Q1 2025 Garmin Ltd Earnings Call
Okay.
Operator: Ladies and gentlemen, thank you for standing by and welcome to the Garmin Limited First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise.
Speaker Change: Ladies and gentlemen, thank you for standing by and welcome to the Garmin Ltd. First quarter 2025 earnings Conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you'd like to ask a question. During this time press star followed by the number one.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star followed by the number one.
Telephone keypad if.
Speaker Change: If you would like to withdraw your question Press Star followed by the number one.
Teri Seck: I will now hand today's call over to Teri Seck, Director of Investor Relations. Please go ahead.
Speaker Change: I'll now hand, todays call over to Terry sick director of Investor Relations. Please go ahead.
Teri Seck: Good morning. We would like to welcome you to Garmin Limited's first quarter 2025 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.
Speaker Change: We would like to welcome you to Garmin Limited's first quarter 2025 earnings call. Please note that the earnings press release and related slides are available at garments Investor Relations site on the Internet at Www Dot Garmin Dot com Slash dock and archive of the webcast and related transfer. It will also be available on our website.
Teri Seck: 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 share, products 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.
Speaker Change: 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 share product introductions foreign currency tariffs impacts future demand for our products and plans and objectives are forward looking.
Speaker Change: 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.
Teri Seck: 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.
Clifton Pemble: Presenting on behalf of Garmin Limited this morning are Clifton Pemble, 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 Clifton Pemble. Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin delivered outstanding financial results during the first quarter of 2025, in a continuation of the positive business trends we've been experiencing over the longer term. Consolidated revenue increased 11% to $1.54 billion. a new first quarter record with three business segments delivering double-digit growth. Gross and operating margins were 57.6% and 21.7% respectively, resulting in record first quarter operating income of $333 million, up 12% year over year.
Cliff Pemble: Our Cliff Pemble, President and Chief Executive Officer, and Doug <unk>, Chief Financial Officer, and Treasurer at this time I would like to turn the call over to questions.
Speaker Change: Thank you Terry and good morning, everyone.
Speaker Change: As announced earlier today Garmin delivered outstanding financial results during the first quarter of 2025 and.
Speaker Change: In a continuation of the positive business trends, we've been experiencing over the longer term.
Consolidated revenue increased 11% to 154 billion a.
Speaker Change: A new first quarter record with three business segments, delivering double digit growth.
Speaker Change: Gross and operating margins were 57, 6% and 21, 7% respectively.
Speaker Change: Adjusting and record first quarter operating income of $333 million up 12% year over year.
Clifton Pemble: and Proforma EPS of $1.61 up 13% year-over-year. We're off to a great start, and we are very pleased with these results.
Speaker Change: And pro forma EPS of $1 61.
Speaker Change: 13% year over year.
Speaker Change: We're off to a great start and we are very pleased with these results.
Clifton Pemble: While it is not our normal practice, we are updating our full year 2025 guidance to reflect first quarter results and our current assessment of markets and the global trade environment.
Speaker Change: While it is not our normal practice, we are updating our full year 2025 guidance to reflect first quarter results and our current assessment of market and the global trade environment.
Clifton Pemble: Doug will discuss our financial results and updated guidance in greater detail in a few minutes.
Speaker Change: Doug will discuss our financial results and updated guidance in greater detail in a few minutes, but first I will provide remarks on tariffs followed by an update for each business segment.
Clifton Pemble: But first, I'll provide remarks on tariffs, followed by an update for each business. The global trade environment is very dynamic due to recent changes in U.S. trade policy. which is affecting every business, especially those with extensive global supply chains. It appears that higher tariffs and more complex trade structures will be a normal part of business going forward. While the situation remains fluid, we have established assumptions about tariff structures that are most likely to impact Garmin. and have reassessed our 2025 guidance using these assumptions. It's important to note that approximately 25% of our revenue is generated in the U.S.
Speaker Change: Yeah.
Speaker Change: The global trade environment is very dynamic due to recent changes in U S trade policy.
Speaker Change: Which is affecting every business, especially those with extensive global supply chains.
Speaker Change: It appears that higher tariffs and more complex trade structures will be a normal part of business going forward.
Speaker Change: While the situation remains fluid we have established assumptions about tariff structures that are most likely to impact garmin.
Speaker Change: And if reassessed our 2025 guidance using these assumptions.
Speaker Change: It's important to note that approximately 25% of our revenue is generated in the U S market from.
Clifton Pemble: market. from products manufactured outside of the U.S. primarily in Taiwan. Our assumptions include a 10% baseline tariff on all products manufactured outside of the U.S. including those manufactured in Taiwan. Many of our products are temporarily exempt from tariffs, but we have not assumed any benefit from these temporary exemptions. reflecting conservatism in our assumption. We will benefit from these exemptions as long as they remain in place. We are also assuming an incremental 145% tariff on products and materials imported into the U.S. directly from China. While we do not source a significant amount of material directly from China for U.S.
Speaker Change: From products manufactured outside of the U S.
Speaker Change: Primarily in Taiwan.
Speaker Change: Our assumptions include a 10% baseline tariff on all products manufactured outside of the U S.
Speaker Change: Including those manufactured in Taiwan.
Speaker Change: Many of our products are temporarily exempt from tariffs, but we have not assumed any benefit from these temporary exemptions.
Speaker Change: Reflecting conservatism in our assumptions.
Speaker Change: We will benefit from these exemptions as long as they remain in place.
Speaker Change: We are also assuming an incremental 145% tariff on products and materials imported into the U S directly from China.
Speaker Change: While we do not source a significant amount of material directly from China for U S production.
Clifton Pemble: production, The Reciprocal Tariff amplifies the impact. The current trade environment has weakened the U.S. dollar relative to other currencies. which benefits our revenue and margin. Approximately 40% of our revenue is generated in non-U.S. dollar currencies. And we expect the benefit to partially offset the direct impact of tariffs. We are pursuing mitigations, some of which have already been established, while others will take more time. We are not ruling anything out, and we intend to be strategic and selective with these actions. given the current trade environment and potential impact on consumers. Our guidance assumes a modest reduction of demand moving forward.
Speaker Change: <unk> tariff amplifies the impact.
Speaker Change: The current trade environment has weakened the U S dollar relative to other currencies, which benefits our revenue and margin.
Speaker Change: Approximately 40% of our revenue is generated in non us dollar currencies and we expect the benefits partially offset the direct impact of tariffs.
Speaker Change: We are pursuing mitigation some of which have already been established.
Speaker Change: While others will take more time.
Speaker Change: We're not ruling anything out and we intend to be strategic and selective with these actions.
Speaker Change: Given the current trade environment and potential impact on consumers are.
Speaker Change: Our guidance assumes a modest reduction of demand moving forward.
Clifton Pemble: Using these assumptions, we estimate the gross impact from tariffs on our 2025 results prior to any mitigations will be approximately $100 million of increased costs. However, our 2025 Proforma EPS is unchanged at $7.80. As the expected benefit from foreign exchange and plan mitigations offset the impact of tariffs on earnings.
Speaker Change: Using these assumptions we estimate the gross impact from tariffs on our 2025 results.
Speaker Change: Fire to any mitigation will be approximately $100 million of increased cost.
Speaker Change: However, our 2025 pro forma EPS is unchanged at $7 80.
Speaker Change: As the expected benefit from foreign exchange and planned mitigation offset the impact of tariffs on earnings.
Clifton Pemble: While the current trade environment has created headwinds and increased uncertainty in the market, we remain optimistic because of our strong product lines and the resilience of our vertically integrated, highly diversified business.
Speaker Change: While the current trade environment has created headwinds and increased uncertainty in the market.
