Garmin Ltd. (GRMN) Q3 2026 Earnings Report, Transcript and Summary

Hello, everyone. Thank you for joining us and welcome to the Garmin Limited Third Quarter 2026 Earnings. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Teri Seck, Director of Investor Relations. Please go ahead.

Good morning. We would like to welcome you to Garmin Limited's third quarter 2026 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/investors. An archive of the webcast and related transcript 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 impact, 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-Ks filed with the Securities and Exchange Commission. Presenting on behalf of Garmin Limited this morning are Cliff Pemble, president and chief executive officer and Douglas Gerard Boessen, chief financial officer and treasurer. At this time, I would like to turn the call over to Cliff Pemble.

Thank you, Teri, and good morning, everyone. As announced earlier today, Garmin achieved another quarter of record breaking financial results in a continuation of the positive trends we have been experiencing over the long term. Consolidated revenue increased 12%, to nearly $2 billion with gross margin of 63.3%. We experienced a robust expansion in consolidated gross and operating margins. The majority of which is attributable to favorable segment mix, and lower product costs. Margins also benefited from tariff refunds of $33 million recognized in the third quarter. Even when excluding this benefit, our gross margin performance was impressive by any historical comparison, reflecting the strength of our product lines, and the efficiency of our vertically integrated business model. Through strong operational execution, we delivered significant leverage to the bottom line. Operating income increased 34% to $612 million and pro forma EPS increased 39% to $2.76. With most of 2026 behind us and considering the momentum we are experiencing entering the important Q4 holiday season, we anticipate delivering another record year of double digit growth in revenue and profits. We now anticipate revenue of $8.15 billion. An increase of $100 million over the prior guidance, and an increase of 12% over the prior year. We expect gross margin of 61% for the full year which assumes higher costs for raw materials. Particularly memory. Which I will expand upon in a moment. We further expect an operating margin of 29%. An expansion from our prior estimate and a tax rate of 16.5%. Which is unchanged from our prior estimate. These assumptions result in pro forma EPS of $10.80 an increase of $0.80 over the prior guidance, and a 26% increase over the prior year. Before covering segment highlights, I want to provide additional context on supply chain matters. As previously mentioned, our results will soon reflect the higher cost of memory and other raw materials which have increased significantly since last year driven by both high demand and limited supplies. Our results have benefited from our safety stock of memory purchased at lower prices. New supplies are being purchased at current market prices. Which are significantly higher than last year. This represents a headwind going forward and drives higher inventory amounts on our balance sheet. Additionally, our inventory strategy is focused on product availability. Which translates to higher inventory levels of certain critical components. And from time to time, we make prepayments to secure supplies. While it is too early to offer a comprehensive outlook for 2027, we expect our consolidated gross margin profile will return to a historical range primarily due to higher memory costs. We believe a return to historical gross margin levels represents impressive performance given the unusual supply chain circumstances affecting many companies. As we formulate our 2027 plan, we will look for every opportunity to offset this headwind by leaning heavily on our vertical integration and scale of operations and through strategic and selective mitigations, which we have successfully used in the past. Douglas will discuss our financial results in greater detail in a few minutes but first, I will provide a few remarks on the performance of each business segment. Starting with fitness, revenue increased 16% to $694 million a new third quarter record primarily driven by broad based wearable growth. Gross and operating margins expanded to 63% and 33%, respectively, resulting in operating income of $231 million. During the quarter, we launched the CIRQL Smart Ring, a screenless wearable offering rich wellness and fitness insights that expands our addressable market for wellness devices. Initial demand for CIRQL has been very strong and feedback from customers has been positive. We recently announced the next generation edge cycling computers, the Edge 1.06 thousand features a built in microphone and speaker for hands free voice control. And the easy to use Edge Explore 3 is designed for riders of all levels. The fitness segment has achieved outstanding performance throughout the year, and we expect this trend to continue in the fourth quarter. We are very pleased with these results and expect that the fitness segment