GRMN 10-K & 10-Q changes, risk factors and insider trading

The risks described below are not the only ones facing our company. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also impair our business operations. If any of the following risks occur, our business, financial condition or operatingand results of operations could be materially adversely affected.

If we are not successful in the continued development, timely manufacture, and introduction of new products or product categories, overall demand for our products could decrease to the extent that losttotal sales and profits are not entirely offset.decline.

A significant portion of our revenue has been, and we expect in the future will continue to be, derived from sales of newly introduced products. The market for our products is characterized by rapidly changing technology, evolving industry standards and regulations and changes in customer needs. If we fail to introduce new products, or to modify or improve our existing products, in response to changes in technology, industry standards, regulatory requirements or customer needs, our products could rapidly become less competitive or obsolete. We must continue to make significant investments in research and development in order to continue to develop new products, enhance existing products and achieve market acceptance for such products. However, there can be no assurance that development stage products will be successfully completed or, if developed, will achieve significant customer acceptance. If we are unable to successfully develop and introduce competitive new products, and enhance our existing products, our business, financial condition and results of operations could be materially adversely affected.

If weThere are unablemany factors that can affect new product offerings, product features, and timeliness to successfully develop and introduce competitive new products, and enhance our existing products, our future results of operations would be materially adversely affected.market. Our pursuit of necessary technology may require substantial time and expense. We may need to license new technologies to respond to technological change. These licenses may not be available to us on terms that we can accept or may materially change the gross profits that we are able to obtain on our products. We may not succeed in adapting our products to new technologies as they emerge. Development and manufacturing schedules for technology products are difficult to predict, and there can be no assurance that we will achieve timely initial customer shipments of new products. The timely availability of these products in volume and their acceptance by customers are important to our future success. Any future challenges related to new products, whether due to product development delays, manufacturing delays, supply chain constraints, lack of market acceptance, delays in regulatory approval, or otherwise, could havematerially aadversely material adverse effect onaffect our business, financial condition and results of operations.

The markets for many of our products and services are highly competitive, and we expect competition to increase in the future. Some of our competitors have significantly greater financial, technical and marketing resources than we do. TheseThey may also be able to devote greater resources to the development, promotion and sale of their products or secure better product positioning with retailers. Additionally, existing and emerging competitors have been able to replicate certain features offered by some of our products and services or respond more rapidly to emerging technologies or changes in customer requirements. They may also be able to devote greater resources to the development, promotion and sale of their products or secure better product positioning with retailers. In addition, someSome of our original equipment manufacturer (OEM) customers may develop in-house equipment and components that they currently purchase from us. Increased competition could result in price reductions, fewer customer orders, reduced margins and loss of market share. Our failure to compete successfully against current or future competitors could materially adversely affect our business, financial condition and results of operations.

Our principal manufacturing facilities for consumer products are located in Taiwan. The People’s Republic of China, also referred to as the PRC, asserts sovereignty over all of China, including Taiwan, certain other islands, and all of mainland China. The PRC government does not recognize the legitimacy of the Taiwan government. Although significant economic and cultural relations exist between Taiwan and the PRC, the PRC government has indicated that it may use military force to gain control over Taiwan in certain circumstances, such as the declaration of independence by Taiwan. There is also a risk that the PRC government may unilaterally seek to occupy Taiwan, by force if necessary, without a clear triggering event. In this scenario, Garmin’s manufacturing facilities and suppliers based in Taiwan could be subject to disruptions that could have a material negative impact to our operations. The United States'States–Taiwan relations with Taiwan are governed by the 1979 Taiwan Relations Act, which signifies when the U.S. switched diplomatic recognition from Taiwan to the PRC, referred to as the "one-China" policy. China's relations with Taiwan may also be influenced by changes in relations between the U.S. and China.China or other geopolitical conditions. Deviations from the "one-China" policy or other conflicts or disputes could lead to adverse changes in China-U.S. and China-Taiwan relations and could materially adversely affect our manufacturing operations and suppliers based in Taiwan, which could materially adversely affect our business, financial condition and results of operations and the market price and the liquidity of our shares.operations.

We have made and expect tomay continue making significant investments in the auto OEM segment, the associated cost of which may negatively impact total company profits if auto OEM segment revenue significantly declines.profits.

We have been awarded several tier-one and tier-two auto OEM supplier contracts. To fulfill the associated program commitments, we have invested significantly in facilities, research and development, and other operating expenses and expect to continue doing so.expenses. Operating marginsperformance associatedof with thesethe auto OEM programssegment willhas negatively impactimpacted our consolidated operating marginincome, as autothe OEMassociated revenue increasesand asgross aprofit percentagehave ofnot consolidatedbeen revenue.sufficient to cover these costs. If we are not successful in winning additional contracts, substantially leveraging our past and future investments, and implementing and maintaining efficient manufacturing processes, the auto OEM segment’s contributions may continue to negatively impact total company profits may be negatively impacted.profits. We may incur substantial restructuring costs if we are unable to generate profits from auto OEM contracts.contracts, which could materially adversely affect our business, financial condition and results of operations.

We have experienced and mayexpect to in the future experience shortages of certain componentscomponents, as well as delays in procuring certain components. In addition, a shortage in supply of components may result in an increase of the costs of procuring these components. IfSupply chain disruptions, including suppliers arebeing unable to meet our demand for components on a timely basis or ifthe we are unableinability to obtain components from an alternative source,sources, or ifcomponent thecost priceincreases ofcould alternative components is prohibitive,affect our ability to maintain timely and cost-effective production of our productsproducts, wouldwhich becould seriouslymaterially harmed.adversely affect our business, financial condition and results of operations.

