Garmin Ltd.

Company Overview

Business Model: Garmin Ltd. and its subsidiaries (collectively, Garmin) design, develop, manufacture, market, and distribute a diverse family of products featuring location technology, such as Global Positioning System (GPS), and other navigation, communications, sensor-based, and information products. These products are designed for individuals with active lifestyles and are sold across five primary markets: fitness, outdoor, aviation, marine, and auto OEM. Garmin also supplies products for original equipment manufacturers (OEMs) and aftermarket applications. The company utilizes various global navigation satellite systems (GNSS) including GLONASS, Galileo, BeiDou Navigation Satellite System, and satellite-based augmentation systems (SBAS), as well as subscription-based access to private satellite networks like the Iridium satellite network for global communication. In fiscal 2024, Garmin delivered over 18 million products.

Market Position: Garmin operates in highly competitive markets but believes it generally competes favorably, maintaining a significant presence in its major segments. The company is a leading manufacturer of recreational marine electronics and a leading supplier of cartography for this market. In the outdoor segment, Garmin is a leading manufacturer of personal navigation devices (PNDs), integrated and standalone dash cams, and auto accessories. For the auto OEM market, Garmin is a tier-one supplier of domain controllers and infotainment solutions to leading automobile manufacturers. In aviation, Garmin is recognized for defining the integrated flight deck (IFD) space in general and light business aviation and is emerging as a strong competitor in commercial air-carrier, military and defense, electric aircraft, and Advanced Air Mobility / eVTOL markets. Garmin's products are known for their value, high performance, ease of use, innovation, and appealing design.

Recent Strategic Developments: Garmin continues to innovate across its segments, including the introduction of its third-generation IFD offering for aviation OEMs and retrofit applications. In marine, the company has introduced steer-by-wire autopilot capabilities and expanded its Force Trolling Motor series with the Force Kraken. Garmin has also become a premier supplier of above and below water lighting for marine and RV markets under the Lumishore name. The company's acquisition of JL Audio significantly contributed to marine revenue growth in fiscal 2024. To address evolving global tax standards, Garmin initiated an intercompany transaction in 2020 to migrate ownership of certain intellectual property from Switzerland to the United States, with advanced pricing agreements obtained from relevant jurisdictions. In February 2024, the Board of Directors approved a new share repurchase program authorizing up to $300 million in common share repurchases.

Geographic Footprint: Garmin operates globally, with sales and marketing efforts primarily managed by Garmin International, Inc. in the Americas, Garmin (Europe) Ltd. in Europe, the Middle East, and Africa (EMEA), and Garmin Corporation in Asia and the Far East. Manufacturing facilities are vertically integrated across Taiwan, the U.S., the Netherlands, Poland, and China. Principal properties include approximately 2,244,000 square feet of owned facilities in Olathe, Kansas; 255,000 square feet of owned and leased facilities in the United Kingdom; 319,000 square feet of leased facilities in Wroclaw, Poland; and 1,847,000 square feet of owned facilities in Taiwan. Research and development activities are primarily conducted in the United States.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 59% (FY2024) vs. 57% (FY2023)
• Operating Margin: 25% (FY2024) vs. 21% (FY2023)
• Net Margin: 22% (FY2024) vs. 25% (FY2023)

Investment in Growth:

• R&D Expenditure: $993,601,000 (16% of revenue)
• Capital Expenditures: $193,571,000
• Strategic Investments: $16,444,000 (net of cash acquired) in acquisitions during FY2024, following $150,853,000 in FY2023, which included the acquisition of JL Audio.

Business Segment Analysis

Fitness

Financial Performance:

• Revenue: $1,774,487,000 (+32% YoY)
• Operating Margin: 27%
• Key Growth Drivers: Sales growth across all product categories, led by strong demand for wearables.

