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Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin, Ltd.NASDAQ: GRMN
$46.22 (as of 4/5)
Initiating Coverage at SELLPrice Target = $43.50
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Agenda
1. Declining Core Business2. Growth Opportunities Not Enough3. Sum-of-the-Parts Valuation
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
1. Declining Core Business2. Growth Opportunities Not Enough3. Sum-of-the-Parts Valuation
Agenda
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
1. Declining Core Business2. Growth Opportunities Not Enough3. Sum-of-the-Parts Valuation
Agenda
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Personal Navigation Devices
Segment Data (as of FY2011)
Revenue Contribution
(% of Total)
Income Contribution
(% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
PND Segment Decline…
$2.6B
$1.5B
FY 2008A
FY 2009A
FY 2010A
FY 2011A
FY 2012E
FY 2013E
FY 2014E
FY 2015E
$0
$1,000
$2,000
$3,000
millions
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
PND Segment Decline…Not Over
$2.6B
$1.5B
$650MM
FY 2008A
FY 2009A
FY 2010A
FY 2011A
FY 2012E
FY 2013E
FY 2014E
FY 2015E
$0
$1,000
$2,000
$3,000
millions
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Disruptive Technology
GoogleAndroid
iPhone
iPad
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Jun-09 Feb-10 Oct-10 Jun-11 Feb-12$15
$25
$35
$45
$55
Garmin Stock Price & Events 6/09 – 4/05/2012
End of Day 4/05/2012
Nasdaq
GRMN
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Google Navigation Announcement& Tom-Tom slashes prices
Garmin down 16.4%
Oct 28, 2009
GRMN
Jun-09 Feb-10 Oct-10 Jun-11 Feb-12$15
$25
$35
$45
$55
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Q1 2011 Earnings & T-Mobile DealGarmin Down 14%
May 5, 2010
GRMN
Jun-09 Feb-10 Oct-10 Jun-11 Feb-12$15
$25
$35
$45
$55
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
June 2010 – Aug 2011
Jun-09 Feb-10 Oct-10 Jun-11 Feb-12$15
$25
$35
$45
$55
GRMN Underperformed the Market
Nasdaq
GRMN
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
Aug 2011 – Apr. 5, 2012
Nasdaq
GRMN
Dividends & Growth?Garmin up 67% from 8/11 – 4/05/12
Jun-09 Feb-10 Oct-10 Jun-11 Feb-12$15
$25
$35
$45
$55
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
FUTURE
Growth Opportunities Not
EnoughValuationDeclining Core
Garmin Sales PresentationUniversity of Kansas
PND Segment Incremental EBITDA Erosion ($Mm)
FY 2012E EBITDA ($29)
FY 2013E EBITDA ($65)
FY 2014E EBITDA ($104)
FY 2015E EBITDA ($129)
Cumulative EBITDA Total ($326)
PND EBITDA Erosion
-$320 Mm
Erosion Gain $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000 326050.373657199
Cumulative EBITDA Erosion for PND Segment through FY2015E
PND
EBIT
DA (M
m)
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Mixed Product Success
• Garmin unsuccessful in markets they do not create– Smartphone “Nuvifone” – Infotainment?
• Dominant in markets they create– General Aviation– Runners’ Watch
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Mixed Product Success
• Garmin unsuccessful in markets they do not create– Smartphone “Nuvifone” – Infotainment?
