Garmin's (NASDAQ:GRMN) CEO, Cliff Pemble, and CFO, Doug Boessen, had a lot to say during the company's second quarter earnings call.
Overall, it was a difficult quarter for Garmin, with earnings falling short of analyst expectations. During the subsequent earnings call, Pemble and Boessen touched on many of the factors affecting Garmin's business. Below are five of the most important quotes from that call.
Currency fluctuations took a toll on Garmin's business
The strengthening U.S. dollar weighed on Garmin's second quarter results. During the call, Pemble blamed the stronger dollar for the company's disappointing performance.
"Unfavorable currency movements continue to impact many global companies, and we are no exception. We estimate that unfavorable currency movements reduced revenue by approximately $59 million in the quarter, which affected revenue growth, margins and EPS."
The importance of auto continues to recede
Garmin's automotive segment, which includes the navigation services it sells to automotive manufacturers, in addition to its personal GPS devices, remains its largest business. Yet the relative size of that business continues to decline. During the call, Boessen highlighted the declining importance of Garmin's automotive sales.
"The auto segment represented 39% of our total second quarter 2015 revenue, compared to 45% in the second quarter of 2014. We continue to diversify our revenue base with marine increasing to 13% and fitness increasing to 21% of our total second quarter 2015 revenue."
Garmin's fitness gadgets have a social component
Garmin's fitness products are its second-largest business. The company sells a variety of activity trackers and smart watches aimed at athletes. It's been a source of growth for Garmin in recent quarters, but that growth slowed to a crawl in the second quarter: Garmin's fitness revenue increased just 5%, compared to 31% in the first quarter.
Garmin's competitors, including Jawbone and Fitbit, tie their trackers to software and include a social element. Users of Fitbit's products can connect with their friends, share data, and compete. In time, this social element could work to its rivals' advantage, and weigh on Garmin's fitness business. But when asked about this aspect of the competitive landscape, Pemble noted that Garmin has its own competing service, though it doesn't often mention it.
"We've been focused on that area for a long time and we haven't talked a lot about our online community, but Garmin Connect is very strong and we have millions of users associated with that. We are increasing our investment on top of what we have already done and we're continuing to roll out updates and new features in Garmin Connect and Garmin Connect Mobile."
Not giving up on action cameras
With the introduction of the VIRB, Garmin entered the action camera market for the first time in 2013. Yet despite its best efforts, Garmin hasn't found much success. During the call, Pemble addressed this fact, reiterating Garmin's long-term commitment to the segment.
"I think the release of [the VIRB X and VIRB XE have] been well received, better received in terms of the update to the existing VIRB. And we're taking a long view on the market. We believe we speak to a certain customer base out there and so our products are focusing on addressing that customer base."
Still aiming to take greater share of the fitness tracking market
Garmin has offered fitness wearables for roughly a decade. Its lineup of smart watches have long been staple gadgets for serious athletes, used to monitor and track precise workouts for set periods of time. But when it comes to general tracking -- counting activity and steps throughout the day -- Garmin is a relative newcomer, only entering that market for the first time last year. During the call, Pemble discussed the company's current market position in trackers, and its expectations for the future.
"We would probably estimate..in the 10% to 15% [market share] range in trackers [at the end of last year]. I think the fitness market...there is a broad range of products, so we're much stronger, very strong in the running category, and of course, new entries in the trackers but our goal is to grow that market share through 2015 in the trackers space. I won't throw out what our targets are but we do – with our advertising investment and our R&D activities, we do have an ambitious goal to grow in the tracker market."
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