Product Portfolio:

• Running and Multi-sport Watches: Forerunner series (GPS-enabled watches with features like wrist-based heart rate, pulse oximeter, AMOLED displays, music storage, LTE Connectivity, solar charging, Garmin Pay).
• Cycling Products: Cycling computers (some with solar charging), power meters, bike radars, cameras, smart lights, speed and cadence sensors. Also includes Tacx indoor training equipment (smart and basic trainers, smart bike).
• Smartwatch Devices: Venu series, vívoactive series, vívomove series, Lily series, vívosmart series, and Bounce series (GPS-enabled smartwatches, fashion-forward hybrid smartwatches, activity tracking fitness bands with features like wrist-based heart rate, AMOLED displays, ECG app, Garmin Pay, music storage, 24/7 health monitoring).
• Scales and Monitors: Chest strap heart rate monitors, smart scales, and blood pressure monitors.
• Platforms: Garmin Connect and Garmin Connect Mobile (web and mobile platforms for tracking and analyzing fitness, activities, workouts, and wellness data), Connect IQ (application development platform for third-party apps on Garmin devices).

Market Dynamics: Not explicitly detailed in the filing.

Outdoor

Financial Performance:

• Revenue: $1,961,990,000 (+16% YoY)
• Operating Margin: 36%
• Key Growth Drivers: Sales growth in adventure watches.

Product Portfolio:

• Adventure Watches: fēnix series, Instinct series, tactix series, Enduro series, MARQ series (features include wrist-based biometrics, sports apps, solar charging, music storage, preloaded full-color purpose-built adventure mapping, built-in LED flashlights, speakers, microphones, Garmin Pay).
• inReach and Garmin Response: Devices with Iridium global satellite communication technology (two-way text messaging, photo and voice messaging, weather forecasts, 24/7 S.O.S. capabilities supported by Garmin Response).
• Outdoor Handhelds and Satellite Communicators: Montana, eTrex, GPSMAP, and inReach product lines (ranging from basic navigators to advanced color touchscreen devices with barometric altimeter, 3-axis compass, camera, preloaded maps, wi-fi, smartphone connectivity, two-way satellite communication, solar charging).
• Golf Devices: Approach product line (watches, laser range finders, launch monitors, simulators, club sensors, handhelds, 43,000+ golf course maps, Approach R50 portable launch monitor and simulator, Garmin Golf mobile app with Home Tee Hero virtual round simulator).
• Consumer Automotive: Personal navigation devices (PNDs), integrated and standalone dash cams, auto accessories (Drive series, Garmin Dash Cam series, dēzl ecosystem for professional truck drivers, zūmo series for motorcycles, RV series, Tread line for off-road guidance, Garmin Catalyst racing coach).
• Sportsman and Dog Devices: Xero product line (e.g., Xero C1 Pro Chronograph for projectile speed measurement), Alpha, PRO, BarkLimiter, and Delta product lines for dog tracking and training.
• Dive Devices: Descent dive computer watch series (integrated air pressure monitoring, multiple dive modes), Descent X50i large-format wearable dive computer, Garmin Descent transceivers.

Market Dynamics: Not explicitly detailed in the filing.

Aviation

Financial Performance:

• Revenue: $876,614,000 (+4% YoY)
• Operating Margin: 24%
• Key Growth Drivers: Growth in OEM product categories.

Product Portfolio:

