台灣國際航電 (GRMN) 2020 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Garmin Ltd. Fourth Quarter 2020 Earnings Conference Call. (Operator Instructions)

I would now like to hand the conference to your speaker today, Teri Seck, Manager of Investor Relations. Please go ahead, ma'am.

Good morning. We would like to welcome you to Garmin Ltd. Fourth 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/stock. 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 Ltd. and its business. Any statements regarding our future financial position, revenues, earnings, gross margin, operating margins, future dividends, market shares, product introductions, future demand for our products and plans and objectives are forward-looking statements. The forward-looking events and circumstances discussed in this earnings call may not occur, and actual results could differ materially as a result of risk factors affecting Garmin. Information concerning these risk factors is contained in our Form 10-K filed with the Securities and Exchange Commission. 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 in the company's business result 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 reported earlier today, our growth momentum accelerated in the final quarter of the year. Revenue increased 23%, exceeding $1.3 billion driven by strong double-digit growth in our fitness, outdoor and marine segments. Gross margin improved to 58.5%. Operating income increased 34% to $371 million, and operating margin expanded to 27.5%. GAAP EPS was $1.73 and pro forma EPS was also $1.73, increasing 34% over the prior year.

Looking back, I'm very proud of what we accomplished in 2020. The COVID-19 pandemic created unprecedented challenges affecting every company, and of course, Garmin was no exception. Many of these challenges were the burden of employees such as learning to work and collaborate remotely while juggling new challenges in their personal lives. Our employees were very resilient and faced these challenges with courage and determination as reflected in our outstanding performance throughout the year. The pandemic also created many new opportunities as interest in health, fitness and active lifestyles surged. We were well positioned to seize these opportunities with a strong product lineup, and our vertically integrated business model gave us flexibility to meet rapidly changing demands. During this crisis, we maintained our focus on R&D, which allowed us to introduce many innovative new products throughout the year.

On a consolidated basis, revenue increased 11% to nearly $4.2 billion, which is a new record for Garmin, and our fifth consecutive year of growth. Gross margin was 59.3%, and operating margin was 25.2%. Operating income increased 11% to over $1 billion, which is another record achievement. This resulted in GAAP EPS of $5.17 and pro forma EPS of $5.14, an increase of 16% over the prior year. Considering these strong results, at our upcoming annual meeting, we'll ask shareholders to approve an annual dividend of $2.68 per share, representing a 10% increase over the current annual dividend amount. Doug will discuss our financial results in greater detail in a few minutes, but first, I'd like to highlight some achievements from the past year and the outlook for each of our 5 business segments.

Starting with the fitness segment. Revenue increased 26% as strong demand for advanced wearables and cycling products fueled our growth. Growth and operating margins were 53% and 24%, respectively, resulting in operating income growth of 66% over the prior year. During the year, we launched innovative new wearables and cycling products, such as the Venu Sq, the Forerunner 745 and the next generation of Edge cycling computers. Looking forward, we are well positioned to capitalize on the broader trends in health and fitness. We plan to leverage our recent acquisition of Firstbeat to offer products with unique health and fitness features. In addition, we intend to capitalize on the trends in indoor cycling with our strong lineup of Tacx products. With these things in mind, we anticipate revenue from the fitness segment will increase approximately 10% in 2021.

In the outdoor segment, revenue increased 23%, primarily driven by strong demand for adventure watches. Gross and operating margins were 66% and 39%, respectively, resulting in operating income growth of 32%. During the year, we added solar charging technology to a broad range of fenix and Instinct models, extending our lead in low-power technology and further differentiating ourselves in the highly competitive smartwatch market. Looking forward, we expect the broader trends in outdoor to continue. We plan to leverage this opportunity by offering compelling products that maximize the enjoyment of outdoor activity and adventure. We believe that inReach will continue to grow as more people appreciate the convenience and life-saving potential of 2-way remote communication. Our recent acquisition of GEOS, a critical provider of emergency monitoring and incident response services, allows us to expand its scale and improve service levels for our growing base of inReach customers. With these things in mind, we anticipate revenue from the outdoor segment will increase approximately 10% in 2021.

