Garmin (GRMN) Q4 2025 Earnings Call Transcript

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DATE

Feb. 18, 2026 at 10:30 a.m. ET

CALL PARTICIPANTS

• President & CEO — Clifton A. Pemble
• Chief Financial Officer — Douglas G. Boessen
• Vice President, Investor Relations — Teri Seck

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TAKEAWAYS

• Consolidated Revenue -- Reached $2.13 billion for the quarter, up 17%, marking the first quarter above $2 billion.
• Full-Year Revenue -- Totaled $7.25 billion, up 15%, setting records across all business segments.
• Gross Margin -- Recorded at 59.2% for the quarter and 58.7% for the year, consistent with prior periods despite elevated tariffs.
• Operating Margin -- Increased 60 basis points to 28.9% for the quarter and to 25.9% for the year.
• Operating Income -- Hit $614 million for the quarter (up 19%) and $1.88 billion for the year (up 18%).
• Pro Forma EPS -- Rose 16% year over year to $2.79 for the quarter and $8.56 for the full year.
• Fitness Segment Revenue -- Increased 33% to $2.36 billion for the year; operating income grew 50% to $726 million, with a 31% operating margin.
• Outdoor Segment Revenue -- Grew 5% to $2.05 billion; operating income was $690 million, with a 34% margin.
• Aviation Segment Revenue -- Increased 13% to $987 million; operating income reached $257 million, up 22%, with a 26% operating margin.
• Marine Segment Revenue -- Rose 10% to $1.18 billion; operating income was $251 million, delivering a 21% margin.
• Auto OEM Segment Revenue -- Grew 9% to $665 million; operating loss was $49 million, with a gross margin of 17%.
• Regional Results -- The Americas posted 40% annual growth; EMEA rose 18%, and APAC advanced 12% for the year.
• Cash & Securities -- Quarter-end balance stood at approximately $4.1 billion.
• Free Cash Flow -- Generated $430 million for the quarter and $1.4 billion for the year, up $30 million and $24 million, respectively.
• Dividend -- Announced proposed increase to $4.20 per share annually, a 17% rise, pending shareholder approval.
• Share Repurchase -- Board approved a $500 million program effective through December 2028, replacing a prior $300 million authorization.
• 2026 Guidance -- Revenue projected at $7.9 billion (+9%), with operating income expected to exceed $2 billion; pro forma EPS estimated at $9.35 (+9%).
• Capital Expenditures -- Planned at $400 million for 2026, up from $270 million, with expansion linked to a new Thailand facility set for early 2027 operation.
• Segment Guidance -- Fitness expected as the largest contributor to 2026 growth; Outdoor growth seen accelerating in the second half on new product launches; Marine to grow steadily; Auto OEM revenue to decline as BMW legacy programs sunset, but with narrowing losses.
• Subscription & Service Revenue -- Ratable revenue remains under 10% of total, with ongoing growth in subscription-based products and high conversion rates for Connect Plus after new feature additions.
• Inventory Strategy -- Management intentionally increased targeted inventories of select components to mitigate supply chain risks, notably for memory parts.
• Tax Rate -- 2025 pro forma effective tax rate was 17.4%, up from 16.7%, primarily due to U.S. R&D tax changes; projected to fall to 16% in 2026 as new deductions take effect.

SUMMARY

Management transitioned to consolidated-only guidance, ceasing emphasis on individual segment growth targets to reflect its diversified business model strategy. The board signaled increasing capital return with a proposed 17% dividend hike and a new $500 million share-repurchase program. Garmin (NYSE:GRMN) outlined new product innovations across segments—highlighting award-winning launches in Fitness and Outdoor, progress with Mercedes-Benz in Auto OEM, and expanded military and service engagements in Aviation. Leadership indicated that Fitness will be the key driver of growth, while Outdoor’s momentum will build later in the year due to the timing of major product introductions. Clarity on supply chain tactics was provided, with higher memory and component costs already embedded in guidance, and inventory positioned to buffer volatility.

• The launch of TruMed payment integration enabled U.S. customers to use HSA, and FSA funds for select Garmin purchases, presenting a new direct-to-consumer sales channel.
• Garmin Connect Plus’s AI-powered nutrition features drove a sharp increase in free trial activations and yielded a "very, very high" conversion rate, according to Pemble.
• Management confirmed that nearly all new Fitness segment customers remain first-time Garmin buyers, supporting broader brand expansion.
• Retail engagement was described as "very, very positive" with brick-and-mortar partners, reflecting higher store activity and pull-through during the holiday period.
• MYLAPS acquisition provided a multisegment digital platform that increases customer interaction across racing, running, and equine categories.
• The upcoming Mercedes-Benz domain controller rollout will "ramp" from early 2027, with only minor contributions anticipated late in 2026.
• Military retrofit awards like the Black Hawk cockpit program will be incremental to Aviation results, but management expects these projects to be additive rather than transformational.
• Garmin’s new facility in Mesa is positioned to support additional avionics certifications and modifications for large aircraft, increasing long-term business opportunity.
• Company expects the defense sector’s increasing openness to commercial off-the-shelf solutions to present gradual, long-duration growth potential.
• Gross margin guidance for 2026 reflects higher input costs, particularly for memory, which have been partially offset through supply chain efficiencies and segment mix improvement.