Our products are also dependent on certain licensed technology and content. If we are unable to continue sourcing such technology and content from our licensors and are unable to obtain an alternative source, or if our relationships with our licensors change detrimentally, our ability to provide certain features in our products would be seriouslyaffected, harmed.which could materially adversely affect our business, financial condition and results of operations.

Our business and reputation havehas been and areis expected to continue to be impacted by information technology system failures and network disruptions.

TheOur Companycompany, and itsour global supply chainchain, and our global distribution network have experienced and are expected to continue to be exposed to information technology system failures and network disruptions including those caused by natural disasters, human error, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, and ransomware or other cybersecurity incidents. Failures or disruptions of our internal operations, our systems, the systems of our supply chain partners, or the systems of our business partners, which can include, among other things, order processing, invoicing, and manufacturing and distribution of products, and a loss of functionality of critical systems and online services, could materially adversely affect our business, financial condition and results of operations.

We have technology and processes in place designed to detect and respond to such failures and disruptions. However, because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems, and the nature of other potential incidents change frequently and may be difficult to detect for long periods of time, our detection and response measures may be ineffective or inadequate. Furthermore, even with appropriate training conducted in support of such measures, human errors and omissions may still occur resulting in system failures and/or disruptions to our information technology infrastructure. Therefore, the Company’sour business continuity and disaster recovery planning, or those of others in our global supply chain, may not be able to sufficiently mitigate all threats.threats and our business, financial condition and results of operations could be materially adversely affected.

We have in the past experienced, and expect to continue to experience, malicious attacks and other attempts to gain unauthorized access to our systems that seek to compromise the confidentiality, integrity or availability of proprietary and confidential information. Actual or anticipated attacks and risks have caused, and are expected to continue to cause, us to incur increasing costs, including costs to deploy additional personnel and protection technologies, to conduct additional employee training, and to engage third party security experts and consultants. A breach of our security systems and procedures or those of others in our global supply chain could result in significant data losses or theft of our intellectual property, confidential and proprietary information, or that of our business partners, as well as our users’ or employees' personal information, which could compromise our competitive position, reputation, operating results, and financial condition. Also,Such ifevents wecould failmaterially toadversely reasonablyaffect maintainour thebusiness, securityfinancial condition and results of our intellectual property, confidential and proprietary information, or that of our business partners, or the personal information of our users or employees, we may be subject to private litigation, government investigations, regulatory proceedings, enforcement actions, and cause us to incur potentially significant liability, damages, or remediation costs. Although we maintain cyber insurance coverage that, subject to policy terms and conditions and significant self-insured retentions, is designed to address certain aspects of cyber risks, such insurance coverage may be insufficient to cover all losses or all types of claims that may arise.operations.

Our future success depends significantly on the continued contribution of our key executive, engineering, sales, marketing, manufacturing, and administrative personnel. Recruiting and retaining the skilled personnel we require to maintain and grow our market position has been and is expected to continue to be difficult.challenging. The overall shortageShortages in qualified workforce personnel has increased and in the future may continuelead to increase ourincreased compensation costs in order for us to recruit and retain such personnel. If we fail to hire and retain qualified employees, our business and growth prospects will be harmed.harmed, which could materially adversely affect our business, financial condition and results of operations.

We currently do not have employment agreements with any of our key executive officers. Swiss law prohibits us from paying certain severance payments to our senior executive officers, which may impair our ability to recruit for these positions. We do not have key person life insurance on any of our key executive officers and do not currently intend to obtain such insurance. The loss of the services of any of our senior level management, or other key employees, could harmmaterially adversely affect our business.business, financial condition and results of operations.

Additionally, rapid increases in production levels to meet unanticipated demand could result in higher costs for manufacturing and supply of components, higher freight costs associated with urgent distribution of the products, and other expenses. These higher costs could lower our profit margins. Further, if production is increased rapidly, manufacturing quality could decline, which may also lower our profit margins and reduce customer satisfaction.

If actual results are significantly lower than forecasted demand does not develop,demand, we could have excess inventories of finished products and components, which would use cash and could lead to write-offs of some or all of the excess inventories. Lower than forecasted demand could also result in excess manufacturing capacity or reduced manufacturing efficiencies at our facilities, which could result in lower profit margins.

OurThese productsevents, andor servicesothers mayrelated beto affectedinaccurately byanticipating design and manufacturing defects thatdemand, could materially adversely affect our business, financial condition,condition and results of operations.

Our products and services, or those of our OEM customers in which our products are installed, could be affected by design and manufacturing defects. There can be no assurance we will be able to detect and fix all issues and defects in our products and services, and may have limited ability to respond to those impacting our OEM customers. Failure to do so can result, and in the past has resulted in recalls, product replacements or modifications, and may cause reputational harm, and significant warranty and other expenses, which could havematerially aadversely material adverse impact onaffect our business, financial condition and results of operations.

If our products malfunction or contain errors or defects, we could also be subject to significant liability for personal injury and property damage and, under certain circumstances, could be subject to a judgment for punitive damages. We maintain insurance against accident-related risks involving our products. However, there can be no assurance that such insurance would be sufficient to cover the cost of litigation or damages to others or that such insurance will continue to be available at commercially reasonable rates. In addition, insurance coverage may not cover awards of punitive damages and may not cover the cost of associated legal fees and defense costs, which could result in lower margins. If we are unable to maintain sufficient insurance to cover product liability costs or if our insurance coverage does not cover the award, this could have a material adverse impact on our business, financial condition and results of operations.operations could be materially adversely affected.

