Garmin Ltd. (GRMN) Q2 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Garmin Ltd. Second Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference might be recorded. I would now like to turn the conference over to your host, Ms. Teri Seck. Ma’am?

Good morning. We would like to welcome you to Garmin Ltd. second quarter 2020 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/doc. An archive of the webcast and related transcripts will also be available on our website. This earnings call includes projections and other forward-looking statements regarding Garmin Ltd. and its business. Any statements regarding our future financial position, revenues, earnings, gross margins, operating margins, future dividends, market shares, product introductions, future demand for our products and plans and objectives and the future impact of actual or potential cyber attacks 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 has been contained in our Form 10-K and second quarter 2020 Form 10-Q filed with the Securities and Exchange Commission. In particular, there is significant uncertainty about the duration and impact of the COVID-19 pandemic. This means that results could change at any time, and any statement about the impact of COVID-19 on the company’s business results and outlook is the best estimate based on the information available as of today’s date. 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 reported strong second quarter financial results during a period of extreme uncertainty created by the COVID-19 pandemic. As reported last time, the onset of the coronavirus pandemic and measures taken to control the spread of the virus had a significant impact on the economy, on retailers and our consumers. The month of April was particularly challenging for every business, including Garmin. However, conditions steadily improved, and we ended the quarter with significant growth momentum. Consolidated revenue came in at $870 million, down only 9% on a year-over-year basis. We experienced strong growth from certain online channels, including garmin.com, which partially offset weakness from retailers who were disrupted during the early phases of the pandemic. We also delivered strong profitability. Gross margin was 59.3%. Operating margin was 21.7%, with operating income of $188 million for the quarter. This resulted in GAAP EPS of $0.96 and pro forma EPS of $0.91 for the quarter. Doug will provide additional financial details in a moment, but first, I’d like to make a few remarks on the performance of our business segments. Starting with the fitness segment, revenue increased 17%, driven by strong consumer interest in health and fitness. Sales of advanced wearables and cycling products were very strong in the quarter. Gross and operating margins were 53% and 24%, respectively. We recently acquired Firstbeat Analytics, our long time partner and leading provider of physiological analytics technology for health, fitness and athletic performance. This acquisition will help us achieve even greater levels of innovation that will benefit consumers. Looking forward, we expect that the interest in health and fitness will remain very strong. We are ready to seize this opportunity with a great lineup of new products with more new products on the way. Looking next at marine. Revenue increased 4% as boating and fishing became popular pastimes during the pandemic. Many boat builders were idle during the quarter, which tempered our growth, but retail sales were very strong, led by chartplotters and Panoptix sonars. Gross and operating margins were 59% and 28%, respectively. During the quarter, we launched quatix solar, our first marine smartwatch featuring solar charging technology. Looking forward, interest in our marine products remains very strong. We anticipate an extended marine season this year as boaters maximize their time on the water and boat builders work through production backlogs. Additionally, we intend to leverage our compelling product lineup to capture additional market share. Turning next to the outdoor segment. Revenue decreased 2%. Weakness in traditional handheld categories was mostly offset by growth in adventure watches. Gross margin and operating margin were 65% and 33%, respectively. We recently incorporated solar charging technology into the fenix 6, the 6S, the Instinct line and tactix Delta smartwatches. The Instinct Solar sets a new standard in low power technology by achieving unlimited smartwatch operation using only the energy harvested from the sun. We expect that our solar harvesting technology will be a significant differentiator for us in the smartwatch market. Interest in adventure and outdoor activity remains very strong. We are ready to seize this opportunity with a great lineup of recently introduced products with more new products and new categories on the way. Turning next to the aviation segment. Revenue decreased 31% as the pandemic created economic uncertainty that negatively impacted OEM partners and retrofit activity. In addition, sales of ADS-B products rapidly declined, as we expected, after the U.S. mandate passed and the market matured. Gross and operating margins were 73% and 12%, respectively. During the quarter, Autoland was certified, marking the beginning of a new era for general aviation safety technology. Autoland is already available and flying on the Piper M600 and Daher TBM 940, and additional certifications are on the way. For the remainder of the year, we anticipate aviation will continue to face challenging headwinds. However, we remain confident in the long-term outlook for this segment as interest in general aviation remains high and we are prepared with a strong lineup of products for every aircraft application. In addition, we believe that advanced safety technologies such as Autoland will make general aviation accessible to more people, which in turn is expected to grow the market. Finally, for the auto segment, revenue decreased 46% as automakers idled their factories and driving activity decreased significantly. Gross margin was 47%, with an operating loss of $10 million in the quarter, driven by the investment we are making to complete several significant programs. Specialty RV and truck categories were a bright spot during the quarter. We launched several products, including new diesel navigators with oversized displays and enhanced routing features and our new RV 890 navigator designed specifically for the needs of the RV and camping lifestyle. Looking forward, we anticipate that revenue from OEM products will grow in the back half of the year as we complete several OEM programs. Additionally, we continue to invest in specialty products and expect to enter new market verticals soon. And finally, most of you are aware of the recent cyber attack that led to a network outage affecting much of our website and consumer-facing applications. We immediately assessed the nature of the attack and started remediation efforts. We have no indication that any customer data was accessed, lost or stolen. Additionally, the functionality of Garmin products was not affected other than the ability to access some online services. Critical affected business systems have been restored, and we expect to restore remaining systems in the coming days. We appreciate the patience and kind words of support we’ve received from customers and friends during this challenge. So that concludes my remarks. Next, Doug will walk us through additional details on financial results. Doug?