• Integrated Flight Decks: Third-generation IFD offerings for OEMs and retrofit applications, scalable for various aircraft and rotorcraft, featuring communication, navigation, weather, terrain/traffic awareness, aircraft performance, and automated safety solutions.
• Electronic Flight Displays and Instrumentation: Primary or back-up systems providing cockpit information and situational awareness.
• Navigation and Communication Products: Integrated and stand-alone GPS navigation and VHF radio communication products.
• Automatic Flight Control Systems and Safety-Enhancing Technologies: Scalable flight control systems (Autopilots, Autonomí solutions, Autoland system, Smart Glide, Smart Rudder Bias system).
• Audio Control Systems: Panel-mount and remote-mounted units with Bluetooth connectivity, voice command, and integrated intercoms.
• Engine Indication Systems: Advanced systems for piston and turbine aircraft with data-logging, wireless data offloading, cloud storage, and analysis via flyGarmin.com.
• Traffic Awareness and Avoidance Solutions: TAS and TCAS / ACAS solutions.
• ADS-B and Transponders: ADS-B “Out” compliant solutions, ADS-B “In” and Bluetooth capable units for mobile device connectivity, enabling Runway Occupancy Awareness and CDTI-Assisted Visual Separation.
• Weather Information and Avoidance Solutions: Onboard Doppler digital radar, satellite-based SiriusXM, ground-based ADS-B, Garmin Connext global satellite weather options.
• Datalink and Connectivity: Solutions for global weather data download, text/voice communication, flight plan transfer, database updates, real-time aircraft system monitoring.
• Portable GPS Navigators and Wearables: Portable GPS navigators, smartwatches for pilots, satellite communicators, portable traffic and weather solutions.
• Services: Web and mobile app-based products (FltPlan.com, Garmin Pilot electronic flight bag application), FltPlan safety management system, AeroData solutions (runway analysis, performance data, weight and balance, obstacle clearance, load planning, navigation database products), product support, databases, training, extended warranties, and subscription services.

Market Dynamics: Serves general aviation, business aviation, rotorcraft, experimental/light sport, commercial air-carrier, military and defense, electric aircraft, and Advanced Air Mobility / eVTOL markets.

Marine

Financial Performance:

• Revenue: $1,073,192,000 (+17% YoY)
• Operating Margin: 22%
• Key Growth Drivers: Primarily driven by contributions from the Company's acquisition of JL Audio.

Product Portfolio:

• Chartplotters and Multi-Function Displays (MFDs): GPSMAP and ECHOMAP product lines (4-inch portable to 27-inch fully integrated Glass Helm offerings with 4k resolution, wireless connectivity to ActiveCaptain mobile app).
• Cartography: Garmin Navionics Vision+ and Navionics Platinum+ charts (compatible with most major chartplotters/MFDs, featuring Auto Guidance+ routing technology, satellite imagery, 3D views).
• Fishfinders: Striker series (GPS technology, Garmin Quickdraw Contours, wireless features via ActiveCaptain and StrikerCast mobile apps).
• SONAR: LiveScope sonar system (high-resolution, live sonar views), Panoptix line (detailed 3D underwater views), CHIRP “black-box” sounders and CHIRP transducers.
• Autopilot Systems: Full-featured marine autopilot systems for sailboats and powerboats (remote steering, speed control, Garmin’s Shadow Drive technology, steer-by-wire capabilities).
• RADAR: Fantom radar with MotionScope Doppler technology (solid state, lower power consumption, increased reliability, improved situational awareness), full line of magnetron radars.
• Instruments: NMEA 2000 and NMEA 0183 compliant instrument displays and sensors.
• VHF Communication Radios: Full line-up of marine VHF radios and Automatic Identification System (AIS) transceivers (integrated GPS receivers, NMEA 2000 compatible, multi-station support, AIS channel monitoring).
• Handhelds and Wearable Devices: quatix series wearable, GPS-enabled smartwatches for mariners (marine features for navigation, sailing, stereo control, autopilot functions, tidal information, built-in LED flashlight, solar charging), floating marine GPS handhelds.
• Sailing: Garmin SailAssist features integrated into MFD and instrument systems (enhanced wind rose, POLAR tables, pre-race guidance, synchronized race timer, virtual starting line, time to burn, lay line data fields).
• Audio: Fusion and JL Audio brands (premium audio products and accessories for marine, powersports, aftermarket automotive, RV, and home environments).
• Digital Switching: EmpirBus product line (power distribution and control solutions for marine and RV applications, enabling advanced logic controls and automation).
• Trolling Motors: Force Trolling Motor series (powerful, efficient, built-in CHIRP and Ultra High-Definition ClearVü and SideVü sonar, Force Kraken with various shaft lengths, wireless connectivity to Garmin chartplotters/MFDs).
• Lighting: Lumishore name (premier supplier of above and below water lighting for marine and RV markets, single color, dual color, full RGB lighting, zone control, automation, audio inputs, integration with Garmin’s MFD/mobile app systems).