will be the strongest contributor to our full year consolidated growth. Moving to outdoor. Revenue increased 20% to $597 million primarily driven by strong demand for adventure watches. Following the launch of the Fenix 9 series. Gross and operating margins expanded to 68% and 39%, respectively, resulting in operating income of $233 million. During the quarter, we launched the Fenix 9, and the Fenix 9 Pro series, with an all titanium watch case option and the largest available AMOLED screen on our flagship adventure watch lineup. We also launched the Garmin Drive Navigators that feature high resolution ultra wide displays, and an elevated all-new user experience. Looking forward, we expect growth momentum to continue in Q4, primarily driven by the Fenix 9 series. Resulting in improved full year growth rates when compared to 2025. Looking next at aviation, revenue increased 5% To $253 million with growth primarily driven by OEM product categories. Gross and operating margins expanded to 78% and 26%, respectively, resulting in $66 million of operating income. We recently announced that the G1 thousand integrated flight deck for the iconic King Air aircraft has surpassed 1 thousand systems in the field marking a significant milestone as 1 of the most successful retrofit flight deck programs in aviation history. We also announced that more than 2.5 thousand aircraft are now equipped with our revolutionary Autoland system. Autoland is available in more than 15 models from piston powered aircraft to twin engine jets. Bringing added peace of mind to a growing number of pilots and passengers across the aviation industry. Just this quarter, Pilatus aircraft and EPIC aircraft announced the certification of Garmin Autoland on the PC-12 and the E1 thousand airplanes. During the quarter, we introduced the G2000 PRIME, bringing prime flight deck functionality to the high performance piston and electric aircraft market. Also during the quarter, we announced the certification of an all glass retrofit cockpit for the original Cessna Citation Jet. And finally, we made important updates to Garmin Pilot. Adding Smart Charts coverage for Canada and Mexico, as well as mobile clearance delivery which allows pilots to obtain clearances electronically through the Garmin pilot app. We are pleased with the performance of aviation during the first 3 quarters of the year. And we expect fourth quarter year over year growth to be similar to that of Q3. Turning to the marine segment. Revenue increased 16% to $310 million with broad based growth across multiple product categories led by sonar products following the launch of LiveScope Plus sonar system. LiveScope is widely considered to be 1 of the most consequential innovations in modern fishing electronics. LiveScope Plus builds on this legacy of disruptive innovation by offering improved range and unprecedented image clarity. Gross and operating margins expanded to 64% and 30%, respectively, resulting in operating income of $94 million. The primary driver of margin expansion was the tariff refund recognized during the quarter, Although margins improved, even when excluding this benefit. During the quarter, we expanded our sailboat product lineup with the GMI 40 instrument display, and the smart drive steering actuator. We also launched the JL Audio M6 600 head unit series and the M200 speaker system. We were recently named manufacturer of the year by the National Marine Electronics Association for the 12th consecutive year. An honor that is particularly meaningful because it reflects the opinions of the broader NMEA community for innovation,, product quality, service, support. We also received 6 Product of excellence awards. For multiple product categories as selected by NMEA dealers, certified installers and industry professionals. We are pleased with the performance of marine during the first 3 quarters of the year. And believe we are on track to achieve full year growth that is consistent with the prior year. Moving finally to the auto OEM segment, revenue decreased 20% to $132 million primarily driven by domain controllers. Gross margin was 16%, and the operating loss narrowed year over year to $12 million. As we shifted R&D resources to other segments. We expect fourth quarter revenue to decrease year over year consistent with Q3 as domain controllers continue to decline as expected. We look forward to the launch of our next major domain controller program with Mercedes Benz which we expect will drive significant growth in 2027. Wrapping up, I am very proud of what our team has accomplished. We delivered strong growth, expanded profitability, We invested in future innovation, and introduced new products across nearly every segment of our business. We look forward. As we look forward, our product portfolio is very strong. And we are confident in the opportunities that lie ahead. We believe success is driven by our commitment to create products that are essential to our customers, and supporting them with industry leading quality, reliability, and innovation. So that concludes my remarks, and Douglas will walk you through additional details on our financial results. Douglas.