Looking next at the aviation segment. Revenue decreased 15% due to lower revenue from OEM product categories and the expected decline of the ADS-B market. Gross and operating margins were 73% and 22%, respectively. While the pandemic created some headwinds, particularly in the OEM market, we see positive signs in the smaller aircraft segment, especially in owner-flown aircraft. In addition, when adjusting for the impact of ADS-B, there are encouraging signs in the aftermarket as aircraft owners embrace the latest cockpit technologies. Autoland is being recognized as game-changing new safety technology for general aviation and recently was named one of 2020's greatest innovations by Popular Science. Autoland also won a Top Flight Award from Aviation International News. During the year, Autoland achieved certification on 3 aircraft models, including the Cirrus Vision Jet, the Piper M600 and the Daher TBM 940. Over 150 Autoland-equipped aircraft are now in service, a number that continues to grow every day. We believe the general aviation market is stabilizing, and during 2021, we expect this segment to grow approximately 5% with contributions from both OEM and aftermarket categories. We expect revenue from the segment to decline in the first quarter as we compare against strong residual ADS-B numbers from last year, followed by growth as the year-over-year comparisons become much more favorable. We are focused on certifying safety-enhancing technologies such as Autoland in additional aircraft models, and we will continue to invest in future growth opportunities.

Moving on to marine. The segment delivered another year of impressive results as the pandemic created an opportunity for people to rediscover boating and fishing. Revenue increased 29%, with growth in multiple product categories led by strong demand for chartplotters. Gross and operating margins were 58% and 27%, respectively, resulting in operating income growth of 60%. We continue to be recognized for innovation and achievement in the marine industry. We were named Supplier of the Year by Independent Boat Builders, Inc.; Manufacturer of the Year by the National Marine Electronics Association; and recently, we were recognized as one of the top 10 most innovative marine companies by Soundings Trade Only, which is a B2B news and information provider for the recreational boating industry. Looking forward, we anticipate that interest in boating and fishing will remain strong. Many boatbuilders have already sold out of their 2021 models, and our retail partners are preparing for another year of strong growth. We plan to capitalize on these trends by offering a compelling lineup of products with innovative features and disruptive new technologies. With this in mind, we anticipate revenue from the marine segment will increase approximately 15% in 2021.

Moving finally to the auto segment. I want to highlight that we are now providing expanded disclosures for the segment. Specifically, we are disclosing separate financial information for the 2 operating segments within auto: the consumer segment, which includes PND and specialty products; and the OEM segment, which is focused on hardware and software solutions for vehicle manufacturers. We believe these expanded disclosures will help investors better understand the mix of revenue, the level of investment and the profit profile of each profit segment. Now looking at the year-end results for the auto segment. Revenue decreased 16% as the decline in PNDs was partially offset by growth in specialty products and revenue from new OEM programs. Gross margin was 45%, and we recorded an operating loss of $19 million driven by investments in auto OEM programs. Our auto OEM business has reached an inflection point as we ramp up new programs over the next few years. Prior to the most recent wins, we have been successful on various software, navigation and infotainment programs with several top-tier OEMs, such as Honda, Toyota, Daimler and Peugeot, to name just a few. We are currently in production with a full infotainment system for the Daimler Vito van, and we recently began production on the current BMW program, where we are a Tier 1 build-to-print supplier. Also, we are developing the next-generation program for BMW as the lead supplier, which expands our role to encompass all aspects of the design, including hardware, complex operating system development and system integration. Moving into this lead supplier role on future programs is a testament to the progress we've made as a Tier 1 supplier to the auto industry. These programs require a significant investment in R&D prior to realizing revenue, and not all costs are reimbursed by the customer. With these things in mind, we expect total auto revenue to grow approximately 5% in '21, driven by growth in specialty consumer products and new OEM programs. We also expect additional losses from the OEM operating segment as we invest in the development of future programs expected to launch in late 2022.

Well, in summary, I'm very proud of what we accomplished in 2020 while facing challenges that no one could have anticipated just 1 year ago. The indicators for 2021 look positive, and we are excited about the opportunities in every business segment. With this in mind, we anticipate 2021 revenue will be approximately $4.6 billion, an increase of 10% over the prior year, and we anticipate growth in all segments. We expect gross margin to be approximately 59.2%, and operating margin at approximately 23.5%. Assuming a pro forma effective tax rate of 10.5%, pro forma earnings per share are expected to be approximately $5.15.

That concludes my remarks. Next, Doug will walk us through additional details on our financial results. Doug?