INDUSTRY GLOSSARY

• Domain Controller: Centralized automotive computing hardware managing multiple vehicle cabin systems, enabling integrated digital features.
• Connect Plus: Garmin’s premium subscription service offering enhanced analytics, coaching, and AI-enabled features.
• inReach: Garmin’s satellite communication service providing SOS, text, and photo sharing for devices operating outside cellular coverage.
• Autoland: Garmin’s automated emergency landing technology for aircraft, designed to bring a plane to a safe landing without pilot intervention.
• BOM (Bill of Materials): Detailed list of all components and costs required to manufacture a product.
• TruMed: Healthcare payments provider enabling HSA/FSA transactions for health-related purchases, now integrated with Garmin’s sales platform.
• MYLAPS: Digital platform and timing solution for sporting events, facilitating engagement from registration through race results.

Full Conference Call Transcript

Clifton Pemble: Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin achieved another quarter of outstanding financial results, driven by strong broad-based demand for our products. Consolidated revenue increased 17% to more than $2,100,000,000, which is a new fourth quarter record, our first quarter to exceed $2,000,000,000. We experienced strong double-digit revenue growth in three business segments, reflecting the strength of our highly diversified business model. Gross margin was comparable to the prior year at 59.2%, while operating margin expanded 60 basis points to 28.9%. This resulted in record fourth quarter operating income of $614,000,000, up 19% year over year, and record pro forma EPS of $2.79, up 16%.

2025 was another year of remarkable growth and achievement for Garmin, with record consolidated revenue, record operating income, and record revenue for all business segments. We attribute this strong performance to our strategic focus on market diversification and creating superior products that are essential to our customers' lives. This approach has been a winning strategy for us since we were founded more than 36 years ago. Consolidated revenue increased 15% to $7,250,000,000, which is a new annual record and up nearly $1,000,000,000 over 2024. Gross margin of 58.7% was comparable to 2024, which is a significant achievement considering the impact of generationally high tariff structures that took effect early in the year.

Operating margin expanded by 60 basis points to 25.9%, resulting in record full-year operating income of nearly $1,900,000,000, up 18% year over year. Before sharing our full-year outlook, I want to provide insights on what is important to us when considering forward-looking guidance. Our primary objective is to deliver the best result for Garmin on a consolidated basis. There are many factors that influence individual segment results, and we have said before that the diverse nature of Garmin’s business gives us multiple paths to achieving consolidated goals. This makes individual segment growth targets less relevant, especially when viewed in isolation.

With this in mind, we will continue to provide consolidated guidance measures, and we will provide qualitative forward-looking insights for segments when it is helpful to do so, but we will no longer emphasize individual segment growth targets. This approach aligns with our primary objective to deliver the best results for Garmin on a consolidated basis. With this in mind, we anticipate 2026 to be another year of strong top and bottom line growth. We expect revenue to increase approximately 9% to $7,900,000,000, and we expect operating income to exceed $2,000,000,000 for the first time. Many are wondering how industry-wide memory constraints will affect us.

Our guidance considers everything we know about the supply chain environment, including recent cost pressures on memory components. It is our practice to continually seek efficiency throughout our entire supply chain by leveraging our vertically integrated business model and scale to optimize our cost structure. We have always used inventory as a business tool, and we have intentionally increased inventory levels of certain components and products to ensure we can meet long-term demand. We also have strong relationships with our suppliers and are working closely with them to meet the expected demand for our products. While no one wishes to see supply chain challenges, we believe we are well prepared.

Our strong results and positive outlook give us confidence to propose an annual dividend of $4.20 a share, reflecting a 17% increase over the current dividend amount, which will be considered by shareholders at the upcoming annual meeting. In addition, our Board of Directors recently approved a $500,000,000 share repurchase program effective through December 2028. Douglas will discuss our financial results and outlook in greater detail in a few minutes, but first, I will provide a few remarks on the performance of each business segment. Starting with Fitness, 2025 was another exciting year of growth as customers embrace the healthy active lifestyles our brand represents.

