Q4 2019 Earnings Call

We will conduct a question answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone as a reminder of this conference call is being recorded I would now like turn the conference over to your host Teri Seck manager of Investor Relations.

Good morning, everyone. We would like to welcome you to Garmin Limited fourth quarter 2019 earnings calls. Please note that the earnings press release unrelated slides are available at Garmin Investor Relations side on the Internet at Www Dot Garmin Dotcom flashed out an archive of the webcast and related transcript will also be available on our website. This earnings.

Call include projections and other forward looking statements regarding regarding Garmin limited and its business any statements regarding our future financial position revenues earnings growth and operating margin and future dividend market shares product introduction future demand for our products and plans and objectives are forward looking statements so far looking a bit.

And circumstances discussed in this earnings call may not occur and actual results could differ materially as a result of the 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, our Cliff Pemble press.

With that and Chief Executive Officer, and does that then Chief financial Officer and Treasurer at this time I would like to turn the call over to Cliff Pemble.

Thank you Terry and good morning, everyone.

As announced earlier today, we finished 2019 strong with revenue for the quarter, increasing 18% over the prior year to $1.1 billion.

Fitness aviation Marine and outdoor collectively increased 24% over the prior year.

Gross margin was 58% compared to 58.9% during the prior year.

Operating margin improved to 25.1% an operating income increased 24% over the prior year.

These results generated GAAP bps of $1.89 and pro forma EPS of $1.29 in the quarter, an increase of 26%.

[noise] looking briefly at our full year performance 2019 was a remarkable year of accomplishments.

Revenue increased 12% to over $3.7 billion, representing a new record for garment.

Combined revenue from fitness aviation Marine and outdoor increased 18%.

Gross margin improved to 59.5%.

Operating margin improved to 25.2% in operating income increased 21% to $946 million another record achievement.

This resulted in GAAP EPS at $4.99 and pro forma EPS at $4.45, an increase of 21% over the prior year.

In light of these strong results at our upcoming annual meeting will be asking shareholders to approve an annual dividend of $2.44 a share.

Representing a 7% increase.

Doug will discuss financial results in greater detail in a few minutes, but first I'd like to highlight some achievements from the past year and our outlook in each of our five business segments.

Yes.

2019 was an outstanding year for our fitness segment with each product category performing well.

During the year, we launched sweeping updates to our running wellness and cycling product lines and these products were strong contributors in the final quarter of the year.

In addition, our recent acquisition attacks brought new revenue to the segment and expanded our ability to serve cycling customers indoors and outdoors all year long.

For the year revenue from fitness increased 22%.

Exceeding the 1 billion dollar threshold for the first time.

Gross and operating margins were 51% and 18% respectively.

And operating income increased 6% over the prior year.

In 2020, we plan to build on this momentum by launching new feature rich products, while also expanding the distribution of tax products.

As a result, we anticipate revenue from the fitness segment will increase approximately 10% for the year.

[noise] 2019 was an extraordinary year from our aviation segment.

ASV was a significant contributor to growth, but on a combined basis other categories contributed even more.

We experienced growth in aftermarket systems as customers recognize the strong value proposition of modern cockpit electronics.

We also experienced growth in OEM systems, driven by popular new aircraft and from increasing demand for trainer aircraft.

For the year revenue from aviation increased to 22%.

Gross and operating margins were 74% and 34% respectively.

And operating income increased 24% over the prior year.

For 2020, we anticipate that revenue from aviation will be comparable did not have 2019 as growth in aftermarket systems is offset by declining Ats fee revenues.

Trends in the broader OEM market should be in line with those of 2019.

We anticipate that the early part of the year will be the strongest driven by residual 80, espeed demand followed by a weaker back half as we moved past the inevitable peak of the DSP cycle.

We are focused on opportunities that lie ahead, and we're confident in the long term growth prospects for our aviation business.

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Our marine segment delivered another year of impressive results as market growth in market share gains boosted our performance.

From time to time, we've highlighted our halo products and technologies achievements at speak for themselves and cast a positive glow across the entire Garmin brand.

Our panoptix lives scope sonar system is one example that is generating excitement and strong sales across a broad range of products.

We also introduced our first electric trolling motor, which is a new product category for us and brings game changing new features to the market.

For the year revenue from Marine increased 15% exceeding the 500 million dollar threshold for the first time.

Gross and operating margins improved to 60% and 22% respectively.

Operating income increased 73%.

Looking forward interest in our products remained very strong entering the 2020 boating season.

