Garmin Ltd. (NYSE:GRMN) Q4 2024 Earnings Call Transcript

Garmin Ltd. (NYSE:GRMN) Q4 2024 Earnings Call Transcript February 19, 2025

Garmin Ltd. beats earnings expectations. Reported EPS is $2.41, expectations were $1.9.

Operator: Hello, and thank you for standing by. My name is Bella. I will be your conference operator today. At this time, I would like to welcome everyone to Garmin Ltd. fourth quarter 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star, then the number one on your telephone keypad. To withdraw your question, press star one again. I would now like to turn the conference over to Teri Seck, Director of Investor Relations. You may begin.

Teri Seck: Good morning. We would like to welcome you to Garmin Ltd. fourth quarter 2024 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/docs. An archive of the webcast and related transcripts will also be available on our website. This earnings call includes projections and other forward-looking statements regarding Garmin Ltd. 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 shares, product 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. Information concerning these risk factors is contained in our Form 10-Ks filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Ltd. this morning are Cliff Pemble, President and Chief Executive Officer, and Doug Boessen, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble.

Cliff Pemble: Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin delivered another quarter of outstanding financial results as our products continue to resonate with customers. Consolidated revenue increased 23% to $1.82 billion, a new fourth quarter record, and we achieved growth and record revenue in each of our five business segments. Gross margin expanded 100 basis points to 59%. Operating income increased 52% year-over-year to 28%, reflecting both improved gross margin and operating leverage. This resulted in pro forma EPS of $2.41, up 40% over the prior year. 2024 was a remarkable year of growth and achievement for Garmin. While we were optimistic at the beginning of 2024, we consistently outperformed even our highest expectations throughout the entire year.

We achieved growth in every segment, resulting in record segment revenue and record consolidated revenue. 2024 was also a year of historical significance, marking our 35th year in operation. Since we were founded in 1989, we have delivered more than 300 million navigation and communication devices, including more than 18 million delivered in 2024. Consolidated revenue increased 20% to $6.3 billion. Gross margin expanded over 100 basis points to nearly 59%. Operating income increased 46% to nearly $1.6 billion, and operating margin came in at 25%. We believe our performance is the direct result of our robust product portfolio. Looking ahead, we have many product launches planned for 2025 that will further strengthen our portfolio, with some representing new categories for Garmin.

With this in mind, we anticipate 2025 consolidated revenue will increase approximately 8% to $6.8 billion. Also, our strong results and positive outlook give us confidence to propose an annual dividend of $3.60 a share, reflecting a 20% increase over the prior dividend amount, which will be considered by shareholders at the upcoming annual meeting. Doug will discuss our financial results and outlook in greater detail in a few minutes, but first, I’ll provide remarks on the performance of each business segment. Starting with fitness, 2024 was an exciting year as demand for running, cycling, and wellness products has been robust, and new customers are embracing the healthy active lifestyles our brand represents. We experienced growth in every product category, led by strong contributions from advanced wearables.

For the year, fitness revenue increased 32% to $1.77 billion. Gross margin was 58%, a 480 basis point improvement over the prior year, primarily driven by lower product cost and favorable mix. Operating income more than doubled year-over-year to $483 million, and operating margin expanded approximately 1,000 basis points to 27%, reflecting both improved gross margin and operating leverage. During the quarter, we launched Lilly 2 Active, our smallest GPS-enabled smartwatch featuring an elegant design and up to nine days of battery life in smartwatch mode. Looking ahead, we anticipate another strong year for the fitness segment, with many new product introductions planned throughout the year. With this in mind, we expect fitness revenue to increase approximately 10% for the year.

The outdoor segment delivered a strong year of product achievements and revenue growth. 2024 revenue increased 16% to $1.96 billion, driven primarily by adventure watches following the launch of the highly successful Phoenix 8 series. Gross margin was 67%, a 340 basis point improvement over the prior year, primarily driven by lower product cost and favorable mix. Operating income exceeded $700 million, and operating margin expanded 550 basis points to 36%, reflecting both improved gross margin and operating leverage. We are strategically focused on creating growth opportunities by introducing new product categories and penetrating new markets. During the quarter, we launched two products that are rising to the definition of a Halo product because they are changing the game in their respective markets.