For the year, Fitness revenue increased 33% to $2,360,000,000 and was driven by wearables as we continue to benefit from both market share gains and market growth. Gross margin was 60%, a 130 basis point improvement over the prior year. Operating income increased 50% year over year to $726,000,000, and operating margin expanded 360 basis points to 31%, reflecting both improved gross margin and operating leverage. During the quarter, we announced our collaboration with healthcare payments provider TruMed to assist customers using pre-tax Health Savings Account and Flexible Spending Account funds for qualifying purchases of select Garmin products.

We recently published our annual Garmin Connect data report, which shows that on average, our users increased activity levels by 8% during the year, reflecting a high level of engagement with our products and app platforms. At the 2026 Consumer Electronics Show, the Venu 4 and the Forerunner 970 received Innovation Awards for novel features in digital health and fitness, and we announced exciting enhancements to our premium Connect Plus service with nutrition tracking and insights powered by AI-based Active Intelligence to help users achieve nutrition goals. Looking forward, we expect another year of strong performance from Fitness, driven by demand for our current product lineup and contributions from new product introductions.

We also expect that the Fitness segment will be our strongest contributor to 2026 consolidated growth. Moving to Outdoor, full-year 2025 revenue increased 5% to $2,050,000,000, also exceeding $2,000,000,000 for the first time. Growth in Outdoor was primarily driven by adventure watches, with a full year of contributions from the highly successful fēnix 8 series that was launched in 2024, followed by the launch of the fēnix 8 Pro with inReach technology in September 2025. Gross and operating margins were 66% and 34%, respectively, resulting in operating income of $690,000,000. During the quarter, we launched the inReach Mini 3 Plus satellite communicator with voice, text, and photo sharing.

This compact and rugged communicator offers essential SOS safety features and reliable communication that explorers can use to stay connected with loved ones while adventuring beyond cell phone coverage. And with up to two weeks of battery life in the 10-minute tracking mode, the inReach Mini 3 Plus can be used on multi-day trips without added worry of battery charging. Several Outdoor products also received CES Innovation Awards, including the fēnix 8 Pro microLED version, Blaze equine wellness system, and the Descent S1 Buoy, which highlights our commitment to exploring new product categories and developing groundbreaking innovation.

Looking forward, we expect full-year growth in Outdoor to accelerate in 2026 compared to 2025, driven by a significant number of new product introductions. We also expect stronger performance in the back half of the year due to the timing of product launches.

Looking at Aviation, full year 2025 revenue increased 13% to $987,000,000 with growth contributions from both OEM and aftermarket product categories. Gross and operating margins expanded year over year to 75% and 26%, respectively. Operating income increased 22% to $257,000,000. During the quarter, we launched the D2 Air X15 and the D2 Mach 2, our latest aviator smartwatches with cockpit connectivity and advanced aviation, health, fitness, and smartwatch features. We announced that the Garmin G5000H cockpit system was selected for the Brazilian Air Force UH-60 Black Hawk helicopter, part of a growing list of military modernization programs based on our advanced commercially available integrated cockpit systems.

On 12/20/2025, our Autoland system was used by a customer for the first time, returning the aircraft and crew safely to the ground following rapid depressurization while operating in instrument flight conditions over the Rocky Mountains. This incident illustrates how our cockpit can improve the safety margins of flight. We are very proud of our aviation team for creating our award-winning Autoland technology. Looking forward, we expect Aviation revenue will continue to grow in 2026 in line with historical norms. Turning to the Marine segment. Full-year 2025 revenue increased 10% to $1,180,000,000, driven by growth across multiple categories led by chartplotters. Gross and operating margins were 55% and 21%, respectively, resulting in operating income of $251,000,000.

We recently introduced the flagship GPSMAP 9000xsv lineup to further strengthen our offerings in the chartplotter category. The GPSMAP 9000xs offers stunning 4K resolution displays, 5 GHz Wi‑Fi networking, and industry-leading sonar performance. Also during the quarter, we launched Garmin Onboard, a versatile man-overboard and engine cutoff system that uses wireless technology offering users freedom to move around the boat while still enjoying the protection of this important safety system. Garmin Onboard was selected as the winner of the 2025 DAME Design Award in the Safety and Security category at the recent METSTRADE Marine Exhibition in Amsterdam.

During 2025, we received multiple awards, including being named Most Innovative Marine Company by Soundings Trade Only for the third consecutive year, NMEA Manufacturer of the Year for the eleventh consecutive year, and we received the National Boating Safety Award for the fifth consecutive year. This is an unprecedented level of industry recognition, and we attribute our success to the outstanding products we offer and our strong commitment to serving customers. In 2026, we expect Marine segment growth to be consistent with the prior year based on improving market conditions. Moving finally to the Auto OEM segment. Full-year 2025 revenue increased 9% to $665,000,000, primarily driven by growth in domain controllers.