In addition, our market share in the OEM category will grow as some of the most respected boat brands adopt our products as standard equipment on their 2020 models.

With this in mind, we anticipate revenue from the Marine segment will increase approximately 10% for the year.

[noise] outdoor delivered another strong year product achievements in revenue growth.

During the year, we launched the Mark luxury watch series and we completely refreshed the Phoenix Adventure Watch series.

We also introduced versions of the Phoenix with passive solar recharging technology, which has resonated positively with the market.

For the year revenue from outdoor increased 13%.

Gross and operating margins were 65%, 36% respectively.

And operating income increased 15% over the prior year.

Looking ahead, we believe that the adventure watch category will continue to grow driven by further innovation and new utility.

We also believe that Inreach will continue to grow as more people appreciate the convenience and lifesaving potential of two way remote communication.

But these things in mind, we anticipate revenue from the outdoor segment will increase approximately 10% for the year.

Our auto segment also delivered many strong achievements in 2019.

We integrated the Alexa digital assistant into our PND product line.

We entered a new product category with the launch of the overlap under navigation device.

At the recent consumer electronics show, we announced a new dash Cam tandem.

The captures quality video, both inside and outside the vehicle regardless of lighting conditions.

During the year, we also secured a significant backlog of new business of the tier one supplier to the world's most respected automakers.

For the year revenue from auto decreased 14%.

Gross and operating margins improved to 47% and 10% respectively.

In operating income increased 50% over the prior year.

Looking ahead, we believe that the negative trends in auto will moderate as contributions from specialty categories increase and as previously announced OEM programs contribute in the back half of the year.

2020 will also be a year of accelerated investment to support recently awarded programs.

We are putting our manufacturing facility in Alaska for auto OEM production.

And we are opening a new manufacturing facility in Europe that will be dedicated to auto OEM production.

We also plan to hire additional resources and engineering and operations to support these complex intensive development programs.

Things in mind, we anticipate that revenue from the auto segment will decrease 5% for the year.

In summary, we are excited about the opportunities we see in every business segment.

For 2020, we anticipate consolidated revenue will reach approximately $4 billion up 6% year over year as growth in fitness outdoor and marine more than offset a slight decline in the auto segment.

We anticipate that revenue in aviation will be comparable to that of 2019.

We anticipate gross margin of approximately 59.2% and operating margin of approximately 23.5%, reflecting our plans for an increased level of investment to support long term growth initiatives.

We anticipate a full year performance effective tax rate of approximately 10%.

Resulting in pro forma earnings per share of approximately $4.60.

Our estimated tax rate will be favourably impacted by an intercompany transaction to migrate the ownership of our consumer intellectual property from Switzerland to the United States over the next several years, Doug will be providing more details on this in a few moments so.

So that concludes my remarks next Doug will walk you through additional details on our financial results and outlook, Doug. Thanks Cliff. Good morning, everyone. Let's begin by reviewing our fourth quarter full year plants results through the comments on the balance sheet cash flow statement and taxes.

As a revenue over $1.1 billion for fourth quarter present, 18 point, 18% increase year over year gross margin was 58% 90 basis point decrease from the prior year.

Operating expense percentage of sales was 32.9% 210 basis point decrease from the prior year.

Operating income was $277 million, 24% increase for the prior year operating margin was 25.1% 120 basis point increase from the prior year.

Our GAAP EPS was $1.39 cents.

Former EPS was $1.29 cents, a 26% increase the prior year.

Looking at the full year results posted revenue of over $3.7 billion, representing 12% increase year over year gross margin was 59.5% 40 basis point increase from the prior year operating expense, so new sales, 34.3% hundred 60 basis point decrease.

The prior year.

Operating income was $946 million, 21% increase over the prior year operating margin was 25.2% increase of 190 basis points from the prior year.

Our GAAP EPS was $4.09 pro forma EPS was $4.45, 21% increase the prior year.

Next we'll get fourth quarter full year revenue by segment.

Fourth quarter, we achieved strong double digit growth in four of our five segments led by the fitness segment with 34% growth followed by the aviation and marine segments growth of 22%.

Outdoor growth of 16%.

For the full year 2019, we achieved 12% consolidated growth double digit growth in four or five segments.

Looking next our fourth quarter revenue and operating income.

Combined basis, the fitness aviation marine not or segments contributed 89% of total revenue in the fourth quarter 2019, Kurt 84% prior to quarter.

Fitness grew from 30%, 34% aviation grew from 17% 18%.