Market Dynamics: Recreational marine market.

Auto OEM

Financial Performance:

• Revenue: $610,620,000 (+44% YoY)
• Operating Margin: -6% (operating loss, but improved from -14% in FY2023)
• Key Growth Drivers: Increased shipments of domain controllers.

Product Portfolio:

• Domain Controllers: Tier-one supplier of remote computing modules controlling infotainment, instrumentation, key advanced driver-assistance systems (ADAS) functionality, and rear seat entertainment.
• Infotainment Units: Tier-one supplier of centralized control and integrated multi-display platforms for premium audio and multimedia, navigation, cameras, smartphone links, customized voice recognition, personal assistants, and rear-seat entertainment instrument clusters.
• Other: Software, map database, camera, wearable, and other automotive solutions.

Market Dynamics: Garmin has cultivated key relationships with leading automobile manufacturers. The segment is expected to experience an operating loss in 2025.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: In fiscal 2024, Garmin repurchased 357,797 shares for $62,767,000 under the 2024 Program, which authorizes up to $300,000,000 in repurchases. As of December 28, 2024, $237,233,000 remained available under this program, which expires on December 26, 2026. Cash paid for share repurchases was $62,348,000 in FY2024.
• Dividend Payments: Shareholders approved total dividends of $3.00 per share for fiscal 2024, amounting to $576,492,000. Cash paid for dividends was $572,355,000 in FY2024.
• Future Capital Return Commitments: The 2024 Program authorizes the repurchase of up to $300,000,000 of common shares, with $237,233,000 remaining as of December 28, 2024.

Balance Sheet Position:

• Cash and Equivalents: $2,079,468,000
• Total Debt: $0 (no outstanding long-term debt as of December 28, 2024)
• Net Cash Position: $3,699,069,000 (comprising cash, cash equivalents, and marketable securities)
• Debt Maturity Profile: Not applicable due to no outstanding long-term debt.

Cash Flow Generation:

• Operating Cash Flow: $1,432,471,000
• Free Cash Flow: $1,238,900,000 (Operating Cash Flow less Capital Expenditures)
• Cash Conversion Metrics: Not explicitly detailed in the filing.

Operational Excellence

Production & Service Model: Garmin employs a vertically integrated manufacturing model across its facilities in Taiwan, the U.S., the Netherlands, Poland, and China. This approach is considered a core competency, providing advantages in product cost, quality, and time-to-market. The vertical integration allows for rapid prototyping, iterative design, and leveraging manufacturing resources across various product volumes, optimizing design for manufacturing and reducing costs. Automation and advanced production processes ensure in-service robustness and consistent reliability, with immediate feedback loops to development teams for continuous improvement. Multi-disciplinary teams facilitate quick transitions from concept to manufacturing. Garmin Corporation is primarily responsible for manufacturing and distribution to subsidiaries, while Garmin International, Inc. manufactures most aviation products.

Supply Chain Architecture: Key Suppliers & Partners:

• Components: Garmin sources components such as semiconductors, liquid crystal displays, memory chips, batteries, and microprocessors from a large network of qualified suppliers. However, certain key components are obtained from single or limited sources, posing supply and pricing risks. Garmin mitigates this through safety stock and its vertical integration strategy, which allows for quick deployment of new product designs.
• Licensed Technology & Content: The company relies on licensed technology and content for certain product features.
• Satellite Communication: Garmin partners with Iridium Communications Inc. and its subsidiaries for satellite communication systems used in some products.