Cliff. Good morning, everyone. I will begin by reviewing our third quarter financial results, followed by comments on the balance sheet, cash flow statement, taxes, updated guidance. We posted revenue of $1.186 billion, for the third quarter. Representing a 12% increase year over year. Gross margin was 63.3%, a 20-basis-point increase in the prior year quarter. Increase was primarily due to favorable segment mix, lower product costs due to weakening of the Taiwan dollar approximately $33 million in refunds of previously paid tariffs. Operating expense as a percentage of sales was 32.5%, an 80-basis point decrease. Operating income increased 34%, to $612 million. Operating margin expanded to 30.8%, a 100-basis-point increase compared to prior year quarter. Our GAAP EPS was $2.80 and our pro forma EPS was $2.76 Next, we will look at our third quarter revenue by segment and geography. During the third quarter, we achieved consolidated double digit growth led by the outdoor segment with 20% growth. Followed by the fitness, and marine segments with 16% growth. By geography, we achieved growth in all 3 regions led by 15% growth in Americas, followed by 12% growth in EMEA, and 4% growth in APAC. The APAC sales growth is lower than Americas and EMEA, due to challenging market conditions in China. Excluding China, the APAC sales growth would have been more comparable to the other regions. Looking next at operating expenses. Research and development expenses increased $26 million approximately 9% primarily driven by personnel related expenses. SG&A expenses increased $30 million approximately 10% primarily driven by personnel related expenses and advertising expense. Few highlights on the balance sheet. Cash flow statement, and taxes. In the quarter with cash and marketable securities of approximately $4.1 billion, Accounts receivable increased year over year to approximately $1.1 billion on the strong sales in the third quarter. Inventory increased year over year and sequentially to approximately $2.3 billion We are executing our strategy to increase inventory of certain components to mitigate the risk of supply constraints. Also, the cost of certain components has increased significantly year over year. During the third quarter of 26, we generated free cash flow of $293 million $132 million decrease from the prior year quarter. Decrease is primarily due to an increase in on-hand inventory, prepayments of inventory to secure future delivery of strategic components, primarily offset by improved operating results. Capital expenditures for the third quarter of 2026 were $101 million approximately $40 million higher than the prior year quarter. We expect full year 2026 free cash flow to approximately $1.1 billion and capital expenditure is approximately $500 million. Decrease in our free cash flow estimate compared to the previous estimate is primarily due to increase in on hand inventory and prepayments for inventory. The third quarter 26, we paid dividends of approximately $202 million and purchased $41 million of company stock. At quarter end, we had approximately $407 million remaining share repurchase program authorized through December 2028. For an effective tax rate of 18.1% compared to 21.2% in the prior quarter. Decrease in effective tax rate is primarily driven by an increase in US deductions due to certain provisions of U.S. tax legislation enacted in 2025, which became effective in 2026. Turning next to our full year guidance. Based on our performance during the first 3 quarters of 2026, a positive outlook for the fourth quarter. Now estimate revenue approximately $8.15 billion compared to our previous guidance of $8.05 billion. The result of year to date performance we have increased our gross margin to approximately 61% which is 130 basis points higher than our previous guidance and is 32 basis points higher than a full year 2025 gross margin. We expect higher memory costs to impact the fourth quarter, which has been factored in our full year gross margin guidance. Received majority of our expected tariff refunds and our updated gross margin guidance only includes the benefit of tariff refunds already recorded in the year to date results. We expect our operating margin to be approximately 29%, which is 200 basis points higher than our previous guidance. Also, we expect a pro forma effective tax rate of 16.5% consistent with our previous guidance. The expected pro forma earnings per share is approximately $10.80, versus our previous guidance of $10. This concludes our formal remarks. Rebecca, could you please open the line for Q&A?

We will now begin the question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asked a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. And please stand by while we compile the Q&A roster. Your first question comes from the line of Timothy Long with Barclays. Timothy, your line is now open.

Thank you. Maybe 2, if I could. Could you touch a little bit on some of the new launches, the Fenix 9 series and CIRQL? Sounds like initial feedbacks positive, but could you just kind of give us a sense of how you are viewing the ramp of those products over the next several quarters? And then second, I just did want to follow-up on the gross margin. I mean it sounds like this is largely memory, and it is hitting you a little bit later since you had some advanced buys. But, you know, maybe as we look into next year, I am assuming you are talking 58%, 59% as the more historic gross margins. If you could just clarify that and let us know the other puts and takes there. Thank you.

