Q4 2025 Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the Garmin Ltd. Fourth Quarter and Full Year 2025 Earnings Conference Call. [Operator Instructions] I will now hand the call over to Teri Seck, Director of Investor Relations. Please go ahead.

Good morning. We would like to welcome you to Garmin Ltd.'s Fourth Quarter and 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/stock. 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 Ltd. and its business. Any statements regarding our future financial position, revenues, segment growth rates, earnings, gross margins, operating margins, future dividends or share repurchases, market shares, product introductions, foreign currency, tariff impacts, future demand for our products and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur, and actual results could differ materially as a result of risk factors affecting Garmin.

Information concerning these risk factors is contained in our Form 10-K filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Ltd. this morning are Cliff Pemble, President and Chief Executive Officer; and Doug Boessen, Chief Financial Officer and Treasurer. At this time, I would like to turn the call over to Cliff Pemble.

Thank you, Teri, 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% to more than $2.1 billion, which is a new fourth quarter record and our first quarter to exceed $2 billion. We experienced strong double-digit revenue growth in 3 business segments, reflecting the strength of our highly diversified business model.

Gross margin was comparable to the prior year at 59.2% while operating margin expanded 60 basis points to 28.9%. 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 Garmin's 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 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 growth. 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've 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% to $2.36 billion, 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 health care payments provider, Truemed, 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 Venu 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+ 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 fenix 8 series that was launched in 2024 followed by the launch of the fenix 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 2 weeks of battery life in the 10-minute tracking mode, inReach Mini 3 Plus can be used on multi-day trips without added worry of battery charging. Several Outdoor products also received CES Innovation Awards, including the fenix 8 Pro MicroLED 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% to $257 million. During the quarter, we launched the D2 Air X15 and the D2 Mach 2, our latest aviator smartwatches 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 20, 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 chartplotters. Gross and operating margins were 55% and 21%, respectively, resulting in operating income of $251 million. We recently introduced the flagship GPSMAP 9000xsv lineup to further strengthen our offerings in the chartplotter category.

The GPSMAP 9000xsv offers stunning 4K resolution displays, 5 gigahertz WiFi networking and industry-leading sonar performance. Also during the quarter, we launched Garmin OnBoard, 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 OnBoard was selected as the winner of the 2025 DAME Design Award in the Safety and Security Award category at the recent METSTRADE 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 system 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'll begin by reviewing our fourth quarter and full year financial results, provide comments on the balance sheet, cash flow statement, taxes, our 2026 guidance. We posted revenue of $2.125 billion for the fourth quarter, representing a 17% increase year-over-year.

Gross margin was 59.2% comparable to the prior year. Operating expense as a percentage of sales was 30.3%, a 60 basis point decrease. Operating income was $614 million, 19% year-over-year increase. Operating margin was 28.9%, a 60 basis point increase from the prior year.

Our GAAP EPS was $2.73, and pro forma EPS was $2.79, a 16% increase from the prior year pro forma EPS. Looking at our full year results. We posted revenue of $7.246 billion, representing a 15% increase year-over-year. Gross margin was 58.7% comparable to the prior year.

Operating expense as a percentage of sales was 32.9%, a 50 basis point decrease. Operating income was $1.876 billion, 18% increase. Operating margin was 25.9%, a 60 basis point increase from the prior year. Our GAAP EPS was $8.59, pro forma EPS was $8.56, 16% increase from the prior year pro forma EPS.

Next, 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-digit growth in 3 of our 5 segments led by the fitness segment with 42% growth followed by marine segment with 18% growth, aviation segment with 16% growth. By geography, the Americas region achieved strong double-digit growth of 21%, resulting in quarterly revenue exceeding $1 billion for the first time.

EMEA region, APAC 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 5 segments. Our geography, we achieved 18% growth in EMEA, 40% growth in Americas and 12% growth in APAC. Looking next, operating expenses.

Fourth quarter operating expenses increased by approximately $80 million or 14%. Research and development increased by $36 million, primarily due to personnel-related expenses. SG&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 share repurchase.

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 our fourth quarter of 2025, we generated free cash flow of $430 million, a $30 million increase from the prior year quarter.