Gross margin was 17%, and the operating loss was $49,000,000 for the year. At the recent Consumer Electronics Show, we introduced our next-gen unified cabin domain controller that adds digital key capability, seat-specific audio and video, and an AI assistant designed to make vehicle interactions more conversational and powerful. We also announced our collaboration with Meta to explore new ways of interacting with the vehicle. We continue to achieve important milestones leading up to the launch of our next domain controller program. I am pleased to report that this program is with renowned global automaker Mercedes-Benz and will broadly apply across their portfolio passenger car models with significant volumes ramping up in 2027.

In 2026, we expect revenue to decrease year over year as we have reached the peak of BMW domain controller volumes as certain legacy programs approach end of life. We expect operating losses to narrow in 2026 as we shift certain Auto OEM R&D resources to accelerate product roadmap development in other segments. That concludes my remarks. Next, Douglas will walk you through additional details on our financial results. Douglas? Thanks, Cliff. Good morning, everyone. I will begin by reviewing our fourth quarter and full-year financial results and provide comments on the balance sheet, cash flow statement, taxes, and 2026 guidance.

Douglas Boessen: We posted revenue of $2,125,000,000 for the fourth quarter, representing a 17% increase year over year. Gross margin was 59.2%, comparable to the prior year. Operating expense as a percentage of sales was 30.3%, a 60 basis point decrease. Operating income was $614,000,000, a 19% year over year increase. Operating margin was 28.9%, a 60 basis point increase from the prior year. Our GAAP EPS was $2.73. Our pro forma EPS was $2.79, a 16% increase from the prior year pro forma EPS. Looking at our full-year results, we posted revenue of $7,246,000,000, representing a 15% increase year over year. Gross margin was 58.7%, comparable to the prior year.

Operating expense as a percentage of sales was 32.9%, a 50 basis point decrease. Operating income was $1,876,000,000, an 18% increase. Operating margin was 25.9%, a 60 basis point increase from the prior year. Our GAAP EPS was $8.59. Pro forma EPS was $8.56, a 16% increase from the prior year pro forma EPS. Next, look at our fourth quarter revenue by segment and geography. During the fourth quarter, we achieved record revenue on a consolidated basis. We achieved double-digit growth in three of our five segments, led by the Fitness segment at 42% growth, followed by the Marine segment with 18% growth and the Aviation segment with 16% growth.

By geography, the Americas region achieved strong double-digit growth of 21%, resulting in quarterly revenue exceeding $1,000,000,000 for the first time. EMEA region, APAC region, had 14% and 8% growth, respectively. For full year 2025, we achieved record revenue on a consolidated basis and record revenue for each of our five segments. By geography, we achieved 18% growth in EMEA, 40% growth in the Americas, and 12% growth in APAC. Looking next at operating expenses. Fourth quarter operating expenses increased by approximately $80,000,000, or 14%. Research and development increased by $36,000,000, primarily due to personnel-related expenses. SG&A increased by $44,000,000, primarily due to increased advertising and personnel-related expenses.

A few highlights on the balance sheet, cash flow statement, dividends, and share repurchase. We ended the quarter with cash and marketable securities of approximately $4,100,000,000. Accounts receivable increased sequentially and year over year to approximately $1,300,000,000 due to strong sales in the fourth quarter. Inventory balance increased year over year to approximately $1,800,000,000. For fourth quarter 2025, we generated free cash flow of $430,000,000, a $30,000,000 increase from the prior-year quarter. For the full year 2025, we generated free cash flow of approximately $1,400,000,000, a $24,000,000 increase from the prior year. Our full-year 2025 capital expenditures were $270,000,000, an increase of $77,000,000 over the prior year.

For 2026, we expect free cash flow to be approximately $1,400,000,000 with approximately $400,000,000 of capital expenditures. The expected year over year increase in capital expenditures is primarily due to a manufacturing facility in Thailand. We expect it to be operational in early 2027. During 2025, we paid dividends of approximately $664,000,000. Also, we announced our plan to seek shareholder approval with a $0.60 increase in our annual dividend beginning with the June 2026 payment. This is a 17% increase from our current annual dividend of $3.60. Proposed annual cash dividend of $4.20, $1.05 per share per quarter. In 2025, we purchased $181,000,000 of company shares.

Also, our Board of Directors recently approved a $500,000,000 share purchase program through December 2028 to replace the remainder of the previous $300,000,000 authorization. Full-year 2025 pro forma effective tax rate was 17.4% compared to 16.7% in the prior year. The increase in the current year effective tax rate is primarily due to the 2025 U.S. tax legislation, which changed capitalization requirements of certain R&D costs, resulting in a decrease in certain U.S. tax deductions and credits. Turning next to our full-year 2026 guidance, we estimate revenue of approximately $7,900,000,000, an increase of approximately 9% over 2025.