Hi, Timothy. Good morning. In terms of the newer launches, we believe those were very successful. We are still catching up on some of the initial demand, especially on CIRQL, although Phoenix is also very, very strong, and so we are working hard to fill that backlog of demand we have for those new products. And Doug, maybe you can answer the question on the gross margin.

Yeah. So maybe I will talk a little bit about the gross margins here in the quarter than we expect in Q4, and then, you know, in the future. So, yeah, in Q3, there is 3 big drivers of that year over year improvement. You know, 1 of which was favorable segment mix, you know, as auto OEM is a lower percentage of our total you know, this year versus last year. The second of which is lower product costs primarily due to the weakening Taiwan dollar, and then we did have some benefits relating to tariff refunds and we were. We have received majority of our tariff refunds. there is some that we will hopefully receive here in Q4 next year, but we will record those, you know, as they are realized or realizable. So then the other thing relating to memory costs, we did see a small impact of increased memory cost in Q3, but there will be more impact you know, in Q4. And it is primarily due to our inventory our inventory turns from a standpoint. You know, then as we get into 2000, you know, 2027, you know, there is a lot of moving parts relating to the gross margin. Standpoint. You know, we will have a segment mix, the situation where, you know, we have the ramp of a Mercedes coming in. So, therefore, there will probably be some unfavorable segment mix. We will have the continued higher increased costs of memory that go through there also. But then also, you know, there is a lot of other moving parts, you know, in our gross margin between FX, product mix, and such in their standpoint. But we will give you, you know, a better feel for that you know, when we get into a 2027.

Okay. Thank you.

The next question comes from the line of Erik Woodring with Morgan Stanley. Erik, your line is now open.

Great. Thank you very much for taking my question, guys. Cliff, I would love to maybe step back from the quarterly results and could you just maybe riffle a little bit on how you are seeing the competitive landscape evolve across the broader wearables market? Traditional smartwatch players, kind of increasingly emphasizing fitness and performance. You have new competitors with kind of specialized health and wellness use cases. Just where is Garmin's competitive positioning strengthening And then do you see any areas where you see just greater competitive pressure? And then a quick follow-up, please. Thanks so much.

Well, it is. Good morning, Erik. It is a very competitive market for sure. it is also very know, market that is been around a while now. So the I think the players are fairly well entrenched in terms of their positions in the market. Many of them are catching up to what we have known all along that health and fitness are very important drivers of interest in wearables. And so you know, we are continuing to lead, I believe, in terms of product features and sensor capabilities and the ability to help a user on their journey, whether it is a health and wellness focus or a fitness focus. And, you know, I believe that trend is very durable. I believe that trend is something that is always going to be of interest to people, especially as you know, there is more and more focus on health and wellness across every level, whether it is from the government side and also, you know, cohorts of generation that are more interested in their health. So very excited about it. We believe there is lots of opportunity ahead of us.

Okay. Awesome. No, I appreciate that, Cliff. Thank you. And then maybe just maybe this is a Douglas question, but if we take a step back realizing that you guys do keep a lot of safety stock inventory, but we are in probably the most inflationary component environment we have seen in a long time. that is not just memory, but you just expanded aviation gross margins 200 basis points year over year. Marine ex tariff refunds is up 200 basis points year over year. Outdoor and fitness, both expanding very strong. When you talk about product cost reductions, can you just maybe be a little bit more specific or granular on exactly not just what is but why this is happening now, why maybe you could not execute on this a year or 2 years ago just given we are kind of in, like, it is just very counterintuitive given the environment. We are in. So just trying to understand, like, exactly what it is and why now. Yeah. Please.

Yeah. Maybe I will start, and Douglas can certainly add to it. But you know, as I mentioned in my remarks, our vertical integration is really paying off both in terms of our flexibility and an ability to bring in the right components and the right. Build the right products at the right time. But, also, the scale is really important. You know, our volumes have increased a lot, and so we have a lot of scales, which is helping in our overall efficiency. We did get some benefit from the Taiwan dollar So, you know, that is part of our product cost, but also, you know, our products many of our new ones, especially are premium in nature and have a lot of desirable features and capability, and so we are able to command higher margins for those products as well, which become a higher part of our mix. Awesome. Thank you so much, Cliff. Best of luck, guys. Thank you.

