Garmin Ltd. (GRMN) Q1 2025 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. And welcome to the Garmin Limited First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. I would now hand today's call over to Teri Seck, Director of Investor Relations. Please go ahead.

Good morning. We would like to welcome you to Garmin Limited's first quarter 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 transcripts will also be available on 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, 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-Q and in our Form 10-K filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Limited 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 delivered outstanding financial results during the first quarter of 2025, in a continuation of the positive business trends we've been experiencing over the longer-term. Consolidated revenue increased 11% to $1.54 billion, a new first quarter record with three business segments delivering double-digit growth. Gross and operating margins were 57.6% and 21.7% respectively, resulting in record first quarter operating income of $333 million, up 12% year-over-year and pro forma EPS of $1.61, up 13% year-over-year. We're off to a great start and we are very pleased with these results. While it is not our normal practice, we are updating our full year 2025 guidance to reflect first quarter results and our current assessment of markets and the global trade environment. Doug will discuss our financial results and updated guidance in greater detail in a few minutes, but first, I'll provide remarks on tariffs followed by an update for each business segment. The global trade environment is very dynamic due to recent changes in U.S. trade policy, which is affecting every business, especially those with extensive global supply chains. It appears that higher tariffs and more complex trade structures will be a normal part of business going forward. While the situation remains fluid, we have established assumptions about tariff structures that are most likely to impact Garmin and have reassessed our 2025 guidance using these assumptions. It's important to note that approximately 25% of our revenue is generated in the U.S. market from products manufactured outside of the U.S., primarily in Taiwan. Our assumptions include a 10% baseline tariff on all products manufactured outside of the U.S. including those manufactured in Taiwan. Many of our products are temporarily exempt from tariffs, but we have not assumed any benefit from these temporary exemptions, reflecting conservatism in our assumptions. We will benefit from these exemptions as long as they remain in place. We are also assuming an incremental 145% tariff on products and materials imported into the U.S. directly from China. While we do not source a significant amount of material directly from China for U.S. production, the reciprocal tariff amplifies the impact. The current trade environment has weakened the U.S. dollar relative to other currencies, which benefits our revenue and margin. Approximately 40% of our revenue is generated in non-U.S. dollar currencies and we expect the benefit to partially offset the direct impact of tariffs. We are pursuing mitigations, some of which have already been established, while others will take more time. We are not ruling anything out and we intend to be strategic and selective with these actions. Given the current trade environment and potential impact on consumers, our guidance assumes a modest reduction of demand moving forward. Using these assumptions, we estimate the gross impact from tariffs on our 2025 results prior to any mitigations will be approximately $100 million of increased cost. However, our 2025 pro forma EPS is unchanged at $7.80 as the expected benefit from foreign exchange and planned mitigations offset the impact of tariffs on earnings. While the current trade environment has created headwinds and increased uncertainty in the market, we remain optimistic because of our strong product lines and the resilience of our vertically integrated, highly diversified business model. Turning now to business updates. Starting with Fitness, revenue increased 12% to $385 million with growth led by strong demand for advanced wearables. According to the latest data provided by IDC, we were the only global smartwatch provider that grew in 2024, reflecting increased market share. Gross and operating margins were 57% and 20% respectively, resulting in operating income of $78 million. During the quarter, we announced Garmin Connect+, a premium service offering AI based health and fitness insights, enhanced live tracking and exclusive achievement badges. We recently announced the vívoactive 6, our newest health and fitness smartwatch with an even brighter AMOLED display, more than 80 preloaded sports apps and access to Garmin Coach training plans. Given the first quarter performance of the Fitness segment and the expected benefit from foreign currency shifts, we are raising our revenue growth estimate to 15% for the year. Moving to Outdoor, revenue increased 20% to $438 million with growth driven primarily by adventure watches. Gross and operating margins were 64% and 29% respectively, resulting in operating income of $129 million. During the quarter, we launched several new products across multiple categories, including wearable for adventure sports, dive and golf. One noteworthy launch is the new Instinct 3 adventure watch series, which now includes versions with a bright AMOLED display. We also released our annual 2024 inReach SOS Report highlighting the importance of Garmin response, which coordinates emergency response services in more than 200 countries and territories and supports rescue efforts in more than 210 languages. The emergency response coordination center is an important part of what differentiates our inReach SOS service from others. We are pleased with the strong performance of the Outdoor segment so far this year. Looking forward, we expect growth to moderate as we reach the anniversary of the highly successful fenix 8 launch and considering the possibility that economic uncertainty could reduce demand for certain products. With these things in mind, we are maintaining our revenue growth estimate of 10% for the year. Looking next at Aviation, revenue increased 3% in the first quarter to $223 million, driven by growth in OEM product categories. Gross and operating margins were 75% and 22% respectively, resulting in operating income of $48 million. During the quarter, Pilatus Aircraft announced the new PC-12 PRO featuring our G3000 Prime flight deck, which with deliveries expected to begin later this year. Pilatus also selected the G3000 Prime for the PC-7 MKX military training aircraft, demonstrating versatility to serve both civilian and military applications. The G3000 Prime flight deck is truly extraordinary and significantly raises the bar for modern cockpit system technology. We were also named Supplier of the Year by Cirrus Aircraft, reflecting our commitment to create the best products and provide outstanding service to our customers. Given the first quarter performance of the Aviation segment, we are maintaining our 5% revenue growth estimate for 2025. Turning to the Marine segment. Revenue decreased 2% to $319 million primarily due to the timing of promotions. Gross and operating margins improved to 58% and 27% respectively, resulting in operating income of $87 million. During the quarter, we launched the Force Pro trolling motor with multiband GPS for improved control, reverse thrust capability and a built in sonar transducer. Also during the quarter, we were named 2025 Supplier of the Year for the second consecutive year by Independent Boat Builders, Incorporated for providing outstanding service, support and dedication to its owner network. Given the first quarter performance of the Marine segment and continued softness in the overall market, we now expect 2025 revenue will be flat versus the prior year. Moving finally to the Auto OEM segment, revenue increased 31% to $169 million with growth primarily driven by increased shipments of domain controllers to BMW. Gross margin was 18% and the operating loss narrowed to $9 million. During the quarter, Honda Motor Company announced the 50th anniversary model of the iconic Gold Wing motorcycle featuring a complete infotainment solution from Garmin. Given the first quarter performance of the Auto OEM segment, we are now maintaining our 7% revenue growth estimate for 2025. That concludes my remarks. Next, Doug will walk you through additional details on our financial results. Doug?

