Good day, ladies and gentlemen, and welcome to the Garmin Limited Second Quarter 2015 Earnings Call. At this time, all participants are in a listen-only model. Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this conference may be recorded. I would like to introduce your host for today's conference, Kerri Thurston, Director of Investor Relations. Ma'am, you may begin.

Thank you. Good morning, everyone. We'd like to welcome you to Garmin Limited's Second Quarter 2015 earnings call. Please note that the earnings press release and the related slides are available at Garmin's Investor Relations site on the Internet, at www.garmin.com/stock. An archive of the webcast and the related transcript will also be via our website. This earnings call includes projections and other forward-looking statements regarding Garmin Limited and its business. Any statements regarding our future financial position, revenues, earnings, market share, product introductions, future demand for our products 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, which is filed with the SEC. Presenting on behalf of Garmin Limited this morning are Cliff Pemble, President and CEO; and Doug Boessen, CFO and Treasurer. At this time, I'll turn the call over to Cliff.

Thank you, Kerri, and good morning, everyone. As previously announced, Garmin reported second quarter revenue which was down only slightly year-over-year, despite significant downward pressure caused by a stronger U.S. dollar. In the quarter, we shipped over 4 million units, representing an 8% increase over the prior year. Unfavorable currency movements continue to impact many global companies, and we are no exception. We estimate that unfavorable currency movements reduced revenue by approximately $59 million in the quarter, which affected revenue growth, margins and EPS. Note that our pro forma calculations do not account for these factors, but we offer this commentary to highlight the underlying strength of our business. Revenue from aviation, fitness, marine and outdoor grew 11% on a combined basis. These segments contributed 61% of the total revenue and 73% of the operating profit in the second quarter. Gross margin was 54% and operating margin came in at 22%. The reduction in margins from the prior year reflects a combination of factors, including downward pressure from unfavorable currency movements, a more competitive pricing environment and continued investments in advertising and R&D. These factors, combined with a higher effective tax rate, resulted in GAAP and pro forma EPS of $0.72 in the quarter. Doug will discuss our financial results in greater detail in a few minutes, but first I'll provide a few comments on each business segment. Beginning with the fitness segment, revenue grew 5% on a year-over-year basis, which is slower than both first quarter and the year-ago quarter. Looking closer, prior year growth reflected significant sell-in activity due to new product launches, which were not repeated in 2015. Additionally, as I mentioned last time, currency headwinds disproportionately impact fitness and outdoor due to the geographical revenue mix. In summary, while the growth rate slowed in the second…

Our first question comes from Brad Erickson of Pacific Crest. Your line is open.

Hi. Thanks for taking my questions. First, I just wanted to touch on the fitness in the quarter. Can you kind of talk about how much of it was related to sort of delays in new product launches as opposed to the drivers you called out around competition and currency, if those were – just curious to know if those were also meaningful? And then, secondarily, just given that – it seems like there is some channel fill coming, talk about sort of the sequential margin profile we should expect here in fitness heading into Q3?

Yeah. So in terms of any other factors impacting fitness, there really wasn't any material impact due to product delays in the quarter. In terms of what we can expect going forward, we would expect the Q3 margin to come up some and then Q4 would be lower sequentially in order to accommodate the year-end promotions and sales.

Thank you.

Thanks, Brad.

Thank you. Our next question comes from Charlie Anderson of Dougherty & Company. Your line is open. Charlie Lowell Anderson - Dougherty & Co. LLC: Yeah. Thanks for taking my questions. If we look at fitness and the operating income there, it's roughly equivalent to where it was before you had the activity tracker business. So it gives the appearance that that business is breaking even or maybe a little bit worse. So I wonder if you could lay out for us what your long-term target operating margin is for that category and what kind of revenue levels we need to get to, to get there.

Yeah. I think, Charlie, it's probably more complicated than just looking at the differences between what it was before trackers and what it was after. Keep in mind that we are facing a significant headwind due to the currency issues. So that's a major factor as well. The tracker product line, while it's lower ASP, it's still what we feel is attractive profit. So I don't think it's as easy as just looking at before and after. Charlie Lowell Anderson - Dougherty & Co. LLC: Got it. And then, in the automobile segment, I noticed the margin was not as high as it typically is in Q2 in terms of the flow-through from Q1. Was that mostly in FX this year or was there anything changing on pricing in the PND market?