Undiscovered vulnerabilities in our products could expose them to hackers or other unscrupulous third parties who develop and deploy viruses and other malicious software programs that could attack our products. Actual or perceived security vulnerabilities in our products could harm our reputation and lead some customers to return products, to reduce or delay future purchases, or use competing products.products, which could materially adversely affect our business, financial condition and results of operations.

Natural disasters and extreme weather events, such as tsunamis, typhoons, floods, wildfires, or earthquakes, could occur in a region where we have a manufacturing or warehousing facility which could cause disruptions in our business operations, loss of inventory, or affect the sale of our products. Global climate change could also result in certain types of these natural disasters occurring more frequently or with moregreater intense effects.intensity. For descriptions and locations of our principal properties, see Item 2, “Properties”. These events could also have an impact on our suppliers and affect our supply chainchain, or our customers and affect the demand for our products. If our backup and recovery plans are not sufficient to minimize business disruption or if our insurance is not sufficient to recover the costs associated with these types of events, our business, financial condition and results of operations could be materially adversely affected.

Climate change can also pose a risk to our business due to related regulatory and legislative measures, requirements of our OEM customers or other strategic partners, and evolving societal pressures, including pressures to reduce the carbon footprint of the aviation and marine industries, which could negatively impact the market for our products. The U.S. Environmental Protection Agency regulates greenhouse gas emissions under the authority granted to it under the Clean Air Act. U.S. Congress, in addition to other regulatory authorities and legislative bodies around the world, could pass further legislation to mandate greenhouse gas emission reduction, implement cap-and-trade programs, or promote renewable energy and energy efficiency. Such measures could influence mobility and transportation trends, which could decrease the demand for certain of our products.products, and our business, financial condition and results of operations could be materially adversely affected.

If climate change has impacts on natural disasters, the regulatory environment, or societal pressures as discussed above, it could result in a change in demand for certain products in markets that we serve, including auto, aviation, and marine. If we fail to adjust our product and service offerings to respond to new opportunities driven by changes in regulation and/or consumer preferences, itour business, financial condition and results of operations could havebe anmaterially adverseadversely effect on our financial results.affected.

Because it is uncertain what laws and regulations will be enacted, we cannot predict the potential impact of such laws and regulations on our future consolidated financial condition, results of operations or cash flows. Enactment of additional laws and regulations directed at climate change policy could materially adversely affect our business, financial condition and results of operations.

Because we sell many of our products to independent dealers and distributors, we are subject to many risks, including risks related to their inventory levels and support for our products. IfThese dealersdistribution channel-related risks could materially adversely affect our business, financial condition and distributors attempt to reduce their levelsresults of inventory or if they do not maintain sufficient levels to meet customer demand, our sales could be negatively impacted.operations.

Many of our dealers and distributors also sell products offered by our competitors. If our competitors offer our dealers and distributors more favorable terms, those dealers and distributors may de-emphasize or decline to carry our products. In the future, we may not be able to retain or attract a sufficient number of qualified dealers and distributors. If we are unable to maintain successful relationships with dealers and distributors or to expand our distribution channels, our businessbusiness, willfinancial suffer.condition and results of operations could be materially adversely affected.

Our large customers may also seek to leverage their position to improve their profitability through increased promotional programs or other measures, which could have a negative impact on our gross margin. Additionally, the loss of any large customer could materially adversely affect our salesbusiness, financial condition and profits.results of operations. See Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements for more information on concentration of credit risk.

We continually evaluate acquisition opportunities and opportunities to make investments in complementary businesses, technologies, services or products, or to enter into strategic partnerships with parties who can provide access to those assets, additional product or services offerings, additional distribution or marketing synergies or additional industry expertise. We may not be able to identify suitable acquisition, investment or strategic partnership candidates, or if we do identify suitable candidates in the future, we may not be able to complete those transactions on commercially favorable terms, or at all.all, which could materially adversely affect our business, financial condition and results of operations.

Any past or future acquisition could also result in difficulties assimilating acquired employees, operations, and products and diversion of capital and management’s attention away from other business issues and opportunities. Integration of acquired companies may result in problems related to integration of technology and inexperienced management teams. Due diligence performed prior to closing acquisitions may not uncover certain risks or liabilities that could materially impact our business and financial results. In addition, the key personnel of the acquired company may decide not to work for us. We may not successfully integrate business, operational, and financial activities such as internal controls, Sarbanes-Oxley Act of 2002 compliance, cyber security measures, the GDPR and other corporate governance and regulatory matters, operations, personnel or products related to acquisitions we may make in the future. If we fail to successfully integrate such transactions, our businessbusiness, financial condition and results of operations could be materially harmed.adversely affected.

Many of our products rely on thesatellite Global Positioning Systemsystems and othernetworks. Disruption to our use of those satellite systems.systems and networks could harm our business.

The Global Positioning System (GPS) is a satellite-based navigation and positioning system consisting of a constellation of orbiting satellites. The satellites and their ground control and monitoring stations are maintained and operated by the United States Department of Defense. The Department of Defense does not currently charge users for access to the satellite signals. These satellites and their ground support systems are complex electronic systems subject to electronic and mechanical failures and possible sabotage. GPS satellites have a limited lifespan and are subject to damage by the hostile space environment in which they operate. The U.S. Space Force and Missile Systems Center continue to launch new satellites to replace retired and aged satellites.