Thanks, Cliff. Good morning, everyone. I’ll begin by reviewing our second quarter financial results, move to comments on the balance sheet, cash flow statement and taxes. We posted revenue of $870 million for the second quarter, representing a 9% decrease year-over-year. Gross margin was 59.3%, 100 basis point decrease in the prior year. Operating expense as a percentage of sales was 37.6%, a 220 basis point increase from the prior year. Operating income was $188 million, a 26% decrease year-over-year. Operating margin was 21.7%, a 510 basis point decrease from the prior year. Our GAAP EPS was $0.96, pro forma EPS was $0.91. Next, we look at our second quarter revenue by segment. We achieved revenue of $870 million with two of our five segments posting growth, led by the fitness segment with strong revenue growth of 17%. As seen in the charts, we have a diversified business model from both a segment and geography perspective. Looking at our year-to-date revenue for the first six months of 2020. Our consolidated revenue was flat to the prior year, with three of our segments posting growth, led by fitness with 20% growth; marine, with 12% growth. Our geography, EMEA is up 6%; Americas is flat compared to the prior year. Looking next, operating expenses. Our second quarter operating expenses increased by $8 million or 2%. Research and development increased $17 million year-over-year, primarily due to investments in engineering resources. Advertising expenses decreased approximately $12 million from the prior year quarter due to lower media spend. SG&A increased $3 million compared to the prior year quarter, primarily due to increases in personnel-related expenses. A few highlights on the balance sheet, cash flow statement and taxes. We ended the quarter with cash and marketable securities of approximately $2.7 billion and no debt. Accounts receivable increased sequentially to $524 million, but decreased year-over-year in line with second quarter sales. Inventory balance increased on both a sequential year-over-year basis due to our strategy to increase data supply, sport increasingly diversified product lines, timing of product launches, the transition to a higher percentage of ocean shipments compared to air. In the second quarter of 2020, we generated free cash flow of $142 million, $50 million increase from the prior quarter. In the second quarter 2020, we report an effective tax rate of 6.8%. Excluding the impact of a $14 million income tax benefit due to the release of uncertain tax position reserves associated with the 2014 intercompany restructuring, our pro forma effective tax rate was 14% compared to 18.9% in the prior year quarter. The decrease is primarily due to intellectual property migration transaction. This concludes our formal remarks. May, can you please open the line for Q&A?