Facility Network:

• Manufacturing: Principal manufacturing facilities are located in Olathe, Kansas (U.S.), various locations in the United Kingdom, Wroclaw, Poland, and various locations in Taiwan.
• Research & Development: R&D is primarily conducted in the United States.
• Distribution: Garmin operates global distribution networks, including facilities in Taiwan.
• Certifications: Garmin's design, manufacturing, distribution, and service functions in its U.S., Taiwan, China, Netherlands, and U.K. facilities are ISO 9001 certified. Automotive operations in Taiwan, China, Poland, and Olathe hold IATF 16949 certification. Aviation operations in Olathe, Kansas, and Salem, Oregon, U.S., are AS9100 certified. Facilities in the U.S., Taiwan, Poland, and China have achieved ISO 45001 certification for Health and Safety Management.

Operational Metrics:

• Total unit sales increased approximately 15% to 18.6 million units in fiscal 2024 from 16.2 million units in fiscal 2023.

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: Garmin sells products and services directly through its online webshop (garmin.com), subscriptions for connected services, and its own retail stores. Direct distribution channels accounted for greater than 10% of total net sales in 2024.
• Channel Partners: A broad and diverse network of indirect distribution channels, including independent retailers, dealers, distributors, installation and repair shops, and OEMs, is utilized worldwide.

Customer Portfolio: Enterprise Customers:

• Strategic Partnerships: Garmin has cultivated key relationships with leading automobile manufacturers as a tier-one supplier. Arrangements with OEM customers in aviation, marine, and auto OEM segments are often long-term, intended to fulfill purchasing requirements for the entire product life cycle, though typically without firm volume commitments.
• Customer Concentration: The top ten customers collectively contributed between 20% and 25% of net sales annually since 2022. No single customer accounted for 10% or more of consolidated net sales in fiscal years 2024 or 2023.

Geographic Revenue Distribution:

• Americas: 48.2% of total revenue in FY2024 ($3,036,083,000)
• EMEA: 36.8% of total revenue in FY2024 ($2,319,310,000)
• APAC: 15.0% of total revenue in FY2024 ($941,510,000)

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The markets for Garmin's products are highly competitive and characterized by rapidly changing technology, evolving industry standards and regulations, and shifts in customer needs. The wearable device market, in particular, has experienced periods of growth and decline, impacting Garmin's fitness and outdoor segments.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Fitness: Apple, Bryton, Coros, Elite, Fitbit (Google), Huawei, Oura, Polar, Samsung, SRAM, Suunto, Wahoo Fitness, Whoop, Xiaomi, Zepp Health, and Zwift.
• Outdoor: Apple, Casio, Coros, Dogtra, Globalstar, Infinition, Rand McNally, Samsung, Shearwater Research, SportDOG, Suunto, TAG Heuer, Tissot, TomTom, Trackman, Uneekor, Vista Outdoor, and Zoleo.
• Aviation: Aspen Avionics, Avidyne, Dynon Avionics, ForeFlight / Jeppesen (Boeing), Genesys Aerosystems, Honeywell Aerospace & Defense, Innovative Solutions and Support Inc., Collins Aerospace (Raytheon), Safran, Thales, and Universal Avionics Systems Corporation.
• Marine: Furuno, Johnson Outdoors, Navico (Brunswick), and Raymarine (Teledyne).
• Auto OEM: Alpine Electronics, Aptiv, Bosch, Continental, Harman (Samsung), Panasonic, and Visteon.

Emerging Competitive Threats: Competitors, some with significantly greater resources, are capable of replicating Garmin's product features or responding more rapidly to technological changes. Additionally, some OEM customers may develop in-house equipment and components that they currently purchase from Garmin.