Thanks, Cliff. Good morning, everyone. I'd begin by reviewing our first quarter financial results by comments on the balance sheet, cash flow statement, taxes, updated guidance. Posted revenue of $1,535 million for the first quarter, representing 11% increase year-over-year. Gross margin was 57.6%, 50 basis point decrease in the prior quarter. Decrease was primarily due to segment mix. Operating expense as a percentage of sales was 35.9%, 50 basis point decrease. Operating income was $333 million, a 12% increase. Operating margin was 21.7% compared with the prior quarter. Our GAAP EPS is $1.72, pro forma EPS is $1.61. Next, look at our first quarter revenue by segment and geography. During the first quarter, we achieved double-digit growth in three or five segments, led by the Auto OEM segment 31% growth followed by the Outdoor segment with 20% growth, the Fitness segment with 12% growth. By geography, we achieved growth in all three regions led by 23% growth in EMEA followed by 9% growth in APAC, 4% growth in Americas. Looking next on operating expenses, first quarter operating expense increased by $48 million or 10%. Research and development increased approximately $26 million; SG&A increased approximately $22 million per the prior year quarter. Both increases are primarily related to personnel related expenses. Few highlights on the balance sheet, cash flow statement, and taxes. End the quarter with cash marketable securities approximately $3.9 billion, cash receivable increased year-over-year through strong sales but decreased sequentially to $787 million following the seasonally strong fourth quarter. Inventory increased year-over-year sequentially to approximately $1.6 billion. In the first quarter 2025, we generated free cash flow of $381 million, $21 million decrease than prior year quarter. Capital expenditures for first quarter 2025 were $40 million, probably $7 million higher than prior year quarter. We still expect full year 2025 free cash flow to approximately $1.1 billion, capital expenditures approximately $350 million. In the first quarter of 2025, we paid dividends of approximately $145 million, purchased $27 million of the company stock. At quarter end, we had approximately $210 million remaining share repurchase program, which authorized through December 2026. Reported effective tax rate 14.5% compared to 15.6% in the prior year quarter. Decrease in the current quarter is primarily due to increased tax benefits from stock-based compensation. Turning next to our full year guidance. We estimate revenue of approximately $6.85 billion compared to our previous guidance of $6.8 billion. Increase is primarily due to expected net favorable foreign currency impacts partially offset by modest weakening of demand. Point of reference for foreign currency impact approximately 40% of our sales denominated non-U.S. dollar currencies in the euro is about half of the non-U.S. dollar currencies, resulting in a benefit to revenue when the U.S. dollar weakens relative to other major currencies. We expect gross margin to be approximately 58.5%, just 20 basis points lower than our previous guidance to be 8.7% to an estimated $100 million of increased cost from tariffs, mostly offset by expected favorable foreign currency impacts and planned mitigations. We expect an operating margin approximately 24.8% compared to our previous guidance of 25%. Also, we expect pro forma effective tax rate 16.5% to unchange from our previous expectations. This results in expected pro forma earnings per share of approximately $7.80, which consistent with our previous guidance. This concludes our formal remarks. Tameka, can you please open the line for Q&A?