Speaker Change: We remain optimistic because of our strong product lines and the resilience of our vertically integrated highly diversified business model.
Clifton Pemble: Turning now to business updates, starting with fitness, revenue increased 12%. $385,000,000 with growth led by strong demand for advanced wearables. According to the latest data provided by IBC, we were the only global smartwatch provider that grew in 2025. reflecting increased market share. Gross and operating margins were 57% and 20% respectively, resulting in operating income of $78 million.
Speaker Change: Turning now to business updates, starting with fitness revenue increased 12% to.
Speaker Change: The $385 million with.
With growth led by strong demand for advanced Wearables.
Speaker Change: According to the latest data provided by IDC, we were the only global smartwatch provider that grew in 2024, reflecting increased market share.
Gross and operating margins were 57% and 20%, respectively, resulting in operating income of $78 million.
Clifton Pemble: During the quarter, we announced Garmin Connect Plus, a premium service offering AI-based health and fitness insight. Enhanced Live Tracking, and Exclusive Achievement Badges.
Speaker Change: During the quarter, we announced Garmin connect plus premium service offering AI based health and fitness insights enhanced live tracking.
Speaker Change: And exclusives achievement patches.
Clifton Pemble: We recently announced the VEVO Act in effect. our newest health and fitness smartwatch, with an even brighter AMOLED display, more than 80 preloaded sports apps, and access to Garmin Coach training.
Speaker Change: We recently announced the vivo acting six our newest health and fitness smartwatch with an even brighter AMOLED display.
Speaker Change: And then 80 preloaded sports apps and access to Garmin coach training plans.
Clifton Pemble: Given the first quarter performance of the fitness segment and the expected benefit from foreign currency shifts, we are raising our revenue growth estimate to 15% for the year.
Speaker Change: Given the first quarter performance of the fitness segment and the expected benefit from foreign currency shifts we are raising our revenue growth estimate to 15% for the year.
Clifton Pemble: Moving to outdoor, revenue increased 20% to $438 million with growth driven primarily by adventure watches. Gross and operating margins were 64% and 29% respectively. resulting in operating income of $129 million.
Speaker Change: Moving to outdoor revenue increased 20% to $438 million with growth driven primarily by adventure watches.
Speaker Change: Gross and operating margins were 64% and 29% respectively.
Speaker Change: Resulting in operating income of $129 million.
Clifton Pemble: During the quarter, we launched several new products across multiple categories. including wearables for adventure sports, dive, and golf. One noteworthy launch is the new Instinct 3 Adventure Watch series, which now includes versions with a bright AMOLED display. We also released our annual 2024 InReach SOS report, highlighting the importance of Garmin Response, which coordinates emergency response services in more than 200 countries and territories. supports rescue efforts in more than 210 languages. The Emergency Response Coordination Center is an important part of what differentiates our InReach SOS service from others.
Speaker Change: During the quarter, we launched several new products across multiple categories, including wearable or adventure sports tie than golf.
Speaker Change: One noteworthy launches the new instinct III Adventure Watch series, which now includes versions with the bright AMOLED display.
Speaker Change: We also released our annual 2024 and reach Sos report highlighting the importance of Garmin response, which coordinates emergency response services and more than 200 countries and territories and supports rescue efforts and more than 210 languages.
Speaker Change: The emergency response coordination center is an important part of what differentiates our enriched Sos service from others.
Clifton Pemble: We are pleased with the strong performance of the outdoor segment so far this year.
Speaker Change: We are pleased with the strong performance of the outdoor segment so far this year.
Clifton Pemble: Looking forward, we expect growth to moderate as we reach the anniversary of the highly successful Phoenix 8 launch and considering the possibility that economic uncertainty could reduce demand for certain products. With these things in mind, we are maintaining a revenue growth estimate of 10% for the year.
Speaker Change: Looking forward, we expect growth to moderate as we reached the anniversary of the highly successful Phoenix eight launch.
Speaker Change: And considering the possibility that economic uncertainty could reduce demand for certain products with.
Speaker Change: With these things in mind, we are maintaining our revenue growth estimate of 10% for the year.
Clifton Pemble: Looking next at aviation, revenue increased 3% in the first quarter. $223 million Driven by Growth in OEM Product Category Growth in operating margins were 75% and 22% respectively, resulting in an operating income of $48 million.
Speaker Change: Looking next at aviation revenue increased 3% in the first quarter.
Speaker Change: To $223 million driven by growth in OEM product categories.
Speaker Change: Gross and operating margins were 75% and 22% respectively.
Speaker Change: Altering an operating income of $48 million.
Clifton Pemble: During the quarter, Pilatus Aircraft announced the new PC-12 Pro featuring our G3000 Prime flight deck, which with deliveries expected to begin later this year. Pilatus also selected the G3000 Prime for the PC-7 MKX military training aircraft, demonstrating versatility to serve both civilian and military applications. The G3000 Prime flight deck is truly extraordinary and significantly raises the bar for modern cockpit system technology.
Speaker Change: During the quarter a lot of aircraft announced the new PC 12, CRO, featuring RG 3000 Prime flight deck.
Speaker Change: With deliveries expected to begin later this year.
Speaker Change: <unk> also selected the <unk> 3000 prime for the PC seven MK ex military training aircraft, demonstrating versatility to serve both civilian and military applications.
Speaker Change: The <unk> 3000 Prime flight deck is truly extraordinary and significantly raises the bar for modern cockpit system technology.
Clifton Pemble: We were also named Supplier of the Year by Cirrus Aircraft. reflecting our commitment to create the best product. and provide outstanding service to our customers. Given the first quarter performance of the aviation segment, we are maintaining our 5% revenue growth estimate for 2020.
Speaker Change: We were also named supplier of the year by serious aircraft, reflecting our commitment to create the best products.
Speaker Change: And provide outstanding service to our customers.
Speaker Change: Given the first quarter performance of the aviation segment, we are maintaining our 5% revenue growth estimate for 2025.
Speaker Change: Yes.
Clifton Pemble: Turning to the marine segment, revenue decreased 2% to $319 million primarily due to the timing of promotion. Gross and operating margins improved to 58% and 27% respectively. resulting in operating income of $87 million.
Speaker Change: Turning to the Marine segment revenue decreased 2% to $319 million, primarily due to the timing of promotions.
Speaker Change: Gross and operating margins improved to 58% and 27% respectively.
Speaker Change: <unk> and operating income of $87 million.
Clifton Pemble: During the quarter, we launched the Force Pro trolling motor with multiband GPS for improved control, reverse thrust capability, and a built-in sonar transducer.
Speaker Change: During the quarter, we launched the <unk> trolling motor with Multimap GPS for improved control reverse thrust capability and a built in sonar transducer.
Clifton Pemble: Also during the quarter, we renamed 2025 Supplier of the Year for the second consecutive year by Independent Boat Builders Incorporated for providing outstanding service, support, and dedication to its owner network. Given the first quarter performance of the marine segment and continued softness in the overall market, we now expect 2025 revenue will be flat versus the prior year.
Speaker Change: Also during the quarter, we renamed 2025 supplier of the year for the second consecutive year by independent boat builders incorporated for providing outstanding service support and dedication to its owner network.
Speaker Change: Given the first quarter performance of the Marine segment and continued softness in the overall market. We now expect 2025 revenue will be flat versus the prior year.
Clifton Pemble: And moving finally to the auto OEM segment, revenue increased 31% to $169 million. with growth primarily driven by increased shipments of domain controllers to BMW. Gross margin was 18%, and the operating loss narrowed to $9 million.
Speaker Change: Moving finally to the auto OEM segment revenue increased 31%.