Thanks, Cliff. Good morning, everyone. I'll begin by reviewing our fourth quarter and full year financial results, move to comments on the balance sheet, cash flow statement and taxes. We posted revenue over $1.3 billion for the fourth quarter, representing a 23% increase year-over-year. Gross margin was 58.5%, 50 basis point increase on the prior year. Operating expense percentage of sales was 31.1%, 180 basis point decrease. Operating income was $371 million, a 34% increase. Operating margin was 27.5%, 240 basis point increase in the prior year. Our GAAP pro forma EPS was $1.73, 34% increase from the prior year pro forma of EPS.

Looking at full year results, we posted revenue of over $4.1 billion, representing 11% increase year-over-year. Gross margin was 59.3%, a 20 basis point decrease from the prior year. Operating expense as a percentage of sales was 34.1%, 20 basis point decrease. Operating income was $1.054 billion, 11% increase. Operating margin was 25.2%, consistent with the prior year. Our GAAP EPS was $5.17. Pro forma EPS was $5.14, 16% increase on prior year.

Next, looking at fourth quarter revenue by segment and geography. In our fourth quarter, we achieved double-digit growth for our 5 segments, led by marine segment with growth of 48%; followed by the outdoor segment, 40% growth; fitness segment with 26% growth. By geography, we achieved growth in all 3 regions, led by strong growth of 32%, both EMEA and APAC. Americas grew 13%, which is more heavily impacted by the decline in aviation. Excluding aviation, Americas' growth was more in line with other regions. For the full year 2020, we achieved 11% consolidated growth with strong double-digit growth in 3 of our 5 segments. Marine, fitness and outdoor each grew in excess of 20%. On geography, we achieved growth in all 3 regions, led by 17% growth, EMEA; 8% growth, both Americas and APAC.

Looking next, operating expenses. Fourth quarter operating expenses increased by $57 million or 16%. Research and development increased $38 million year-over-year, primarily due to engineering personnel costs and other expenses related to auto OEM programs. Our advertising expense decreased approximately $2 million from the prior year quarter. SG&A increased $21 million compared to prior year quarter, a decrease percentage of sales to 11.8%, 70 basis point decrease compared to the prior year. Increase in SG&A is primarily due to increases in information technology costs and personnel-related expenses.

A few highlights on the balance sheet, cash flow statement and dividends. We ended the quarter with cash and marketable securities of approximately $3 billion. Accounts receivable increased sequentially year-over-year to $849 million due to strong sales in the fourth quarter. Inventory balance increased year-over-year to $762 million. During the fourth quarter 2020, we generated free cash flow of $387 million. For the full year 2020, we generated free cash flow of approximately $950 million, $369 million increase from the prior year due to improved earnings and decreased operating capital needs. For 2021, we expect free cash flow to be approximately $725 million, approximately $350 million of capital expenditures. Expected year-over-year increase capital expenditures due to investments in platforms for growth include expansion of our Taiwan manufacturing facilities; restarting the late expansion project, which includes the renovation of the previous Olathe manufacturing and distribution facility to increase workspace capacity; the auto OEM manufacturing facility in Europe and IT-related projects. We announced our plans to seek shareholder approval for an increase in our dividend, beginning with the June 2021 payment. Proposal is a cash dividend of $2.68 per share or $0.67 per share for the quarter. This is a 10% increase from our current quarterly dividend of $0.61 per share. For full year 2020, we reported an effective tax rate of 10.1%. Pro forma effective tax rate is 10.4%, 510 basis point decrease from the prior year, primarily due to the migration intellectual property ownership of Switzerland to United States. The fiscal year 2021 pro forma effective tax rate expected to be 10.5%, relatively flat year-over-year.

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

(Operator Instructions) Our first question comes from Robert Spingarn with Crédit Suisse.

Cliff, Doug, very good numbers. I wanted to dig in a little bit in a couple of things. But just starting off, the guidance on the operating margin for '21, if we could just bridge that from '20, the decline in the operating margin. Is that just more R&D on the auto side?