The next question comes from the line of Joseph Cardoso with JPMorgan. Joseph, your line is now open.

Hi. Good morning, and thanks for the question here. Maybe just wanted to start first on fitness. Obviously, had very strong growth in the quarter. Maybe against you guys setting very high standards for yourselves over the last couple of quarters and maybe more robust growth. Just wanted to touch on the trends you are seeing in Q3 and obviously into Q4 today, you know, just relative to registration, sell through inventory, new users, you know, that whole gambit of kind of KPIs that we all kind of like to hear about, you know, and how are you thinking about maybe the durability here? as we are heading into the holiday season? And then I do have a follow-up.

Yeah. I think in terms of registration, you know, that is something we watch very closely, and it is really a near real time pulse on the overall market. Our registrations did outpace our sell in. So there is some implication there that the channel is destocking a little bit, probably because they are getting ready to bring in more stocks for the holiday season. But the demand for our products and the pull through at the registration level is very strong. In terms of durability, again, you know, like, I have mentioned before that there is a lot of opportunity in this market, and we have demonstrated over the long term that we have delivered strong double digit growth rates across segments that are highly influenced by wearables, particularly fitness and outdoor. And so looking at Q4, you know, we see more of the same of that, and also the feedback from our retailers and their plans are very strong. As I mentioned, we have significant backlog. We are working to fill for the fourth quarter, and so that is our objective. And in the coming weeks. Yeah. I appreciate the color there, Cliff. And then maybe just switching gears here, wanted to touch on the Garmin Connect Plus traction and what you are seeing maybe in update there, just particularly just given, you know, as we think about when the product was launched and maybe cycling past in a more material way, you know, customers who are enjoying early free trials, How has that trended? And also curious to hear like what you guys are seeing around maybe implications around new products potentially having features only available via Connect Plus and how you are thinking about the opportunity around that? Thank you.

Yeah.

Connect Plus has outgrown the general rates of the underlying segments where those products can benefit from Connect Plus. Of course, that is probably to be understood because it is growing from a smaller base, but Connect Plus has outpaced our expectations and the renewals and the commitments after the free periods have been very strong. For those people that sign up for it. And even products that you would not suspect have would be of interest for Connect Plus, particularly CIRQL, People are also signing up for Connect Plus to get more out of CIRQL. So we feel very good about Connect Plus, and we have a long term road map to further expand that. In terms of just offering features of new products only through Connect Plus, I mean, we are already doing that today in terms of features like nutrition that is that is available with Connect Plus. But in general, our approach to the market has always been to offer rich features on our products. That delight our customers and satisfy them. And if they want more, we will offer more with Connect Plus. Got it. Thanks for the color, Cliff. Thank you.

The next question comes from the line of David MacGregor with Longbow Research. David, your line is now open.

Yes, good morning, everyone. Thanks for taking the questions. I guess I wanted to just ask about kind of channel inventories and the preseason sell in. You kind of touched on this in response to a previous question, but how are you seeing that seasonal sell in? And do you sense retailers and dealers are maybe just staying lean ahead of the election? Or is there some other reason why maybe we are seeing a little bit of an aberration from what is historically been a pattern there.

Yeah. I do not think there is any aberration at all, and I certainly could not figure out how to tie it to elections. But as I mentioned in Yeah. In some other comments that you know, retailer interest in Q4 promotions is very strong, and we are working on filling all of their orders for the for the holiday season. Okay. Okay. I guess second question, just on Thailand. Any update on the manufacturing facility there? And is production still expected to begin in 1Q 2027? And I guess, when does the capitalization of costs end in and the expensing begin? Yeah. I will maybe make a comment on the timelines, and Douglas can respond to the capitalization, but we are on track to open the new facility, expected start producing new products in the first quarter of 27, and it is something we desperately need as, you know, our volumes have basically reached our capacity. So we are we are excited to bring more capacity online.