Speaker Change: $169 million with growth, primarily driven by increased shipments of domain controllers to BMW.
Speaker Change: Gross margin was 18% and the operating loss narrowed to $9 million.
Clifton Pemble: During the quarter, Honda Motor Company announced the 50th anniversary model of the iconic Goldwing motorcycle. featuring a complete infotainment solution from Garmin. Given the first quarter performance of the auto OEM segment, we are now maintaining our 7% revenue growth estimate for 2020.
Speaker Change: During the quarter Honda Motor Company announced the 50th anniversary model of the iconic gold wing motorcycle featuring a complete entertainment solution from Garmin.
Speaker Change: Given the first quarter performance of the auto OEM segment, we are now maintaining our 7% revenue growth estimate for 2025.
Clifton Pemble: That concludes my remarks and next Doug will walk you through additional details on our financial results. Thanks, Clif.
Speaker Change: That concludes my remarks next Doug will walk you through additional details on our financial results Doug.
Doug Besson: Good morning, everyone. I'll begin by reviewing our first quarter financial results, provide comments on the balance sheet, cash flow statement, taxes, updated guidance. posted a revenue of $1,535,000,000 for the first quarter, representing an 11% increase year-over-year. Gross margin was 57.6%, 50 basis point decrease in the prior quarter. Decrease was primarily due to segmentation. Operating expense, percentage of sales was 35.9%, 50 basis point. operating income of $333 million, 12%. Operating margin was 21.7 percent compared with the prior quarter. Our GAP EPS is $1.72, but former EPS is $1.61.
Doug: Thanks Cliff good morning, everyone.
Doug: By reviewing our first quarter financial results by comments on the balance sheet cash flow statement taxes updated guidance.
Doug: Of course, our revenue of $1 billion $535 million for the first quarter, representing 11% increase year over year.
Doug: Gross margin was 57, 6% 70 basis point decrease in the prior quarter.
Doug: The increase was primarily due to segment mix.
Doug: Operating expense percentage of sales was 35, 9% 30 basis point decrease.
Doug: Operating income was $333 million and 12% increase.
Doug: Operating margin was 21, 7% comparable with the prior quarter or.
Doug: Our GAAP EPS was $1 72.
Doug: Pro forma EPS was $1 61.
Doug Besson: Next, we'll look at our first quarter revenue by segment and geography. In the first quarter, we achieved double-digit growth in three or five segments, led by the auto EM segment, 31% growth, followed by the outdoor segment, 20% growth. Fitness segment with 12% growth. By geography, we achieved growth in all three regions, led by 23% growth in EMEA, followed by 9% growth in APAC, 4% growth in America.
Doug: Next well look at our first quarter revenue by segment and geography.
Doug: During the first quarter, we achieved double digit growth in three of five segments.
Doug: By the auto OEM segment, 31% growth followed by the outdoor segment, 20% growth the fitness segment with 12% growth.
By geography, we achieved growth in all three regions led by 23% growth in EMEA, followed by 9% growth in APAC, 4% growth in Americas.
Doug Besson: Looking next at offering expenses. First quarter operating expense increased by $48 million for 10%. Research and Development increased approximately $26 million. SG&A increased approximately $22 million compared to prior year quarter. Both increases are primarily related to personnel related expenses.
Doug: Looking next at operating expenses.
Doug: Quarter operating expense increased by $48 million or.
Doug: 10%.
Doug: Research and development increased approximately $26 million SG&A increased approximately $22 million compared.
Doug: The prior year quarter.
Doug: The increases are primarily related to personnel related expenses.
Doug Besson: Highlights on the Balance Sheet, Cash Flow Statement, and Tax and a quarter with cash, mark those securities, approximately $3.9 billion. Catchable sea will increase year-over-year through strong sales and decrease sequentially to $787 million upon the seasonally strong worth of water. Inventory increased year-over-year, sequentially, to approximately $1.6 billion. In the first quarter of 2025, we generated free cash flow of $381 million, a $21 million decrease from the prior quarter. Capital expenditures for first quarter 2025 were $40 million, probably $7 million higher than a prior year's quarter. We still expect full year 2025 free cash flow to be approximately $1.1 billion, capital expenditures approximately $350 million.
Doug: A few highlights on the balance sheet cash flow statement and taxes.
Doug: In the quarter with cash Mark with Securities approximately $3 9 billion.
Doug: Cash receivable increase year over year as strong sales have decreased sequentially to $787 million on the seasonally strong fourth quarter.
Doug: Inventory increased year over year sequentially to approximately $1 $6 billion.
Doug: First quarter 2025, we generate free cash flow $381 million.
Doug: $21 million decrease from prior quarter.
Doug: Capital expenditures for first quarter of 2025 or $40 million, roughly $7 million higher than prior year quarter.
Doug: We still expect full year 2025 free cash flow to be approximately $1 1 billion capital.
Doug: Capital expenditures of approximately $350 million.
Doug Besson: In the first quarter of 2025, we paid dividends of approximately $145 million, purchased $27 million of the company's stock. At quarter end, we had approximately $210 million dollars remaining in the shared purchase program, which was authorized through December 2015. reported an effective tax rate of 14.5% compared to 15.6% in the prior quarter. The decrease in the current quarter is primarily due to increased tax benefits from stock-based compensation.
Doug: For the first quarter of 2025, we paid dividends of approximately $145 million.
Doug: Purchased $27 million of company stock.
Doug: At quarter end, we had approximately $210 million remaining share repurchase program, which authorized through December 2026.
Doug: Our reported effective tax rate 14, 5% compared to 15, 6% in prior quarter.
Doug: Decrease in the current quarter is primarily due to increased tax benefits from stock based compensation.
Doug Besson: Turning next to our full year guide. We estimate revenue approximately $6.85 billion compared to our previous guide to $6.8 billion. increases primarily due to expected net favorable foreign currency impacts, partially offset by modest weakening of demand.
Doug: Turning next to our full year guidance.
Doug: We estimate revenue of approximately $6 85 billion compared to our previous guidance of $6 8 billion.
And created primarily due to the expected net favorable foreign currency impacts, partially offset by a modest weakening of demand.
Doug Besson: Point of reference, the foreign currency impact. Approximately 40% of our sales denominated non-U.S. dollar currency. The euro is about half of the non-U.S. dollar currency. helping in a benefit to revenue when the U.S. dollar weakens relative to other major currencies.
Doug: Point of reference.
Doug: Foreign currency impacts approximately 40% of our sales denominated in non us dollar currencies and the euro it's about half of the non U S. Dollar currencies something of benefit to revenue in the U S dollar weakened relative to other major currencies.
Doug Besson: We expect gross margin to be approximately 58.5%, which is 20 basis points lower than our previous guidance to be 8.7%, to an estimated $100 million of increased costs from tariffs, mostly offset by expected favorable foreign currency impacts and planned mitigation. We expect an operating margin of approximately 24.8% compared to our previous guides of 25%. Also expect to perform an effective tax rate of 16.5% unchanged from our previous expectation. This results in expected pro forma earnings per share of approximately $7.08, which consists of our previous guidance.
Doug: We expect gross margin to be approximately 58, 5% to 20 basis points lower than our previous guidance of eight 7% to an estimate of $100 million of increased costs from tariffs, mostly offset by expected favorable foreign currency impacts and planned mitigation.
Doug: We expect an operating margin of approximately 24, 8% previous guidance of 25%.
Doug: Also expect pro forma effective tax rate 16, 5% unchanged from our previous expectations.
Doug: And expected pro forma earnings per share of approximately <unk> <unk>.
It consists of our previous guidance.