Competitive Response Strategy: Garmin's strategy involves significant and continuous investment in research and development to introduce new products and enhance existing ones, aiming for market acceptance. The company leverages its vertical integration for cost, quality, and time-to-market advantages, and its ability to quickly deploy new product designs helps mitigate supply chain risks.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• New Product Development & Obsolescence: The market is characterized by rapidly changing technology and evolving customer needs. Failure to timely develop and introduce new or enhanced products could lead to products becoming less competitive or obsolete, despite significant R&D investments.
• Competition: Intense competition from companies with potentially greater financial, technical, and marketing resources, which could lead to price reductions, reduced margins, and market share loss. OEM customers developing in-house components also poses a risk.
• Wearable Device Market Volatility: Maturation or contraction of the overall wearable device market or specific categories could adversely affect revenue and profits.
• Economic & Geopolitical Conditions: Adverse macroeconomic conditions (e.g., high interest rates, inflation, recession) could reduce demand. Geopolitical instability, war, or terrorism could disrupt operations, supply chains, or the Global Positioning System (GPS).
• Climate Change Impact: Increased frequency/intensity of natural disasters, new regulations (e.g., greenhouse gas emission reduction), and evolving societal pressures (e.g., to reduce carbon footprint in aviation/marine) could decrease demand for certain products.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on third-party suppliers for key components (e.g., semiconductors, displays, memory chips, batteries, microprocessors), some of which are sole-source. Shortages, delays, or cost increases could harm production.
• Licensed Technology Dependency: Dependence on licensed technology and content; inability to continue sourcing or detrimental changes in licensor relationships could impair product features.
• Geographic Concentration: Principal manufacturing facilities in Taiwan expose Garmin to unique economic and political risks related to the People’s Republic of China's assertion of sovereignty, potentially causing significant operational disruptions.
• Demand Forecasting & Inventory Management: Difficulty in accurately forecasting demand for a diverse product portfolio can lead to inadequate production to meet demand (higher costs, lower quality) or excess inventories (cash usage, write-offs, reduced manufacturing efficiencies).
• Product Defects & Liability: Design and manufacturing defects in products could result in recalls, replacements, reputational harm, significant warranty expenses, and potential liability for personal injury or property damage.

Cybersecurity Vulnerabilities:

• System Failures & Breaches: Exposure to information technology system failures and network disruptions (e.g., natural disasters, human error, cyberattacks like ransomware). Such incidents could disrupt internal operations, lead to data loss or theft of intellectual property/personal information, harm reputation, and incur significant costs and liabilities.

Financial & Regulatory Risks

Market & Financial Risks:

• Foreign Currency Exchange Rate Risk: Significant exposure to fluctuations in foreign currency exchange rates relative to the U.S. Dollar, impacting revenue, gross margin, and profitability. Garmin has not historically hedged these risks.
• Gross Margin Erosion: Gross margins may fluctuate or decline due to competitive price reductions, product mix shifts, foreign exchange rates, tariffs, freight/component costs, and manufacturing facility utilization. Average selling prices for specific products tend to decrease over their life cycle.
• Quarterly Operating Fluctuations & Seasonality: Operating results are difficult to predict due to seasonal demand patterns (consumer products highest in Q4, marine in Q1/Q2) and the timing of new product launches.
• Tax Law Changes & Disputes: Changes to tax laws, treaties, regulations, or their interpretation (particularly in the U.S., Switzerland, Taiwan, and U.K.), including global minimum tax legislation (OECD BEPS) and increased Swiss cantonal tax rates, could result in adverse tax consequences.
• Customer Credit & Concentration Risk: Reliance on independent dealers, distributors, and large OEM customers exposes Garmin to risks related to their inventory levels, support for products, and potential for large customers to demand more favorable terms or the loss of a major customer.

Regulatory & Compliance Risks:

• Intellectual Property Infringement: Reliance on patents, copyrights, trademarks, and trade secrets. Risk of patents being challenged, not providing competitive advantage, or third-party claims of infringement leading to costly litigation, liabilities, or cessation of product sales.
• Global Regulatory Compliance: Subject to complex and changing global laws and regulations across various areas (e.g., telecommunications, environmental, labor, data privacy, trade). Non-compliance could adversely affect reputation, business, and financial results.
• Data Protection & Privacy: Collection and use of personal information is subject to evolving global data protection laws (e.g., GDPR). Non-compliance could result in significant penalties, investigations, litigation, and reputational harm.
• Governmental Certifications: Aviation products require Federal Aviation Administration (FAA) certification, and wireless products require Federal Communications Commission (FCC) and comparable foreign authority certifications. Delays or loss of these certifications could harm the business.