We expect gross margin to be approximately 58.5%, a 20 basis point lower than 2025 gross margin due to higher product costs, partially offset by favorable segment mix. We expect an operating margin of approximately 25.5%. 2026 pro forma effective tax rate is expected to be 16%, a 140 basis point decrease from 2025. The expected year over year decrease in 2026 pro forma effective tax rate is primarily due to an increase in certain U.S. tax deductions as certain provisions in the 2025 U.S. tax legislation became effective in 2026. This results in expected pro forma earnings per share of approximately $9.35, a 9% increase over 2025 pro forma earnings per share. This concludes our formal remarks.

Jade, could you please open the line for Q&A?

Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. To withdraw your question, press 1 again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Joseph Cardoso from JPMorgan. Please go ahead.

Joseph Cardoso: And maybe if I could, for the first one, just wanted to touch on the memory side of things. Like, Cliff, I appreciate the comments that you made, but curious if you could help contextualize more like how material of an impact you are expecting memory to be on your 2026 guide, and which areas of the portfolio are more or less impacted there. And then we think about mitigation factors, you obviously mentioned inventory. However, how are you thinking about other levers like de-speccing or pricing to offset any headwinds here? And then I have a follow-up.

Clifton Pemble: Good morning, Joe. I think in terms of quantifying the impact, we do not quantify individual components of our cost structure, so we will not be sharing that. Definitely, you know, there is pressure on memory costs. There are certainly a lot of items in our overall BOM that are, you know, pricier items like displays and that kind of thing. So we simply just manage the entire BOM to be as cost efficient as possible. There are other opportunities to make the BOMs more efficient and also make our overall supply chain more efficient, looking for cost opportunities across the spectrum.

So we are working all different angles, and there is not one area to identify that we would, you know, isolate because it is the entire picture. I would remind everyone that our overall margin structure is higher, and that is because we are a vertically integrated company. And so, therefore, we see some variation at the BOM level; of course, the impact to the overall margin is less impactful.

Joseph Cardoso: Nope. Got it. Appreciate the color there. And then maybe just as my follow-up, obviously, another strong quarter, a year for wearables and then Fitness. You highlighted share gains and, obviously, the market growth around refreshes as key drivers. I am assuming pricing has also been a tailwind this year for Garmin. Correct me if I am wrong there, but could you maybe just talk about how each of these factors have contributed, at least at a high level, to the wearables growth this year?

And as we think about growth for 2026 that you highlighted as being the larger contributor, at least as where is it related the Fitness segment as a whole, how are you thinking about each of these factors and any kind of shift in terms of contribution there?

Clifton Pemble: Joseph Cardoso, our 2025 results in Fitness and Outdoor, you know, was influenced heavily by wearables, and definitely volume was the driver. There is some minor impact from ASP, but most of it was really volume driven. And as we look forward to 2026, you know, we feel like the momentum in the market for our brand and for our products is still there. That is why we are, you know, basically, on the qualitative side of things, saying that we expect the growth to continue, and we also expect Fitness will be the larger contributor because of the broader product line across running and advanced wellness.

Joseph Cardoso: And, Cliff, maybe just anything in between how much is new customers versus existing customers refreshing from '25 looking at '26?

Clifton Pemble: Yeah. I think we are still seeing most of our new customers are new to Garmin. So that is a very encouraging thing, and we see strong pull-through rates on registrations, you know, showing that as products go into the channel, they are selling out and customers are activating those. So we feel very positive about the customer trends and very positive about the retail landscape.

Joseph Cardoso: Thank you.

Operator: Your next question comes from the line of Erik Woodring from Morgan Stanley. Please go ahead.

Erik Woodring: Hey, guys. Good morning, and thank you for taking my questions. Cliff, maybe touching on Auto OEM, back in early 2023 you first introduced the idea that this business could grow 40% annually. I think the target was scaling to $800,000,000 of annual revenue. You did not quite get there, but I would just love to, like, better understand from you what you learned about this business over the last three years that gives you the conviction to kind of double down as we go forward.

And just to carry on that is just what details can you share with us about the next evolution of this business with Mercedes as we think about three-year growth rates or customer diversification targets or target margins or just love to understand kind of what you learned and how that influences the next three years of this business. Please? And then a follow-up. Thank you. Okay.

Clifton Pemble: Yeah. So our view in 2023 was based on what we knew at the time, which was based on projections given to us by our automotive OEM partners. And, of course, like everything, you know, they go through cycles and some of their assumptions are not always correct. And in that case, you know, I think the outlook was more positive then than what it turned out to be because of changes in the overall their market structure and their geographic results, you know, whether it is between Asia, Americas, or Europe. So that is the situation we found ourselves in.

