Garmin (1989), a company review

Garmin - Deep Dive

The first surprising thing about Garmin is that it was founded in 1989! I was shocked. Not sure why - maybe because I was expecting a company that was around since the 1930’s like Samsung. But I’m enthralled at the back-story of this navigational giant, and what it has accomplished in a comparatively short time. Disclaimer - I had a Garmin Swim 2 watch, but haven’t any more. So this will be ‘objective’! More on that later.

We all know that Garmin now produces everything from smart watches to aviation navigational systems to dog trackers to sonar, and much, much more. But let’s take a look behind the scenes and try to get a feel for the company, as usual, from the start.

GAR-MIN comes from the founders’ names. GARy Burrell and MIN H Kao founded the company in 1989 in Lenexa, Kansas, originally under the original name "ProNav." Their first product was a GPS device for boaters, known as the GPS 100. It made its first appearance at the 1990 International Marine Technology Exposition, where it received an impressive 5,000 orders. The company eventually changed its name to "Garmin," obviously combining the names of its founders, and in 1991, it landed its first customer, the U.S. Army, around the first Gulf War - although some say they never had a formal military contract and that the tech was brought by personnel themselves.

It was quite hard to get reliable insight into the two individuals. Gary Burrell, the senior by 12 years, was 52 when the company was founded. Min Kao, at 40, was the ‘garsún’ and he remains on as Chairman to this day, a position Burrell held until his passing in 2019. Burrell earned his undergraduate degree in electrical engineering from Wichita State University and a master's degree from Rensselaer Polytechnic Institute. Early in his career Burrell worked for Lowrance Electronics and King Radio Corporation while in the mid 1980s, he worked for Allied Signal. Interestingly it was at King Radio that he met and actually hired Min Kao from Magnavox in 1983.

Min H. Kao was born in 1949 in Zhushan, Nantou, which is a small town in Taiwan. He graduated from the National Taiwan University, and earned a doctorate in electrical engineering (after moving to the US), from the University of Tennessee in 1977. Post graduation, Kao undertook research for NASA and the United States Army. He was subsequently a systems analyst for Teledyne Systems, an algorithm designer for Magnavox Advanced Products, and an engineering group leader for King Radio Corporation. He also worked for AlliedSignal. The pair came into contact with the then highly classified satellite positioning technology while working for their former employer on a project for the US Department of Defense.

Suffice it to say that the company was born out of an interest in engineering, specifically an interest in navigational engineering. But their ideal was to "popularize GPS and change the world," which ended up being in conflict with their former employer, who was cutting R&D budget. Hence their decision to start their own business. And the rest, as they say, is history.

The company started out by integrating cockpit navigation devices into an all-in-one design, which became enormously popular in 1993. This was the GPS 95 and the GPS technology was then gradually expanded, eventually into wearable products today, broadening its market further into aviation along with marine, automotive, outdoor, and fitness. 1998 saw NavTalk - the world’s first GPS-integrated mobile phone.

You know what they say, being in the right place at the right time is key, and a huge tailwind emerged in 2000 when the US government opened GPS data to the public. This greatly improved the precision of GPS positioning for the general civilians.

After this came a raft of new innovations including:

• StreetPilot® III, the world’s first portable navigation product with voice prompts in 2001.

• The historic Forerunner™ 201, the world's first wrist-based GPS trainer in 2003.

• Becoming the provider of in-dash navigation systems for Mercedes-Benz in 2013

• Connect IQ was released in 2014 - which was Garmin’s open platform for third party apps. This was a smart move which allowed third-party developers to create apps for Garmin products.

• In 2015 the Forerunner 225 was launched which was the company’s first running watch with wrist based heart rate monitor

• 2016 saw the release of vivomove - the smartwatch with analog hands which began the hybrid market

• Along the way Garmin was named manufacturer of the year three years in a row by the National Marine Electronics Association.

• Garmin introduced its first dive watch - the Descent Mk 1 - in 2018

• In 2019 it was the MARQ collection of smart tool watches

• Solar charging tech for smart watches arrived in 2020

• 10,000 SOS outdoor rescue records were accumulated by the Garmin Response Centre

Phew. That’s quite a bit of innovation. So, how?

I quote from their website:

“Vertical Integration — The Key to Garmin's Success.