[Operator Instructions] We have our first question from the line of Paul Chung [JPMorgan]. Your line is now open.

Hi. Thanks. Thanks for taking my questions. So just on aviation. You mentioned a long recovery here, and you do have tough comps on ADS-B to end the year. But do you think we’ve kind of troughed in 2Q in your view? And are you seeing any kind of uptick in demand in July? And then on the margins, it looks like your gross margins are pretty steady from the last quarter. What can you do kind of on the OpEx side in the near term to kind of shore up profitability there? And any onetime items kind of hitting aviation or mostly just lower revenue impact?

Yes. Good morning, Paul. Definitely, we’ve seen improvements in the sales across all the segments from April, including aviation. As I mentioned, it does take a little more time for that market to recover, but we’re very optimistic about the future there. And definitely, those trends, I think, are continuing as we move into July, and we expect it to do so throughout the end of the year. In terms of margins, particularly the operating margin side of things, we do have – because of the lower volumes, we do have some additional overhead expenses that are being absorbed in the business. But as trends continue to improve over time, we would expect those to wash out.

And then how big is the Autoland opportunity in your view and in kind of respect of impact on growth in margins?

Yes. I think as a feature or as a category, it’s an incremental adder. But what we see is that Autoland is a unique technology, differentiating for us that helps our systems stand out compared to others in the market. And so consequently, we see it as a significant differentiator for our entire cockpit system line.

Okay. And then my last question, just on Tacx. What was the contribution in the quarter? And did you see some uptick in demand kind of given shelter-in-places around the globe? And any update on how the business is kind of scaling in the U.S.? Thank you.

Yes, we’re including Tacx now within what we call the cycling category. So the results that we talked about, the increased interest in cycling is definitely Tacx is a part of that as well as our cycling head units. There was a lot of interest in these products and continues to be with a lot of people focusing on indoor activities, and the backlogs are very strong. So we’re working to catch up with demand.

Thank you.

Thank you.

Next question is from the line of Nik Todorov [Longbow Research]. Your line is now open.

Yes. Thanks, thanks for taking the question. Hi, guys and congrats on great execution and results. Cliff, can you talk about the sustainability of – especially on the consumer-facing markets, the fitness, the outdoors and maybe a little bit in the marine? Obviously, I think a lot of investors have expected the stimulus in North America and in part of Europe has drove a lot of money in the pockets of the consumers and that has helped spending in discretionary items. But how do you see that demand sustaining into the second half? And any kind of color you can give us on how you’re thinking about the September quarter directionally? I know you’re not guiding, but typically, seasonally has been down. Now obviously, it’s a much more unique situation. So how are you thinking of sequential performance in the September quarter overall? That will be helpful.

Yes. So the stimulus, I suppose, when people have more money, they do spend it, which is the intent of the program. I would say, though, that as we look forward, and there’s uncertainty around what stimulus or how much it would be, we still see a lot of interest from retailers and excitement around things coming up in the second half. So we believe that with their indications, plus what we’re hearing back from consumers that the product categories that we’re in are the ones where people will spend their money. In terms of September, we don’t comment in terms of forward guidance. As I mentioned in my remarks, we did exit the quarter with strong momentum, and we’re continuing to experience that. And so we’re focusing on making sure that we can fill all of demand for the quarter and also for the back half of the year.

Okay. And on the fitness gross margin, very strong given, I believe, you had a little bit more – you were a little bit more aggressive on the discounting to drive consumer demand, which actually paid-off. But when you talked about strength in cycling, are you guys seeing also, in addition to Tacx, maybe a little bit more contribution from your traditional cycling outdoor products, and that is a strong contributor to that gross margin, essentially staying flat year-over-year? Is that a right way to think about it?

Well, there’s always product mix that comes into the overall gross margin for a segment. We definitely saw increased sales of Tacx, which we’ve remarked in the past is at about at category average or slightly below. And then we also saw strong sales of other products, which are category average or above. So in general, it – the extra products and Tacx certainly didn’t hurt us. And the promotional activities were targeted and the mix of sales between retailers and online was such that we came out very well in the quarter.