[Operator Instructions]. Your first question is from the line of Joseph Cardoso with J.P. Morgan.

Hey, good morning. Thank you for the details and the question here. Maybe for my first one, in the prepared remarks, you talked about a modest demand reduction assumed in the outlook. But if we take a step back, just curious, as we look across the first quarter trends across your segments, and perhaps even the second quarter trends today, are you observing any indications of potential demand pulling at your customers as they possibly attempt to build inventory to de-risk kind of this volatile tariff situation? And then I have a follow-up.

Yes. I think -- good morning, Joseph. I think at this point, we have not seen any indications of weakness. We already mentioned that the marine market has been somewhat soft, and that's been fairly consistent. I think if anything, with the real-time pulse on our registrations, the demand for our products and the registrations, which really means sell-through has been very strong. There's no indication that retailers are stocking or overstocking of products, and there's a natural limitation there because they have limited capital they can deploy on inventory and also credit limits are in place as well. So in general, I don't see that the channel or the consumers are out of balance because of the trade concerns.

No. Got it. That's great to hear. And then maybe switching away from tariffs, it was great to see the release of Connect Plus. But I guess, Cliff, why now in past discussions, at least anecdotally, there appear to be some reservations about finding the right value to essentially end up charging your customers. So I guess, what capabilities or what developments prompted you to kind of launch this at this time. And then, obviously, early days, but curious if you can provide any initial indications around customer reception, interaction with Connect Plus that might be indicative of increasing appetite to use the app, et cetera. Just curious if there's anything you can share on that front as well.

Yes. I think we've been saying for a while that, that we are evaluating opportunities to have a premium offering on Garmin Connect. And I think the developments of AI and particularly around AI-based insights for our users was one of those things that we felt was important to recognize the value for the investment that it takes to do. And so we felt like it was the right time, and we do have a very strong user base. Connect Plus it certainly doesn't -- isn't required for users, and we're not taking any features away from people that they've had and we still have a strong commitment to develop Garmin Connect and our devices with broad features that are available to everyone. The certain ones, we will likely reserve for premium offerings and so far, the response has been positive. We're not measuring success in terms of the short-term. This is a long-term thing for us, a very important part of our Fitness segment going forward. So we're going to build on where we started.

Fair enough. Appreciate the color. Thanks, guys.

Thank you.

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

Great. Thanks so much for taking my questions, guys. Good morning. Cliff, just maybe two quick clarification points. Is there any way for the full year calendar 2025 guide that you can kind of disaggregate how much demand, relative weakness you are baking in versus how much of a tailwind the U.S. dollar is, obviously, total revenue guide went up slightly. But just trying to understand how much demand weakness are you kind of embedding versus how much FX tailwinds are you now embedding? And then a quick follow-up. Thank you.