Yeah. As it relates to when it starts hitting the P&L when it basically gets into production, that point in time, it will go through. Flow through the goods. At that point in time. So Q1 2027? Yes.

Okay. Terrific. Thanks very much. Good luck with everything.

The next question comes from Ivan Feinseth with Tigris Financial Partners. Ivan, your line is now open.

Hi. Thank you for taking my questions, and congratulations on another record quarter. Thank you. Starting with the Phoenix. What kind of uptake on the Phoenix are you seeing from people who are new to Garmin and new to the Phoenix versus people who are upgrading from existing watches? And what model have they been upgrading the most from?

In terms of new versus existing, as has been the history of the Phoenix launches. Initial demand, particularly, is very strong from existing users who are upgrading mostly from more than 1 generation old. It can vary but the response has been very positive. And then, of course, as the product makes its way further out into the channel, we start to see more new users come to the platform. And then, you know, based on the fact that you look for price increases on components, but, I feel you have, you know, pricing power. What do you what do you feel about your price. Or how do you feel about your pricing power, especially considering that a lot of your customers buy really based on features versus price. I think we are. Definitely pricing is something that you know, when I mentioned the mitigations that we can use, it is 1 of the things that we can we can look at. it is 1 of the tools that we have, but we do not overfocus on 1 particular thing, and we try to get the best balance of all the different ways that we can mitigate cost increases in our supply chain in order to achieve an outstanding result. I would probably just remind people that a little more than a year ago now, we Everyone was faced with higher supply chain costs really driven by tariffs. And that was something that we were able to navigate because of the diversity of our business and our vertical integration and our ability to create products that people want. And then that you said that you have had strong demand for the CIRQL, but in some supply constraint and only for like $50 more, you could get the Lilly with the screen or even a $100 more for the Venu Active. Are you seeing customers or are you getting feedback that they are going into store looking at the CIRQL and saying only for, you know, just a little bit more I can get a lot more functionality. Do you see some upgrades there?

Well, I think we certainly see a lot of demand for something like Vivoactive.

it is a very, very popular product. I think people that are looking at CIRQL are looking at it for a specific reason, which is the screenless approach, and they want the ability to have flexibility with other devices that they might wear So we do not necessarily have strict data points around how it is driving you know, people into other products. But the demand that we have been experiencing for CIRQL is very strong and, you know, definitely exceeded our expectations, which is what I like to call a happy problem. And so we are working hard to expand our production and to fill all of the orders that we have. I just have 1 more. What kind of feedback are you getting that people are looking at the CIRQL if they are going for a screenless product that people are considering a ring, let's say, versus a watch Where are people kind of thinking about the functionality of the 2?

Yeah.

I think, again, it really boils down to personal choice. We are not necessarily hearing people make those kind of trade offs, at least in ways that we can really dig that signal out of the noise. But I think, you know, by offering a broad range of products, that is really been our approach all along is to have broad ranges of products that allow people to select something that is right for them.

We have 2 other quick questions. On the 2.5 thousand planes, is that still just original equipment on a brand new plane? Or do you have now an upgrade process that you can retrofit an existing plane?

Well, it is really also retrofit because our King Airline includes Autoland option. And so, you know, we are we are applying auto land technology to both original equipment as well as retrofit. Okay.

And then 1 last quick. When in 2027 will we start to see the impact of Mercedes? Will that be on the 2028 models that come out in late 27? Or on the 2027 models that will start to come out next year?

I think in terms of precise timelines, I probably cannot really say. I would say that it will be early in the year and then later. We are, you know, basically having to follow, of course, the Mercedes direction in terms of ramp up and supplies that they need for their new model year. So we are expecting early in the year, but, again, something that we are following the orders of Mercedes. Alright. Thank you very much, and look and hoping for a strong Q4. Thank you.

The next question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Noah, your line is open.

Hi. Thanks for taking my questions. I guess, just to circle back on tariffs, I think there were $33 million of refunds in the quarter. Would you expect to receive additional refunds in fourth quarter or beyond? And then if you could just provide kind of any thoughts around kind of the run rate impact that you are experiencing and maybe any further offset looking to 2027? Thanks.