Okay. And then moving to free cash flow. I mean, I think this is the second strongest free cash flow in the second quarter in a while. How should we think about the full year free cash flow or any thoughts on resuming the buyback?

Yes. So as it relates to free cash flow in Q2, we saw there is some year-over-year improvement in some working capital items there. So as we saw the receivables receipts were higher year-over-year just due to the lower demand that we had in Q2 being lower from that standpoint. At this point in time, we’re not providing any forward-looking guidance for free cash flow. And at this point in time, we do not have plans for any stock buyback.

Okay. And last question for me. I think, Cliff, you mentioned that you expect some new verticals to enter in auto. I wonder if that’s on the OEM side. I know you have a lot of opportunities there or on the PND side. Any kind of – what makes you most excited? I know you’re generally not commenting on any future products, but any kind of hints will be helpful.

Yes. I think we’re moving fastest in innovative new products and new verticals on the consumer side across our business. And again, I get excited about all of the products that we’re doing across the business. I think we have some great things coming. And I think we’re very excited about those.

Okay. Got it. Thank you, guys. Good luck.

Thanks, Nik.

Next question is from the line of Ben Bollin [Cleveland Research]. Your line is now open.

Good morning, everyone. Thanks. Thanks for taking the questions. I wanted to start, could you provide a little bit of color about where you think channel inventory is? Cliff, you mentioned in the marine segment, the boat builders were idle and maybe constrained some supply or demand in the quarter. Could you address what you’re seeing there? And then also in the broader wearables and any other categories where you’re seeing maybe an imbalance in channel inventory out there.

Yes. So I would say, in general, at the channel level, we think things are in balance or even possibly lean at this point. We watch very closely the real-time pull-through of our products through registrations that we have. And so consequently, we can definitely see the trends in the retail side of things and compare that to what we see in the channel and what we’re shipping into the channel. So we’re seeing a lot of strength on the consumer side of things. It’s definitely not backing up in the channel. And then if anything, it’s a little lean. From the boat builder side, they’re not necessarily a source of inventory. They take products as they need them. But on the retail side of marine, sales have been very strong, and we’ve been working hard with our retail partners on the marine side to keep up with the demand.

Okay. Another question I had, Doug, could you share any updates on where you are from a factory perspective? I believe there’s some new facilities associated with Tacx. And then you’ve talked a little bit about this BMW Tier 1 facility. Where are you on the ramp in these facilities? Any thoughts on the timing and the capital outlay associated with those through the course of this year into next year?

Yes. So basically, I would say that, first, both of those facilities you mentioned, the Tacx manufacturing facility that we have in Europe as well as the OEM manufacturing facility in Europe, both of those are on plan. So we both – we expect both of those to be up and running here later in the year. And actually, things are going well from those, and those will be basically – especially from the Tacx standpoint, that really helped us out because of the increased demand we’re seeing on our Tacx products to meet some of that demand. At this point in time, I’m not providing any full forward-looking guidance on any CapEx.

Okay. Last question is could you talk a little bit about how you are treating the broader COVID situation with employees? Where they’re working? The mix of maybe at your facilities versus at their homes? How that’s coming back online? And then any influence that’s had on OpEx to date, maybe lower OpEx levels with less people, less travel, things like that? And then any thoughts on how permanent this might be looking forward?

Yes. So we have been very careful as we’ve gone through this process to try to maintain a very safe workplace. At the beginning, we had most of our people at home. Of course, as a production and distribution business, there are certain people that always have to be here. But for the most part, they were at home. We’ve since transitioned to about one-third of our associates being on site, and we’ve implemented protocols as we work here in our buildings across the world really for keeping safety. We’re anticipating that this is a long-term deal. We’re not rushing to get people back. But at the same time, we’re also trying to focus on rotating people in and out of the facility to get them with their teammates to be able to interact and enjoy the dynamic environment that we have here at Garmin. In terms of OpEx impact, it’s difficult to quantify, but I would say there’s increased pressure for expenses, of course, as we provided more benefits for our associates to be able to manage some of the difficulties they’ve had in their personal life with schools and family members and also concerns for their own health. But in general, we feel like that’s manageable, and we’re happy and we’re very pleased actually with how we’ve been able to work through this crisis so far.