• Dominant in markets they create– General Aviation– Runners’ Watch
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation
• Steady cash flows• Market share
– 80% in retrofit– 70% in OEM
• Slow growth for General Aviation
• Highly entrenched competitors in cargo and commercial
• Disproportionate amount of R&D spending
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation
• Steady cash flows• Market share
– 80% in retrofit– 70% in OEM
• Slow growth for General Aviation
• Highly entrenched competitors in cargo and commercial
• Disproportionate amount of R&D spending
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation
• Steady cash flows• Market share
– 80% in retrofit– 70% in OEM
• Slow growth for General Aviation
• Highly entrenched competitors in cargo and commercial
• Disproportionate amount of R&D spending
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation
• Steady cash flows• Market share
– 80% in retrofit– 70% in OEM
• Slow growth for General Aviation
• Highly entrenched competitors in cargo and commercial
• Disproportionate amount of R&D spending
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation
• Steady cash flows• Market share
– 80% in retrofit– 70% in OEM
• Slow growth for General Aviation
• Highly entrenched competitors in cargo and commercial
• Disproportionate amount of R&D spending
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Marine
• Gained small Marine market share– 15%-20% of market
• Market is currently in downturn– No signs of short term
recovery
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Marine
• Gained small Marine market share– 15%-20% of market
• Market is currently in downturn– No signs of short term
recovery
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Aviation & Marine Incremental EBITDA Gain ($Mm)
FY 2012E EBITDA $3
FY 2013E EBITDA $22
FY 2014E EBITDA $27
FY 2015E EBITDA $36
Cumulative EBITDA Total
$88
Erosion Gain $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000 326050.373657199
$87,968
Cumulative EBITDA Gain for Aviation & Marine Segments
through FY2015E
Aviation/Marine
PND
EBIT
DA (M
m)
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin Outdoor
Segment Data (as of FY2011)
Revenue Contribution
(% of Total)
Income Contribution
(% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin Outdoor
• Industry leader in product innovation & quality
• Highest ASP’s ($223)• 75% market share
– Healthy Foothold
• Slow-growth industry– Unit Sales 2.5% Y/Y
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin Outdoor
• Industry leader in product innovation & quality
• Highest ASP’s ($223)• 75% market share
– Healthy Foothold
• Slow-growth industry– Unit Sales 2.5% Y/Y
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin Outdoor
• Industry leader in product innovation & quality
• Highest ASP’s ($223)• 75% market share
– Healthy Foothold
• Slow-growth industry– Unit Sales 2.5% Y/Y
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin Fitness
Segment Data (as of FY2011)
Revenue Contribution
(% of Total)
Income Contribution
(% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Historical Dominance
• Industry leader in quality and ASP’s ($219)
• Highly profitable – FY 2011 Gross Margins 61%
• Few competitors– Nike/TomTom partnership enter space Q2 2011
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Historical Dominance
• Industry leader in quality and ASP’s ($219)
• Highly profitable – FY 2011 Gross Margins 61%
• Few competitors– Nike/TomTom partnership enter space Q2 2011
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Historical Dominance
• Industry leader in quality and ASP’s ($219)
• Highly profitable – FY 2011 Gross Margins 61%
• Few competitors– Nike/TomTom partnership announced Q2 2011
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Nike + TomTom = Profit Erosion
• Nike’s brand name with TomTom as technological competitor will erode customer base
• Smartphone Apps and Nike +
• Nike advertising campaign will dominate GRMN efforts
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Nike + TomTom = Profit Erosion
• Nike’s brand name with TomTom as technological competitor will erode customer base
• Smartphone Apps and Nike +
• Nike advertising campaign will dominate GRMN efforts
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Nike + TomTom = Profit Erosion