You see on charts illustrate our profit mix by segment.

The fitness aviation marine not or segments collectively delivered 99% operating income the fourth quarter 2019 credit 80, 97% in the fourth quarter 2018.

All segments. Besides the auto segment had year over year increases in operating income dollars.

Looking next to full year charts.

Full year fitness aviation Marine outdoor segments were up 85% total revenue correct, 81% just 19.

All segments had year over year increases in operating income dollars.

Looking next operating expenses fourth quarter operating expenses increased by $36 million for 11%.

Research and development increased $70 million year over year, two investments in engineering resources incremental costs associated with recent acquisitions.

Advertising expense increased approximately $8 billion of the prior year quarter due to higher fitness and outdoor expenses represented 5.7% of sales 20 basis point decrease compared to prior year.

Mission to increased $12 million compared to prior quarter, but decreased for the size of sales, 12.5% on a basis point decrease compared to prior year.

Chris was primarily due to personnel related expenses incremental costs associated with recent acquisitions.

A few highlights on the balance sheet cash flow statement and dividend payments.

The quarter cash Mark will securities $2.6 billion counter seasonal increase sequentially year over year $707 million strong sales from holiday quarter.

Inventory balance increased year over year to $753 million increases due to our strategy increased data apply to support our increasingly diversified product lines and the acquisition of tax.

Fourth quarter 2019, we generate free cash flow $208 million.

Full year 2019, we generate free cash flow approximately $581 million $183 million decrease for the prior year due to increased working capital needs.

2020 expect free cash flow to be approximately $750 million approximately $225 million a capital expenditures.

We announced our plans to seek shareholder approval for an increase in our dividend beginning with at June 2020 payment postal cash dividend of 2044 cents per share or 61 cents per share per quarter to 7% increase from the current quarterly dividend of 57 cents per share.

For full year 2019 reported income tax expense of $35 million includes an income tax benefit of $118 million to the revaluation step up of certain Switzerland deferred tax assets. It's result for the Switzerland tax reform.

Excluding the 180 million dollar income tax benefit full year 2019 perform effective tax rate was 15.5% 20 basis point decrease from the prior year.

For fiscal year, 2020 pro forma effective tax rate spectra decreased 10%, primarily due to that migration of intellectual property ownership from Switzerland to United States.

Okay consideration the recent major tax reform to Switzerland, not states migration maintained and efficient tax structure sponsor the changing global tax landscape.

Migration includes an intercompany license agreement that shifts intellectual property ownership for consumer products from Switzerland, Tonight's states to royalty payments.

This results in a favorable shift of income by jurisdiction reduces our level expense related to uncertain tax positions.

End of the multiyear license agreement higher percentage of income recognized United States, which includes our formal remarks, Mike could you. Please open the line for Tonight.

Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the Q. Please press the pound Keith.

Your first question comes from the line.

Robert Spingarn from credit Suisse.

Hi, good morning, good morning.

If I wanted to dig into aviation just a little bit here and now that you're I think you're through some of the tough compare with your guide for 20, but how do we think about.

The relative size it maybe SB and 19 versus 20, that's the first question.

And then the second question, we've been getting a lot of from.

Investors as to what extent was ats be driving associated retrofit.

Activity when aircraft, we're in the shop for the.

For the mandate upgrade and it is how do you contemplate any feed in those associated revenues looking forward.

Yes so.

As we exited the year there were approximately 118000 airplanes that had been equipped out of a total of park. If you will have about 160000 so.

Ideally that would mean, there's something over 40000 aircraft that that could be left to equip we don't think that all of those will be some of those are probably.

Airplanes that maybe aren't in the best shape and might be scrap so so theres going to be some fallout from those for sure. We expect that most of the activity would take place in Q1 and some in Q2 and then the activity would would tend to go down in Q3 and four in terms of the retrofit activity.

Well, it's true that ABTSP, probably prompted people to come in and look at other things as we got towards the end of the mandate, particularly most of 19 I would say shop capacity has been a real issue.

So as a result on people may not have been able to do everything that they wanted to and Meanwhile, we've been introducing a lot of great new products and and these are generating a lot of interest. So we would expect that people will come back and do more and the reality is is that not everybody wants to put down the big Bill for all of their retrofit.

Needs at one time too so they may shop, and continue to watch and.

And then do more later so we're optimistic about the retrofit market. We think that it's still has a lot of room to grow.

So if it is.