Great. Thank you. And best luck in back half.

Next question is from the line of Will Power [Baird]. Your line is now open.

Great. Thanks. Yes, I guess a couple of questions. First, maybe to come back to one of the earlier questions or remarks. As we move almost into August here from July, I mean, any reason to think that the trends you’ve seen in fitness, outdoor, marine shouldn’t continue through Q3? I mean it sounds like you exited on a really strong note, and I assume that’s continuing. Just want to kind of confirm that first.

Yes. As I said in my remarks, we definitely see continued opportunity through the year in those categories, particularly as people are very interested in health, wellness, fitness and outdoor activity and adventure. So those are very strong products, the fenix Solar, Instinct Solar is resonating very well. And of course, I think consumers are excited about what will happen in the back half as retailers start to get back to normal in terms of promotions and holidays.

Okay. And then second question, just thinking about supply chain, and I guess probably inventory, too. I mean anything you can call out on the supply chain front in terms of constraints or concerns in terms of components for products? And then the second piece is, as you look at the fitness category, in particular, I know a lot of retailers have struggled to keep as many bicycles in as they liked. There’s been, as we know, strong retail demand on that front. Has that extended to your products? Are there any issues with respect to having enough inventory on hand for retailers on the cycling front?

Yes. So supply chain wise, I think the – early in the pandemic, the focus was on supply chain continuity and maintaining the flow of components we needed for our business. As the pandemic evolved, of course, then everyone worried about the economic downturn. As things have come back, if anything, where we had challenges in supply chain is keeping up with the demand. And that’s part of what we’ve mentioned in terms of gross margin. The freight costs were higher as we work to get products in place for retailers and opportunities that needed them. Specifically around cycling, definitely that has been an area of constraint when it comes to product availability, especially in Tacx products. Again, we have a strong backlog of those. And also with cycling computers and those kinds of products, we are spending more on air freight as we try to get those into place at retailers. Cycling activities have been very popular with customers.

Okay. And maybe just last question. As you look at the geographic breakdown, APAC a bit weaker than the other two regions. And that’s a region that, I guess, returning – I guess, should be returning to normal more quickly or should happen in Q2. Just to be interested in the color there, what’s the mix difference maybe that’s driving the relatively weaker performance in Asia Pac versus the other areas?

Yes. APAC has performed very differently from the Western markets. I think the pandemic and the concern over the pandemic was much stronger there than in some of the other regions, especially at first. And so they’ve taken longer to come back. Each country has its own story. But of course, China has been a significant factor, as well as larger countries like Thailand as well. So APAC kind of is a different narrative from the other geographies. In Americas, I would say that aviation impacted us more there than the consumer side of things. So Americas’ performance, I feel, was very good. And a similar story, in Europe, although aviation’s impact is lower there, but still was an impact. But in general, when you exclude that, I’m very pleased with the performance of those geographies.

Great. Thank you.

Next in line is Charlie Anderson [Colliers Securities]. Your line is now open.

Yes. Thank you for taking my question and congrats on a great quarter. I wanted to start with aviation, Cliff. I recall last quarter, you had some comments about potentially in aviation you could see some benefit there because of routes cut from commercial aviation. I wonder maybe you could just update us on your long-term thoughts on aviation. Do you still think there’ll be benefits created by the pandemic as it relates to the portions of the market you participate in? And then I’ve got a follow-up.