Hey, good morning, Erik. We provided quite a bit of color in terms of the FX part. So that's one that's fairly easy for everyone to understand. I think when you get below that in terms of demand shifts as well as mitigations; it's very hard to disaggregate. And so we're not providing additional color on that. But in terms of just our overall feeling on demand, we're -- we don't feel like there's really any shift at all. We're just including the possibility of a modest decrease. So not very much. And for the most part, all of our mitigations plus the FX benefit goes to the bottom line is a net 0 impact.

That's perfect. Thank you, guys. And that, that kind of segues into my next question, which is a bit broader. And gets at this kind of mitigation point that you're making, Cliff. I'd love if you could just share a little bit more color on if we think short-term, what type of mitigation tools are you prioritizing to limit the impact of tariffs? And then bigger picture or longer-term, you guys are one of the only consumer electronics companies that has wholly-owned facilities that does all of your own manufacturing. Does the current tariff landscape gets you to rethink that at all or your geographic footprint? Any changes? I realize it's still early, and there's a lot of volatility here. But any influence that this current policy could have on how you are thinking about your supply and assembly exposure? Thanks so much.

In terms of mitigations, I think everything is on the table, as I mentioned, and we're considering all of them. There's no one size fits all and we're not taking a broader approach and mitigations across all of our segments and all of our product lines. We're evaluating everything case by case. There are shorter-term things that we can do in terms of sourcing actions. And some of these things were actually in progress before any of the current trade situation started to evolve. And so we'll get the benefit of those actions we were already taken. But in general, we're doing what we can in the short-term, and then we'll continue to work on the longer-term mitigations to optimize our overall results. In terms of our global footprint, actually, a global footprint is a benefit right now, not a detriment. As we mentioned, 25% of our revenue is generated in the U.S. from products manufactured outside of the U.S. So 75% of our products go elsewhere. And so a global footprint is required in order to be able to serve all of the markets. There are some product considerations that we could make in terms of where they're manufactured to optimize our overall supply chains and results. But in general, I would not expect to see a big shift in terms of our overall global footprint and our vertical integration strategy.

Okay. That’s super clear. Thank you for all that color, Cliff. Good luck, guys.

Thank you.

Your next question is from the line of David MacGregor with Longbow Research.

Hi, good morning. This is Joe Nolan on for David. I just had a quick question on the shape of the year a little bit. Just in 2Q, I was wondering if there's going to be any sort of lag from mitigation actions if those maybe will have some impact on margins as they take time to work their way into the system and just how that progresses through the remainder of the year as the timing of the mitigation actions.

Yes. So as it relates to the mitigation, we'll actually, as Cliff mentioned, we'll put those in place when we think it's appropriate with those. But a few things that we have to think about, as of Q2 is, one of which is the timing of when the tariffs are in place also have to consider the inventory that we do have on hand. So we do have inventory on hand that doesn't have the tariffs. It'll be in the timing in there also. So what I'm saying is there's a lot of puts and takes that really take place in that Q2 from that standpoint, we're doing everything we can to not put things in place as soon as we can to mitigate it as soon as we can, but there's a lot of different moving parts in there between inventory, the mitigation efforts that are taking place in there too as well as when the tariffs are in place in there, too.

Got it. Okay. And then just another quick one. In Marine, you mentioned the timing of promotions. If you could just provide any detail on that and if that's expected to be a headwind into the second quarter as well?

I think in 2024, we had a major promotion with a national retailer where inventory was bought in, in the first quarter for those promotions and that promotion will occur this year or did occur in the second quarter and inventory was purchased slightly later. So it's really a shift in terms of a single promotional event. And we would expect some of those dynamics to ripple into the second quarter when it comes to our overall performance.

Got it. Okay. That's helpful. Thanks. I'll pass it on.

Your next question is from the line of George Wang with Barclays.

Hey guys, thanks for taking my questions. Just kind of take a step back kind of high level and philosophically, how do you think about consumer demand backdrop in the second half, kind of puts and takes with the fluidity of the situation given ever-changing tariff policy. I'm just curious, like given diverse portfolio and so a more premier approach for the government, especially on the wearables finish side, whether it's a bit more shielded and kind of you noted, I mean you took down the demand as a precaution measure. Just curious how to frame kind of upside versus downside risk for the consumer demand as we head into the second half. I mean people talk about, Cliff, for the second half, that's probably more of the consensus. But we really haven't seen any real data points. Just curious if you have any other color to add.