The first product I want to mention is the Approach R50. It is the only portable golf launch monitor with a built-in simulator. It features a 10-inch color touchscreen display and includes a preloaded database of more than 43,000 golf courses that could be played on the course or virtually using a built-in simulator. We also launched the Descent X50i, our first large-format dive computer. This device includes a vivid 3-inch color display providing rich information that is readable at a glance, and its rugged design is purpose-built with leak-proof buttons, a sapphire lens, a 20 ATM dive rating, and an integrated backup guideline. Looking ahead, we expect that our strong outdoor product lineup will result in revenue growth of approximately 10% for the year.

Looking next at aviation, revenue increased 4% to $877 million, driven by growth in both OEM and aftermarket product categories. Gross and operating margins were 75% and 24%, respectively, resulting in operating income of $211 million, a decrease of 7% year-over-year. The decrease in operating income is primarily due to increased R&D spending as we develop new products and certify new aircraft platforms. 2024 was a year of milestone accomplishments for aviation. We were named number one in aviation product support for the 21st consecutive year by Professional Pilot Magazine. We also celebrated the legacy of our founders, Gary Burrell and Dr. Min Kao, upon their induction into the National Aviation Hall of Fame. Aviation safety is once again top of mind after recent tragic accidents that have shocked and saddened everyone.

Our strategic focus on aviation safety has resulted in many award-winning innovations designed to save lives, such as envelope protection, SafeGlide, SafeTaxi, and emergency autoland. Our most recent safety innovation, runway occupancy awareness technology, was honored with a prestigious Laureate Award from Aviation Week Network as the first available system to warn pilots if other aircraft are occupying an active runway. During the quarter, Textron Aviation announced the selection of our G3000 Prime integrated flight deck for the Citation CJ4 Gen3 aircraft. The G3000 Prime was also selected by Beta Technologies for the Alia electric conventional takeoff and landing aircraft, which conducted its inaugural flight during the quarter. These announcements are the first of many we anticipate as OEMs embrace this highly advanced next-generation flight deck.

Looking forward, we expect growth to accelerate throughout 2025 as new aircraft platforms enter production and as conditions improve in the aftermarket. With this in mind, we expect aviation revenue will increase approximately 5% for the year. Turning next to the marine segment, revenue increased 17% to nearly $1.1 billion, exceeding the $1 billion threshold for the first time. Growth was primarily driven by new revenue from the 2023 acquisition of JL Audio. Excluding JL Audio, marine revenue increased 6%, outperforming the broader market and strengthening our position as the world’s largest consumer marine electronics company. Full-year gross margin was 55%, a 180 basis point improvement over the prior year, and was favorably impacted by lower product cost.

Operating income increased 32% year-over-year, and operating margin expanded 240 basis points to 22%, reflecting both improved gross margin and operating leverage. 2024 was also a year of milestone accomplishments for Marine as we were named NMEA Manufacturer of the Year for the 10th consecutive year, and we were named Most Innovative Marine Company by Soundings Trade Only for the second consecutive year. During the quarter, we were recognized with the National Boating Safety Award from Sea Tow Foundation for the fourth consecutive year. Also during the quarter, JL Audio received an Innovation Award for the Pavilion line of outdoor home speakers from Home Technology Specialists of America. This award validates the outstanding audio performance the Pavilion line delivers.

As I previously mentioned, Garmin has been consistently outperforming the broader marine market, and we expect to do so again in 2025. The marine market remains soft but is stabilized at a level from which we can anticipate recovery and growth. With this in mind, we expect marine revenue will increase approximately 4% for the year. Moving finally to the auto OEM segment, revenue increased 44% to $611 million, primarily driven by growth in domain controllers. Gross margin was 18%, and the operating loss narrowed to $39 million for the year. During the year, all remaining BMW models were equipped with Garmin domain controllers, paving the way to achieve our maximum potential revenue from the BMW program in 2025. We also captured additional program wins and made significant progress preparing for our next major program that is expected to enter production in 2027.