In terms of what we learned, I think, you know, we have been managing this business really for two goals. One is to achieve scale, and we are working and making good progress towards that. The other is to invest for the future so that we can demonstrate to automakers that we have the innovation capability and the operational capability to meet their needs. And I think we have definitely achieved that as well.

And so as we look forward, one of the adjustments we are making is to shift some of those R&D resources that we have been using to develop new business and concepts and develop our other product lines, and we feel like we have reached a point of critical mass where automakers realize that we can do this job for them, and it would then allow us to work on the scale part of the equation.

Erik Woodring: Awesome. Thank you. Thank you for that color, Cliff. And then maybe just following up, I was kind of taken aback by your Outdoor comments on 2026. It was at least eye-catching you are alluding to accelerating growth in new product features. I guess, I was just going through the IDC data quick and fēnix is the large majority of wearables revenue in the Outdoor segment. And if history is a guide, the next fēnix would not launch until January 2027. So I guess just I am wondering inherently in your about Outdoor, if you are maybe messaging different timing for a fēnix launch or maybe you are expecting to launch all-new models in this segment.

Just trying to kind of get a better understanding of exactly how to think about new product launches and the potential for acceleration in Outdoor this year. Thanks so much.

Clifton Pemble: Well, we do not comment on specific product launch timing. The only thing that we would like people to know is that we do have a very active year planned for Outdoor, and I would expect that many of our launches would occur in the back half of the year, which is why I commented that we expect the revenue to be stronger in the back half. So that is our plan. And, you know, we will continue to update people as we go along throughout the year.

Erik Woodring: Awesome. Thank you, Cliff. I will get back in the queue.

Douglas Boessen: Thank you.

Operator: Your next question comes from the line of Tim Long from Barclays. Please go ahead.

Alyssa: Hi. You have Alyssa on from Tim Long's team. Just a quick question on Aviation. You know, with the Black Hawk win, should we kind of assume higher military exposure in the Aviation segment? Is this an area of expansion for you? Just kind of trying to think about if there is different go-to-market strategy there. And then I have a follow-up.

Clifton Pemble: Yeah. Good morning, Alyssa. In terms of a project like the Black Hawk helicopter, they are using commercial off-the-shelf components from our cockpit system lineup to retrofit those aircraft and fully modernize them. And this is an example of a great program. There are lots of these kinds of programs around where they do not necessarily have to be the same kind of hardened military requirements for what people might think of for fighter jets and that kind of thing. But we still can provide modern cockpit systems to these workhorse aircraft that the military depends on. So it definitely is a growth opportunity, but they are incremental in our view.

So they add to the total, and they are good wins, and we continue to pursue more.

Alyssa: Good. That is helpful. Thank you. And then just a follow-up. Any update on how Connect Plus uptake is tracking?

Clifton Pemble: So Connect Plus is definitely an exciting adder to our business. We added the features I mentioned earlier. The nutrition feature really, you know, accelerated the number of free trials that we have, and so that was really good to see. And also, the conversion rate of those trials is very, very high. So we think that is a winner feature. And we will continue to expand and enhance Connect Plus in order to add more value to customers there.

Alyssa: Great. Thank you so much.

Clifton Pemble: Thank you.

Operator: Your next question comes from the line of Ben Bollin from Cleveland Research Company. Please go ahead.

Benjamin Bollin: Good morning, everyone. Thank you for taking the question. Cliff, could you talk a little bit more about Mercedes and this ramp opportunity? Is this for 2027 model years till it commences in late 2026? Is this commencing in later 2027 for 2028 model year? Just any thoughts on when we can start to expect some contribution from that effort?

Clifton Pemble: Yeah. I think that, you know, there will be some limited contributions in late 2026. It is really, I would say, inconsequential, but the ramp is really early 2027. And it is a very aggressive program and ramp, with significant volumes that will be achieved over the life of the program.

Benjamin Bollin: The other one I wanted to touch on is you commented a little bit about channel inventory overall. Have you seen any change in behavior of your retail partners as they have recognized that hardware costs are going up you know, broadly in other consumer electronics. Do you think that is influencing their commitments or their visibility they are providing you? Any thoughts on pull-forward yet that you might be seeing? Thanks. That is it for me.

Clifton Pemble: Yeah. I think retailers, you know, really are enthused about carrying our brand. We saw a much higher level of engagement from certain retailers over the holiday season as they were happy to offer something from Garmin that was different from everything else that they typically offer. And I think their enthusiasm is really triggered by their customers. You know, they see customers coming into the store, the customers are buying. So I feel like overall, the retail picture, especially some of the brick and mortars, has been very, very positive.

Operator: Your next question comes from the line of David MacGregor from Longbow Research. Please go ahead.