GPS is operated by the U.S. Government, which is currently committed to maintenance and improvement of GPS; however, if the policy were to change, and commercial access to GPS was no longer supported by the U.S. Government, or if user fees or other restrictions were imposed, it could have a material adverse effect on our business, financial condition and results of operations.operations could be materially adversely affected.

Products and services that rely on the Global Navigation Satellite System (GNSS) are vulnerable to external interference, such as jamming and spoofing. Jamming is a deliberate disruption of signals, which prevents a device from determining its location, while spoofing involves transmitting signals that mislead a receiver with a false location. Although jamming and spoofing equipment are typically used in military campaigns, such equipment available commercially can also result in jamming and spoofing. While there are regulations that prohibit the use of jamming and spoofing equipment, if GNSS signals used by our products are disrupted or manipulated it could limit or compromise the location-based features of our products.products which could materially adversely affect our business, financial condition and results of operations.

Some of our products also use signals from Satellite Based Augmentation Systems (SBAS) that augment GPS, such as the U.S. Wide Area Augmentation System (WAAS), Japanese MTSAT-based Satellite Augmentation System (MSAS) and European Geostationary Navigation Overlay Service (EGNOS). Some products also use regional satellite systems like the Indian Regional Navigation Satellite System (IRNSS), operating as NavIC (Navigation with Indian Constellation) and Quasi-Zenith Satellite System (QZSS). Any curtailment of SBAS operating capability could result in decreased user capability for many of our aviation products, thereby impacting our markets.markets, which could materially adversely affect our business, financial condition and results of operations.

Some of our products also use satellite signals from Russia’s GLONASS, the European Union Galileo system, and the Chinese BDS. National or European authorities may provide preferential access to signals to companies associated with their markets, including our competitors, which could harm our competitive position. Use of non-U.S. GNSS signals may also be subject to FCC waiver requirements and to restrictions based upon international trade or geopolitical considerations. If we are unable to develop timely and competitive commercial products using these systems, or obtain timely and equal access to service signals, it could resultmaterially inadversely lostaffect revenue.our business, financial condition and results of operations.

Some of our products and services also operateutilize usingnon-navigation satellite communicationsnetworks, systemssuch as satellite networks utilized for communication, weather, and mapping content, operated by third parties, such as Iridium Communications Inc. and its subsidiaries.Skylo. Any disruption to these satellite communications systems or extended periods of reduced service by these systems could result in lost customers or revenue. If Garmin is unable to maintain contracts with the third parties that operate these satellite communications systems, the communications features of the products and services that leverage these systems would no longer function.function, which could materially adversely affect our business, financial condition and results of operations.

Our Global Positioning System (GPS) technology is dependent on the use of the Standard Positioning Service (SPS) provided by the U.S. Government’s GPS satellites. GPS operates in radio frequency bands that are globally allocated for radio navigation satellite services. International allocations of radio frequency are made by the International Telecommunications Union (ITU), a specialized technical agency of the United Nations. These allocations are further governed by radio regulations that have treaty status and which may be subject to modification every two to three years by the World Radio Communication Conference. Each country also has regulatory authority on how each band is used. In the United States, the FCC and the National Telecommunications and Information Administration (NTIA) share responsibility for radio frequency allocations and spectrum usage regulations.

This or any other ITU or national reallocation of radio frequency spectrum, including frequency band segmentation or sharing of spectrum, or other modifications of the permitted uses of relevant frequency bands, may materially and adversely affect the utility and reliability of our productsproducts, which could materially adversely affect our business, financial condition and couldresults haveof significant negative impacts on our business and our customers.operations.

We have experienced periods of annual growth in sales and profits in our outdoor and fitness segments, which have benefited from increased sales of wearable devices. However, we have also experienced periods of declines in sales and profits in these segments. If the overall wearable device market declines, or categories of devices within the wearable device market decline significantly, or if we lose significant market share in the wearable device market, our business, financial condition or operatingand results of operations could be materially adversely affected.

Additional risks, including gross margin fluctuation,fluctuations, foreign currency fluctuations, product development challenges, impacts to our key personnel, and dependencies on third party suppliers, may be heightened as a result of a widespread public health emergency. If we were unable to manage these risks effectively, our business, financial condition,condition and results of operations could be materially adversely affected.

Geopolitical instability, acts of war or acts of terrorism could have a material adverse impact on our business, financial condition and results of operations. Specifically, the threat of terrorism and war and heightened security and military response to this threat, or any future acts of terrorism, may cause a redeployment of the satellites used in GPS or interruptions of the system. To the extent that such interruptions have an effect on sales of our products, this could have a material adverse effect on our business, financial condition and results of operations.operations could be materially adversely affected.

A shut down of airspace or imposition of restrictions on general aviation would harm our business. A shutdown of airspace could cause reduced sales of our general aviation products and delays in the shipment of our products manufactured in our Taiwan manufacturing facilities to our global distribution facilities, therebywhich adverselywould affectingaffect our ability to supply new and existing products to our dealers and distributors. Such events could materially adversely affect our business, financial condition and results of operations.

Garmin’s fiscal year is based on a 52- or 53-week period ending on the last Saturday of the calendar year. Fiscal years 20242025, 2024, and 2023 each contained 52 weeks, and fiscal year 2022 contained 53 weeks. Unless otherwise stated, all years and dates refer to the Company’s fiscal year and fiscal periods. Unless the context otherwise requires, references in this document to "“we"”, "“us"”, "“our"”, "“the Company"” and similar terms refer to Garmin Ltd. and its subsidiaries.