Reflecting back on what you just said if Q1 in Q2 see a little bit of 80, SP activity and probably a lower rate than the quarters. At 2019 is it fair to say that you're anticipating a decline of something like I don't know, let's call it 60% or sell maybe a little more.

Yes, we don't have guidance specific on that I would tell you that 80 SP is not a market that goes to zero because.

Transponders need to be replaced Theres, new features new products that introduce so there will always be an underlying market for ASV out there and of course, new airplanes always need a DSP. So there will be a run rate of 80 SD going forward.

Okay and then just wanted to ask you have to what extent you factored Corona virus into the guide and that's it for me. Thank you.

Yes, so corona virus I think it's still in emerging situation and the cases seem to be peaking but we're we're watching that I would say it's also early in the year. So we don't.

Even if there is some short term impact we feel like Theres a lot of room to make up for that so far our impact has been.

Minimal and our safety stock situation has helped US there if the outbreak continues to go on then of course that would change the game and for us and a lot of other people, but but for now we're optimistic that things are coming back online our suppliers seem to be coming back, although obviously theres a ramp up period that were manage.

Going through all of it.

Thank you.

Thank you.

Ladies and gentlemen, if you have a question at this time. Please press Star then the number one key on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the Q. Please press the pound key. Your next question comes from Charlie Anderson from Dougherty and company.

Yes, thanks for taking my questions and congrats on a stellar 2019.

I want to I want to start with automotive, but a few things I think number one.

Q4 was a little bit lower operating income looked like higher R&D was that just the start up ahead of the BMW I'm. Just curious there and then you did make some comments in your prepared remarks cliff about production in the U.S. and then in Europe, I know you've talked about before deal recently, but I wonder if you there any others to highlight that drives.

Those facilities together.

Then lastly on automotive.

I know PND is kind of continued probably to be a headwind assuming we're we're not basi mirrors or maybe just kind of curious what you're embedding into guidance you'd be the rate of decline in the BMD business. Thanks.

Yeah. So in terms of the lower operating income in Q4, there was there was a mix of some.

Onetime items, there as well as increased.

R&D associated with non capitalize projects. So so both of those kind of came together to generally lower.

The overall auto operating income the PND side is very profitable and so that's something we're not as worried about we do see that that the market will continue to decline in 2020, although at a moderated pace as specialty products become a bigger part of the mix and we also see a shift in terms of buying.

And behaviors to the more advanced products that we offer so that's all good news in our view in terms of the production plan.

In the U.S. were equipping our factory here to be able to supply the BMW program that we want a few years back.

For North American production and then the European investment is for the most recent BMW when that will supply the European factories for BMW.

Okay, perfect and then from for my follow up.

With that with the change that you made that influences the tax rate Im just sort of curious how that impacts.

Where cash is accessible to corporate so for corporate purposes.

I Wonder if you give us an updated.

Some kind of where everything stands in terms of where cash is an accessible and if theres any change there. Thanks. So much sure. Thanks, Charlie so as it relates to where the cash is it does not change that's going to give you a little bit of a high element more detailed color on another transaction that we went through so this relates to an intercompany.

The license agreement between Switzerland, and the United States and so the situation is that the United States is going to be paying a royalty payment to Switzerland for the use of certain.

Consumer IP, we have in Switzerland. So as a result of that that lowers the amount of income recognized in United States increases that in Switzerland, and so result of that gets us a favorable income mix by jurisdiction during that license period. So during the license.

A period.

It is at the situation is that.

You know a higher percentage of the income will be going to the us.

Great. Thanks, so much.

Thank you.

Your next question comes from Nick Todaro from Longbow Research.

Thanks, Good morning, guys and congrats on Great 2019 results.

Thanks, Nick.

Well, if you talked about expanding distribution of tax in 2020 and I think.

You're also having some additional capacity coming up online before tax specifically in 2020.

And in Europe, we can you give us some sense on the how should we think about overall fitness gross margin in 2020, we'll see that fourth quarter gross margin dip below 50% for a first on him I believe since.

2010, or before so can you give us some color how should we think about that.

Yes, so the fitness gross margin definitely has influenced by product mix and in the fourth quarter, we had.

A lot of.

Products that were sold obviously for the holiday season, particularly promotional.

Products and tax itself is a product line as we've said before that is slightly dilutive to the overall gross margins of the segment and so.

The just under 50% was was obviously a result of all of that mix, we would expect that to go up and down as the year progresses, depending on the seasonality and the kind of products that we offer and generally we're targeting around a 50% gross margin for the segment and.