Doug Besson: And that concludes our phone remarks.
Doug: This concludes our former remarks tamika. Please open the line for Q&A.
Operator: Tameka, could you please open the line for Q&A? At this time, if you would like to ask a question, press star followed by the number one on your telephone keypad. If your question has been answered and you would like to remove yourself from the queue, press star followed by the number one. We'll pause for just a moment to compile the Q&A roster.
Doug: Okay.
Doug: At this time, if you'd like to ask a question press star followed by the number one on your telephone keypad.
Doug: My question has been answered and you would like to win will be yourself from the queue Press star followed by the number one.
Doug: We'll pause for just a moment to compile the Q&A roster.
Doug: Okay.
Joseph Cardoso: Your first question is from the line of Joseph Cardoso with J.P. Morgan. Hey, good morning. Thank you for the details in the question here. Maybe for my first one, in the prepared remarks, you talked about a modest demand reduction assumed in the outlook.
Speaker Change: Your first question is from the line of Joseph Cardoso with J P. Morgan.
Speaker Change: Hey, good morning. Thank you for the details on the question here maybe for my first one in the prepared remarks, you talked about a modest demand reduction assumed in the outlook, but if we take a step back just curious as we look across the first quarter trends across your segments and perhaps even the second quarter trends today are you observing any indications of potential.
Joseph Cardoso: But if we take a step back, just curious, as we look across the first quarter trends across your segments, and perhaps even the second quarter trends today, are you observing any indications of potential demand pulling at your customers as they possibly attempt to build inventory to de-risk kind of this volatile tariff situation? And then I have a follow up.
Speaker Change: Demand pulling out and your customers as they possibly attempt to build inventory to do derisk kind of this volatile tariff situation and then I have a follow up.
Clifton Pemble: Yeah, I think good morning, Joseph. Um, I think at this point, we have not seen any indications of We already mentioned that the marine market has been somewhat soft, and that's been fairly consistent. I think, if anything, with the real-time pulse on our registrations, the demand for our products and the registrations, which really means sell-through, has been fairly consistent. very strong. There's no indication that retailers are stocking or overstocking of products, and there's a natural limitation there because they have limited capital they can deploy on inventory and also credit limit. are in place as well.
Speaker Change: Yes, good morning Joseph.
Speaker Change: I think at this point, we have not seen any indications of.
Speaker Change: The weakness, we already mentioned that the marine market has been somewhat soft and thats been fairly consistent.
Speaker Change: I think if anything with the real time pulse on our registrations that.
Speaker Change: The demand for our products and the registrations, which really means sell through has been.
Speaker Change: Very strong there is no indication that retailers are stocking or overstocking of products and there is a natural limitation there because they have limited capital they can deploy on inventory and also credit limits.
Speaker Change: Our in place as well so so in general I don't I don't see that the channel or the consumers are out of balance because of the trade concerns.
Joseph Cardoso: So in general, I don't see that the channel or the consumers are out of balance because of the trade. Nope, got it. That's great to hear.
Speaker Change: Got it Thats great to hear and then maybe switching away from tariffs. It was great to see the release of connect plus but I guess cliff why now you know in past discussions at least anecdotally there appear to be some reservations about finding the right value to essentially end up charging your customers. So I guess.
Joseph Cardoso: And then maybe switching away from Terrace, you know, it was great to see the release of Connect+.
Clifton Pemble: But I guess, Clif, you know, why now? You know, in past discussions, at least anecdotally, there appeared to be some reservations about finding the right value to essentially end up charging your customers. So I guess, what capabilities or what developments prompted you to kind of launch this at this time? And then, obviously, early days, but curious if you can provide any initial indications around customer reception, interaction with Connect+, that, you know, might be indicative of, you know, increasing appetite to use the app, etc. Just curious if there's anything you can share on that front as well.
Speaker Change: What capabilities are what developments prompted you to kind of launch. This at this time and then obviously early days, but curious if you can provide any initial indications around customer reception interaction with connect plus that might be indicative of <unk>.
Speaker Change: Increasing appetite to use the app et cetera, just curious if theres anything you can share on that front as well.
Clifton Pemble: I think we've been saying for a while that we are evaluating opportunities to have a premium offering on Garmin Connect. And I think the developments of AI, and particularly around AI-based insights for our users, was one of those things that we felt was important to recognize the value for the investment that it takes to do. And so we felt like it was the right time, and we do have a very strong user base. You know, Connect Plus certainly isn't required for users, and we're not taking any features away from people that they've had. And we still have a strong commitment to develop Garmin Connect in our devices with broad features that are available to everyone, but certain ones we will likely reserve for premium offerings.
Speaker Change: Yes, I think we've been saying for a while.
Speaker Change: We are evaluating opportunities to have a premium offering on garmin connect.
Speaker Change: And I think the developments of AI and particularly around AI based insights for our users was was one of those things that we felt.
Speaker Change: What is important to recognize the value for the investment that it takes to do.
Speaker Change: And so we felt like it was the right time and we do have a very strong user base.
Speaker Change: Connect pluses certainly doesn't.
Speaker Change: As required for users and we're not taking any features away from people that they've had and we still have a strong commitment to develop garmin connect and our devices with with broad features that are available to everyone that certain ones, we will likely reserve for premium offerings and so far the response has been positive.
Clifton Pemble: And so far, the response has been positive. We're not measuring success in terms of the short term. This is a long-term thing for us, a very important part of our fitness segment going forward. So we're going to build on where we started.
Speaker Change: We're not measuring success in terms of the short term. This is a long term thing for us a very important part of our fitness segment going forward. So we're going to build on where we started.
Joseph Cardoso: Nope. Fair and I appreciate the color.
Speaker Change: No fair and I appreciate the color thanks, guys. Thank.
Joseph Cardoso: Thanks, guys.
Operator: Thank you.
Speaker Change: Thank you.
Erik Woodring: Your next question is from the line of Erik Woodring with Morgan Stanley. Great, thanks so much for taking my questions, guys. Good morning. Clif, just maybe two quick clarification points. Is there any way for the full-year calendar 25 guide that you can kind of disaggregate how much demand, relative weakness you are baking in versus how much of a tailwind the U.S. dollar is? Obviously, your total revenue guide went up slightly, but just trying to understand, how much demand weakness are you kind of embedding versus how much FX tailwinds are you now embedding? And then a quick follow-up.
Eric Ludwig: Your next question is from the line of Eric Ludwig with Morgan Stanley.
Eric Ludwig: Great. Thanks, so much for taking my questions guys. Good morning.
Cliff just maybe two quick clarification point is there any way for the full year calendar 'twenty five guide that you can kind of disaggregate, how much demand relative weakness you are baking in versus how much of a tailwind the U S. Dollar is obviously.
Eric Ludwig: Total revenue guide went up slightly but just trying to understand how much demand weakness or you are you're kind of embedding versus how much FX tailwind are you now embedding and then a quick follow up thank you.
Erik Woodring: Thank you.
Clifton Pemble: Good morning, Erik. We provided quite a bit of color in terms of the effects part, so that's one that's fairly easy for everyone to understand. I think when you get below that in terms of demand shifts as well as mitigations, it's very hard to disaggregate, and so we're not providing additional color on that. But in terms of just our overall feeling on demand, we don't feel like there's really any shift at all. We're just including the possibility of a modest decrease, so not very much. For the most part, all of our mitigations plus the FX benefit goes to the bottom line as a net zero impact.
Eric Ludwig: Hey, good morning, Eric.
Speaker Change: We provided quite a bit of color in terms of the FX parts of that.
Speaker Change: It's one that's fairly easy for everyone to understand I think when you get below that in terms of demand shifts as well as mitigation.