For the full year 2025, we generated free cash flow of approximately $1.4 billion, 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 of capital expenditures. The expected year-over-year increase in capital expenditures primarily due to a new manufacturing facility in Thailand, we expect to be operational in early 2027. During 2025, we paid dividends of approximately $664 million.

Also, we announced our plan to seek shareholder approval for 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. We proposed a cash dividend of $4.20, $1.05 per share per quarter. 2025, we purchased $181 million of company shares. Also, our Board of Directors recently approved a $500 million share purchase program through December 2028 to replace the remainder of the previous $300 million authorization. Our full year 2025 pro forma effective tax rate was 17.4% compared to 16.7% in the prior year.

Increase in 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 a decrease in certain U.S. tax deductions and credits. Turning next to our full year 2026 guidance. We estimate revenue approximately $7.9 billion increased approximately 9% for 2025. We expect gross margin to be approximately 58.5%, a 20 basis point lower than our 2025 gross margin due to higher product costs, partially offset by favorable segment mix. We expect an operating margin of approximately 25.5%. 2026 pro forma effective tax rate is expected to be 16% a 140 basis point decrease compared to 2025. Expected year-over-year decrease in 2026 pro forma effective tax rate, primarily due to an increase in certain U.S. tax deductions, result of certain provisions in 2025 U.S. tax legislation, which came effective 2026. This results in expected pro forma earnings per share approximately $9.35, a 9% increase over 2025 pro forma earnings per share.

This concludes our formal remarks. Jade, can you please open the line for Q&A.

[Operator Instructions] Your first question comes from the line of Joseph Cardoso from JPM.

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 I 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 the inventory. However, how are you thinking about other levers like de-specking or pricing to offset any headwinds here?

And then I have a follow-up.

Joe, I think in terms of quantifying the impact, we don't quantify individual components of our cost structure. So we won't be sharing that. Definitely, there's pressure on memory costs. There are certainly a lot of items in our overall BoM that are pricier items like displays and that kind of thing.

So we simply just manage the entire BoM to be as cost efficient as possible. There's other opportunities to make the BoMs 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 1 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.

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 tailwind 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.

Our 2025 results in fitness and outdoor was influenced heavily by wearables. And definitely, volume was the driver. There's some minor impact from ASP, but most of it was really volume driven. And as we look forward to 2026, we feel like the momentum in the market for our brand and for our products is still there.

That's why we're basically 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 between how much is new customers versus existing customers refreshing from '25 looking at '26?

Yes. 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, showing that as products go into the channel, they're selling out and customers are activating those. So we feel very positive about the customer trends and very positive about the retail landscape.

Your next question comes from the line of Erik Woodring from Morgan Stanley.

Cliff, maybe just touching on auto OEM. Back in early 2023, you first introduced the idea that this business could grow 40% annually. I think the target was scaling to $800 million of annual revenue. You didn't quite get there, but I would just love to, like, better understand from you what you learned about this business over the last 3 years, that gives you the conviction to kind of double down as we go forward?

And just to carry on that is just what details can you share with us about the next evolution of this business with Mercedes as we think about 3-year growth rates or customer diversification targets or target margins. I would just love to understand kind of what you learned and how that influences the next 3 years of this business, please? And then a follow-up.

Okay. Yes. So 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, they go through cycles and some of their assumptions are not always correct. And in that case, 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 results, 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 we have been managing this business really for 2 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 the operational capability to meet their needs.

And I think we've definitely achieved that as well. And so as we look forward, one of the adjustments we're making is to shift some of those R&D resources that we've been using to develop new business and concepts 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.

And then maybe just following up, I was kind of taken aback by your outdoor comments on 2026 or it was at least eye-catching, you're alluding to accelerating growth in new product features. I guess I was just going through the IDC data quickly. And fenix is the large majority of wearables revenue in the outdoor segment. And if history is a guide, the next fenix 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 fenix 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?

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 we'll continue to update people as we go along throughout the year.

Your next question comes from the line of Tim Long from Barclays.

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

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 a follow-up, how is -- any update on how Connect+ uptake is tracking?

So Connect+ is definitely an exciting adder to our business. We added the nutrition features I mentioned earlier. The nutrition feature really accelerated the number of free trials that we have. And 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+ in order to add more value to customers there.