Innovation & Technology Leadership

Research & Development Focus: Garmin maintains a strong emphasis on research and development, driven by a close partnership between its engineering and manufacturing teams. The company is committed to increasing innovative design and development of new products to expand its reach in existing consumer and aviation markets, as well as new auto OEM programs and active lifestyle markets. Core technology areas include advanced GPS and multi-GNSS capabilities, Iridium satellite communication, wrist-based biometrics, AMOLED displays, ECG applications, solar charging, comprehensive mapping, LTE connectivity, Garmin Pay, high-resolution sonar (LiveScope), Doppler radar (MotionScope), and advanced aviation safety systems (Autoland, Smart Glide, Smart Rudder Bias system).

Intellectual Property Portfolio: As of December 28, 2024, Garmin holds over 1,970 patents worldwide and more than 1,190 trademark registrations. The company regularly files patent applications to protect its proprietary technologies and trademarks. Garmin also relies on licenses of intellectual property for use in its business. The company faces ongoing risks of third-party claims of intellectual property infringement and has been a defendant in patent infringement lawsuits.

Technology Partnerships: Garmin engages in strategic alliances, notably with Iridium Communications Inc. and its subsidiaries for global satellite communication technology, to enhance its product offerings.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Garmin's success relies on retaining key executive, engineering, sales, marketing, manufacturing, and administrative personnel. The company does not have employment agreements with its key executive officers, and Swiss law restricts certain severance payments, which may impact recruitment for these positions.

Board Composition: Garmin's Board of Directors performs the risk oversight role, including cybersecurity risks. The Audit Committee comprises Joseph J. Hartnett (Chairman), Catherine A. Lewis, and Susan M. Ball, all of whom are independent and designated as "audit committee financial experts."

Human Capital Strategy

Workforce Composition:

• Total Employees: Approximately 21,800 full and part-time employees worldwide as of December 28, 2024.
• Geographic Distribution: Approximately 7,700 in the Americas, 11,100 in APAC (Asia Pacific and Australian Continent), and 3,000 in EMEA (Europe, the Middle East, and Africa).
• Skill Mix: Approximately 6,000 employees in engineering and development staff, and approximately 10,100 employees in manufacturing staff.

Talent Management: Acquisition & Retention: Garmin's strategy depends on attracting, developing, and retaining key employees. The company provides career growth opportunities, competitive compensation, and generous benefits (including stock compensation, savings plans, healthcare, paid time off, family leave, and an Employee Stock Purchase Plan). An overall shortage in qualified personnel may increase compensation costs. Diversity & Development: Garmin invests in talent development programs to provide training and education for career advancement and skill building. Business Resource Groups foster employee connection and community engagement.

Culture & Engagement: The company reports a strong company culture and positive relations with its employees. Garmin respects employees' rights to form associations and bargain collectively, with only some employees in Sweden represented by a labor union.

Environmental & Social Impact

Environmental Commitments: Climate Strategy: Garmin has a global environmental policy and is committed to protecting the environment and increasing environmental sustainability efforts. The company aims to reduce greenhouse gas emissions through direct carbon reduction and elimination strategies. Garmin utilizes renewable electricity where available under reasonable terms, including at its Olathe, Kansas facilities, and continuously works to reduce waste and increase recycling and composting. Supply Chain Sustainability: Not explicitly detailed in the filing.

Social Impact Initiatives:

• Community Investment: Garmin supports local community engagement initiatives where it has a business presence, providing opportunities for employees to contribute.
• Product Impact: The company actively engages in Science, Technology, Engineering, and Math (STEM) community outreach programs to educate and encourage local students to pursue engineering careers.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Net sales are subject to seasonal fluctuation. Sales of consumer products are typically highest in the fourth quarter due to holiday buying, while many marine products experience increased demand in the first and second quarters in anticipation of the summer boating season.
• Economic Sensitivity: Sales of consumer products are also influenced by the timing of new product releases. Aviation and auto OEM products exhibit less seasonal variation, being more influenced by aircraft certifications, regulatory mandates, auto program manufacturing, and new product launches.
• Industry Cycles: Adverse economic conditions, such as higher interest rates, inflation, higher fuel prices, or recession, could negatively affect demand for Garmin's products and services.

