $74 million, or 14 percent. Research and development increased approximately $34 million. SG&A increased approximately $40 million compared to prior year quarter. Both increases were primarily due to personnel-related expenses. A few highlights on the balance sheet, cash flow statement, and taxes. We ended the quarter with cash and marketable securities of approximately $3.9 billion. Account receivable increased both year-over-year and sequentially to approximately $1 billion following the seasonally strong sales in the second quarter. Inventory increased year-over-year and sequentially to approximately $1.8 billion. We are executing our strategy to increase the inventory of certain product lines to support strong customer demand, as well as mitigate the effects of potential increases in tariffs. During the second quarter of 2025, we generated a free cash flow of $127 million, a $91 million decrease from the prior year quarter, primarily due to an increase in inventory. Capital expenditures for the second quarter of 2025 were approximately $46 million, approximately $9 million higher than the prior year quarter. We expect full year 2025 free cash flow to approximately $1.2 billion. Capital expenditures approximately $350 million. During second quarter 2025, we paid dividends of approximately $173 million and purchased $67 million of company stock. At quarter end, we had approximately $143 million remaining in the share purchase program, which authorized December 2026. report an effective tax rate of 16.5% compared to 17.9% in the prior quarter. The decrease in effective tax rate is primarily due to the release of tax reserves. Turning next to our full year guidance. We estimate revenue of approximately $7.1 billion compared to our previous guidance of $6.85 billion. We expect gross margin to be approximately 58.5% consistent with our previous guidance. We expect the impact from tariffs to be lower than we previously estimated. However, this favorable impact will be offset by unfavorable foreign currency impacts on product costs due to the strengthening of the Taiwan dollar. We expect our operating margin to be approximately 24.8%, consistent with our previous guidance. Also, we expect a performant effective tax rate of 17.5%, compared to our previous guidance of 16.5%, which incorporates the impact from the new U.S. tax bill. We expect the new tax bill will result in a decrease in U.S. tax deductions and credits in 2025, primarily due to the change in capitalization requirements of certain R&D costs. Expected performer earnings per share is approximately $8, compared to our previous guidance of $7.80. This concludes our formal remarks. Rob, can you please open the line for Q&A?