Your next question comes from the line of Ben Bollin from Cleveland Research Company.

Cliff, could you talk a little bit more about Mercedes in this ramp opportunity? Is this for 2027 model years, so it commences in late '26. Is this commencing in later '27 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 broadly in other consumer electronics. Do you think that's influencing their commitments or their visibility they're providing you? Any thoughts on pull forward that you might be seeing?

That's it for me.

Yes. I think retailers really are enthused about carrying our brand. We saw a much higher level of engagement from certain retailers over the holiday season as 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.

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 MacGregor from Longbow Research.

I wanted to just start on fitness and ask you about the Truemed collaboration and how meaningful the 2026 revenue growth allowing HSA/FSA funds to be used in the purchase of select Garmin products could turn out to be.

Truemed is a way by which people can purchase the product on our website using their HSA funds. And it really is a great program, and 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 purchased the product that's available to be purchased with this program.

And it has quickly become one of our significant outlets, if you will, if you consider it a stand-alone outlet for our products.

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

We don't share our future product plans in 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 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 the IEEPA tariffs?

Yes. We probably won't share specific dollar amounts, but 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.

And I think we've come out on the other side of that in a very, very good position and if it goes away, then certainly that changes the game in terms of our cost structure and things, but there's offsetting factors, too, with the supply chain constraints and memory issues that are going on right now. So there will 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.

Your next question comes from the line of Ivan Feinseth from Tigress Financial Partners.

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 fenix 8 Pro and the expanded capabilities in the new inReach Mini 3. What kind of uptake are you seeing on the subscription services? And what percentage, for example, of people buying the fenix 8 Pro are opt-in for the LTE and satellite connectivity.

Yes. I think fenix 8 Pro is a product that's built around connectivity. So when somebody buys that product, they're definitely interested and motivated to activate the inReach service. We've already seen SOS events with the fenix 8 Pro, where people bought the product, are wearing them on adventures 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 of halo effect are you seeing on products from your acquisition last year of MYLAPS, including there was some optimism that would help with, for example, the Garmin Catalyst, and I see just launched an upgrade to the Catalyst was that -- did that have an effect and then you just launched some competitive track capabilities on the new Zumo XT3.

Yes. So MYLAPS 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 MYLAPS 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.

Your next question comes from the line of Noah Zatzkin from KeyBanc Capital Markets.

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? 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?

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-single to 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, 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 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 chartplotters and mapping all of those things are driving market share for us as well.

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

So yes, maybe just changing gears a little bit in the aviation direction. Cliff, can you talk a little bit to the recent acquisition facility you guys bought in Meta and what your goal is for that and what that can bring to the table for Garmin?

Yes. So we were really excited to find that 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 hanger 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 in aircraft modifications. So we believe over the long term that will help us reach new opportunities and more aircraft with more equipment.

And if I can read between the lines a little bit, does the facility like this give you the capability to maybe offer things on larger airplanes?

Well, it's a very large hanger. Yes, I'm excited about that.

All right. And if I may, just a quick follow-on here. Following up on -- I think it was Alyssa's 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 trying to do more stuff on commercial terms with commercial contractors broadly.

And you guys are almost exclusively commercial. Is that opening any doors 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 to push more commercial just because one would think potentially, given everything that's going on, maybe that is more opportunity for you all.

We believe that will bring more opportunities even though 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 as people look at the equipment that's available and realize that military especially could benefit from the commercial products that we offer.

Your next question comes from the line of Erik Woodring from Morgan Stanley.

Just one quick follow-up, Cliff. I would just love to know how you're thinking about kind of the ratable side of your business. Over the last 3 years, that revenue capture over time has marginally decreased to around 5%, that's really seems to be mostly part of your success in the transactional business. So I'm just wondering 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 constitute subscriptions and services. But is there a way to help us think about margins on the ratable business versus the point-in-time business?

Yes. 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 base 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% threshold yet. So we feel like we're in a good position. We have lots of ideas of things that we can offer people going forward.

And we're going to continue to build that business across every one of our segments.

At this time, there are no further questions. I will now turn the call back to Teri Seck 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. Thank you for attending. You may now disconnect.