• Nike’s brand name with TomTom as technological competitor will erode customer base
• Smartphone Apps and Nike +
• Nike advertising campaign will dominate GRMN efforts
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Garmin
Nike
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000
$145
$2,448
Nike vs. Garmin 2010 Advertising Budget
Series1
Ad
Budg
et (M
m)
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
FY2012 Will Be Most Costly Year for Fitness Segment
FY 2011E FY 2012E FY 2013E FY 2014E FY 2015E $-
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
Fitness Advertising Expense Fitness Selling, General, & Admin ExpenseFitness R & D Expense
$107 Mm
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Higher Costs + Lower ASP’s Margin Pressure
FY 2011E FY 2012E FY 2013E FY 2014E FY 2015E0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
58.0% 58.0%55.0%
52.0%50.0%
22.7% 22.2%20.5%
18.7% 17.6%
Fitness Gross Margin Fitness Operating Margin
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Erosion Gain $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
326050.373657199
26000
$87,968
Cumulative EBITDA Erosion for Outdoor & Fitness Segments through
FY2015E
outdoor/fitness
PND
Aviation/MarineEBIT
DA
(Mm
)
Outdoor & Fitness Incremental EBITDA Erosion
(Mm)FY 2012E EBITDA $1.2
FY 2013E EBITDA ($3.6)
FY 2014E EBITDA ($9.5)
FY 2015E EBITDA ($14.0)
Cumulative EBITDA Total
($25.9)
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Auto OEM / Infotainment Segment
• Current Strategy– OEM Software/ maps
packages – Chrysler, Dodge, Jeep
& VW models
– ASPs ~ $130– Operating Margins ~
20%– 1 million units = $26
million in Op. Income
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Auto OEM / Infotainment Segment
• Current Strategy– OEM Software/ maps
packages – Chrysler, Dodge, Jeep
& VW models
– ASPs ~ $130– Operating Margins ~
20%– 1 million units = $26
million in Op. Income
Segment Data (as of
FY2011)
Revenue Contribution (% of Total)
Income Contribution (% of Total)
PND 56.7% 39.6%
Aviation 11.2% 13.4%
Marine 8.5% 12.2%
Outdoor 13.2% 24.2%
Fitness 10.4% 10.5%
Auto OEM 0% 0%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Auto OEM / Infotainment Segment
• Future Growth Strategy– Fully Integrated Infotainment console– Partnering with Panasonic and Kenwood– Reason for optimism in industry – 10%+ CAGR
• Aggressive action in FY2011
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Auto OEM / Infotainment Segment
• Future Growth Strategy– Fully Integrated Infotainment console– Partnering with Panasonic and Kenwood– Reason for optimism in industry – 10%+ CAGR
• Aggressive action in FY2011
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
“K2/Everest” Prototype 2012 CES Conference in Las Vegas
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Economic Forces against Growth
• Entrenched Competition with Dominant Market Shares
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Economic Forces against Growth
• Entrenched Competition
• Integration, Execution, and Regulatory Risks – Achieving Tier 1 Supplier status– Long sales cycles with Auto Manufacturers– Safety Issues and Concerns
• Substitutable / Disruptive Technologies– In-dash bracket + mobile tablet device
+ FREE Navigation App = Value Proposition
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Economic Forces against Growth
• Entrenched Competition
• Integration, Execution, and Regulatory Risks – Achieving Tier 1 Supplier status– Long sales cycles with Auto Manufacturers– Safety Issues and Concerns
• Substitutable / Disruptive Technologies– In-dash bracket + mobile tablet device
+ FREE Navigation App = Value Proposition
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Auto OEM / Infotainment Incremental EBITDA Gain ($Mm)
FY 2012E EBITDA -
FY 2013E EBITDA $30
FY 2014E EBITDA $44
FY 2015E EBITDA $54
Cumulative EBITDA Total $128
Erosion Gain $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
326050.373657199
26000
$87,968
$128,255
Cumulative EBITDA Gain for Infotainment Segment through FY2015E
Aviation/Marine PNDInfotainment outdoor/fitness
EBIT
DA (M
m)
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Erosion Gain $-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
326050.373657199
26000
$87,968
$128,255
Cumulative EBITDA Erosion vs Gain for All Garmin segments through FY2015E