I think pricing is generally stable year-over-year. We mentioned that the deferred revenue impact, we're recognizing lower levels of deferred revenue this year versus what we were last year. So that definitely has an impact. Charlie Lowell Anderson - Dougherty & Co. LLC: Thanks so much.

All right. Thanks.

Thank you. Our next question comes from Simona Jankowski of Goldman Sachs. Your line is open. Simona K. Jankowski - Goldman Sachs & Co.: Hi. Thanks so much. I just wanted to dig into the expected reacceleration of the fitness business in the second half. Obviously, if you're maintaining the full-year expectation of 25% growth there, it implies that Q4 is going to be up well above normal seasonality. I just wanted to understand how much of that expectation rests on upcoming new products you've got in the pipeline versus any other expectations relative to competition or pricing or channel fill or anything else you might highlight.

Well, I think, there is a slightly different dynamic, Simona, in the fitness market, with the tracker market being more driven in the consumer space whereas some of our traditional business was – had a different dynamic around specialty. But that said, you know, we do expect that there will be a stronger level of seasonality in the back half due to the promotions in the fourth quarter. And we do have some additional product launches that are coming into the back half of the year, but for the most part our product line is set for the upcoming season. Simona K. Jankowski - Goldman Sachs & Co.: And just in terms of that expectation of the stronger seasonality, is that based on commitments you're getting already from the retailers in the channel more broadly or is that just your expectation based on your history of how the market responds to increased advertising?

I think it's based on – some on the commitments and also some on our experience in the PND market which was more consumer-driven and driven in the back half of the year with promotions. Simona K. Jankowski - Goldman Sachs & Co.: Great. And then just a longer term question on the fitness category, so obviously the market has been very dynamic and we've seen a lot of movement in terms of the competitive landscape as well. And one of the trends that we're observing is that there does seem to be a significant shift towards the value of online communities or kind of a social network around fitness as well as mobile apps. Those aren't necessarily some of the areas that I think Garmin have historically been very, very focused on. But just curious on how much investment you're increasing in those areas or do you even view them as something that is important to focus more on going forward?

Well, we've been focused on that area for a long time and we haven't talked a lot about our online community, but Garmin Connect is very strong and we have millions of users associated with that. We are increasing our investment on top of what we have already done and we're continuing to roll out updates and new features in Garmin Connect and Garmin Connect Mobile. Simona K. Jankowski - Goldman Sachs & Co.: Okay, thank you.

All right. Thanks, Simona.

Thank you. Our next question comes from Mark Sue of RBC Capital Markets. Your line is open.

Thank you. At a high level, the investor worries that in some technology markets we've often seen situations where the winner takes all and it's evident in your fitness segment where your nearest competitor is growing at 180%; you grew 5%. So what are some of the thoughts to kind of leapfrog the competitor to kind of keep them at bay? And it doesn't seem to be a product or technology issue, rather a brand issue, so maybe some of the things you're doing to turn that around so that you could resonate more with consumers?

Yeah, thanks Mark. I think in terms of where we stand in the market today, we've a fairly new entry to the market in the past year and we quickly have taken the number two position on a global basis, some countries stronger than others. So we feel so far we've made good progress. In terms of where we stand with our product line, I think one of the key areas where we're focusing is increasing the number of sensors that are in our products, that's an area we feel like we still have some work to do. But I think once we get there, our product line should be well-positioned to compete. In terms of whether or not we have a brand issue, I think that's why we are choosing to invest in more advertising. We are new to the category, so we're letting people know that we have great solutions in the category and we do see movement based on what we've been doing so far.

One road traffic corollary (22:31) related to your action cameras, we – Garmin has been at this for a while. Your market share has not really moved. When do you decide we've tried, so – but we've made little efforts, so it's time to pull the plug? Or is this something where you – it's very important to Garmin considering you have a lot of different things going on at the moment, so maybe the value of focus?