Speaker Change: It's very hard to disaggregate and so we're not providing additional color on that.
Speaker Change: But in terms of just our overall feeling on demand.
Speaker Change: We don't feel like.
Speaker Change: There is really any shift at all we're just including the possibility of a modest decrease though so not very much and.
Speaker Change: For the most part all of our mitigation plus the FX benefit goes to the bottom line is a net zero impact.
Speaker Change: Yes.
Erik Woodring: That's perfect. Thank you, guys.
Speaker Change: That's perfect. Thank you guys and that kind of segways into my next question, which is a bit broader than gets at this kind of mitigation point that you're making cliff I'd love. It if you could just share a little bit more color on if we think short term what type of <unk>.
Clifton Pemble: And that that kind of segues into my next question, which is a bit broader and gets at this kind of mitigation point that you're making, Clif. I'd love if you could just share a little bit more color on if we think short term, you know, what type of mitigation tools are you prioritizing to limit the impact of tariffs? And then bigger picture or longer term, you know, you guys are one of the only consumer electronics companies that has wholly owned facilities that does all of your own manufacturing. Does the current tariff landscape get you to rethink that at all or your, you know, your geographic footprint?
Speaker Change: <unk> tools are you prioritizing.
Speaker Change: Limit the impact of tariffs and then bigger picture or longer term.
Speaker Change: You guys are one of the only.
Speaker Change: Assume electronics companies that has wholly owned facilities that does all of your own manufacturing.
Speaker Change: Does the current tariff landscape gets you to rethink that Ed or your geographic footprint any changes I realize it's still early and there's a lot of volatility here, but.
Clifton Pemble: And any changes? I realize it's still early and there's a lot of volatility here, but any influence that this current policy could have on how you are thinking about your supply and assembly exposure? Thanks so much. In terms of mitigations, I think everything is on the table, as I mentioned, and we're considering all of them. There's no one-size-fits-all, and we're not taking a broad approach to mitigations across all of our segments and all of our product lines. We're evaluating everything case by case. There are shorter-term things that we can do in terms of sourcing actions, and some of these things were actually in progress before any of the current trade situations started to evolve.
Speaker Change: And the influence that the current policy could have on how you are thinking about your supply and assembly exposure. Thanks, so much.
Speaker Change: In terms of.
Speaker Change: Mitigation I think.
Speaker Change: Everything is on the table as I mentioned and we're considering all of them. There is no one size fits all and we're not taking a broader approach to mitigation is across all of our segments and all of our product lines. We're evaluating every everything case by case there are shorter term things that we can do in terms of sourcing actions and some of these things were.
Speaker Change: Actually.
Speaker Change: In progress before any of the current trade.
Speaker Change: <unk> started to evolve and so so we will get the benefit of those actions were already taken but but in general we're doing what we can in the short term and then we will continue to work on the longer term mitigation to optimize our overall results in terms of our global footprint actually our global footprint is a benefit right now not a detriment.
Clifton Pemble: So, we'll get the benefit of those actions we were already taking, but in general, we're doing what we can in the short-term, and then we'll continue to work on the longer-term mitigations to optimize our overall results. In terms of our global footprint, actually, a global footprint is a benefit right now, not a detriment. As we mentioned, 25% of our revenue is generated in the U.S. from products manufactured outside of the U.S., so 75% of our products go elsewhere, and so a global footprint is required in order to be able to serve all of the markets.
Speaker Change: As we mentioned 25% of our revenue is generated in the U S from products manufactured outside of the U S. So 75% of our products.
Speaker Change: Go elsewhere, and so our global footprint as required in order to be able to serve all of the markets. There are some product considerations that we could make in terms of where they are manufactured to optimize our overall supply chain and results, but in general I would not expect to see a big shift in terms of our overall.
Clifton Pemble: There are some product considerations that we could make in terms of where they're manufactured to optimize our overall supply chains and results, but in general, I would not expect to see a big shift in terms of our overall global footprint and our vertical integration strategy.
Speaker Change: <unk> global footprint and our vertical integration strategy.
Erik Woodring: Okay, that's super clear. Thank you for all that color, Clif. Good luck, guys. Thank you.
Speaker Change: Okay. That's super clear. Thank you for all that color Cliff. Good luck guys. Thank you.
David Macgregor: Your next question is from the line of David MacGregor with Longbow Research. Hi, good morning.
Speaker Change: Your next question is from the line of David Macgregor with Longbow Research.
Joe Nolan: Hi, Good morning. This is Joe Nolan on for David.
Joe Nolan: This is Joe Nolan on for David. I just had a quick question on the shape of the year a little bit. Just in 2Q, I was wondering if there's going to be any sort of lag from mitigation actions, if those maybe will have some impact on margins as they take time to work their way into the system, and just how that progresses through the remainder of the year, the timing of the mitigation actions. Oh yeah, so as it relates to the mitigations, you know, we'll actually, as Cliff mentioned, we'll put those in place, you know, when we think it's appropriate with those.
Joe Nolan: I just had a quick question.
Joe Nolan: The shape of the year a little bit.
Joe Nolan: Just in <unk> I was wondering if theres going to be any sort of lag from mitigation actions, maybe will have some impact on margins.
Joe Nolan: Take time to work their way into the system and just how that progresses through the remainder of the year as the timing of the mitigation actions.
Joe Nolan: Oh, yes, so as it relates to the mitigation will actually as Cliff mentioned, we will put those in place when we think it's appropriate with those puts a few things that we have think about.
Clifton Pemble: But a few things that we have to, you know, think about, you know, as of Q2 is, you know, one of which is, you know, timing of when the tariffs are in place. Also have to consider, you know, the inventory that we do have on hand, so we do have inventory on hand that doesn't have the tariffs, there'll be the timing in there also. So what I'm saying is there's, you know, a lot of puts and takes, you know, that really take place in that Q2 from that standpoint. We're doing everything we can to, you know, put things, you know, in place as soon as we can, you know, to mitigate it as soon as we can.
Joe Nolan: Q2 is one of which is timing of when the tariffs are in place also have to consider the inventory that we do have on hand. So we do have inventory on hand that doesn't have the tariffs will be and the timing in there also so what I'm, saying is there is a lot of puts and takes that really take place in that Q2.
Joe Nolan: From our standpoint, we're doing everything we can take now to put things in place as soon as we can to mitigate it as soon as we can but there was a lot of different moving parts in there between inventory. The mitigation efforts that are taking place in there too as well as you know when the tariffs are in place in there too.
Clifton Pemble: But, you know, there's a lot of different moving parts in there between inventory, the mitigation efforts that are taking place in there too, as well as, you know, when the tariffs are in place.
Clifton Pemble: And then just another quick one, in Marine you mentioned the timing of promotions, if you could just provide any detail on that and if that's expected to be a headwind into the second quarter as well. I think in 2024, we had a major promotion with with a national retailer. where inventory was bought in in the first quarter for those promotions. And that promotion will occur this year. It did occur in the second quarter, and inventory was purchased slightly later. So it's really a shift in terms of a single promotional. We would expect some of those dynamics to ripple into the second quarter when it comes to our overall.
Speaker Change: Got it Okay and then just another quick one in Marine you mentioned the timing of promotions.
Speaker Change: You could just provide any detail on that and if thats expected to be a headwind into the second quarter as well.
Speaker Change: I think in 2024.
Speaker Change: A major promotion with with a national retailer.
Speaker Change: Our inventory was was bought in the first quarter for those promotions.
Speaker Change: That promotion will occur this year it did occur in the second quarter and inventory.
Speaker Change: We purchased slightly later, so it was really a shift in terms of.