I’m proud of the progress that we’ve made in our quest to build a successful auto OEM segment. As many of you know, the outlook of major automakers is softening, which changes the revenue trajectory we previously shared. Even so, we expect 2025 to be another pivotal year of growth and progress towards the profitability stage for this growing business segment. With this in mind, we expect revenue to increase approximately 7% for 2025. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?

Doug Boessen: Thanks, Cliff. Good morning, everyone. I’d begin by reviewing our fourth quarter and full-year financial results, provide comments on the balance sheet, cash flow statement, taxes, and 2025 guidance. We posted revenue of $1.823 billion for the fourth quarter, representing a 23% increase year-over-year. Gross margin was 59.3%, an increase of 100 basis points over the prior year quarter, primarily due to lower product cost. Operating expenses as a percentage of sales were 30.9%, a 440 basis point decrease. Operating income was $516 million, a 52% year-over-year increase. Operating margin was 28.3%, a 540 basis point increase from the prior year. GAAP EPS was $2.25, and pro forma EPS was $2.41, a 40% increase from the prior year pro forma EPS.

Looking at the full-year results, total revenue was $6.197 billion, a 20% increase year-over-year. Gross margin was 58.7%, a 120 basis point increase from the prior year, primarily due to lower product cost. Operating expenses as a percentage of sales were 33.4%, a 320 basis point decrease. Operating income was $1.594 billion, a 46% increase. Operating margin was 25.3%, a 240 basis point increase from the prior year. GAAP EPS was $7.30, and pro forma EPS was $7.39, a 32% increase from the prior year pro forma EPS. Next, we’ll look at fourth-quarter revenue by segment and geography. During the fourth quarter, we achieved record revenue on a consolidated basis for each of our five segments. We achieved double-digit growth in three of five segments, led by the fitness segment with 31% growth, followed by the auto OEM segment with 30% growth, and the outdoor segment with 29% growth.

By geography, we achieved double-digit growth across all regions, led by the EMEA region with 34%, the APAC region with 18%, and the Americas region with 17% growth, respectively. For the full year 2024, we achieved 20% consolidated growth, record revenue on a consolidated basis, and record revenue for each of our five segments. By geography, we achieved 31% growth in EMEA, 16% in the Americas, and 12% growth in APAC. Next, operating expenses. Fourth-quarter operating expenses increased by approximately $40 million or 8%. Research and development increased by $22 million, and SG&A increased by $19 million. Both increases were primarily due to 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 $3.7 billion. Accounts receivable increased sequentially and year-over-year to $983 million due to strong sales in the fourth quarter. Inventory balance increased year-over-year to approximately $1.5 billion. For the fourth quarter of 2024, we generated free cash flow of $399 million, an $18 million decrease from the prior year quarter. For the full year 2024, we generated free cash flow of approximately $1.2 billion, a $56 million increase from the prior year, due to improved earnings, partially offset by increased working capital needs. Our full-year 2024 capital expenditures were $194 million, consistent with the prior year. For 2025, we expect free cash flow to be approximately $1.1 billion, with approximately $350 million of capital expenditures.

For 2025, we expect to continue to make investments in platforms for growth, including facilities and IT-related projects. In 2024, we paid dividends of approximately $572 million. Also, we announced our plan to seek shareholder approval for a $0.60 increase in our annual dividend, beginning with the June 2025 payment, resulting in a cash dividend of $3.60, or $0.90 per quarter, a 20% increase from our current quarterly dividend of $0.75 per share. During 2024, we used $62 million of cash to repurchase company shares. At year-end, we had approximately $238 million remaining in the share repurchase program authorized through December 2026. Our full-year 2024 pro forma effective tax rate was 16.7% compared to 8.5% in the prior year. The increase in the effective tax rate is primarily due to an increase in the combined Switzerland tax rate in response to global minimum tax requirements.

The 2025 pro forma effective tax rate is expected to be 16.5%, which is comparable to the 2024 tax rate. Turning next to our full-year 2025 guidance, we estimate revenue of approximately $6.8 billion, an increase of approximately 8% from 2024. We expect gross margins to be approximately 58.7%, consistent with our 2024 gross margin. We expect an operating margin of approximately 25%, comparable to the 2024 results. The full-year pro forma effective tax rate is expected to be approximately 16.5%, comparable to the 2024 tax rate. This results in expected pro forma earnings per share of $7.80, a 6% increase over the 2024 pro forma earnings per share. This concludes our formal remarks. Can you please open the line for Q&A?