The Company is a leading worldwide providerproducer of wirelessinnovative devices,products, many of which feature Global Positioning System (GPS) navigation, services and applications that are designed for people who live an active lifestyle. Garmin is organized in the five operating segments of fitness, outdoor, aviation, marine, and auto OEM.OEM, which represent the primary markets served by the Company. These operating segments also represent our reportable segments. The Company’s Chief Executive Officer, who has been identified as the Chief Operating Decision Maker (CODM), allocates resources and assesses performance of each operating segment individually.

Our discussion and analysis of financial condition and results of operations are based upon the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The presentation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to customer sales programs and incentives, product returns, bad debts, inventories, investments, goodwill, intangible assets, income taxes, warranty obligations, and contingencies and litigation. We base our estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Refer to Note 1 – Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements for our significant accounting policies related to our critical accounting estimates.

WeThe recognizeCompany recognizes liabilities associated with uncertain income tax positions, including those related to the application of transfer pricing,pricing rules to certain intercompany transactions, based on our estimate of whether, and the extent to which, additional taxes will be due. WeThe recognizeCompany recognizes the tax benefits from an uncertain tax position only if payment of thesethose amounts ultimately proves to be not required or it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest amount of benefit that is more likely than not to be realized upon ultimate settlement.

Our net sales are primarily generated through sales to our retail partners, a dealer and distributor network, installation and repair shops, original equipment manufacturers (OEMs), our online webshop (garmin.com), subscriptions for connected services, and our own retail stores. Refer to the Revenue Recognition discussion in Note 1 – Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.Statements Wefor aimadditional toinformation achieve a quick turnaround on orders we receive fromregarding our retail,revenue dealer,recognition and distributor customers. Certain arrangements with OEM customers are entered into at the beginning of an aircraft, boat, or vehicle life cycle with the intent to fulfill customer purchasing requirements for the entire production life, although there are generally no firm volume commitments, and sales are therefore generated on an order-by-order basis. As a result, we do not believe backlog information is material to the understanding of our business.policies.

Raw material costsmaterials are our most significant component of cost of goods sold. Our existing practice of performing the design and manufacture of the majority of our products in-house has enabled us to source components from different suppliers and, where possible, to redesign our products to leverage lower-cost or more readily available components.

We believe that our flexible production model allows our factories to experience relatively low costs of manufacturing. In general, products manufactured in Taiwan have been our highest volume products. Our manufacturing labor costs historically have been lower in Taiwan than in most other locations.

Shipping and handling costs associated with the transportation and delivery of our products are included in cost of goods sold. Such costs fluctuate due to a number of factors, including freight market pricing and the mix of modes of transportation we utilize.

information systems and infrastructuretechnology costs;

InAs previously announced, beginning in the first quarter of fiscal 2024, the Company changed the presentation of operating expense to include advertising expense within selling, general and administrative expenses on the Company'sCompany’s consolidated statements of income, which management believes to be a more meaningful presentation. The Company continued this presentation of operating expense in the current period. Results for the 52-week and 53-week periodsperiod ended December 30, 2023 and December 31, 2022, respectively, have beenwere recast to conform to current periodthis presentation. This change had no effect on the Company’s consolidated operating or net income.

The table below sets forth ourthe results of operations through operating income (loss) for each of our five reportable segments. The Company’s CODM primarily uses operatingOperating income as the measure of profit or (loss to assess segment performance and allocate resources. Operating income) represents net sales less costs of goods sold and operating expenses. Net sales are directly attributed to each segment. Most costs of goods sold and the majority of operating expenses are also directly attributed to each segment, while certain other costs of goods sold and operating expenses are allocated to the segments in a reasonable manner considering the specific facts and circumstances of the expenses being allocated. For each line item in the table below, the total of the reportable segments’ amounts equals the amount in the accompanying consolidated statements of income.

Net sales increased 20%15% in fiscal year 20242025 when compared to the year-ago period. Total unit sales increased approximately 15%11% to 20.7 million units in 2025 from 18.6 million units in 20242024. The increase in net sales differs from 16.2the million unitsincrease in 2023.total Outdoorunit sales primarily due to shifts in segment and product mix. Fitness revenue representedwas the largest portion of our revenue mix at 31%33% in 2024,2025, comparedwhile tooutdoor 32%was the largest portion of our revenue mix in 2023.2024 at 31%.

The increase in fitness revenue was primarily driven by sales growth across all product categories, led by strong demand for wearables. Outdoor revenue increased primarily due to sales growth in adventure watches. AviationThe increase in aviation revenue increasedwas primarilydriven dueby tosales growth in OEM and aftermarket product categories. The increase in marine revenue was primarily driven by contributionssales fromgrowth theacross Company'smultiple acquisitionproduct ofcategories, JLled Audio.by chartplotters. Auto OEM revenue increased primarily due to increasedsales shipmentsgrowth ofin domain controllers.

Gross profit dollars in fiscal year 20242025 increased 23%,15%, primarily due to the increase in net sales compared to the year-ago period as described above. Consolidated gross margin increasedwas 120 basis pointsflat when compared to the year-ago period due to higher margins within certain segments, partially offset by unfavorable segment mix.period.

The fitness, outdoor, and marinefitness gross margin increasesincrease of 480130 basis points,points 340compared basisto points,the andyear-ago 180period basis points, respectively, werewas primarily attributable to lower costs of goods and favorable product mix. Gross margin remained relatively flat within the aviationoutdoor, segment.aviation, Themarine, and auto OEM grosssegments marginwhen decrease of 550 basis points was primarily attributablecompared to unfavorablethe productyear-ago mix.period.