Yeah. So we have received the majority of our refunds. You know, we have applied for some of those, and we have filed for some, but it all depends upon, you know, how quickly the government processed those and receive those. But we do have, a smaller amount that we still have not received yet when we do expect to receive either in Q4 or 2027. As a run rate for those, you know, it really depends upon, you know, how those are processed. Through the system. Thanks.

And then, And then, Cliff, maybe just 1 on marine, another very strong quarter. Now sitting in the off season, how are you feeling about kind of the end market and the trajectory there? Just any thoughts would be helpful. Thanks. Yes. If I think about the end market broadly, I would say it is probably a little bit soft right now. You know, it is not necessarily a concern, but the market in general is probably just a tad bit softer, but we have still found ways to be successful and grow again based on innovation and, you know, probably some benefit from people refitting existing boats as opposed to purchasing new boats from time to time. But there is still strong demand for the newer boat segment, particularly in the in the mid range of the market. And so there is bright spots there as well. But, certainly, you know, I think high fuel prices have probably had more of an impact in marine than maybe some of the other segments, and people, you know, since it is kind of the off season now, they are probably in a wait and see mode. Thank you. Thank you.

Your next question comes from the line of Benjamin Bollin with Cleveland Research. Benjamin, your line is now open.

Thank you. Good morning, everyone. I appreciate you taking the question. Cliff, you made a reference to Phoenix around refresh and also talked to registration trends. Could you share any perspective on how you think about new users versus refresh opportunity outside of Phoenix? When you look at Forerunner, Venu, and even CIRQL, how it fits in? Just any thoughts on user expansion versus net new? And then I have a follow-up for Douglas.

I think the new user profile outside of Phoenix is very, very strong, heavily weighted towards new users. And products like CIRQL, products like Vivoactive, the entry level running products like the 470 and 170 all attract significant numbers of new users to the Garmin ecosystem. Okay.

Douglas, I was hoping you could share a little bit about the inventory prepayments. Just any ways to think about the structure of these agreements, how variable, how material, just any flex or how locked in you are that would be helpful. Thank you. Yeah. Related to the inventory prepayments it is really related to the memory supply constraint situation. Just negotiating with those suppliers there and just basically ensuring that we are going to be able to get, you know, the supply whenever we need that. From a standpoint. So it is kind of on a 1-by-1 1 basis depending upon that situation.

Next question comes from the line of Ronald Epstein with Bank of America Merrill Lynch. Ronald, your line is now open.

Hey. Good morning, guys. Maybe just 2 quick ones. Cliff, in the avionics business, you know, 1 of the things we have heard is there is been, you know, some issues across the industry getting printed circuit boards and other components. How have you guys been managing that, and how's it been for avionics, given that supply chain is different than your consumer supply chain?

Out of Taiwan? I think there is definitely second order effects driven by the memory situation and the overall AI build out. That creates both availability supply issues as well as some pricing issues in other areas. For example, you mentioned PCBs. that is very true. That there is some concerns there as well as even things you would not think of, like cabling and being able to find the cable supplies that we need But I think that is that is 1 of the secret sauces of Garmin's business is leveraging the scale and the relationships we have across the entire business in order to serve the needs of things like aviation, which are more niche and lower volume and we are able to successfully do that by, you know, again, all of those things in our business to be able to create a good result for aviation. Got it.

And then and then maybe just a follow-up on a question I asked a couple of years back. You said that there is been a change in the law that we can, you know, no longer import Chinese drones. Given Garmin's expertise in navigation, and aviation, is there an opportunity there for Garmin in its own market?

Well, I think I think some of the drones you might be referring to, you know, are more of consumer drones, and that market is mature and kind of saturated. I think a lot of interest in drones right now, of course, is around military uses, and there is a lot of companies focusing on that. We do not really see that as being our area of total expertise, so we are focused on the markets where we serve, where we feel like there is lots of opportunity to advance technology and innovation. Got it. Thank you very much. Thank you.

There are no further questions at this time. I will now turn the call back to Teri Seck for closing remarks.

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

This concludes today's call. Thank you for attending. You may now disconnect.