Yeah, I think that Garmin's strength has been diversity in our product lines and in our market segments that we've served over the years and we're able to leverage our technology and our competence across multiple segments and multiple product categories. So we view the action camera segment as a similar approach to what we've used in the past in growing our business. In terms of what we're doing in action cameras, I think the release of our new product has been well received, better received in terms of the update to the existing VIRB. And we're taking a long view on the market. We believe we speak to a certain customer base out there and so our products are focusing on addressing that customer base.

Okay, that's helpful. Thank you, and all the best.

Thanks, Mark.

Thank you. Our next question comes from Ben Bollin of Cleveland Research. Your line is open.

Good morning, everyone. Thanks for taking the call. First question, when you look at the increased advertising initiatives, could you tell us a little bit about what you're doing and how you're approaching it versus how you've spent that money in the past and any specifics you could provide on how many points of sale you have today, in-store kiosks, anything along those lines would be great. And then I have a follow-up.

Okay. So in terms of what we're doing today, we've shifted, like many companies, towards – more of our dollars towards online and digital, so we have quite a bit of activity going on in the online space. We've also used some out-of-home things in airports and transportation centers where people are gathering and a larger portion of TV than what we've done in the past as well, so those are kind of the states if you will of what we're doing in the program.

Okay. The second question, when you look at the existing portfolio today, do you have any thoughts on what is needed to grow revenue and profitability into the future and what I mean by that, can you do it with the existing line-up where you keep refreshing existing skews or does it require that you continue to expand into new product areas and completely new items? Thank you.

Yeah, if you look at what we've done over the years, Ben, we've never completely relied on what we do today as our growth strategy for the future. While we serve a broad range of market segments, each one has its own dynamic. The reality in today's world is that any customer is looking for new innovation for more compelling features and utility and so we always have a plan to refresh and improve our product lines over time and we're constantly looking for new categories that we can expand into in order to grow our revenue. If you look at where we are today in terms of our revenue, yes, it's basically flat or a little bit down year-over-year but a big portion of that is the currency headwinds and definitely had we not invested in the past in order to get where we are today the situation would be much worse. So we believe in innovation to drive our growth in the future.

Thank you. Our next question comes from Jeremy David of Citigroup. Your line is open.

Hi, good morning guys. Just want to go back to the gross margin in fitness, the decline about 10 points year-over-year. Could you give us kind of the breakdown of the impact of FX versus a mix shift within the fitness portfolio versus your promotional pricing? And then on the pricing pressure in fitness that you've mentioned, is it coming just from fitness trackers or are you seeing it in products where maybe you're trying to – like GPS fitness watches where there are more offerings and more OEMs offering different products there?

Doug? Douglas G. Boessen - Chief Financial Officer & Treasurer: Hi Jeremy, this is Doug. Regarding the fitness gross margin change year-over-year, about 400 basis points of that change related to product mix and competitive pricing dynamics. So with that, we have a larger percentage of our fitness business in activity trackers year-over-year as well as we have some competitive pricing dynamics going on in that area. And the rest of it is primarily FX related in the fitness.

Okay. On the pricing dynamics, I mean I think as early as Q4 last year, you said you would be more aggressive in the fitness tracker category and anywhere this past (27:35) holiday season. And the (27:39) pricing continued to be pretty low in Q1 and Q2, so I haven't really seen a big change from Q1 to Q2. What – your gross margin at the company level for the fitness segment did change quite a bit quarter to quarter, what really changed because I didn't pick it up based on kind of the retail checks I was doing.

I think part of your earlier question was whether or not we're seeing pressure across the entire line and maybe that relates to your current question as well, but there is more competitive pressure across the entire line-up and products particularly in running, and so we've seen some impact from those areas as well. Does that answer your question?

Yes, it does. Thank you so much.

Thank you. Our next question comes from Robert Spingarn of Credit Suisse. Your line is open. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Good morning.

Good morning. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Maybe we could change lanes a bit here. I have a couple questions on aviation and then on marine.

Okay. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): So Cliff, if we could drill down into aviation a bit, the 5% net growth, I think you called out that's an after-market-driven number, could we parse out the after-market growth versus the original equipment?