Aviation/Marine PND Infotainment outdoor/fitness
EBIT
DA (M
m)
$136Mm EBITDA
Shortfall!
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
How does Garmin overcome the $136Mm EBITDA shortfall over the next four years?
• Innovation: Auto OEM segment– ASPs ~ $400– Operating Margins ~ 10%– 1 million vehicle units = $40M Op. Income
• Unrealistic market share expectations– $264Mm EBITDA = 6.6 million units– 3.3Mm units annually = 65% addressable market share– We project between 15%-20%
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
How does Garmin overcome the $136Mm EBITDA shortfall over the next four years?
• Innovation: Auto OEM segment– ASPs ~ $400– Operating Margins ~ 10%– 1 million vehicle units = $40M Op. Income
• Unrealistic market share expectations– $264Mm EBITDA = 6.6 million units– 3.3Mm units annually = 65% addressable market share– Aggressively projecting between 15%-20% share by 2015
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Valuation
• Sum-of-the-Parts Most Accurate Method– Different segment markets– Different competitive landscapes– Different growth rates for segments
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Valuation
• Sum-of-the-Parts Most Accurate Method– Different segment markets– Different competitive landscapes– Different growth rates for segments
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Valuation
• Sum-of-the-Parts Most Accurate Method– Different segment markets– Different competitive landscapes– Different growth rates for segments
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Marine 2.85$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Marine 2.85$
Outdoor 9.06$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Marine 2.85$
Outdoor 9.06$
Fitness 3.20$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Marine 2.85$
Outdoor 9.06$
Fitness 3.20$
Auto OEM 2.86$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
PND 6.90$
Aviation 6.15$
Marine 2.85$
Outdoor 9.06$
Fitness 3.20$
Auto OEM 2.86$
Cash 12.60$
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions to $43.50 Price Target
Total $43.62
PND 6.90$
Aviation 6.15$
Marine 2.85$
Outdoor 9.06$
Fitness 3.20$
Auto OEM 2.86$
Cash 12.60$
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Summary
1. Declining Core Business
2. Growth Opportunities Not Enough
3. Sum-of-the-Parts Valuation
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Q & A
Outline1. Declining Core
– Stock Graph
2. Growth Opportunities– Outdoor– Fitness– Aviation– Marine– Infotainment
3. Valuation– Sum of Parts– Total
Appendices
Valuation Methods
Sensitivity Analysis
Aviation Assumptions
Marine Assumptions
Outdoor/FitnessAssumptions
International
PND/InfotainmentAssumptions
Other Valuations
Pro Forma Income Statement
Segment Contribution
Summary
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
PND7x TEV/EBITDA multiple
Competitor: TomTom
AviationDCF with 0.5% terminal growth rate
Marine8.4x TEV/EBITDA multiple
Competitors: Johnson Outdoor, Raymarine (FLIR) and Lowrance
Valuation MethodsOutdoor
DCF with 1% terminal growth rate
FitnessDCF with 1.5% terminal growth rate
Auto OEM/InfotainmentDCF with 1% terminal growth rate
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Sensitivity Analysis
6.0x 7.0x 8.0xBear 5.48$ 6.39$ 7.30$ Base 5.92$ 6.90$ 7.89$
Bull 6.37$ 7.44$ 8.50$
Auto/Mobile Valuation
(in $ per share)times NTM EBITDA
0% 0.50% 1.00%
Bear 4.67$ 4.88$ 5.13$
Base 5.97$ 6.25$ 6.57$
Bull 7.45$ 7.81$ 8.21$
Aviation Valuation
(in $ per share)Terminal Growth Rate
1% 2.50% 3.50%Bear 7.71$ 8.17$ 8.30$ Base 11.61$ 12.33$ 12.51$
Bull 20.93$ 22.48$ 23.02$
Outdoor/Fitness Valuation
(in $ per share)Combined Growth Terminal Growth Rate
(in $ per share) 7.0x 8.4x 9.0x
Bear $1.82 $2.19 $2.34
Base $2.36 $2.83 $3.04Bull $2.58 $3.10 $3.32
times NTM EBITDA
Marine Valuation
0.5% 1.0% 2.0%Bear 2.23$ 2.37$ 2.68$ Base 2.70$ 2.86$ 3.25$
Bull 3.18$ 3.36$ 3.82$
Auto OEM Valuation
(in $ per share)Terminal Growth Rate
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Other Valuation Methods
Price Undervalued
Relative Valuation (8x 2012E EBITDA) 31.77$ -31.3%DCF- Implied Terminal Grow th of 0.5% 45.29$ -2.0%DCF- Using 8x 2013E EBITDA 33.93$ -26.6%P/E Valuation (12.2x 2012E EPS) 30.41$ -34.2%
DDM (3% grow th) 27.56$ -40.4%