David MacGregor: Yes. Good morning, everyone. Thanks for taking my questions.

I wanted to just start on Fitness and ask you about the TruMed collaboration and how meaningful the 2026 revenue growth allowing HSA, FSA funds to be used in the purchase of select Garmin products could print out to be?

Clifton Pemble: TruMed is a way by which people can purchase the product on our website using their HSA funds. And it really is a great program, and, you know, each product that is in the program has to be evaluated and approved. But it allows people another payment approach basically on our website. So the customers come directly to our website, they purchase the product that is available to be purchased with this program. And it has quickly become, you know, one of our significant outlets, if you will, if you considered it a stand-alone outlet, for our products.

David MacGregor: Okay. Let me just follow up by, again within Fitness, just thinking about within the wearables category, sort of nontraditional form factors. How are you thinking about the opportunity for Garmin there and from a timing standpoint? How likely we are to see developing something and introducing something there.

Clifton Pemble: We do not share our future product plans and what direction we might go with those. I would point everyone to our history, which is that we explore new product categories and new form factors and deliver really great products to our customers. So, you know, that is what we will continue to do to drive and grow the segment.

David MacGregor: Okay. If I could just squeeze in a third one quickly. If you are able to quantify the benefit to Garmin if the Supreme Court overturns the UFLPA tariffs?

Clifton Pemble: We probably will not share specific dollar amounts, but, you know, as you can appreciate, the 20% tariff and now moving to 15% is a significant cost adder to our products. So as we mentioned in our remarks, we have done an excellent job. Our teams across the world have done phenomenal in mitigating that, and I think we have come out on the other side of that in a very, very good position. And if it goes away, then certainly that changes the game in terms of our cost structure and things, but there are offsetting factors too, you know, with the supply chain constraints and memory issues that are going on right now.

So there will be puts and takes, but we are not really counting on one approach or the other. We are assuming that everything stays pretty much as it is with regard to tariffs.

David MacGregor: Okay. Very much, and good luck. Thank you.

Operator: Your next question comes from the line of Ivan Feinseth from Tigris Financial Partners. Please go ahead.

Ivan Feinseth: Thank you. Thanks for taking my questions and congratulations on another great quarter and phenomenal year. Thank you. While some of my questions have been answered as far as tariffs and, you know, memory concerns, it is incredible that your supply chain and your integrated manufacturing capabilities have helped to mitigate that. With the launch of your new products that have connectivity like the fēnix 8 Pro and the expanded capabilities in the new inReach Mini 3, what kind of uptake are you seeing on the subscription services? And what percentage, for example, of people buying the fēnix 8 Pro are opting for the L-band satellite connectivity.

Clifton Pemble: I think fēnix 8 Pro is a product that is built around connectivity. So when somebody buys that product, they are definitely interested and motivated to activate the inReach service. We have already seen SOS events with the fēnix 8 Pro where people bought the product or are wearing them on adventures, and they needed help or needed some other kind of service while they were out there, and they were able to achieve that right on the wrist. So we think it is a breakthrough platform.

It is certainly not for everyone, but on the other hand, it is an important adder to our product line, and we will continue to expand on that to add that capability to more products.

Ivan Feinseth: And my follow-up question is what kind of halo effect are you seeing on products from your acquisition last year of MYLAPS including there was some optimism that would help with, for example, the Garmin Catalyst, and I see you just launched an upgrade to the Catalyst. Was that did that have an effect? And then you just launched, you know, some competitive track capabilities on the new zūmo XT3.

Clifton Pemble: So MYLAPS allows us the opportunity to improve the overall race experience for customers from the sign-up process on through to race day, in-race results, and the devices that they wear during the race. So we feel like this is going to give us a high level of fidelity with customers as they embrace and pursue these race activities. And in terms of the other markets, one of the benefits of MYLAPS is that it is across many different markets. So running is one, but they also do, as you say, the racing and also moving into equine as well.

So we just feel like that opens up new avenues for us to apply our innovation and our unique products into new areas.

Ivan Feinseth: And thank you, and looking forward to a big 2026.

Clifton Pemble: Thanks, Ivan.

Operator: Your next question comes from the line of Noah Zatzkin from KeyBanc Capital Markets. Please go ahead.

Noah Zatzkin: Hi. Thanks for taking my questions. I guess maybe zooming out, if you could just kind of share any thoughts maybe around the global wearables market, how that is kind of been trending, you know, has it been kind of stagnant or a tailwind to your trends? And any changes that you have seen over the last year or so either competitively or just in overall growth rates? Thanks.