Speaker Change: A single promotional.
Speaker Change: Event and.
Speaker Change: We would expect some of those dynamics to ripple into the second quarter when it comes to our overall.
Speaker Change: Performance.
Joe Nolan: Okay, that's helpful.
Speaker Change: Got it okay. That's helpful. Thanks, I'll pass it on.
Joe Nolan: Thanks, I'll pass it on.
George Wang: Your next question is from the line of George Wang with Barclays. Well, hey, guys. Thanks for taking my question.
Speaker Change: Your next question is from the line of George Wang with Barclays.
George Wang: Hey, guys. Thanks for taking my question.
George Wang: Just kind of to take a step back, kind of for high level, you know, philosophically, how do you think about consumer demand backdrop in the second half? You know, kind of put some text with the validity of the situation given ever-changing tariff policy. I'm just curious, like, you know, given diverse portfolio and sort of a more premium approach for the Garmin, especially on the wearables and fitness side, whether, you know, it's a bit more shielded. And kind of, you know, you noted, I mean, you took down the demand as a precaution measure. Just curious, you know, how to frame kind of upside versus downside risk for the consumer demand as we head into the second half.
Speaker Change: Just kind of take a step back kind of a high level.
George Wang: It is politically how this thing Paul consumer demand backdrop in the second half kind of puts and takes.
George Wang: With the fluidity of the situation given the changing tariff policy I'm just curious.
George Wang: Given diverse portfolio and its still more a premier approach.
George Wang: Portfolio Gammon, especially on the Wearables that finished side, whether it's that.
It'd be the most showed it in kind of all.
George Wang: Youll notice that you took down the demand as a precaution measures just curious.
George Wang: How to frame, what kind of upside versus downside risk for the consumer demand as we head into second half I mean people talk about cliffs.
George Wang: You know, I mean, people talk about Clif for the second half. You know, that's probably more of a consensus. But we really haven't seen any real data points. Just curious if you have any other color to add.
George Wang: For the second half, that's probably more of a consensus but we really haven't seen any real data points. Just curious if you have any other color to add.
Clifton Pemble: Yeah, thank you for the question. I think no one has a crystal ball into what the consumer will do. As I mentioned earlier, you know, so far the indications are no change in terms of behaviors. Our demand for our products is still very strong, but we're including the possibility that it could weaken some. I think people would probably say we're ignoring the risk if we didn't do that. So, consequently, we've included some conservatism around that. But I think in terms of your point about the diversity of our company and our product line, I think we offer unique products, and when people want to have a product like what we offer, we believe that they probably will step up and buy it.
George Wang: Yes. Thank you for the question I.
George Wang: I think no one has a crystal ball into what the consumer will do as I mentioned earlier.
George Wang: So far the indications are no no change in terms of behaviors or the demand for our products is still very strong.
George Wang: We're including the possibility that it could weaken.
George Wang: I think people would probably say, we're ignoring the risk if we didn't do that.
Consequently, we have included some conservatism around that but.
George Wang: But I think in terms of your point about about the diversity of our company and our product lines.
George Wang: I think we offer a unique products and when people want to have a product like what we offer.
George Wang: We believe that they probably will step up and buy it and so consequently, we're not we're not factoring in significant changes in terms of overall demand just a little bit of incremental softness.
Clifton Pemble: And so, consequently, we're not factoring in significant changes in terms of overall demand, just a little bit of incremental software.
George Wang: Okay, great. And just to kind of segue quickly, just in terms of, you know, mediation measures, you know, I understand that you guys are not specifically, you know, kind of graphing the specific measures, but, you know, I think a small price raise, you know, could be on the bulk here, just as a consensus. Just curious, like, you know, how you think about the pricing power for Garmin products, you know, given pretty strong following. I feel like that could be one of the ways, just by kind of low single digit to 5 cent price raise. So, do you think, you know, that's something kind of in the ballpark?
Speaker Change: Okay, Great and then just kind of a segue quickly just in terms of full.
George Wang: Mitigation measures.
Speaker Change: I understand that you guys allowed specifically.
George Wang: Telegraphing specific measures, but I think.
George Wang: <unk> raised could be our bulk here just as it because there's just curious like how you think about the pricing power for carbon products.
George Wang: Evan.
George Wang: Pretty straightforward I feel like that could be well.
George Wang: EBIT waste just a spike in the low single digits <unk> rates.
George Wang: You think.
That's something kind of in the ballpark.
Clifton Pemble: And, you know, if you have higher pricing, you know, do you think kind of 100 million gross impact from TAVR could be understated, just, you know, all else being equal? Just curious, like, you know, whether you can potentially walk up the guidance for the balance of 25, if you kind of will have pricing, so they, you know, follow through and some other, you know, cost cuts, et cetera.
George Wang: If you have a buyer.
George Wang: Rising do you think.
George Wang: Kind of $100 million gross impact from <unk> could be understated just all else.
George Wang: Just curious if I can.
George Wang: Whether you can potentially walk up the guidance for the balance of 'twenty five.
George Wang: You kind of had to pricing so the photos through and there are some other.
George Wang: Cost cuts et cetera.
Clifton Pemble: Yeah, I think that's a very good question. Just one point of clarification, there will always be a gross impact from tariffs, because there's always a cost. So the real question is, how can you mitigate it? And your specific question is about how we can mitigate through pricing actions. As I mentioned, everything's on the table, so we're evaluating pricing, not broadly, but specifically in context of each market and product line. I can't say what we're going to do in specific circumstances, but there are cases where definitely there's room to have different pricing, and there's other cases because it's more competitive and difficult to increase prices.
Speaker Change: Yes, I think Thats a very good question just one point of clarification, there will always be a gross impact from some tariffs because theres always a cost. So the real question is how can you mitigate it in your specific question is about how we can mitigate through pricing actions as I mentioned everything's on the table.
George Wang: We are evaluating pricing.
George Wang: Broadly, but specifically in context of each market and product line.
George Wang: I can't say, what we're going to do in specific circumstances, but there are cases, where.
George Wang: We're definitely there's there's room to have different pricing and theres other cases, because there.
George Wang: It's more competitive and difficult to incur.
Clifton Pemble: So we're managing it case by case, and of course we'll use the opportunities where we can, but otherwise we're going to make sure that we maintain our market share and optimize our overall profit dollars in this environment.
George Wang: Increased prices so we're managing it case by case.
George Wang: And of course, we'll use the opportunities where we can but otherwise we're going to make sure that we.
George Wang: We maintain our market share and optimize our overall profit dollars in this environment.
Clifton Pemble: Okay, great. Just quickly, if I can squeeze in, just in terms of shifting to auto OEM margin profile, you know, are you guys are sticking to the medium term model for auto OEM in terms of the gross margin, the OPM margin? Or do you think the tariff and the macro is slightly, you know, pushing out the break even for the business? I think we're still modeling the high teens, 20% gross margin level for this segment. Tariffs are still a factor for auto OEM and there's a lot of noise around how tariffs will be applied. In this market, we're also working very closely with our partners to see cost recoveries for any additional cost that we have on the tariff side of things.
Speaker Change: Okay, Great just firstly, if I can squeeze in just seeing some shifting to auto OEM margin.
George Wang: Margin profile.
You guys are sticking to the mean.
George Wang: Medium term model for auto Oems in terms of the gross margin. The OPM margin do you think the tariffs and the macro is slightly push out the breakeven for the business.
George Wang: I think we're still modeling the.
George Wang: The high teens, 20%.
George Wang: Gross margin level for this segment.
George Wang: Tariffs are still a factor for auto OEM and Theres a lot of noise around around how tariffs will be applied.