Garmin outsources nothing. From a product's design, engineering, manufacturing, marketing, to servicing, everything is done in-house. This creates a big advantage for Garmin. Direct communications between R&D and manufacturing gives Garmin full control over the materials and parts used, and keeps the manufacturing processes optimized.

In-house mechanical engineering eliminated interferences between devices, and allowed for higher-capacity batteries without sacrificing the slimness of the products.

By integrating accelerometer, gyroscope, and magnetometer, Garmin devices are able to detect the precise direction and angle of movement, and tracks floors ascended/descended, or the types of activities taken, greatly enhancing the precision of GPS positioning.”

Quick one question poll please. Article continued below.

This is, in my opinion, definitely the case because the founders were engineers - i.e. product guys instead of sales and marketing guys (probably said with bias, by a product guy!). And I love the fact that - especially at Garmin’s scale - they have stayed true to their roots. Although, we should note again that the company has also made a number of very strategic acquisitions such as UPS Aviation Technologies in 2003, Dynastream, Navigon in 2011, iKubu in 2015, Tacx in 2019 and AeroData in 2021. Last year saw them acquiring JL Audio - focusing on marine audio tech. As we’ve seen over the last few chapters, this rolling up of tech is very common and in fact almost needed for quicker scale. It is of course very possible for cash rich companies such as Garmin.

So, what has this become? What is the result of all this innovation and M&A activity? Let’s take a look at the numbers. They are impressive. Firstly, revenue:

The highlights:

• Garmin revenue for the quarter ending June 30, 2024 was $1.507B, a 14.07% increase year-over-year.

• Garmin revenue for the twelve months ending June 30, 2024 was $5.648B, a 14.92% increase year-over-year.

• Garmin annual revenue for 2023 was $5.228B, a 7.57% increase from 2022.

• Garmin annual revenue for 2022 was $4.86B, a 2.46% decline from 2021.

• Garmin annual revenue for 2021 was $4.983B, a 19.02% increase from 2020.

Revenue for vanity, profit for sanity - so let’s take a look at EBITDA:

Again, the highlights:

(EBITDA can be defined as earnings before interest, taxes, depreciation and amortization.)

• Garmin EBITDA for the quarter ending June 30, 2024 was $0.386B, a 17.53% increase year-over-year.

• Garmin EBITDA for the twelve months ending June 30, 2024 was $1.430B, a 23.66% increase year-over-year.

• Garmin 2023 annual EBITDA was $1.27B, a 6.55% increase from 2022.

• Garmin 2022 annual EBITDA was $1.192B, a 13.23% decline from 2021.

• Garmin 2021 annual EBITDA was $1.373B, a 16.3% increase from 2020.

These figures are, in anyone’s language, seriously impressive. (Note - all for analysis purposes only - never ever trading advice)

So, navigational upstart to giant status. And prudently run, from the top. This is a powerful combination. And I love that it’s product focused, and not marketing mumbo jumbo again. Do you see a trend emerging between these stories? Bad copy can sell excellent products. But the best copy in the world won’t create pull demand for bad products, without market fit. Garmin obviously solves problems. It is their raison d‘etre. They obsess over it. Simple, isn’t it?!? Truth be known, they were in a great space at a great time, when outdoor tech was in high demand. But even that wasn’t an accident. They are in every sense pioneers. So, why have I moved to Apple watch? Garmin’s strap sucked on the SWIM 2. Consumers are fickle….

Amazon strategy update

Last week I mentioned that we were working with a couple of tools to gain a better category insight on Amazon. Well, I’ve been introduced to another one, which has its own unique insights. This one is named Smart Scout (again you can Google it - just to prove we’ve no affiliate interests!)

This subscription tech has 2 particularly interesting tools.

1. Subcategories. This, I think, is hugely informative. It will basically breakdown any main Amazon into subcategories, take hiking and camping for example:

2. Brands

You can take a deep dive into various brand performances in categories and subcategories. What was a complete shock was that I had never heard of some of the best performing brands in the outdoors space on Amazon. And I regard myself to be pretty up to date. And the figures they’re doing are very impressive.

This tool can also give you insights into data such as how much of a category’s sales are generated by Amazon itself, and how many direct from China sellers are in a category.

As you can imagine. useful data for anyone planning to seek out product opportunities. More on this next week.