Q&A Session

Operator: At this time, I would like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We do request for today’s session that you please limit to one question and one follow-up. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Joseph Cardoso with JPMorgan. Your line is now open.

Joseph Cardoso: Thank you, and good morning. Thanks for the question. And congrats on the results here. I guess maybe the first question is just related to fitness. Obviously, you exited 2024 strongly. And I was just wondering if you could help dimensionalize the key drivers for the segment between, you know, the refresh of the install base, share gains that you’re seeing with new customers, as well as even potentially pricing there, and then maybe more importantly, as we look towards the 2025 growth forecast for the segment, maybe from a high level, how are you guys thinking about the contribution across those variables that you’re embedding into the guide? And then I have a quick follow-up.

Cliff Pemble: Hey. Good morning, Joe. I think in terms of our fitness performance, it was very broad-based across many product lines. I think if you look at all of our product categories, each one probably has its own dynamic when it comes to the customer base and when we introduce new products, what mix of those are new versus existing. But in general, especially in the wearables area, we’re seeing many more new customers coming to Garmin, and we’re benefiting from market share gains, which is driving our results. Looking forward to 2025, we really see more of the same. Of course, we recognize that these are outstanding results. So we’re trying to be realistic about our growth, but 10% is a fabulous outlook. And we’re excited to see what the year will bring.

Joseph Cardoso: No. Appreciate the color there, Cliff. And then maybe as just my follow-up here, it’s more on the operating margin guidance. Kinda suggest a slightly lower operating leverage or flow-through than we typically see from Garmin. Maybe, Doug, can you just walk us through the puts and takes here and kind of what we should be considering or factoring or factors that are influencing to maybe the softer leverage for 2025 than what we’ve historically seen from the company. Then thanks for the questions.

Doug Boessen: Yeah. It relates to the operating margin, you know, gross margin we’re expecting that to be relatively consistent, you know, year over year, which we also expect, you know, as it relates to our operating expenses, as a percentage of sales, we’re expecting to be up about 30 basis points. That 30 basis points is coming from R&D. For SG&A, we expect as a percent of sales to be relatively flat. The investment in R&D is basically investments for growth. Those investments are really for innovation and all the different product launches that we do have coming up for the next year.

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

Ben Bollin: Good morning, everyone. Thanks for taking the question. I wanted to piggyback that last question, Doug. With respect to gross margin, you know, the implied guide or the explicit guide on the revenue growth across categories really suggests to a favorable mix in your higher margin categories, you know, grow as a percentage of revenue into 2025. So curious how you think about flat gross margins when you know, outdoor fitness, aviation growing its percentage of mix into the out year. And then I had a follow-up.

Doug Boessen: Yeah. As it relates to gross margin on a consolidated basis, yeah, we do expect that to be relatively consistent. And, you know, there’s a lot of different variables that go into the gross margin. You know, we have a product mix, as you mentioned, you know, component costs, you know, overhead per unit, etcetera. And so, you know, there’s a lot of mix in there from that standpoint. But, you know, we’re thinking about, you know, as it relates to gross margin by segment, there’s not a real major differences we’re expecting. You know, gross margin by segments out there. There may be some inputs and takes, you know, as we move as we move through the year, but it’s a relatively consistent, you know, for our gross margins by segment.

Ben Bollin: Okay. Cliff, you know, the performance in EMEA has been really remarkable. Last couple of years. I’m curious, you know, what you attribute to the success there. Could you talk about the dynamics of, you know, maybe more industrialized versus emerging markets and any go-to-market efforts that have changed really driving that outperformance?

Cliff Pemble: Yeah. In EMEA, I would say that the strength there is primarily driven by the relative stronger benefit we get from wearables and consumer market in EMEA. In some of the countries, the major countries, we’re the strong number two player in wearables. Of course, America’s dynamic is slightly different, so we’re the number three here, but in Europe, we’ve been much stronger as a marketplace over there with our product line.