Yes. Thank you for the question. I think no one has a crystal ball into what the consumer will do, as I mentioned earlier, so far, the indications are no change in terms of behaviors. Our demand for our products is still very strong. But we're including the possibility that it could weaken some I think people would probably say we're ignoring the risk if we didn't do that. So consequently, we've included some conservatism around that. But I think in terms of your point about the diversity of our company and our product lines; I think we offer unique products. And when people want to have a product like what we offer, we believe that they probably will step up and buy it. And so consequently, we're not factoring in significant changes in terms of overall demand, just a little bit of incremental softness.

Okay. Great. And just kind of segue quickly just in terms of mediation measures, I understand that you guys are not specifically telegraphing the specific measures. But I think small price rates could be bulk just as a consensus. Just curious like how you think about the pricing power for government products, given pretty strong following, I feel like that would be one of the either waste just despite kind of low-single-digit to 5% price rise. So do you think that's something kind of in the ballpark? And if you have higher pricing, do you think kind of $100 million growth impact from tariff could be understated just all else being equal. Just curious like whether you can potentially work up the guidance for the balance of 2025 if you kind of have pricing or follow through and some other cost cuts, et cetera?

Yes, I think that's a very good question. Just one point of clarification. There will always be a growth impact from tariffs because there's always a cost. So the real question is how can you mitigate it? And your specific question is about how we can mitigate through pricing actions. As I mentioned, everything is on the table. So we're evaluating pricing not broadly, but specifically in context of each market and product line, I can't say what we're going to do in specific circumstances, but there are cases where definitely, there's room to have different pricing, and there's other cases because they're -- it's more competitive and difficult to increase prices. So we're managing it case by case. And of course, we'll use the opportunities where we can. But otherwise, we're going to make sure that we maintain our market share and optimize our overall profit dollars in this environment.

Great. Just quickly, if I can squeeze in. Just in terms shifting to Auto OEM margin profile are you guys sticking to the medium-term model for Auto OEM in terms of the gross margin or OPM margin? Or do you think the tariffs and the macro is slightly pushing out the breakeven for the business?

I think we're still modeling the high-teens, 20% gross margin level for this segment. Tariffs are still a factor for Auto OEM, and there's a lot of noise around how tariffs will be applied. In this market, we're also working very closely with our partners to see cost recoveries for any additional costs that we have on the tariff side of things. And so in general, we're staying with our model because we believe there's a few more levers there that we can manage.

Great, great. Thanks again, and congrats again on the strong execution. I'll go back to the queue.

Thank you, George.

Your next question is from the line of Ben Bollin with Cleveland Research.

Good morning, everyone. Thanks for taking the question. Could you talk a little bit about the relative performance across the geographies? The Americas obviously grew, but a big detail versus last quarter, EMEA continues to really outperform. Any thoughts on the dynamics you're seeing across geos that are contributing to the relative performance levels? And then I have a follow-up.

Yes. The geographies reflect a little bit of where the biggest markets are for some of our segments in the Americas, Marine and Aviation are the majority of those markets are in the Americas market area. So the lower performance of growth in those two segments, of course, influence of the Americas region. In EMEA, we're very strong, especially on the wearables side of things and a lot of growth there in terms of our advanced wearable products. So that influenced EMEA as well. And finally, Auto OEM with our European deliveries out of our Poland factory at BMW grew significantly year-over-year as we put new models into production. And so therefore, that, that influenced the growth there as well.

Yes, thanks. The other question I had is, when you look at the guidance within Fitness, 1Q run rate, a bit below how you're guiding the year. Could you talk a little bit how you're thinking about new products or just the pace rate that you see that, that segment developing over the course of the year? That's it for me. Thank you.

We expect Fitness will have a bigger benefit from foreign exchange because of the weighting of the revenues outside of the U.S. dollars. So that's one factor. And then the other thing I would say is that, that, we're still working towards new product releases this year that will influence our revenue going forward. And so we're anticipating a benefit from new product releases that are coming.

Thank you.

Thank you.

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

Hi, thank you for taking my question and congratulations on the great results in this difficult economic and global trade environment.

Thank you.

Since you keep introducing more and more subscription-based products, and you have a lot of them now, not only like the Aviation and Marine maps, but the inReach and now Connect Plus at what point do you think you would start to report subscription and software revenue as a separate line item.