Yes. I think my view is still very much in line with that. In fact, I feel like, if anything, many are coming out in the industry supporting that view. We see some of the partners in the charter side of things see a significant uptick in the number of people who are inquiring about and proceeding with charter flights over the concern over exposure on airlines. And I think general aviation definitely has a slower timetable when it comes to reacting to these kinds of demand changes. It’s still a very small market. But for sure, we’re seeing anecdotal evidence of customers being more interested in investing in aircraft and in equipment.

Okay. Great. And then for my follow-up, I was sort of curious about go-to-market strategy. I think there was a comment about garmin.com helping out. I wonder if you think that’s a permanent change or shift in the trajectory of direct-to-consumer as a proportion of your business? Or that was more temporary because of some demand that retailers couldn’t fill? And then I’m also curious about advertising spending. It was down a decent amount from a year ago, and you also got some leverage there. I wonder if there’s a permanent change in maybe needing less advertising? Or that was just a function of sort of some of the things that were happening in the quarter?

Yes. So in terms of go-to-market on the website side of things, I do see that, that shift would be longer term in our business. And again, we have a mix of all kinds of retail and product outlet situation. So we work with all of them, but we definitely see that customers are gravitating towards online purchases, whether it’s through a partner or through Garmin. And we did see a significant uptick, as we mentioned in our own web sales, which we view as a positive development. In terms of advertising and what the dynamics are there, there are really two things. There was certainly impact because of the pandemic and everyone just pulling back because for a while, everyone was glued to news channels and websites, staying indoors and not doing much. But as things evolve, that quickly changed. And so we became very strategic in how we spent our advertising money, focusing on digital and social channels as well as co-op opportunities with retailers. I would see that continuing as well as we go forward, as the situation remains very dynamic and retailers’ plans also are very dynamic.

Okay, great. Thank you so much.

Next question is from the line of Ivan Feinseth [Tigress Financial Partners]. Your line is now open.

Thank you for taking my questions and congratulations on another great quarter. Congratulations on the Firstbeat acquisition. Now some of the other companies that use the technology from Firstbeat that – do they have like contracts to license the technology? Are you going to continue to license technology to other firms? Or what is your view on licensing some of your technology because you also have great technology in other areas. And have you ever licensed technology to other companies before?

Yes. Firstbeat has a list of their own customers. Of course, Garmin is one of those and the major one. They will continue those relationships for the most part. And I think there could be various adjustments on different priorities that they have. They have a lot of activity with research and different things, of course. But in general, I would see that the technology would continue to be evolved and innovative for the benefit of customers.

Right. Then since Autoland is such an innovative and incredible product, and do you see a way of leveraging that innovation into automotive OEM especially in some autonomous vehicle technology? I don’t know if you saw that. Ford announced a new partnership with Mobileye. And I know you have a partnership with Ford with the Mustang Mach-E V, as well as, let’s say, working not only with the auto manufacturers, but some of the tech manufacturers like Mobileye or NVIDIA, which makes the drive computer, or even Qualcomm that has a number of autonomous vehicle computers coming out.

I would say that Autoland is solving a unique problem for the aviation market, and there’s a lot of considerations in the technology around how airplanes operate in the airspace system and the nuances of airports and landing and communication and all of those things. So I think it’s very specific there. Of course, there’s fundamental control technologies that are probably extensible to other areas. But specifically for auto, that problem is much different to solve, and I wouldn’t see a lot of overlap there. We do partner with others in the industry as well on some of our OEM products, but we would see ourselves mostly there serving as a component or a technology provider as part of the bigger system.

Okay. What about extending the solar screen technology to other handhelds, like the inReach with – that would be another great item to have solar charging?

Yes. Solar is a great technology for us that I’m really super excited about, and it has a lot more applications that we can apply it to across our product lines in several segments.

And then without giving specific products and categories, can you give us like an indication because you speak a lot about new innovative products to come in different categories. Could you give us some idea of these categories and products?

Well, I think Garmin is all about adventure and activity. And so these new products will take us deeper into those kinds of spaces, market spaces and categories.