Planning & Forecasting: Demand forecasting is challenging due to Garmin's diverse product portfolio, intensifying competition, and maturing markets. Significant unanticipated fluctuations in demand can lead to challenges in increasing production to meet demand (due to supplier constraints, higher costs, or quality decline) or result in excess inventories and reduced manufacturing efficiencies if demand is lower than forecasted.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• GPS/GNSS: Garmin's products rely on GPS, operated by the U.S. Government, and other GNSS. Risks include changes in government policy, imposition of user fees, or external interference (jamming, spoofing).
• Radio Frequency Spectrum: Dependence on allocated radio frequency bands for GPS technology. Risks include international or national reallocation of spectrum or harmful interference from new uses (e.g., 5G to radar altimeters).
• Aviation Certification: Aviation products require Federal Aviation Administration (FAA) certification for installation in type-certificated aircraft. Delays or decertification could adversely affect business.
• Wireless Product Certification: Wireless transceiver products require certification by the FCC in the U.S. and comparable authorities internationally, as well as compliance with European Commission directives.
• Environmental Laws: Operations are subject to various environmental laws concerning air/water pollution, hazardous substances, energy efficiency, and extended producer responsibility for electronic products. Garmin's facilities are ISO 14001 certified.

Trade & Export Controls:

• Trade Restrictions: Changes to trade regulations, including restrictions, sanctions, tariffs, or duties, could significantly harm results of operations. Products are subject to tariffs and duties, with risks of classification changes leading to additional costs.
• Sanctions & Export Controls: New or changed restrictions announced with little notice can create uncertainty and retaliatory measures, potentially having a substantial adverse effect.

Legal Proceedings: Garmin is involved in various legal claims and lawsuits, including patent infringement and other intellectual property matters. Management does not expect the outcomes of these proceedings to have a material adverse effect on the company's results of operations, financial position, or cash flows. Material legal matters settled in fiscal 2024 did not have a material impact.

Tax Strategy & Considerations

Tax Profile: Garmin's effective tax rate was 17% in fiscal 2024, compared to a benefit of -7% in fiscal 2023 and an expense of 9% in fiscal 2022. The increase in the effective tax rate in 2024 is primarily due to an increase in the combined Switzerland statutory tax rate.

• Geographic Tax Planning: In 2020, Garmin initiated an intercompany transaction to migrate intellectual property ownership from Switzerland to the United States, aiming to recognize a higher percentage of income in the U.S. The company has obtained advanced pricing agreements for this transaction.
• Tax Reform Impact: Global taxing standards are evolving due to OECD recommendations (BEPS), including a global minimum tax rate of 15%, which many countries where Garmin operates are implementing. The Swiss canton of Schaffhausen increased its corporate tax rate in 2024, resulting in a combined federal and cantonal statutory tax rate of approximately 15% in Switzerland.
• Tax Benefits: Fiscal 2023 included a $181.4 million income tax benefit from the revaluation of Switzerland deferred tax assets and a $12.1 million benefit from auto OEM manufacturing tax incentives in Poland.
• Future Tax Planning: Garmin expects net cash outlays for income taxes to exceed income tax expense in fiscal 2025, primarily due to the 2017 United States Tax Cuts and Jobs Act (requiring capitalization and amortization of R&D costs) and the payment of taxes in arrears related to the intellectual property migration.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Garmin maintains cyber insurance coverage, subject to policy terms and significant self-insured retentions, to address certain cyber risks. The company also maintains insurance against accident-related product risks. However, there is no assurance that coverage will be sufficient for all losses or claims.
• Risk Transfer Mechanisms: Not explicitly detailed beyond insurance.