Well, as you know, we would have to report those as soon as they reach 10% of our consolidated revenue. So when that happens, we'll definitely let you know.

Okay. Also, congratulations on the Gold Wing infotainment adoption. Does that or is there the opportunity to include like the zūmo radar on -- as an OEM addition to motorcycles? And do you see any opportunity to start to go into more like advanced rider safety systems?

Well, the zūmo radar is early news. So it's just getting out there to the market. And what's really interesting about the zūmo radar is it's another example of a product category that we invented and brought to the market. And so it's early days, but I would expect that motorcycle OEMs as well as aftermarket users are going to embrace that product line, and it will be part of the market going forward.

No, on your forward guidance, which I think was pretty impressive in light of what's going on, is a major portion of that going to be driven by new product introductions? Or can you give us some color on that?

Yes. I can't provide a detail on what that is, but it's all factored into our overall outlook. We have a cadence of roughly 100 new product releases every year and 2025 certainly has a lot of new products that are coming as well as new product categories. And so we're factoring all of that into our outlook.

All right. Thanks. Congratulations on the great execution again.

Thanks, Ivan.

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

How are you thinking about just getting shipments of product? I mean my understanding there's freight that's waiting outside of ports. I mean how are you factoring that in?

Well, I'm not sure exactly what the nature of your question is; we have been following a normal cadence of manufacturing and shipping. And so our shipping consists of a combination of both air and sea freight. And things have been business as usual along those lines.

Okay. That's good to know. And then can you give any more color on the various tools that you're trying to use to mitigate tariffs?

Yes. As I mentioned, everything is on the table. So we're looking at a broad range of things from the detailed sourcing level of supply chains to where specific products might be manufactured to pricing, to overall cost structures within the company. So everything is on the table. We're not ruling anything out. We're just simply not providing details on that right now because some of the items, depending on the market is more competitively sensitive.

Yes, that makes sense. And then on the Aviation side, do you expect any impact there on tariffs? I mean in terms of maybe some of the electronics that you use?

Well, there's some impact because there's always materials that are coming from outside of the U.S. And so we factored that into our overall outlook for Aviation. But the impact is more limited in Aviation. And as you know, we do most of our manufacturing of Aviation products here in the United States in two different factories in Oregon and Kansas.

Yes, yes. That's great. All right, cool. Thank you very much.

Thank you, Ron.

[Operator Instructions]. Your next question is from Noah Zatzkin with KeyBanc Capital Markets.

Hi, thanks for taking my questions. Maybe first, just on the adjustment to the Marine revenue growth outlook. Is that a reflection of kind of a differing view on kind of the end market versus prior? Or what's kind of embedded there? Thanks.

Yes. Again, this is more just an intrical view of what could happen to the market and just kind of listening to what customers are saying without any real data points yet, obviously, because it's very early days. Early boat show indications were very strong. I do think that the shock factor around the tariffs and the changes that happened so quickly. Could put some of those customers who were looking at high-end boats and also equipment on pause as they "see what happens". We hear that a lot. But in general, we expect that the bell curve of our market where these products are sold will continue to function, although we're factoring in just a slight amount of softness for this transition time.

Makes sense. And maybe just one more and apologies if you've already touched on this. But on the Auto OEM side, how should we think about kind of the -- like a 31% growth in the quarter versus kind of the 7% unchanged thoughts for the year? Is it like just kind of contract cadence items or just any thoughts there? Thanks.

Yes. The high growth rate in Q1 is really a result of still getting the benefit of the additional models that were brought online last year. So we'll soon anniversary all of that and the growth will moderate going forward as it's really a static situation with the number of models and the production rates coming out of BMW. The other factor is, of course, as you know, carmakers are softening their views as they deal with the impact of tariffs on their customers. And so our outlook reflects their input as well in terms of the number of cars they will make.

Very helpful. Thank you.

Thank you.

At this time, there are no further questions. I will now hand today's call back over to Teri Seck for any closing remarks.

Thank you all for joining us today. As typical, Doug and I are available for callbacks and we hope you have a great day. Bye.

This concludes today's call. Thank you for joining. You may now disconnect your lines.