George Wang: In this market. We're also working very closely with our partners to to see cost recoveries for any additional costs that we have on the tariff side of things and so in general we're staying with our model because we believe there is a few more levers there that we can.
Clifton Pemble: In general, we're staying with our model because we believe there's a few more levers there that we can manage.
George Wang: Manage.
George Wang: Great, great. Thanks again. And congrats again on the strong execution. I will go back to the queue. Thank you, George.
George Wang: Great Great. Thanks, again, and congrats again on the strong execution I will go back to the queue. Thank.
George Wang: Thank you George.
George Wang: Your next question is from the line of Ben Bollin with Cleveland Research. Good morning, everyone. Thanks for taking the question. Could you talk a little bit about The relative performance across the geographies, the Americas obviously grew, but a big detail versus last quarter. EMEA continues to really outperform. Any thoughts on the dynamics you're seeing across geos that are contributing to the relative performance levels? And then I have a follow up. Yeah, the geographies reflect a little bit of where the biggest markets are for some of our segments. In the Americas, marine and aviation are the majority of those markets are in the Americas market area.
Speaker Change: Your next question is from the line of Ben Bollin with Cleveland Research.
Ben Bollin: Good morning, everyone. Thanks for taking the question.
Speaker Change: Could you talk a little bit about.
Speaker Change: The relative performance across the geographies the Americas obviously.
Speaker Change: Grew but a big detail versus last quarter.
Speaker Change: EMEA continues to really outperform any thoughts on the dynamics youre seeing across Geos that are contributing to the relative performance levels and then I have a follow up.
Speaker Change: Yes.
Speaker Change: Geographies to reflect a little bit of where we're the biggest markets are for some of our segments in the Americas Marine and aviation are the majority of those markets are in the Americas market area. So the lower performance of <unk>.
Clifton Pemble: So the lower performance of growth in those two segments, of course, influence. of the Americas region. In EMEA, we're very strong, especially on the wearables side of things, and a lot of growth there in terms of our advanced wearable products. So that influenced EMEA as well.
Speaker Change: And in those two segments of course influence.
Speaker Change: The Americas region in EMEA were very strong, especially on the Wearables side of things and a lot of growth there in terms of our advanced wearable products, so that influenced EMEA as well.
Clifton Pemble: And finally, AutoEM, with our European deliveries out of our Poland factory to BMW, grew significantly year over year as we put new models into production, and so therefore that influenced the growth there as well. Thanks.
Speaker Change: And finally auto OEM with our European deliveries out of our Poland factory to BMW.
Speaker Change: Grew significantly year over year is as we put new models into production and so therefore that influenced the growth there as well.
Speaker Change: Yes.
Benjamin Bollin: The other question I had is... When you look at the guidance within fitness, once you run rate. bit below how you're guiding the year.
Speaker Change: Got it.
Speaker Change: The other question I had is.
Speaker Change: When you look at the guidance within fitness.
Speaker Change: <unk> run rate.
Speaker Change: Bit below how youre guiding the year.
Clifton Pemble: Could you talk a little bit about how you're thinking about new products or just the pace rate that you see that segment developing over the course of the year? That's it for me. Thank you. We expect fitness will have a bigger benefit from foreign exchange. because of the weighting of the revenues outside of the U.S. dollar. So that's one factor. And then the other thing I would say is that we're still working towards new product releases this year that will influence our revenue going forward. And so we're anticipating benefit from new product releases that are coming.
Speaker Change: Can you talk a little bit how you're thinking about new.
Speaker Change: New products or just the pace rate that you see that that segment developing over the course of the year. That's it for me. Thank you.
Speaker Change: And we expect fitness will have.
Speaker Change: A bigger benefit from foreign exchange.
Speaker Change: Because of the weighting of the revenues outside of the U S. Dollar. So thats one factor and then the other thing I would say is that that we're still working towards <unk>.
Speaker Change: New product releases this year that will influence our revenue going forward and so we're anticipating.
Speaker Change: Benefit from new product releases that are coming.
Benjamin Bollin: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you.
Ivan Feinseth: Your next question is from a line of Ivan Feinseth with Tigris Financial Partners. Thank you for taking my question. And congratulations on the great results in this difficult economic and global trade environment. Since you keep introducing more and more subscription based products, and you have a lot of them now, not only like the, you know, the aviation and marine maps, but, you know, the inReach and now Connect+.
Speaker Change: Your next question is from the line of Ivan <unk> with Tigress financial partners.
Speaker Change: Alright. Thank you for taking my question and congratulations on the great results in this difficult economic and global trade environment.
Speaker Change: Simply you keep introducing more and more subscription based products and you have a lot of them now not only like the.
Speaker Change: No the aviation and marine maps, but.
Speaker Change: Inmates and now connect plus at what point do you think you would start to.
Ivan Feinseth: At what point do you think you would start to report subscription and software revenue as a separate line Well, as you know, we would have to report those as soon as they reach 10% of our consolidated revenues. So when that happens, we'll we'll definitely let you know.
Speaker Change: Report subscription and software revenue as a separate line item.
Speaker Change: Well as you know we would have to report those as soon as they reach 10% of our consolidated revenue. So when that happens will we will definitely let you know.
Clifton Pemble: Okay. Also, congratulations on the Gold Wing infotainment adoption. Is there the opportunity to include the Zumo radar as an OEM addition to motorcycles? And do you see any opportunity to start to go into more advanced rider safety? The Zumo Radar is fairly new, so it's just getting out there onto the market, and what's really interesting about the Zumo Radar is it's another example of a product category that we invented and brought to the market. And so it's early days, but I would expect that motorcycle OEMs as well as aftermarket users are going to embrace that product line and it'll be part of the market.
Speaker Change: Okay also.
Speaker Change: Congratulations on the gold wing infotainment.
Speaker Change: Adoption.
Speaker Change: Or is there the opportunity to include like the zummo radar on it.
Speaker Change: As an OEM addition to motorcycles and do you see any opportunity to start to go into more like an advanced rider safety systems.
Speaker Change: Well the CMO radar is fairly new so it was just getting out there into the market in <unk> and what's really.
Speaker Change: Interesting about the Zama radar is it's another example of a product category that we.
Speaker Change: Invented and brought to the market and so it's early days, but I would expect that.
Speaker Change: Motorcycle Oems as well as aftermarket.
Speaker Change: Users are going to embrace that product line and it will be part of the market going forward.
Ivan Feinseth: Now, on your forward guidance, which I think was pretty impressive in light of what's going on, is a major portion of that going to be driven by new product introductions or? you give us some color on that. Yeah, I can't provide a detail on what that is, but it's all factored into our overall outlook. We have a cadence of, you know, roughly 100 new product releases every year, and 2025 certainly has a lot of new products that are coming, as well as new product categories, and so we're factoring all of that into our outlook. Alright, thanks and congratulations on the great execution again.
Speaker Change: No.
Speaker Change: Our forward guidance I think it was pretty impressive in light of what's going on is a major portion of that going to be driven by new product introductions.
Speaker Change: Can you give us some color on that.
Speaker Change: Yes, I cant provide a detail on what that is but it's all factored into our overall outlook.
Speaker Change: Have the cadence of roughly 100, new product releases every year and in 2025 certainly has.
Speaker Change: A lot of new products that are coming as well as new product categories and so we're factoring all of that into our outlook.
Speaker Change: Alright, thanks, congratulations on the great execution again thanks.
Ivan Feinseth: Thanks, Ivan.
Eitan: Thanks Eitan.
Ron Epstein: Your next question is from the line of Ron Epstein with Bank of America. Hey. Yeah, good morning, guys. How are you thinking about just getting shipments of product? I mean, my understanding, there's freight that's waiting outside of ports. I mean, how are you factoring that in?