Clifton Pemble: So from our perspective, what we believe is happening is that the overall market has been on a growth path. I would call it steady growth in the mid-single to up to 10% kind of range. Everyone will get confirmation on that as data comes out for the full year, but that is our belief of what is happening in the market. So that is one driver of our overall growth. But market share has been a really important one for us as well, as we have been able to take share both above and below us from different players. And so I think people recognize the value of our products and the uniqueness of the features that they offer.

And we are seeing the results of that with our market share.

Noah Zatzkin: Great. Really helpful. And then maybe just one more on Marine. Impressive growth there in 2025 given kind of the choppiness in the end market. So I think you mentioned maybe some kind of consistent growth expected in 2026. What is kind of underlying that from a kind of industry perspective? And in general, like, any thoughts around the Marine industry looking out this year? Would be great. Thanks.

Clifton Pemble: Well, what we see in Marine is that the market has been, I would say, finding its footing and is incrementally positive as we move into 2026. So the underlying market seems, I would say, healthy. The boat shows seem very active. And it is a similar story, you know, where especially those larger boats with more equipment, they tend to be very popular, and a lot of our equipment goes on those boats. And, of course, in the fishing story, with our products and the industry-leading sonar capability, and chartplotters and mapping, you know, all of those things are driving market share for us as well.

Noah Zatzkin: Thank you.

Erik Woodring: Thanks, Noah.

Operator: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead.

Ron Epstein: Yes. Hey. Good morning, guys. How are you?

Clifton Pemble: We are good. Thank you.

Ron Epstein: Good. Good. Good. So, yeah, maybe just changing gears a little bit. In the aviation direction. Cliff, can you talk a little bit to the recent acquisition facility you guys bought in Mesa? And what your, you know, goal is for that and what that can bring to the table for Garmin?

Clifton Pemble: Yeah. So we were really excited to find that facility. We have lots of projects and lots of equipment that have to go into all kinds of aircraft. As you know, the process of taking our products to market is not as simple as just creating the product. They all have to be certified on each type of aircraft. And this facility allows us not only very, very significant hangar space to bring in very large aircraft, but it also allows us to build a completely new staff of people that can do certification work and aircraft modifications. So we believe over the long term that will help us reach new opportunities in more aircraft with more equipment.

Ron Epstein: And if I can read between the lines a little bit, does a facility like this give you the capability to maybe offer things on larger airplane?

Clifton Pemble: Well, it is a very large hangar.

Ron Epstein: Yeah. I am excited about that. Okay. Alright. And if I may, just a quick follow-on here. Following up on I think it was Alyssa’s question earlier about some of the defense stuff you guys are doing. With the changes in the defense acquisition system, the Department of War, Department of Defense, whatever I call it, has been you know, trying to do more stuff on commercial terms with commercial contractors broadly. And, you know, you guys are almost exclusively commercial. Is that opening the door for you to do other things that maybe were not, I do not know, in the plan just a year ago before they really started to push more commercial? Because one would think, potentially, given everything that is going on, maybe that is more opportunity for you all.

Clifton Pemble: We believe that will bring more opportunities even though, you know, some of these discussions and the shift has started to gain some momentum. The actual selection and identification programs and all of that still takes time. So we view it as a long-term opportunity, but a nice shift as people, you know, look at the equipment that is available and realize that the military especially could benefit from the commercial products that we offer.

David MacGregor: Got it. Great. Thank you very much.

Clifton Pemble: Thanks, Ron.

Operator: Your next question comes from the line of Erik Woodring from Morgan Stanley. Please go ahead.

Erik Woodring: Hey, guys. Thank you. Just one quick follow-up, Cliff. I would just love to know how you are thinking about kind of the ratable side of your business. Over the last three years, revenue captured over time has marginally decreased to around 5%. That really seems to be mostly a part of your success in the transactional business. So I am just wondering, how much of a priority is growing this ratable kind of part of your business? And is there any way, I know it kind of constitutes subscriptions and services, but is there a way to help us think about margins on the ratable business versus the point-in-time business?

Clifton Pemble: Yeah. I think, like every kind of subscription-based business, the margins tend to be higher. Service-based businesses are definitely higher that way. Our objective is to grow those within Garmin, but we also are not focusing on that as the only growth path. And so we are growing everything around it. The nice part is that our subscription-based business has been growing as strongly or even stronger than the overall business, but everything else is growing around it so much that it still has not triggered that 10% threshold yet. So we feel like we are in a good position. We have lots of ideas of things that we can offer people going forward.

And we are going to continue to build that business across every one of our segments.

Erik Woodring: Awesome. Thanks so much, Cliff. That is it for me. Thank you.

Operator: At this time, there are no further questions. I will now turn the call back to Teri Seck for closing remarks. Thanks, everyone, for joining us today. As usual, Douglas and I are available for callbacks. We hope you have a great day. Bye. This concludes today's call. Thank you for attending. You may now disconnect.

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