Public, for example, one of the – some of the trends from the pandemic, RV sales are on fire. Yesterday, Polaris said they saw unprecedented demand for ATVs and personal watercraft and bikes. Do you see opportunities that – are we going to see new products in those categories?

Yes, we see opportunities across all those kinds of specialty vehicles, and we’re working hard to appeal to a new group of customers that are discovering those kind of activities.

Very good. Congratulations again.

Next question is from the line of Erik Woodring [Morgan Stanley]. Your line is now open.

Thank you and good morning, guys. Congrats on the quarter. I’m just following up on a few questions from earlier. So first, just to follow-up on Ivan’s question there. From a design standpoint, are there any inhibitors to you in including solar technology in, for example, wearables products? I guess we’ll start there and I have a follow-up.

Yes. Actually, Erik, the solar components now are on our wearables. So the fenix line, the Instinct line, the tactix as well as the quatix, those are all our smartwatch wearables, and that’s where we targeted that technology first.

Right. I meant more on the fitness side, so the Forerunner, any of the vivos, anything on that end?

Yes. There’s no technical limitation to where it can go. I think it’s best suited in environments where the devices are already naturally low-power designs because solar technology, while it’s exciting, it’s still very challenging to collect enough energy from the sun to do some of the things that the more advanced wearables do. But in general, it will continue to evolve, we’ll continue to improve it, improve the efficiency and make it a real differentiator for Garmin.

Awesome. Very helpful. And then just as a follow-up. Congrats on the Piper M600 Autoland win. I’m just curious, from a high level, we know that in 2008, 2009, aviation was fairly weak. Would just love to hear what you think about aviation today during the current crisis relative to that time? And any differences you see that you can compare and contrast? And then as a follow-up to that is also just what inning you think we’re in with ADS-B? Obviously, the mandate has passed, but if there’s any kind of juice left in that tank? Thanks.

Yes. So I would say the similarities to 2008 and 2009 with regard to aviation business performance, in both cases, there was an economic shock that impacted the segment. But I think that’s probably where the similarity ends. Back in 2008 and 2009, there was a significant oversupply of every kind of business jet. And so as the financial crisis developed and companies were pulling back, individuals we’re pulling back, there’s a lot of used aircraft on the market, which impacted valuations. And even to this day, there’s probably still impact from that more than 10 years on. And I would say that this time, though, one of the positive things that we see is that activity in the light jet side of things, probably light and up to light medium jet is still very strong. And as I mentioned in the earlier question that interest around charter and ownership in those class of aircraft is remaining firm. So we’re excited about that. And we think even in the small aircraft side of things, there’s more potential as people consider traveling by private aircraft as opposed to commercial aircraft. And then on your question with ADS-B, what inning are we in? We – actually we’re in the extra innings. So we felt like ADS-B performed in terms of overall market adaptation, much better than anyone predicted at the very beginning stages. And as we go forward, it doesn’t mean that we sell zero ADS-B products. We’ll continue to sell ADS-B products to new aircraft. Of course, they all need that. And also as in the aftermarket, we expect that competitive systems will be upgraded. That’s a market opportunity for us to take share. And of course, products, repairs and things that happen that require new systems. So it will be just an ongoing business going forward.

Awesome. And if I could just sneak one last one in for Doug. Just in the past, you’ve commented on the trajectory of different OpEx lines. Just wondering if you can provide any color there. But that’s it for me. Thanks, guys.

Yes. Regarding operating expense in general, we’ll continue to make investments in our own business really to grow that. At this time, we’re not to able to provide any detailed forward-looking guidance on OpEx, but we’ll continue to make investments appropriate to drive our business.

Great. Thanks, guys. Congrats on the quarter.

At this time, I would like to turn it back to the speakers for any further comments.

I’d just like to thank everyone for joining the call today. Doug and I are available for callbacks. Have a great day.

Ladies and gentlemen, this concludes today’s conference. Thank you all for your participation, and have a wonderful day. You may all disconnect.