P/Sales Valuation (2.36x 2012 Sales) 30.56$ -33.9%Average Target Price 33.00$ -28.6%
+ Cash per Share 12.60$ Price Target 45.60$ -1.3%
VALUATION METHODS
Intrinsic Prices
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
PND/Infotainment Segment Assumptions
PND BASE ASSUMPTIONS
FY 2012E FY 2013E FY 2014E FY 2015E
Market Share 38% 39.0% 40.0% 40.0%
ASP $ 117.26 $ 107.87 $ 99.24 $ 91.31 Change ASP -6.5% -8.0% -8.0% -8.0%Change Unit Cost -10.1% -10.0% -10.0% -10.0%EBIT Margin 15.0% 15.0% 14.0% 14.0%EBIT Multiple 7.0x 7.0x 7.0x 7.0x
AUTO OEM ASSUMPTIONS
Vehicle Prod Growth 2.5% 2.5% 2.5% 2.5%
USA Manf % Units 32.0% 35.0% 37.0% 40.0%Market Share 19.0% 20.0% 20.0% 25.0%Non-US Units (Mm) 0.35 0.5 0.75 1
ASP $ 130.00 $ 120.00 $ 250.00 $ 225.00 Gross Margin 30.0% 30.0% 25.0% 25.0%Operating Margin 18.0% 18.0% 10.0% 10.0%
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Outdoor/Fitness Segment Assumptions
Base Assumptions FY 2012E FY 2013E FY 2014E FY 2015E
Outdoor Unit Sales Growth 4.0% 2.5% 2.0% 2.0%
Outdoor Average Sales Price Growth -1.0% -1.0% -1.0% -1.0%
Outdoor COGS as % of Rev 38.0% 38.0% 38.0% 38.0%
Outdoor Advertising Expense as % of Gross Income 9.0% 10.0% 10.0% 10.0%
Outdoor S,G, & A Expense as % of Gross Income 22.0% 22.0% 22.0% 22.0%
Outdoor R & D Expense as % of Gross Income 8.5% 8.5% 8.5% 8.5%
Fitness Unit Sales Growth 10.0% 5.0% 3.5% 2.0%
Fitness Average Sales Price Growth -5.0% -5.0% -5.0% -5.0%
Fitness COGS as % of Rev 42.0% 45.0% 48.0% 50.0%
Fitness Advertising Expense as % of Gross Income 14.0% 14.0% 14.0% 14.0%
Fitness S,G, & A Expense as % of Gross Income 24.5% 24.5% 24.5% 24.5%
Fitness R & D Expense as % of Gross Income 16.0% 16.0% 16.0% 16.0%
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Marine Segment Assumptions
Gross Margins………..50-60%Operating Margins….25-35%Sales Growth…………Stagnant to 10%Acquisition……………Bull CaseMultiple………………..Based on Lowrance/Navico deal (8.4x forward EBITDA)
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Aviation Segment Assumptions
Assumptions Base Case Bear Case Bull Case
Growth as % of GA 1.0% 0% 2%
Growth in ASP $150 $120 $180
COGS as % of Revenue 32% 34% 30%
R&D as % of Revenue 35% 38% 32%
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Competition•Aviation: Honeywell, Rockwell-Collins, Aspen•Marine: FLIR, Navico, Johnson Outdoors•Auto: TomTom, Harman, Continental, Bosch•Fitness: Nike, TomTom, Polar, Timex
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
International Opportunities
73% 72%
64%
3% 4%8%
24% 23%
28%
0%
10%
20%
30%
40%
50%
60%
70%
80%
2008 2009 2010
Geographic Revenue Contribution
America Asia Europe
FY 2009A FY 2010A
North America 767,696$ 537,214$
Asia 45,074 65,884
Europe 246,613 234,617 Total Revenues 1,059,383$ 837,715$
GEOGRAPHIC REVENUE
Garmin Sales PresentationUniversity of Kansas
Growth Opportunities Not
EnoughValuationDeclining Core
Pro Forma Income Statement
In Thousands FY 2009A FY 2010A FY 2011E FY 2012E FY 2013E FY 2014E FY 2015EOutdoor -$ 229,562$ 339,858$ 350,029$ 355,191$ 358,672$ 362,187$
Fitness - 159,475 267,216 279,406 278,708 274,039 265,544 Marine 177,644 198,860 219,345 230,312 241,828 253,919 266,615 Automotive/Mobile 2,054,127 1,668,939 1,456,906 1,276,557 1,036,591 831,399 650,154 Infotainment - - - 83,313 170,898 437,846 537,087 Aviation 245,745 262,520 286,652 298,374 321,319 344,923 369,760 Outdoor/Fitness 468,924 170,555 - - - - -
Total Revenue 2,946,440 2,689,911 2,569,977 2,517,990 2,404,535 2,500,799 2,451,348
COGS 1,502,329 1,343,536 1,361,679 1,255,441 1,235,221 1,325,802 1,297,801 Gross Income 1,444,111 1,346,375 1,208,297 1,262,549 1,169,314 1,174,997 1,153,547 Operating Expenses 658,100 709,698 747,974 759,768 730,979 767,745 752,564 Operating Income 786,011 636,677 460,324 502,781 438,335 407,251 400,983 Net Income 703,950 584,605 453,284 387,418 414,649 387,761 382,591
INCOME STATEMENT
Declining CoreGrowth
Opportunities Not Enough
ValuationGarmin Sales Presentation
University of Kansas
Segment Contributions and Margins
Segment Data (as of FY2011)
Revenue Contribution
(% of Total)
Gross Margins
Operating Margins
Income Contribution
(% of Total)
PND 56.7% 33.6% 15.0% 39.6%
Aviation 11.2% 67.5% 27.3% 13.4%
Marine 8.5% 57.6% 26.7% 12.2%
Outdoor 13.2% 64.0% 38.7% 24.2%
Fitness 10.4% 58.0% 20.5% 10.5%
Auto OEM 0% - - 0%
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