Ben Bollin: Okay. My last one is looking at auto OEM, with respect to 2025, you mentioned, you know, capturing, you know, BMW opportunity and kinda get into your normalized run rate. Could you share any thoughts on, you know, the way we should think about the margin of this business, supposed gross and EBIT margin, and how it scales over time and how potential, you know, new wins or future platform opportunity in 2027 and beyond will influence those figures further. That’s it for me. Thank you.

Cliff Pemble: Yeah. I think we’ve talked about the margin profile of this business in the past. And consistent with what we said, we believe this business is a mid-teens kind of gross margin and kind of mid-single digits operating margin. And that’s clearly what we’re still driving for. We have been successful in securing new business for the future, including the one that I mentioned that is coming in 2027, representing our largest win to date. And other smaller wins across the globe that help fill in both terms of volume as well as margin profile that helps support that outlook that I mentioned.

Ben Bollin: Thank you.

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

Erik Woodring: Great. Thanks so much for taking my question, guys. Maybe just to start, I wanted to double-click again on the auto OEM business. And maybe what I’m really trying to get at was, you know, prior expectations for 2025 revenue were $800 million. Obviously, market conditions have softened since you originally gave that guide. But you have obviously this new large win ramping in 2027. So I’m just can you maybe just help us better understand, one, the primary factors causing the 2025 outlook outside of market conditions, have anything changed kind of at the micro level? And then two, you know, any advice on how we should be thinking about maybe the shape of the growth curve as we bridge 2025 with that 2027 win, correct? And then I have a follow-up. Thanks so much.

Cliff Pemble: Okay. Yeah. So definitely 2025 was below our expectations that we had shared a couple of years ago, shaving about $140 million off of the outlook that we had back then, and this is 100% due to the softening outlook of automakers, particularly the higher-end automakers that are operating in the China market, which has been struggling probably more than other areas. Although, globally, it’s generally weak. So there’s really no other factor other than that. There’s no other smaller factors at play really. We definitely, you know, were anticipating a much stronger outlook from them, but conditions changed. So as we look forward to 2027, we do expect, you know, as we are anticipating growth here in 2025, the 2026 could dip a little. And then as we ramp into 2027, grow again.

Erik Woodring: Okay. Very helpful. Thank you so much, Cliff. And then maybe just my follow-up is, Ken, getting to what you alluded to at the top of the call, if we go back a year ago, you guided to 2024 revenue of $5.7 billion and EPS of $5.40. You and I’m just wondering if you’re approaching 2025 in some kind of the same degree of relative service in 2024. I did approach that I’ve been changed about just based on what you learned about your performance in 2025 new users coming into the or etcetera, any color that trying to approach the credit dispute versus a year ago. Thanks so much.

Cliff Pemble: Yeah. I think we had some trouble receiving your audio there, but I think what you were asking is if you looked back to 2024, our initial guide was more conservative than obviously where we ended up. And perhaps wondering if our 2025 outlook has a degree of conservatism built in. Absolutely, 2024 exceeded all of our expectations, internal and external. And we did also feel that there was a lot of potential in 2024, so we worked very hard to achieve everything that we could. As we look to 2025, we, of course, always start our year and try to be pragmatic in our outlook. There’s a lot of the year that’s ahead of us. A lot of the revenue that comes in the back half of the year with seasonality, especially in the consumer markets. So we’re trying to be pragmatic and deliver something that we have high confidence in. And we’ll continue to work throughout the year to achieve and overachieve what we’ve said.

Erik Woodring: Thank you so much, Cliff. I appreciate the color. Thank you.

Operator: Your next question comes from the line of George Wang with Barclays. Please go ahead.

George Wang: Oh, hey. Hey. Hey. It’s Tim. Thanks for taking my question. Just two quick questions. Firstly, I just want to double-click on the auto OEM. Just curious, like, you know, in terms of the profitability kind of, you know, obviously, you laid out target for MSD, OM medium term. Just curious whether you expect to turn profitable kind of in the next, you know, couple quarters? Just kind of near term, like, any thoughts on so they breakeven level kind of, you know, going to kind of low single digit. Just curious if you can impact some of the near-term dynamics in terms of the bottom line for the auto OEM. Thank you.