Mid to high teens operating margin for the segment.

Okay got it and Doug I believe you said our Capex for 2020 is expected to be around 225 million if I'm not mistaken that's qx an increase in one assuming correctly, that's mostly coming from investments on the auto side and facilities and so forth or there's something else to that.

Yes, So let me give you.

Yes. It is at an elevated level compared to 2019, so yeah 2020 will be an investment year for us.

As it relates a capex and probably going into 2021, so what's driving that is exactly what to clip mentioned, we're making some investments related to our OEM business. So we are equipping our facility here in a light to handle OEM also we'll be opening a European.

Well at the manufacturing facility for OEM.

Also we are building a new manufacturing facility for tax in Netherlands for that acquisition. Another piece relates to our overall I'll leave the facility expansion. If you remember we built a new facility.

For our manufacturing as well as our distribution recomplete with that what we're doing now is actually renovating our previous manufacturing operation.

Facility, there are renovating that to increase our workspace because of increased headcount to support our R&D expansion as well as innovation.

The big drivers, we have yeah, I think last one for me the implied guidance assumes about 100 basis points of increase in operating expenses as a percent of sales can you give us some color is that mostly coming up from our higher R&D expenses or is it across the board yeah sure. So as it relates to 2020 on operating expenses.

A little bit flavor that bye.

Category first on advertising for advertising a percentage of sales, we would expect our advertising to be relatively consistent year over year, we'll probably spend more advertising dollars, but we try to keep that in line with our sales growth as it relates to.

R&D, yes, there will be increased R&D as a percentage of sales year over year, we expect that to probably be up may be about 100 basis points and then as it relates to SGN a.

Percentage of sales, we expect that to be up about a 50 basis points or so so what's really driving that.

Increased operating expenses really is upward our increased revenue growth. So one of which is a situation as we talked about for OEM business, So where it makes some investments there you know to cover up increased R&D operations as well as it for a different systems there.

R&D front overall will continue to invest in R&D to make sure that we have innovation.

Our products and lastly, I would say is that there is some full year impact to some acquisitions, most notably attacks that we did in 2019, and we'll have to full year impact to those items. So all those expense items as close as well as the.

Capex, we talked about really to support our increased topline growth in revenue.

Got it okay guys. Thanks, good luck.

Thanks, Nick.

Your next question comes from Willpower from Baird.

Hey, guys. This is Charlie Ehrlich on for will thanks for taking my question.

I wanted to ask about the.

This segment and the strength in the quarter.

Do you talk a little bit more about what specifically drove that strengthen.

It's been a real stand out 2019 looks like you're expecting another strong year in fitness next year. So have you been able to successfully navigate the competitive environment, where Apple continues to do really well as well.

I think for us the strength Charlie on for the year and also for the quarter was really around new products, our new venue Vivoactive for product lines are very popular as well as the new running product lines that we introduced last year, we completely refreshed all of those product lines. So they did very well and then separately.

We got very promotional with some of the previous generation products, which drove a lot of sales activity.

The holiday quarter in terms of just drivers around the competitive landscape I would say that we feel like the landscape is generally narrowed a lot.

Of course, Apple is a big one out there just in terms of total wearables.

Market share, we believe that we differentiate from Apple and others with our products are built specifically for active lifestyles and we focus on all day 24, seven wearability long battery life and the ability to track and detailed health metrics. So we're very focused on those categories and we believe.

Doing very well.

With our space.

Great and all that makes sense and congrats on surpassing $1 billion in revenue, that's up and Thats Clint accomplishment. That's it for me. Thanks, guys. Yes. Thank you.

Ladies and gentlemen, if you have a question that this time. Please press. The star then the number one here on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the Q. Please press the pound keep your next question comes from Eric would range from Morgan Stanley.

Hey, good morning, guys. Congrats on the quarter I'm just a quick procedural question here as I think about the tax rate going forward.

Should we think about 10% as somewhat but normalized tax rate. This license is intact beyond 2020, basically into 2021 and out.

Or how should we think about that beyond 2020 yep.

Yes, so as it relates to our tax rate, we do not give any.

Detailed guidance.

Beyond the current year, so there's a number of things that really impact to that tax rate.

All the way from amount of income we have the income by segment income by country reserve releases as such but.

While we've come a high level perspective is why are we have the license agreement in place, we will see that a favorable income mix by jurisdiction than when we no longer have license agreement. So that point in time, we'll have a higher percentage of our income going to U.S. selects to.