Speaker Change: Your next question is from the line of Ron Epstein with Bank of America.
Ron Epstein: Hey, good morning, guys.
Speaker Change: Hi, how.
Speaker Change: How are you thinking about just getting shipments of product.
Speaker Change: And my understanding there is freight that's waiting outside of ports.
Speaker Change: How are you factoring that in.
Clifton Pemble: Well, I'm not sure exactly what the nature of your question is. We have been following a normal cadence of manufacturing and shipping. And so, our shipping consists of a combination of both air and sea freight, and things have been business as usual along those lines. Okay, that's good to know.
Speaker Change: Well I'm not sure exactly.
Speaker Change: What the nature of your question is we.
Speaker Change: <unk>.
Speaker Change: Have been following a normal cadence of of manufacturing and shipping.
Speaker Change: And so our shipping consists of a combination of both air and sea freight.
Speaker Change: And things have been business as usual.
Speaker Change: Along those lines.
Speaker Change: Okay.
Clifton Pemble: And then, can you can you give any more color on the various tools that you're trying to use to mitigate tariffs? Yeah, as I mentioned, you know, everything is on the table, so we're looking at a broad range of things from the detailed sourcing level of supply chains. to where specific products might be manufactured, to pricing, to overall cost structures within the company. So everything is on the table. We're not ruling anything out. We're just simply not providing details on that right now because some of the items, you know, depending on the market, is more competitively sold.
Speaker Change: Good to know and then can you can you give any more color on the various tools that you are trying to use to mitigate tariffs.
Speaker Change: Yes, as I mentioned everything is on the table. So we're looking at a broad range of things from from.
Speaker Change: The detailed sourcing level of supply chains.
Speaker Change: Two where were specific products might be manufactured to pricing to overall cost structures within the company. So everything is on the table, we're not ruling anything out.
Speaker Change: We're just simply not providing details on that right now because some of the items depending on the market is more competitively sensitive than that.
Clifton Pemble: Yeah, that makes sense.
Clifton Pemble: And then on the aviation side, do you expect any impact there on tariffs? I mean, in terms of maybe some of the electronics that you use? Well, there's some impact because there's always materials that are coming from outside of the U.S., and so we factor that into our overall outlook for aviation, but the impact is more limited in aviation, and as you know, we do most of our manufacturing of aviation products here in the United States in two different factories in Oregon and Kansas. Yeah, yeah, that's great. All right, cool.
Speaker Change: It makes sense and then on the aviation side.
Speaker Change: Do you expect any impact there on tariffs in terms of maybe some of the electronics. So as you do.
Speaker Change: Well there is some impact because theres always materials that are coming from.
Speaker Change: Outside of the U S and so we've factored that into our overall outlook.
Speaker Change: For aviation, but the impact is more limited.
Speaker Change: In aviation and as you know, we do most of our manufacturing of aviation products here in the United States in two different factories in Oregon in Kansas.
Speaker Change: Yeah, Yeah, that's great Alright cool. Thank you very much thank you Rob.
Operator: Thank you very much. As a reminder, to ask a question, press star followed by the number one on your telephone keypad.
Speaker Change: As a reminder to ask a question press star followed by the number one on your telephone keypad.
Noah Zatzkin: Your next question is from Noah Zatzkin with KeyBake Capital Markets. Hi. Thanks for taking my questions.
Speaker Change: Next question is from Noah <unk> with Keybanc capital markets.
Speaker Change: Hi, Thanks for taking my questions, maybe first just on the adjustment to the marine revenue growth outlook.
Noah Zatzkin: Maybe first, just on the adjustment to the marine revenue growth outlook, is that a reflection of kind of a differing view on kind of the end market versus prior, or what's kind of embedded there? Thanks. Yeah, again, this is more just an empirical view of what could happen to the market and just kind of listening to what customers are saying without any real data points yet, obviously, because it's very early days. Early boat show indications were very strong. I do think that the shock factor around the tariffs and the changes that happened so quickly could put some of those customers who were looking at high-end boats and also equipment on pause as they, quote-unquote, see what happens.
Speaker Change: Is that a reflection of kind of.
Speaker Change: Different view.
Speaker Change: The end market versus prior or what's kind of embedded there. Thanks.
Speaker Change: Again this is more just.
And empirical view of what could happen to the market and just kind of listening to what customers are saying without any real data points, yet obviously, because it's very early days.
Speaker Change: Early boat show indications were very strong.
Speaker Change: I do think that the <unk>.
Speaker Change: <unk> factor around the tariffs and the changes that happened so quickly could put some of those customers who were looking at high end boats and also equipment on pause as they quote unquote and see what happens we hear that a lot.
Clifton Pemble: We hear that a lot. But in general, we expect that the bell curve of our market where these products are sold will continue to function, although we're factoring in just a slight amount of softness for this transition.
Speaker Change: But in general we expect that the.
Speaker Change: Bell curve of our market, where these products are sold will will continue to.
Speaker Change: Function, although we're factoring in just a slight amount of softness for this transition time.
Noah Zatzkin: Make sense.
Noah Zatzkin: And maybe just one more, and apologies if you've already touched on this, but on the auto OEM side, how should we think about kind of the, like a 31% growth in the quarter versus kind of the 7% unchanged thoughts for the year? Is it like just kind of contract cadence items or just any thoughts there? Thanks. The high growth rate in Q1 is really a result of still getting the benefit of the additional models that were brought online last year, so we'll soon anniversary all of that, and the growth will moderate going forward, as it's really a static situation with the number of models and the production rates coming out of BMW.
Speaker Change: Makes sense and maybe just one more and apologies if you've already touched on this.
Speaker Change: But on the auto OEM side.
Speaker Change: How should we think about kind of like a 31% growth in the quarter.
Speaker Change: Versus kind of the 7% unchanged thoughts for the year is it just kind of contract cadence items are.
Speaker Change: Just any thoughts there thanks.
Speaker Change: Yeah. The high growth rate in Q1 is really a result of of.
Speaker Change: Still.
Speaker Change: Getting the benefit of the additional models that were brought online last year. So we will soon anniversary.
Speaker Change: All of that and the growth will moderate going forward as it is really a.
Speaker Change: Static situation with the number of models and the production rates coming out of BMW. The other factor is of course as you know carmakers are softening their views as they deal with the impact of tariffs on their customers and so.
Clifton Pemble: The other factor is, of course, as you know, car makers are softening their views as they deal with the impact of tariffs on their customers, and so our outlook reflects their input as well in terms of the number of cars they will make. Very helpful. Thank you.
Speaker Change: So our outlook reflects.
Speaker Change: Their input as well in terms of the number of cars they will make.
Speaker Change: Very helpful. Thank you.
Operator: 1 At this time, there are no further questions.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: At this time there are no further questions I will now hand, todays call back over to Teri Seck for any closing remarks.
Teri Seck: I will now hand today's call back over to Teri Seck for any closing remarks. Thank you all for joining us today. As typical, Doug and I are available for callbacks, and we hope you have a great day.
Teri Seck: Thank you all for joining us today as typical Doug and I are available for callbacks and we hope you have a great day.
Operator: Bye.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your line.
Teri Seck: This concludes today's call. Thank you for joining you may now disconnect your lines.
Teri Seck: Okay.
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Teri Seck: Okay.
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Teri Seck: Thanks.
Teri Seck: Okay.
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Teri Seck: Okay.
Teri Seck: Okay.
Teri Seck: Yes.
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Teri Seck: Okay.
Teri Seck: Yes.
Teri Seck: Okay.
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