Yeah, we don't break it out by category, Robert. So, we don't have those figures that we can share with you. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Well, just maybe qualitatively or directionally, obviously the OE side is weak. Can you – do you have any line of sight to the bottom on either fixed wing or helicopter?

Yeah, I think the aviation, and particularly in the OEM space, is kind of a long game if you will. And we don't really see shock effects going on in the market like what took the market down so low back in 2008 and 2009. But we feel like this is probably a seasonal soft patch and would expect as there is new aircraft deliveries, and as the market continues to recover from the effects of the financial crisis, that the market will improve. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Yeah, but Cliff, any timing on this? I mean, it's like a falling knife here on helicopters and with the oil and gas, the commercial helicopter side, and then general aviation is not a pretty picture here, bizjet, light aircraft. Any more color you can add there, are you seeing is some pickup or any conversations with the OEMs that are encouraging?

Well, I think others in the industry probably have better clarity than we do, because they forecast engines and airframes and all those kind of things. But your comments on oil is definitely true. That's impacted helicopters directly and there's probably some indirect effect on aircraft as well. But again, aviation has kind of a long cycle and so I would not expect it would pop back in a matter of a quarter or quarters, but it might be a year or two to kind of see the market change again. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Okay. And then just switching over to marine, a very successful product introduction here, strong comps in the quarter. How do you expect that to change or adjust if at all, just given the fact that couple of your peers there are also introducing new products with some similar feature sets yet – that they hadn't quite shipped yet in the quarter? I'm thinking of Furuno and Raymarine, just some of their latest products. Does that change the dynamic going forward here, or can you sustain this kind of growth?

I don't see those two particular examples as being a change driver for us. I think what's more likely to impact us in the future is that we're comping against Fusion in Q3, and so the stronger revenue comps that we had in Q1 and Q2 will go away in Q3. And then keep in mind that Q3 is seasonally weak, weaker than Q2. And so consequently, the level of boating activity and the level of sales will go down. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): How about just relative share, even taking Fusion out and just thinking organically?

Yeah, in terms of market share, the marine market is highly fragmented. There is quite a few players with a lower amount of overall market share position. In terms of brand share we're the number one brand in the market, although another competitor which has a lot of house brands is really the number one player in the overall market. But the market size is limited, probably around $1 billion plus and so we all kind of split that pie up. Robert M. Spingarn - Credit Suisse Securities (USA) LLC (Broker): Okay. Fair enough. Thanks, Cliff.

All right, thanks.

Thank you. Our next question comes from James Faucette of Morgan Stanley. Your line is open. James E. Faucette - Morgan Stanley & Co. LLC: Hi, thanks. Just wanted to ask a couple of follow-up questions, just digging in on a couple topics already addressed. First, can you – on the fitness side, you've talked a lot about currency and competitive impacts there. Can you help differentiate a little bit or give a little color on how those elements were impacting kind of the newer fitness tracker products versus more of the legacy watch products et cetera, because in a lot of ways those can sometimes seem like different markets? And then second question is following up on an earlier question, how long would you expect that you would continue to drive the investment, both from an advertising and an R&D perspective, before we should start to think about or you would start to think about curtailing that in the fitness segment because it does require a lot of investment, and there is a well-established leader in different parts of that? And then kind of my last question was just I guess related to that, when could we or should we expect to see improved product, not just branding, cross-product branding awareness but also cross-product integration and functionality that could help improve the ecosystem perception? Thanks.

Yeah, so in terms of product mix and the number of products or the dynamic of newer products versus existing products, this is typical of almost every kind of product company where as new products are introduced they come in at higher prices with new features and new utility and the older products are discounted. And we're definitely seeing that in our product line, not only in trackers, this is across almost every kind of product that Garmin does and so that's just the normal cadence of how the product lifecycle works. You asked about how long we would continue to invest in R&D and particularly in a mode of increasing our investment right now. The market is growing rapidly and so consequently, the opportunity is there and so we feel like it's the right time to invest in those things. Historically, we've always scaled our investments according to the market opportunity. So we would continue to do that in this market as well. And in terms of cross-product functionality I'm not quite sure I understand exactly what your question is. Maybe you could elaborate a little bit more on that? James E. Faucette - Morgan Stanley & Co. LLC: Yeah sure, sorry. Sorry, I wasn't clear about that. So mainly I was just asking is that you talked about building the Garmin Connect site but I'm thinking more along the lines of improving even more the functionality between watches or fitness bands and cameras and other products so that users can see the value to being bought into a Garmin ecosystem?