Cliff Pemble: Well, auto OEM profitability is obviously our goal. This is a very dynamic business. And as we’ve pointed out, you know, we’re affected by the ups and downs of our customers too. So we’re managing through that. I think we’re doing very well. I would like to point out that we report all of our segment results on a GAAP basis. So we don’t allocate cost to overarching corporate segments that help dress up segments. So what you’re seeing with our auto OEM segment is pure GAAP results. And our profitability metrics may not match point per point for everyone else in the industry. But that said, our segment, auto OEM segment, still provides very meaningful contributions in margin that cover a portion of our corporate costs that wouldn’t go away if we didn’t have this portfolio.

And we also achieved significant leverage in our manufacturing as well as our supply chain by combining the volumes that we have across our business. Eighteen million units a year is very substantial and very attractive for our suppliers. So we’re able to achieve cost savings, the benefit of which you are seeing in all of the other segment results.

George Wang: Oh, okay. Just a quick one. Just, you know, as we step back, kind of zoom out in terms of the high level on the consumer. You know, is there anything kind of you would like to call out kind of with maybe, you know, different versus kind of last quarter, kind of three months ago in terms of the consumer backdrop. And especially if you can address some of the selling that sell-through, especially as it relates to some of the flagship products in terms of restocking cycle, you know, in the space of outdoor, just curious over the next couple quarters, whether you should see sustained momentum just on the flagship product, if you will, and just any sort of sales through kind of you want to call out versus last quarter. Thank you.

Cliff Pemble: Yeah. I think we’ve probably made most of our remarks. I would say in terms of the consumer and as we looked at the results of Q4, as well as our registration behavior that we can see in near real-time, the sell-in and the sell-through was very well matched. And we believe that the retail channel is not overstocked. It’s at a healthy level, and we continue to see strong registrations in our products. From our perspective and the kinds of products that we offer and the customer bases for those products, I would say that those customers seem to be fine. We don’t want to say that there’s no consumer pressure because we know that there is. But in general, the embracement of our products has been very strong, and we feel good about where we are at.

George Wang: Okay. Great. Thank you. I’ll go back to the queue.

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

David MacGregor: Yeah. Good morning, everyone, and thanks for taking my questions. Congratulations on a strong quarter, Cliff. Great performance.

Cliff Pemble: Thank you.

David MacGregor: I guess I want to start by just asking about lower product cost because you called that out in each segment. And I’m just trying to get a sense, obviously, there’s some operating leverage benefit here from the strength in the unit volumes. But is there something else going on here from the standpoint of, you know, variable costs or anything from a structural standpoint that would be helpful for the modeling?

Cliff Pemble: Well, increased production definitely allows us to leverage our investments and higher volumes, of course, more efficiencies on the production line. And as I just mentioned to George, the added volumes that we have with our combined business over 18 million units last year allows us to have more efficiency in our overall supply chain and component purchasing. So we’re seeing benefit from that and expect to continue to see that.

David MacGregor: Okay. So it’s scale benefits. There isn’t anything kind of from a structural standpoint that’s changing?

Cliff Pemble: No. No. Yeah. We are very clear. It’s definitely the scale.

David MacGregor: Right. Got it. And then secondly, I wonder if I guess, if you could talk about tariffs, I guess. Somebody has to ask the obligatory question. You got Taiwanese manufacturing. You got the BMW, which I guess gives you some indirect exposure to the extent it, you know, there’s tariffs on the foreign automotive production. You just talk about your exposure there.

Cliff Pemble: Well, I think there’s exposure everywhere as it seems, and it can change, of course, rapidly. So I think everyone is still waiting to see what really transpires. I believe that we are probably optimally positioned in terms of most of our supply chain is out of the way of where most of the attention is being focused right now. So we could have some impacts. We don’t really know how to quantify that, but we believe that we’re in a good position to minimize the impact.

David MacGregor: Do you have anything in the guidance for that now?