Directionally, what it is but like I said, there's a lot of puts and takes you know in that tax rate, but it's something that weve looked at to make sure that we do maintain as efficient of a tax structure as possible.

Perfect. That's Super helpful. And then I guess, if I just think about the the autos business I guess, what you read your guidance would imply in your commentary it would imply that you're going to see more of a mix shift towards the OEM business away from the PND business in 2020, and so what I guess, what I'm trying to get at is is this mix shift.

A tailwind to gross margins are headwind to gross margins just would love to hear coming but the puts and takes if you think about auto gross margins I'm in 2020.

Yes, so as it relates to.

Gross margins you're correct in the auto SEC segment as a total OEM will be a higher percentage of the total so that will be a situation where auto OEM gross margins are lower than the PND. So that will be something that will impact.

Act and decline the.

Total auto gross margin in 2020.

Awesome. Thank you very much guys.

Thank you.

Your next question comes from Paul Chung from JP Morgan.

Hey, guys. Thanks for taking the questions. So.

Yeah, as we think about free cash flow for 2020, you had.

Kind of a working cap Dragon 19, the part of that was from tax but.

How should we think about 20 working cap dynamics and then what is your kind of free cash flow guide for the year.

Should we expect kind of like a bounce back and conversion. This year and then as you think about seasonality for the business you have some aviation flow through in first half and then pickup in second half and in auto Oems a lot of moving pieces, but how should we think about kind of seasonal Pat.

Turns from last year.

Relative to last year in prior years for anything you want to call out and then a follow up.

Yes, sure so as it relates to a free cash flow for.

2020, you're correct to that its first start with 2019. So you have 2019, we did have some significant capital working capital needs, primarily you know when inventory area. You have situation that's truly talked about for 2019, we basically made a strong.

Atg to increase our day supply to increase our safety stock because of tax mitigate Brexit all those type of things as well as we had increased hey are just because of the increase in our sales year over year now turning to page to 2020, we expect our free cash flow to.

Bounce back.

Our current estimates for free cash flow for 2020 or about $750 million. So with that we're not anticipating to have the same type of year over year working capital needs that we had.

In 2019 2020.

I should say as relates to inventory, we would expect inventory yearend inventory 2020 to increase from 2019 levels, but probably more in line with what the sales increase not the type of a step function that we have so we'll get some benefit in 2020 relating to.

That.

Situation not happen workout relates to out falls out through the year the situation as we were building.

Inventories throughout the year, so that probably be a situation, where we may have a situation, where we have no inventory year over year higher than just the level of sales as we get through the year in the first few quarters, but by the end of year, hopefully it'll be in line with that.

As we go forward, but it also no capex plays into that also that's partially offsetting that to increased capex. We have was are pretty as we've talked about so go back to it we're making some increased investments in there for a building us for the revenue for the future.

Gotcha, and then you're kind of seasonality of of top line. If you can follow up on that and then also the increase in Opex is that going to be pretty measured throughout the year.

Yeah, so as it relates to the top line I give you some real high level.

Yes on that I think cliff alluded to the situation in auto a back half of the back half a year, we'll see some of that increase related to OEM also I should mention in the fitness side of our business related to the acquisition of tax. So tax was acquisition that was the first part or other.

Peter So we'll get some benefit you know in Q1 related to that so that will kind of be the seasonality related to revenue.

And then as it relates to.

Opex set that will be something where we started up to basically build us some of those up operating expenses here in Q4 moving into 2020, so I'll be something that we'll see that build throughout the year.

Gary that last question on tax what was the contribution in the quarter.

As we lap it into Q.

How should we think about the kind of growth in the second half in fitness for 2020.

How much that growth or you are you kind of baking in for expanding your your distribution efforts for tax. Thank you.

Yes, so the majority of the growth that we saw on fitness was organic tax was.

Less than half of of of the growth.

We saw on of course, we have one quarter in 2020 that were basically comping a until we comp against the acquisition attack so going forward than the the outlook would be for all organic growth tax contributing to the expanded distribution and then of course, we anticipate a strong year for our wearable products as we had in 2000.

19.

Okay, great. Thanks, guys.

Thank you.

I'm showing no further questions at this time I would now like to turn the conference back to Teri Seck.

Thanks, everyone and as always Doug and I are available for calls throughout the day. We hope you have a wonderful day bye.

Ladies and gentlemen, this concludes todays conference. Thank you for your participation and have a wonderful day you may now disconnect.

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