Well, actually that's been the strategy of our wearables since the beginning. We've tied our wearable connectivity to our marine products for example. We have connectivity with our aviation products. Our watches last year when we introduced the VIRB camera can serve as remotes for the VIRB. So we've absolutely tried to leverage our overall product ecosystem with our wearables and we will continue to do that in the future with exciting new features.

Thank you. Our next question comes from Tavis McCourt of Raymond James. Your line is open. Tavis C. McCourt - Raymond James & Associates, Inc.: Hi, Cliff and Doug. Couple questions. First, I wondered if you could talk, if not exact numbers maybe qualitatively, in terms of the outdoor business. What percentage of that should we think about as being wearables at this point versus handheld? And then on the auto segment, the operating margins are down quite a bit year-over-year although still well into the double digits. I'm just wondering as we look out the next year or two in that segment, if it were to continue to decline at what point do you put your foot in the sand and kind of say we're not willing to run this segment below a certain operating margin target? Thanks.

Yeah, so in terms of category breakout in outdoor, we don't break out by product category. So we're unable to share that. In terms of auto, in terms of our operating margin trends again it's similar to what I just mentioned where we continue to evaluate each business and we participate based on profitability and opportunity. While it's true that the operating income has come down in auto, there's a lot of dynamics behind that including the deferred revenue piece, which is a headwind year-over-year as well as the currency impact, which is another factor there. But again, we've appropriately scaled our investment there to date and we would anticipate continuing to do that going forward in order to be a profitable segment for Garmin. Tavis C. McCourt - Raymond James & Associates, Inc.: Great. Thanks very much.

Thank you.

Thank you. Our next question comes from Brad Erickson of Pacific Crest. Your line is open.

Hi. Thanks. Just had a follow-up or two here. First just back to the fitness business. Historically, you've talked about market share expectations. Seemed like you exited the year last year call it around 10% in terms of the tracker market. Can you talk about any formal expectations you have for growth here market-share-wise in the fitness market in 2016 – sorry, in 2015?

Yeah, so I think your comments on the back half of last year is pretty close to our estimates, we would probably estimate we were in the 10% to 15% range in trackers. I think the fitness market though is – there is a broad range of products, so we're much stronger, very strong in the running category, and of course, new entries in the trackers but our goal is to grow that market share through 2015 in the trackers space. I won't throw out what our targets are but we do – with our advertising investment and our R&D activities, we do have an ambitious goal to grow in the tracker market.

Great. And then just around the spending, I think coming into this year, people were generally pretty aware of some of the competitors out there that were looming in clearly a competitive market and Garmin wanting to really establish a brand and spend in the areas of marketing and advertising. Now, we're seeing this higher level of expense for the year in the forecast. Can you talk about kind of your confidence level in this new forecast and how fully baked that is at this point?

Yeah, so you know, we typically at the halfway point of the year reassess everything based on having half of the year behind us. And like you say, looking at the dynamics in the fitness market particularly, which are rapidly changing, we felt like now is the time to increase the investment around the advertising because of the growth in the market and the opportunity. So we factored in everything that we felt we needed to do to achieve our goals and so our new forecast reflects that, and at this point, we feel confident in that. Of course, things change over time and there's economic as well as competitive dynamics that take place but at this moment, we feel confident in our outlook.

Great. Thanks very much.

Thanks, Brad.

Thank you. I'm showing no further questions. I would like to turn the call back to Kerri Thurston for closing remarks.

Thanks, Amanda. Thanks everyone for joining us today. Doug and I will be out on the road over the next few weeks and look forward to seeing many of you in person. Thanks.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.