Research and development expense increased 10%13% in absolute dollars and decreasedremained 150relatively basis pointsflat as a percent of revenue compared to the year-ago period. The absolute dollar increase was primarily due to higher engineering personnelpersonnel-related costs.expenses.

Selling, general and administrative expense increased 10%13% in absolute dollars and decreasedremained 170relatively basis pointsflat as a percent of revenue when compared to the year-ago period. The absolute dollar increase was primarily attributabledue to increasedhigher personnel-related expenses and information technology costs.advertising.

Total operating income increased 46%18% in absolute dollars and increasedremained 440relatively basis pointsflat as a percent of revenue in fiscal year 20242025 compared to fiscal year 2023.2024. The increase inimproved operating income as a percent of revenue was due to increased sales, increased gross margin as a percent of revenue, and lower operating expenses as a percent of revenue, as described above. The improveddollar performance in fitness, outdoor, marine,aviation, and auto OEMmarine was partially offset by a decreasedecreases in aviation. Auto OEM experienced an operating loss in fiscal year 2024,outdoor and we expect auto OEM to experience an operating loss in 2025.OEM.

The average interest rate returnsreturn on cash and investments during the 52-weeks ended December 28,27, 20242025 was 3.3%, and Decemberremained 30,relatively 2023flat werecompared to 3.3% andduring 2.7%,the respectively.52-weeks ended December 28, 2024. Interest income increased primarily due to higher balances of cash and investments and higher yields on fixed-income securities.investments.

Foreign currency gains and losses for the Company are driven by movements of a number of currencies in relation to the U.S. Dollar. The Taiwan Dollar is the functional currency of Garmin Corporation, the Euro is the functional currency of several subsidiaries, and the U.S. Dollar is the functional currency of Garmin (Europe) Ltd., although some transactions and balances are denominated in British Pounds. Other notable currency exposures include the Australian DollarDollar, Polish Zloty, and PolishSwiss Zloty.Franc. The majority of the Company’s consolidated foreign currency gain or loss is typically driven by the significant cash and marketable securities,cash, receivables and payables held in a currency other than the functional currency at a given legal entity.

Global taxing standards continue to evolve as a result of the Organization for Economic Co-Operation and Development (OECD) recommendations aimed at preventing perceived base erosion and profit shifting (BEPS) by multinational corporations, including the establishment of a global minimum tax rate of 15%.15% under the “Pillar Two” framework. Many countries in which Garmin operates have implemented, or are in the process of implementing, global minimum tax legislation. Additionally, the Swiss canton of Schaffhausen passed legislation in 2023 that increased the cantonal corporate tax rate in 2024, resulting in a combined federal and cantonal statutory tax rate of approximately 15% in Switzerland. The increase in our effective tax rate in 2024 as compared to 2023 and 2022 is primarily due to the increase in the combined Switzerland statutory tax rate, while our effective tax rate in 2023 also benefited from the discrete impacts noted above.

As of December 28,27, 2024,2025, we had approximately $3.7$4.1 billion of cash, cash equivalents and marketable securities. Management invests idle or surplus cash in accordance with the Company’s investment policy, which has been approved by the Company’sGarmin’s Board of Directors. The investment policy’s primary objectives are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during fiscal 20242025 and 20232024 were 3.3% and 2.7%,3.3%, respectively. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral, and in the credit performance of the underlying issuer, among other factors. See Note 4 – Marketable Securities in the Notes to the Consolidated Financial Statements for additional information regarding marketable securities.

Cash used in financinginvesting activities totaled $626.9$645.2 million for fiscal 2024,2025, compared to $636.5$393.3 million for fiscal 2023.2024. ThisThe decreaseincrease was primarily due to lower purchases of treasury shares under the share repurchase plan in fiscal 2024 compared to fiscal 2023. This was partially offset by an increase in dividendscash paidused for acquisitions and an increase in purchases of treasuryproperty stockand related to equity awardsequipment in fiscal 20242025 compared to fiscal 2023.2024.

The Company has lease arrangements for certain real estate properties, vehicles, and equipment. Leased real estate properties are typically used for office space, distribution, data centers, and retail. As of December 28,27, 2024,2025, the Company had fixed lease payment obligations of $195.4$235.5 million, with $36.6$43.5 million payable within 12 months.

The Company obtains various raw materials and components for its products from a variety of third party suppliers. The Company’s inventory purchase obligations are primarily noncancelable.noncancelable commitments. As of December 28,27, 2024,2025, the Company had inventory purchase obligations of $891.9$1,030.6 million, with $731.9$801.7 million payable within 12 months.

Net cash outlays for income taxes exceeded income tax expense in each of the 2024, 2023,2024 and 20222023 fiscal years, partially due to the provisions of the 2017 United States Tax Cuts and Jobs Act, which requirerequired us to capitalize certain research and development costs and amortize those costs on our U.S. tax returns over a period of five or fifteen years, depending on where the associated costs were incurred. PrimarilyNet ascash aoutlays resultfor income taxes were less than income tax expense in 2025, partially due to the provisions included in the U.S. tax legislation enacted in 2025 which, among other things, changed capitalization requirements of thesecertain provisions,research and development costs. Due to the timing of tax payments, we expect net cash outlays for income taxes in fiscal 2026 to again exceed income tax expense in fiscal 2025.2026, Cash paid for taxes is also expectedand to increase in 2025 as compared to 2024,fiscal primarily due to the payment of taxes in arrears related to the intercompany transaction to migrate ownership of certain intellectual property from Switzerland to the United States.2025.

There are many risks and uncertainties that can affect our future business, financial performance or share price. In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 27, 2025. There have been no material changes during the 13-week26-week period ended MarchJune 28,27, 2026 in the risks presented in our Annual Report on Form 10-K for the fiscal year ended December 27, 2025. These risks, however, are not the only risks facing our Company. Additional risks and uncertainties, including those not currently known to us or that we currently deem to be immaterial, also may materially adversely affect our business, financial condition and/or operating results.

Global economic and geopolitical conditions impact our operations and financial results, although we believe our vertically integrated and diversified business model enables us to be resilient and flexible in a dynamic business environment. Recent global supply constraints of memory chips have increased operational complexities and costs, which may unfavorably impact our future gross margin. Foreign currency fluctuations and rapidly changing global trade policies, particularly those affecting the United States (“U.S.”), increase the economic and operational uncertainties that could significantly impact our business and results of operations. On February 20, 2026, the U.S. Supreme Court ruled that the tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) were unauthorized. As of March 28, 2026, we had not recognized a benefit or receivable related to any potential refund related to previously paid IEEPA tariffs.

The following tables and discussion providesprovide an analysis of our results of operations for the firstsecond quarter of 2026 compared to the firstsecond quarter of 2025 and the first half of 2026 compared to the first half of 2025.

Comparison of 13-Weeks Ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025

Net sales (or “revenue”) increased 14%11% for the 13-week period ended MarchJune 28,27, 2026 when compared to the year-ago quarter. Total unit sales in the firstsecond quarter of 2026 increased by approximately 9% to 4,7655,686 when compared to total unit sales of 4,3625,203 in the firstsecond quarter of 2025, which differs from the percent increase in revenue primarily due to shifts in segment and product mix. Fitness was the largest portion of our revenue mix in the firstsecond quarter of 2026 at 31%,37% whilecompared outdoorto was the largest portion of our revenue mix33% in the firstsecond quarter of 2025 at 29%.2025.

The increase in fitness revenue was driven by growth across all product categories, led by strong demand for advanced wearables. The increase in aviation revenue was driven by sales growth in OEM and aftermarket product categories. The increase in marine revenue was driven by sales growth across multiple product categories. The increase in auto OEM revenue was primarily driven by growth in infotainmentdomain programs.controllers. OutdoorThe outdoor revenue decreaseddecrease was primarily due to thedeclines in consumer auto and adventure watch product category comparing against a strong prior year product launch.watches.

Gross profit dollars in the firstsecond quarter of 2026 increased 18%,18% when compared to the year-ago quarter primarily due to the increase in net sales when compared to the year-ago quarter, as described above. Consolidated gross margin as a percent of net sales increased 180360 basis points when compared to the year-ago quarter,quarter with higher margins across all segments. The consolidated gross margin increase was primarily dueattributable to favorable foreignproduct currencymix impactswithin oncertain sales.segments and a favorable 100 basis point impact related to approximately $21 million in refunds of previously paid tariffs, of which approximately $14 million was attributable to marine.

The fitness and outdoor gross margin percentage increases of 470330 basis points and 210270 basis points, respectively, were primarily attributable to favorable foreignproduct currency impacts on salesmix when compared to the year-ago quarter. GrossThe aviation gross margin percentage remained relatively flat withinwith thean aviation80 andbasis autopoint OEM segmentsincrease when compared to the year-ago quarter. The marine gross margin percentage decreaseincrease of 200630 basis points when compared to the year-ago quarter was primarily attributable to higherrefunds tariffof costs.previously paid tariffs and favorable product mix. The auto OEM gross margin percentage increase of 560 basis points when compared to the year-ago quarter was primarily attributable to year-to-date cost recoveries recognized as revenue during the current quarter.

Total operating expense in the firstsecond quarter of 2026 increased 11%9% in absolute dollars and decreased 11080 basis points as a percent of revenue when compared to the year-ago quarter. Operating expense, as a percent of segment net sales, decreased in the fitness, aviation, marine, and auto OEM segments by 39070 basis points, 57070 basis points, 190 basis points, and 90170 basis points, respectively, when compared to the year-ago quarter primarily due to increased salesrevenue and greater leverage of expenses. Operating expense, as a percent of segment net sales, remained relatively flat in the marine segment when compared to the year-ago quarter. Operating expense, as a percent of segment net sales, increased in the outdoor segment by 300100 basis points when compared to the year-ago quarter as decreased salesrevenue and increased expenses were partially offset by improved gross margin percentage.

Total operating income in the firstsecond quarter of 2026 increased 30% in absolute dollars and increased 290440 basis points as a percent of revenue when compared to the year-ago quarter. The increase in operating income as a percent of revenue was driven by increased sales, gross margin improvements and lower operating expenses as a percent of revenue, as described above. TheOperating performance improved operatingacross incomeall dollarsegments performancewhen incompared fitness, aviation, marine and auto OEM was partially offset byto the decreaseyear-ago in outdoor.quarter.

The average interest rate return on cash and investments during the firstsecond quarter of 2026 was 3.3%,3.5%, compared to 3.2% during the same quarter of 2025.

The $3.1$2.5 million currency gainloss recognized in the firstsecond quarter of 2026 was primarily due to the U.S. Dollar strengthening against the Taiwan DollarEuro and weakening against the SwissTaiwan Franc,Dollar, partially offset by the U.S. Dollar strengthening against the Euro,Swiss Franc, within the 13-week period ended MarchJune 28,27, 2026. During this period, the U.S. Dollar strengthened 2.0%1.1% against the Euro and weakened 0.6% against the Taiwan Dollar and 1.0% against the Swiss Franc,Dollar, resulting in gainslosses of $11.2$3.8 million and $3.4$2.7 million, respectively, while the U.S. Dollar strengthened 2.2%1.8% against the Euro,Swiss Franc, resulting in a lossgain of $10.8$4.6 million. The remaining net currency loss of $0.7$0.6 million was related to the impacts of other currencies, each of which was individually immaterial.

The $24.8$23.5 million currency gainloss recognized in the firstsecond quarter of 2025 was primarily due to the U.S. Dollar weakening against the EuroTaiwan andDollar, Polishpartially Zloty,offset andby strengtheningthe U.S Dollar weakening against the TaiwanEuro Dollar,and British Pound Sterling, within the 13-week period ended MarchJune 29,28, 2025. During this period, the U.S. Dollar weakened 3.8% against the Euro, 5.6% against the Polish Zloty, and strengthened 1.1%14.1% against the Taiwan Dollar, resulting in a loss of $67.7 million, while the U.S Dollar weakened 8.2% against the Euro and 6.0% against the British Pound Sterling, resulting in gains of $12.6$36.5 million, $3.2 million,million and $6.0$2.9 million, respectively. The remaining net currency gain of $3.0$4.8 million was related to the impacts of other currencies, each of which was individually immaterial.

The Company recorded income tax expense of $67.5$109.1 million in the 13-week period ended MarchJune 28,27, 2026, compared to income tax expense of $56.3$79.4 million in the 13-week period ended MarchJune 29,28, 2025. The effective tax rate was 14.3%16.8% in the firstsecond quarter of 2026, which is comparablecompared to 14.5%16.5% in the firstsecond quarter of 2025. The increase in effective tax rate between comparative periods was primarily due to changes in income mix by jurisdiction.

As a result of the above, net income for the 13-week period ended MarchJune 28,27, 2026 was $405.1$541.9 million compared to $332.8$400.8 million for the 13-week period ended MarchJune 29,28, 2025, an increase of $72.3$141.1 million.

We primarily useuse, and expect to use, cash flow from operations, and expect that future cash requirements may be used,operations to fund our capital expenditures, support our working capital requirements, pay dividends, fund share repurchases, and fund strategic acquisitions. We believe that our existing cash balances and cash flow from operations will be sufficient to meet our short- and long-term projected working capital needs, capital expenditures, and other cash requirements.

As of MarchJune 28,27, 2026, we had approximately $4.3$4.4 billion of cash, cash equivalents and marketable securities. Management invests idle or surplus cash in accordance with the Company's investment policy, which has been approved by the Company’s Board of Directors. The investment policy’s primary objectives are to preserve capital, maintain an acceptable degree of liquidity, and maximize yield within the constraint of low credit risk. Garmin’s average interest rate returns on cash and investments during the first quartertwo quarters of 2026 and 2025 were 3.3%3.4% and 3.2%, respectively. The fair value of our securities varies from period to period due to changes in interest rates, in the performance of the underlying collateral, and in the credit performance of the underlying issuer, among other factors. See Note 4 – Marketable Securities in the Notes to Condensed Consolidated Financial Statements for additional information regarding marketable securities.

Cash provided by operating activities totaled $536.0$939.5 million for the first quarterhalf of 2026, compared to $420.8$594.0 million for the first quarterhalf of 2025. The increase in cash received from customerscustomers, primarily driven by higher net salessales, was partially offset by increases in cash paid for cost of goods sold and operating expenses, and an increase in cash paid for taxesexpenses in the first quarterhalf of 2026 compared to the first quarterhalf of 2025.

Cash used in investing activities totaled $252.4$396.7 million for the first quarterhalf of 2026, compared to $132.6$246.1 million for the first quarterhalf of 2025. TheThis increase was primarily due to an increase in net purchases of marketable securities and an increase in purchases of property and equipment in the first quarterhalf of 2026 compared to the first quarterhalf of 2025.

Cash used in financing activities totaled $260.1$473.2 million for the first quarterhalf of 2026, compared to $204.8$415.7 million for the first quarterhalf of 2025. This increase was primarily due to higher cash dividend payments, an increase in the purchase of treasury shares related to equity awards, and higher purchases of treasury shares under share repurchase planspayments in the first quarterhalf of 2026 compared to the first quarterhalf of 2025.

The Company has lease arrangements for certain real estate properties, vehicles, and equipment. Leased properties are typically used for office space, distribution, data centers, and retail. As of MarchJune 28,27, 2026, the Company had fixed lease payment obligations of $242.6$258.8 million, with $48.5$48.9 million payable within 12 months.

The Company obtains various raw materials and components for its products from a variety of third party suppliers. The Company’s inventory purchase obligations are primarily noncancelable commitments. As of MarchJune 28,27, 2026, the Company had inventory purchase obligations of $1,116.1$1,533.7 million, with $862.5$1,170.1 million payable within 12 months.

The Company’s other purchase obligations primarily consist of noncancelable commitments for capital expenditures and other indirect purchases in connection with conducting our business. As of MarchJune 28,27, 2026, the Company had other purchase obligations of $634.9$540.4 million, with $342.8$277.9 million payable within 12 months.

For a description of the significant accounting policies and methods used in the preparation of the Company’s condensed consolidated financial statements, refer to Note 1,1 “– Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements in Part II, Item 8 and “Critical Accounting Policies and Estimates” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the fiscal year ended December 27, 2025. There were no significant changes to the Company’s critical accounting policies and estimates in the 13-week periodand 26-week periods ended MarchJune 28,27, 2026.