Cliff Pemble: No. There’s really nothing that you could plan for right now. Again, there’s a lot of changes almost on a daily basis. So we’ll just have to wait and see. But at this moment, we don’t anticipate that there’s going to be major impacts.

David MacGregor: Okay. Thanks very much.

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

Ivan Feinseth: Hi. Thanks for taking my question, and congratulations on another great quarter and a great 2024.

Cliff Pemble: Thank you.

Ivan Feinseth: My first questions are on the two really great new products you launched, the Approach golf simulator and the Descent diving computer. These are more higher-priced products. Are these targeted more at the professional markets? Are you seeing, let’s say, interest or purchase for the dive computer from, you know, dive professionals, which would be like a new channel for you, maybe the ones that work at oil rigs or in shipyards? And the same thing for the Approach golf simulator. Are you seeing a lot of interest, let’s say, from golf pros who use it for teaching or from golf schools?

Cliff Pemble: Yeah. I would say, Ivan, on both of those products, really, the customer base is a broad range. Specific to dive, of course, these are very serious dive electronics. And so consequently, you know, it definitely appeals to a person that is more serious about the sport, but we see interest in that product across a range of enthusiasts from on down to others and including, you know, professional divers, work divers, that kind of thing. So it’s a broad range, and the same is really true for the R50. There’s a lot of people that like to have those in their garage or in their rec room, especially when winter weather is so bad, they can play courses wherever they want to, and this product is unique because it can be taken out to the actual golf course and used, you know, on the course as well.

So it’s really a broad range. We don’t really see a specific customer base that is gravitating to that product. And we love that because appealing to a broad range is always better.

Ivan Feinseth: Yeah. So my friends who know say that the Approach or the price has a lot of features that are in similar items that are two, three, four times the price. So I yeah, you’re giving us the pricing. And then my second question is on your connected cabin display, which was really, I thought, incredible at CES. What kind of feedback did you get or are you getting on that?

Cliff Pemble: I think we got really good feedback on the unified cabin. It is, of course, a futuristic investment on our part so that we can demonstrate to automakers our capability both in terms of innovative product design as well as shaping the future of the automotive industry. So we see a lot of follow-up interest in that, and it may not necessarily result in a car that you see with something called the unified cabin, but the technologies we’re demonstrating and the underlying core electronics and systems that we’re designing for it will definitely become part of future cars.

Ivan Feinseth: Oh, I thought it was pretty cool. I would like a car with all that. Well, wishing you a big 2025.

Cliff Pemble: Yeah. I think we all love to see that demonstrated, and we all wish we had a car like that.

Ivan Feinseth: Thanks.

Cliff Pemble: Thank you.

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

Noah Zatzkin: Hi. Thanks for taking my questions. Maybe just a couple for me on the marine industry. Obviously, you know, 2024 was tougher from an industry perspective. I think new boat retail in the US was down close to 10%. New boat shipments were down over 20%. Obviously, you guys grew 6% organically, which implies pretty substantial share gain there. So I guess first, if you could just remind us how to think about the mix of the business from an OEM versus aftermarket perspective, and then if we were to see some stabilization in the industry in 2025, I think your guidance is for 4% growth. So just any reason to think that might be a bit conservative if the industry were to stabilize. Thanks.

Cliff Pemble: Yeah. And I think we definitely continue to see share gains across our product line. For us, the mix of products is more than half is retail aftermarket. Although, you know, a growing sizable amount is OEM as well. In terms of the overall market condition right now, I would say that again, you know, we don’t see big downswings. We also don’t see big upswings. I don’t think the market is going to snap back, you know, to double-digit growth without some other catalysts. But it’s still a very solid market, and, you know, many have been calling for growth for quite a while, and they’ve mostly been wrong because the market has just taken some time to correct itself after COVID. But in general, we see stabilization. We believe that from here, it’s kind of something we can build on, and if the market performs better, we would expect, of course, that we would also outperform.

Noah Zatzkin: Thank you.

Operator: That concludes our Q&A session. I will now turn the conference back over to Teri Seck, Director of Investor Relations, for closing remarks.

Teri Seck: Thank you all for joining us today. Doug and I are available for callbacks. We’ll be talking to a few of you soon. Have a wonderful day. Bye.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect.