Garmin Ltd Q4 FY2025 Earnings Call

Hello, everyone. Thank you for joining us and welcome to the Garmin Limited fourth quarter and full year 2025 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the call over to Terry Seck, Director of Investor Relations. Please go ahead.

Good morning. We would like to welcome you to Garmin Limited's fourth quarter full year 2025 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. An archive of the webcast and related transcript will also be available on our website. This morning's earnings call includes projections and other forward-looking statements regarding Garmin Limited and its business. Any statements regarding our future financial position, revenues, segment growth rates, earnings, gross margins, operating margins, future dividends or share of purchases, 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-K filed with the Security and Exchange Commission. Presenting on behalf of Garmin Limited this morning are Cliff Pimble, President and Chief Executive Officer, and Doug Besson, Chief Financial Officer and Treasurer. At this time I would like to turn the call over to Cliff Pimble.

Thank you Cherry and good morning everyone. As announced earlier today, Garmin achieved another quarter of outstanding financial results driven by strong broad-based demand for our products. Consolidated revenue increased 17 percent to more than 2.1 billion dollars which is a new fourth quarter record and our first quarter to exceed two billion dollars we experienced strong double-digit revenue growth in three business segments reflecting the strength of our highly diversified business model gross margin was comparable to the prior year at 59.2 percent while operating margin expanded 60 basis points to 28.9 percent this This resulted in record fourth quarter operating income of $614 million, up 19% year-over-year, and record pro forma EPS of $2.79, up 16%. 2025 was another year of remarkable growth and achievement for Garmin, with record consolidated revenue, record operating income, and record revenue for all business segments. We attribute this strong performance to our strategic focus on market diversification and creating superior products that are essential to our customers' lives. This approach has been a winning strategy for us since we were founded more than 36 years ago. Consolidated revenue increased 15% to $7.25 billion, which is a new annual record and up nearly $1 billion over 2024. Gross margin of 58.7% was comparable to 2024, which is a significant achievement considering the impact of generationally high tariff structures that took effect early in the year. Operating margin expanded by 60 basis points to 25.9%, resulting in record full year operating income of nearly $1.9 billion, up 18% year over year. before sharing our full year outlook i want to provide insights on what is important to us when considering forward-looking guidance our primary objective is to deliver the best result for garmin on a consolidated basis there are many factors that influence individual segment results and we have said before that the diverse nature of garments business gives us multiple paths to achieving consolidated goals this makes individual segment growth targets less relevant especially when viewed in isolation with this in mind we will continue to provide consolidated guidance measures and we will provide qualitative forward-looking insights for segments when it is helpful to do so but we will no longer emphasize individual segment growth targets this This approach aligns with our primary objective to deliver the best results for Garmin on a consolidated basis. With this in mind, we anticipate 2026 to be another year of strong top and bottom line We expect revenue to increase approximately 9% to $7.9 billion, and we expect operating income to exceed $2 billion for the first time. Many are wondering how industry-wide memory constraints will affect us. Our guidance considers everything we know about the supply chain environment, including recent cost pressures on memory components. It's our practice to continually seek efficiency throughout our entire supply chain by leveraging our vertically integrated business model and scale to optimize our cost structure. We have always used inventory as a business tool, and we have intentionally increased inventory levels of certain components and products to ensure we can meet long-term demand. We also have strong relationships with our suppliers and are working closely with them to meet the expected demand for our products. While no one wishes to see supply chain challenges, we believe we are well prepared. Our strong results and positive outlook give us confidence to propose an annual dividend of $4.20 a share, reflecting a 17% increase over the current dividend amount, which will be considered by shareholders at the upcoming annual meeting. In addition, our board of directors recently approved a $500 million share repurchase program, effective through December, 2028. doug will discuss our financial results and outlook in greater detail in a few minutes but first i'll provide a few remarks on the performance of each business segment starting with fitness 2025 was another exciting year of growth as customers embrace the healthy active lifestyles our brand represents for the year fitness revenue increased 33 percent to 2.36 billion dollars surpassing $2 billion for the first time, and was driven by wearables as we continue to benefit from both market share gains and market growth. Gross margin was 60%, a 130 basis point improvement over the prior year. Operating income increased 50% year-over-year to $726 million, and operating margin expanded 360 basis points to 31%, reflecting both improved gross margin and operating leverage. During the quarter, we announced our collaboration with healthcare payments provider, TruMed, to assist customers using pre-tax health savings account and flexible savings account funds for qualifying purchases of select Garmin products. We recently published our annual Garmin Connect data report, which shows that on average, our users increased activity levels by 8% during the year, reflecting a high level of engagement with our products and app platforms. At the 2026 consumer electronics shows, the Venue 4 and the Forerunner 970 received innovation awards for novel features in digital health and fitness and we announced exciting enhancements to our premium connect plus service with nutrition tracking and insights powered by ai based active intelligence to help users achieve nutrition goals looking forward we expect another year of strong performance for fitness driven by demand for our current product lineup and contributions from new product introductions We also expect that the fitness segment will be our strongest contributor to 2026 consolidated growth. Moving to outdoor, full-year 2025 revenue increased 5% to $2.05 billion, also exceeding $2 billion for the first time. Growth in outdoor was primarily driven by adventure watches, with a full year of contributions from the highly successful Phoenix 8 series that was launched in 2024, followed by the launch of the Phoenix 8 Pro with InReach technology in September of 2025. Gross and operating margins were 66% and 34% respectively, resulting in operating income of $690 million. During the quarter, we launched the InReach Mini 3 Plus satellite communicator with voice, text, and photo sharing. This compact and rugged communicator offers essential SOS safety features and reliable communication that explorers can use to stay connected with loved ones while adventuring beyond cell phone coverage. And with up to two weeks of battery life in the 10-minute tracking mode, the InReach Mini 3 Plus can be used on multi-day trips without added worry of battery charging. several outdoor products also receive ces innovation awards including the phoenix 8 pro micro led version blaze equine wellness system and the descent s1 buoy which highlights our commitment to exploring new product categories and developing groundbreaking innovation looking forward we expect full year growth in outdoor to accelerate in 2026 compared to 2025 driven by a significant number of new product introductions. We also expect stronger performance in the back half of the year due to the timing of product launches. Looking next at aviation, full year 2025 revenue increased 13% to $987 million with growth contributions from both OEM and aftermarket product categories. Gross and operating margins expanded year-over-year to 75% and 26% respectively. operating income increased 22 percent to 257 million dollars during the quarter we launched the d2 air x15 and the d2 mach 2 our latest aviator smart watches with cockpit connectivity and advanced aviation health fitness and smartwatch features we announced that the garmin g5000h cockpit system was selected for the brazilian air force uh-60 black hawk helicopter part of a growing list of military modernization programs based on our advanced commercially available integrated cockpit systems on december 20th 2025 our autoland system was used by a customer for the first time returning the aircraft and crew safely to the ground following rapid depressurization while operating in instrument flight conditions over the rocky mountains this incident illustrates how our cockpit systems can improve the safety margins of flight we are very proud of our aviation team for creating our award-winning autoland technology looking forward we expect aviation revenue will continue to grow in 2026 in line with historical norms. Turning to the marine segment, full year 2025 revenue increased 10% to $1.18 billion, driven by growth across multiple categories, led by chart plotters. Gross and operating margins were 55% and 21% respectively, resulting in operating income of $251 million. We recently introduced the flagship GPSMAP9000XSV lineup to further strengthen our offerings in the chart plotter category. The GPSMAP 9000XSV offers stunning 4K resolution displays, 5 gigahertz Wi-Fi networking, and industry-leading sonar performance. Also during the quarter, we launched Garmin On Board, a versatile man overboard and engine cutoff system that uses wireless technology offering users freedom to move around the boat while still enjoying the protection of this important safety system garmin on board was selected as the winner of the 2025 dame design award in the safety and security award category at the recent mets trade marine exhibition in amsterdam during 2025 we received multiple awards including being named most innovative marine company by soundings trade only for the third consecutive year nmea manufacturer of the year for the 11th consecutive year and we received the national boating safety award for the fifth consecutive year this is an unprecedented level of industry recognition and we attribute our success to the outstanding products we offer and our strong commitment to serving customers. In 2026, we expect marine segment growth to be consistent with the prior year based on improving market conditions. Moving finally to the auto OEM segment, full year 2025 revenue increased 9% to $665 million, primarily driven by growth in domain controllers. Gross margin was 17%, and the operating loss was $49 million for the year. At the recent Consumer Electronics Show, we introduced our next-gen unified cabin domain controller that adds digital key capability, seat-specific audio and video, and an AI assistant designed to make vehicle interactions more conversational and powerful. We also announced our collaboration with Meta to explore new ways of interacting with the vehicle. We continue to achieve important milestones leading up to the launch of our next domain controller program. I'm pleased to report that this program is with renowned global automaker Mercedes-Benz and will broadly apply across their portfolio of passenger car models with significant volumes ramping up in 2027. In 2026, we expect revenue to decrease year-over-year as we have reached the peak of BMW domain controller volumes and as certain legacy programs approach end-of-life. We expect operating losses to narrow in 2026 as we shift certain auto OEM R&D resources to accelerate product roadmap development in other segments.

That concludes my remarks. next doug will walk you through additional details on our financial results doug thanks cliff good morning everyone i'd begin by reviewing our fourth quarter and full year financial reports and write comments on the balance sheet cash flow statement taxes and 2026 guidance propose a revenue of 2 billion 125 million dollars for the fourth quarter there's any 17 percent increase year over year gross margin was 59.2 percent comparable to the prior year operating expense percentage of sales was 30.3 percent 60 basis point decrease operating income was 614 million dollars 19 percent year-over-year increase operating margin was 28.9 percent 60 basis point increase from the prior year Our GAAP EPS was $2.73, our pro forma EPS was $2.79, 16% increase from the prior year of forma EPS. Looking at our full year results, we posted revenue of $7,246,000,000, representing a 15% increase year-over-year. Gross margin was 58.7%, comparable to the prior year. Operating expense percentage sales was 32.9%, 50 basis point decrease. Operating income was $1,876,000, 18% increase. Operating margin was 25.9%, 60 basis point increase from the prior year. Our GAAP EPS was $8.59, pro forma EPS was $8.56, 16% increase in a prior year pro forma EPS. Next, we'll look at our fourth quarter revenue by segment and geography. During the fourth quarter, we achieved record revenue on a consolidated basis. We achieved double-edged growth in three of our five segments, led by the fitness segment with 42 percent growth, followed by the marine segment with 18 percent growth, aviation segment with 16 percent growth. By geography, the Americas region achieved strong double-digit growth of 21%, resulting in quarterly revenue exceeding $1 billion for the first time. EMA region, APEC region, had 14% and 8% growth, respectively. For full year 2025, we achieved record revenue on a consolidated basis and record revenue for each of our five segments. By geography, we achieved 18% growth in EMEA, 40% growth in Americas, and 12% growth in Looking next, Operant Expenses. Fourth quarter Operant Expenses increased by approximately $80 million, or 14%. Research and Development increased by $36 million, primarily due to personnel-related expenses. S&A increased by $44 million, primarily due to increased advertising and personnel-related expenses. A few highlights on the balance sheet, cash flow statement, dividends, and shared purchases. We ended the quarter with cash and marketable securities of approximately $4.1 billion. Accounts receivable increased sequentially and year-over-year to approximately $1.3 billion due to strong sales in the fourth quarter. Inventory balance increased year-over-year to approximately $1.8 billion. For the fourth quarter of 2025, we generate free cash flow of $4 and $30 million, a $30 million increase from the prior year quarter. For the full year 2025, we generate free cash flow of approximately $1.4 billion, and a $24 million increase from the prior year. Our full year 2025 capital expenditures were $270 million, an increase of $77 million over the prior year. For 2026, we expect free cash flow to be approximately $1.4 billion, approximately $400 million capital expenditures. Expect a year-over-year increase in capital expenditures, primarily due to a manufacturing facility in Thailand. We expect to be operational in early 2027. In 2025, we pay dividends of approximately $664 million. Also, we announced our plan to seek shareholder approval, a $0.60 increase in our annual dividend beginning with the June 2026 payment. This is a 17% increase from our current annual dividend, $3.60. Opposedly, cash dividend of $4.20, $1.05 per share per quarter. 2025, we purchased $181 million of company shares. Also, our board directors recently approved $500 million share purchase program through December 2028 to replace the remainder of the previous $300 million authorization. Our full year 2025 performed effective tax rate was 17.4% compared to 16.7% in the prior year. Increasing the current year effective tax rate is primarily due to the 2025 U.S. tax legislation which changed capitalization requirements of certain R&D costs, resulting in decrease in certain u.s tax deductions and credits turning next to our full year 2026 guidance west made revenue approximately 7.9 billion dollars increase approximately 9 percent for 2025. we expect gross margin to be approximately 58.5 percent at 20 basis point lower than 2025 gross margin with a higher product cost partially offset by favorable segment mix we expect an operating margin approximately 25.5 percent. 2026 pro forma effective tax rate expected to be 16 percent 140 basis point decrease period 2025. Expected year-over-year decrease in the 2026 pro forma effective tax rate primarily due to an increase in certain u.s tax deductions so that certain provisions in the 2025 u.s tax legislation which came effective 2026. This results in expected pro forma earnings per share, probably $9.35, 9% increase over the 2025 pro forma earnings per share. This concludes our four more remarks. Jade, could you please open the line for Q&A?

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

Maybe if I could, for the first one, just wanted to touch on the memory side of things. Like, Cliff, I appreciate the comments that you made, but was curious if you could help contextualize more, like, how material of an impact you're expecting memory to be on your 2026 guide and which areas of the portfolio are more or less impacted there and then as we think about mitigation factors you obviously mentioned inventory however how are you thinking about other levers like de-specking or pricing costs at any headwinds here and then I have a follow-up good morning Joe I think in terms of quantifying the impact we we don't quantify individual components of our cost structure so we won't be sharing that definitely you know there's pressure on on memory costs there there are certainly a lot of items in in our overall bomb that that are

you know pricier items like displays and that kind of thing so we we simply just manage the entire bomb to to be as cost efficient as possible there's other opportunities to make the bombs more efficient and also make our overall supply chain more efficient looking for cost opportunities across the spectrum. So we're working all different angles and there isn't one area to identify that we would isolate because it's the entire picture. I would remind everyone that our overall margin structure is higher and that's because we're a vertically integrated company. And so therefore, when we see some variation at the BOM level, of course, the impact to the overall margin is less impactful.

Nope, got it. I appreciate the color there. And then maybe just as my follow-up, obviously another strong quarter, actually a year for wearables and in fitness. You highlighted share gains and obviously the market growth around product refreshes as key drivers. I'm assuming pricing has also been a tail end this year for Garmin. Correct me if I'm wrong there, but could you maybe just talk about how each of these factors have contributed at least at a high level to the wearables growth this year? And as we think about growth for 2026 that you highlighted as being a larger contributor, at least as it relates to the fitness segment as a whole, how are you thinking about each of these factors and any kind of shift in terms of contribution there? Thank you for the question.

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

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

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

Your next question comes from the line of Eric Woodring from Morgan Stanley, please hey guys um good morning and thank you for for taking my questions um cliff maybe just touching on auto em back uh back in early 2023 you first introduced the idea that this business could could grow 40 annually i think the target was scaling to 800 million of annual revenue um but i would just love to like better understand from you what you learned about this business over the last three years, that gives you the conviction to kind of double down as we go forward. And just to carry on that, it's just, you know, what details can you share with us about the next evolution of this business with Mercedes as we think about, you know, three-year growth rates or customer diversification targets or target margins? We'd just love to understand kind of what you learned and how that influences the next three years of this business, please. And then a follow-up. Thank you.

So, you know, our view in 2023 was based on what we knew at the time, which was based on projections given to us by our automotive OEM partners. And, of course, like everything, you know, they go through cycles and some of their assumptions are not always correct. And in that case, you know, I think the outlook was more positive then than what it turned out to be because of changes in the overall, their market structure and their geographic structure. results you know whether it's between Asia, Americas or Europe. So that's the situation we found ourselves in. In terms of what we learned I think you know we have been managing this business and really for two goals. One is to achieve scale and we're working and making good progress towards that. The other is to invest for the future so that we can demonstrate to automakers that we have the innovation capability and and the operational capability to meet their needs and i think we've we've definitely achieved that as well and so as we look forward what one of the adjustments we're making is to is to shift some of those r d resources that we've been using to develop new business and concepts and and develop our other product lines. And we feel like we've reached a point of critical mass where automakers realize that we can do this job for them and it would then allow us to work on the scale part of the equation.

Kind of taken aback by your outdoor comments on 2026, or at least eye-catching, you're alluding to accelerating growth and new product features. I guess, you know, I was just going through the IDC data quickly. And Phoenix is the revenue in the outdoor segment. And if history is a guide, the next Phoenix wouldn't launch until January 2027. So I guess just I'm wondering inherently in your messaging about outdoor, if you're maybe messaging different timing for a Phoenix launch, or if maybe you're expecting to launch all new models in this segment, just trying to kind of get a better understanding of exactly how to think about new product launches and the potential for acceleration in outdoor this year. Thanks so much.

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

We'll get back in the queue.

Thank you.

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

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

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

That's helpful. And then just to follow up, how is, any update on how Connect Plus uptake is tracking?

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

Great. Thank you so much.

Thank you.

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

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

I think there'll be some limited contributions in late 2026. It's really, I would say, inconsequential. but the ramp is really early 2027 and it's a very aggressive program and ramp with significant volumes that will be achieved over the life of the program.

The other one I wanted to touch on is you commented a little bit about channel inventory overall. Have you seen any change in behavior of your retail partners as they've recognized that hardware costs are going up you know broadly and other consumer electronics do you think that's influencing their commitments or their visibility they're providing you any thoughts on pull forward yet that you might be seeing thanks that's it for me yeah I think retailers you know really are enthused about carrying our brand we saw a much higher level of engagement from from certain retailers over the holiday season as they were they were happy to offer something from Garmin that was different from everything else that they typically offer.

And I think their enthusiasm is really triggered by their customers. You know, they see customers coming into the store, the customers are buying. So I feel like overall, the retail picture, especially some of the brick and mortars has been very positive.

Your next question comes from the line of David McGregor from Longbow Research. Please go ahead.

Yes. Good morning, everyone. Thanks for taking my questions. I wanted to just start on fitness and ask you about the TruMed collaboration and how meaningful the 2026 revenue growth, you know, allowing HSA, FSA funds to be used in the purchase of select garment products could turn out to be.

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

Okay. Let me just follow up by, again, within fitness, just thinking about within the wearables category, sort of non-traditional form factors, how are you thinking about the opportunity for Garmin there and from a timing standpoint, you know, how likely we are to see developing something and introducing something there?

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

Okay. If I could just squeeze in a third one quickly, are you able to quantify the benefit to Garmin if the Supreme Court overturns value for tariffs?

You know, we probably won't share specific dollar amounts, but, you know, as you can appreciate the 20% tariff and now moving to 15% is a significant cost adder to our products. So as we mentioned in our remarks, we've done an excellent job. Our teams across the world have done phenomenal in mitigating that. um and I think we've come out on the other side of that in a very very good position um and if it if it goes away then certainly that changes the game in terms of of our cost structure and things but but there's offsetting factors too you know with the supply chain uh constraints and and memory memory issues that are going on right now so there there'll be puts and takes but we're not really counting on one approach or the other we're assuming that everything stays pretty much as it is with regard to tariffs. Thanks very much and good luck. Thank you.

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

Thank you. Thanks for taking my questions and congratulations on another great quarter and phenomenal year. While some of my questions have been answered as far as tariffs and memory concerns, It's incredible that your supply chain and your integrated manufacturing capabilities have helped to mitigate that. With the launch of your new products that have connectivity like the Phoenix 8 Pro and the expanded capabilities in the new Image Mini 3, what kind of uptake are you seeing on the subscription services and what percentage, for example, of people buying the Phoenix 8 Pro are opt-in for the LTE and satellite connectivity yeah I think Phoenix 8 Pro is a product that's built around connectivity so when somebody buys that product they're definitely interested and motivated to to activate the the inReach service we've we've already seen SOS events with the Phoenix 8 Pro

where people bought the product are wearing them on adventures and and they needed help or needed some other kind of service while they were out there and they were able to achieve that right on the wrist. So we think it's a breakthrough platform. It's certainly not for everyone, but on the other hand, it's an important adder to our product line and we'll continue to expand on that to add that capability to more products.

And my follow-up question is, what kind a halo effect that you see on products from your acquisition last year of MyLapse, including there was some optimism that would help with, for example, the Garmin Catalyst, and I see you just launched an upgrade to the Catalyst, did that have an effect? And then you just launched some competitive track capabilities on the new XUMO XT. Three.

So MyLapse allows us the opportunity to improve the overall race experience for customers from the sign-up process on through to race day, in-race results, and the devices that they wear during the race. So we feel like this is going to give us a high level of fidelity with customers as they embrace and pursue these race activities. And in terms of the other markets, one of the benefits of MyLabs is that it's across many different markets. So running is one, but they also do, as you say, the racing and also moving into equine as well. So we just feel like that opens up new avenues for us to apply our innovation and our unique products into new areas.

Thank you. And looking forward to a big 2026.

Thanks, Ivan.

Your next question comes from the line of Noah Zatskin from KeyBank Capital Markets. Please go ahead.

All right, thanks for taking my questions. I guess maybe zooming out, if you could just kind of share any thoughts maybe around the global wearables market, how that's kind of been trending, you know, has it been kind of stagnant or a tailwind to your trends, and any changes that you've seen over the last year or so, either competitively or just in overall growth rates? Thanks.

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

Great, really helpful. And then maybe just one more on Marine. You know, impressive growth there in 25, given kind of the choppiness in the end market. So I think you mentioned maybe kind of consistent growth expected in 26. What's kind of underlying that from a kind of industry perspective? And in general, like, any thoughts around the marine industry looking out this year would be great.

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

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

Hey, good morning guys, how are you? We're good, thank you. Good, good, good. So yeah, maybe just changing gears a little bit in the aviation direction. Chris, can you talk a little bit to the recent acquisition facility you guys bought in Mesa and what your goal is for that and what that can bring to the table for Garmin?

Yeah, so we were really excited to find that facility. facility. We have lots of projects and lots of equipment that have to go into all kinds of aircraft. As you know, the process of taking our products to market is not as simple as just creating the product. They all have to be certified on each type of aircraft. And this facility allows us not only very, very significant hangar space to bring in very large aircraft but it also allows us to build a completely new staff of people that can do certification work and aircraft modifications so we believe over the long term that will help us reach new opportunities in more aircraft with more equipment and if if I can read between the lines a little bit does a facility like this give you the capability to maybe offer things on larger airplanes? Well, it's a very large hangar. Yeah, I'm excited about that. Okay. All right.

And then, if I may, just a quick follow on here, following up on, I think it was a listed question earlier about some of the defense stuff you guys are doing. With the changes in the defense acquisition system, the Department of War, Department of Defense, whatever you want to call it, has been, you know, trying to do more stuff on commercial terms with commercial contractors broadly and you know you guys are almost exclusively commercial uh is that opening the door for you to do other things that maybe weren't i don't know in the plan just a year ago before they really started of course more commercial because one would think potentially given everything that's going on maybe that is more opportunity for you all we we believe that will bring more opportunities Even though, you know, some of these discussions and the shift has started to gain some momentum,

the actual selection and identification of programs and all of that still takes time. So we view it as a long-term opportunity, but a nice shift is people, you know, look at the equipment that's available and realize that military especially could benefit from the commercial products that we offer thank you very much thanks your next question comes from the line of eric woodring from morgan stanley please go ahead just one quick follow-up cliff um i would just love to know um how you're thinking about kind of the the the ratable side of your that you know revenue

captured over time has marginally decreased to around five percent that's really seems to be mostly part of your success in the transactional business so I'm just wondering you know how much of a priority is growing this ratable kind of part of your business and is there any way I know it kind of constitutes subscriptions and services but is there a way to help us think about margins on the ratable business versus the point-in-time business thanks so much yeah I think like every kind of subscription-based business the margins tend to be higher.

Service-based businesses are definitely higher that way. Our objective is to grow those within Garmin, but we also are not focusing on that as the only growth path, and so we're growing everything around it. The nice part is that our subscription-based business has been growing as strongly or even stronger than the overall business, but everything else is growing around it so much that it still hasn't triggered that 10 percent threshold yet so so we feel like we're in a good position we have lots of ideas of things that we can offer people uh going forward and uh we're going to continue to build that business across every one of our segments awesome thank you at this time there are no further questions i will now turn the call back to Terry Steck for closing remarks.

Thanks everyone for joining us today. As usual, Doug and I are available for callbacks and we hope you have a great day. Bye. This concludes today's call.

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