Yes. So I'll give you a little bit of color on that. Yes, it's primarily due to operating expense as a percentage of sales increasing. If you look at the gross margin was relatively comparable, maybe 10 basis points lower there. But to give you a little bit color on the operating expenses, yes, we're anticipating 2021 to be about 160 basis points higher as a percent of sales. Looking at each of the pieces, advertising, we anticipate or target that to be relatively flat as a percentage of sales year-over-year. SG&A will be slightly up, we think. That's primarily due to increased IT expense as well as other personnel-related expenses. And then the increase, as you mentioned, really is driven by R&D. So if you look at R&D, we're anticipating that as a percentage of sales to be about 150 basis points higher year-over-year in there. It's really driven by a big piece of that relating to auto OEM investments, but other investments that we see in other parts of our segments.

Okay. And then Cliff, on the topline strength in the year, is there any way, by segment, to parse just market growth versus market share improvement? I'm thinking specifically about marine. I mean it was just outstanding. But just in general, is there a way to think about those 2 different factors?

Yes. I think looking specifically at marine, there's definitely a combination of market size increase as well as market share gains. If you look broadly at the boatbuilders in marine, they're experiencing anywhere from high single digits to double-digits increase in their business. And so probably underlying the business, the market is increasing at those kinds of rates. And then on top of that, our product line and our growth in terms of the market, market share has been strong, and so we've been able to essentially double leverage those things.

Okay. And then just as a final question, have you been constrained at all by semiconductor shortages anywhere?

Yes. I would say that we're experiencing some levels of tightness in supply. It is spotty. It depends on the component and the supplier. We've generally been able to work through those kinds of constraints with our safety stock inventory strategy and also because we're agile. With our vertical integration, we can find substitutes and keep things going. But it's definitely noticeably more challenging in this environment, of course, and there's lots of headlines about that, and we operate in that same environment. So those are factors for us, too. But so far, we believe that we've been able to manage that okay.

So there is nothing in the guide that anticipates any significant pressure there? You're assuming you work through it?

Well, I think if you look at a high level at our guidance, we are a company that's heavily influenced by consumer trends, and it's very early in the year. So I would say that we always try to make sure that we factor in just the general dynamics of the kinds of markets that we serve. But as far as component supply or capacity constraints or anything like that, we haven't necessarily taken any kind of significant haircuts because of those things.

Our next question comes from Nik Todorov with Longbow Research.

Congrats on great results, really impressive. Cliff, I was wondering, how are you thinking about the potential normalization in the world in the second half with vaccine rolling out and everything going on? Do you believe a recovery in the travel and leisure industries will have any impact on the demand for your products?

Well, I think that's still a highly speculative thing that nobody really knows the answer to. I would say that, for myself, I believe that any kind of normalization is going to take some time as we've been in this situation now for about a year, and people have adjusted lifestyles and consequently, some of their priorities probably have changed probably permanently. And it still remains to be seen how much the vaccine really makes people feel free to do those kinds of activities. There's still a lot of guidance coming out that the vaccines have -- they help, but they don't necessarily ensure that people won't get sick or couldn't infect someone else. So these are all things that people are still processing. It's early days. And so right now, we're believing that the trends that we've been seeing in the business over the past year are solid and will continue.

Okay. Great. And then really appreciate the breakdown, the detail for the auto segment. If you look at the OEM side, how should we think about linearity throughout the year? Do you guys have new programs that will start ramping up in calendar year '21?

Yes. We're ramping up really on 2 programs. I mentioned the Daimler Vito has not yet anniversaried the start of production there. So there will be a significant ramp associated with that. And then the BMW, the current program that we're supplying as the build-to-print supplier, again, we're in early days on production in that. So we'll experience a full year of production on those 2 programs.

Okay. Great. And last question for me. On the fitness side, you had a pretty good year for your gross margin. I think you've expanded a couple hundred basis points. How should we think about fitness gross margin as we go forward? Do you anticipate to maintain the current level? I know mix has been a tailwind for you this year.

Yes, we've mostly transitioned our product line to the more advanced wearables. And so the highly competitive low-end bands really aren't influencing our business as much there. So we have said before and we continue to believe that the fitness business is a mid- to upper 50s kind of percent margin on the gross margin line and, of course, targeting 20-plus percent in operating margin for the segment.

Our next question comes from Paul Chung with JPMorgan.

Great quarter. So just a follow-up on operating margin guidance. If you could get more granular by segment. Auto OEM, you mentioned increase in investments there. But on fitness, do we kind of return to that low 20s or high teens on Tacx expansion? Outdoor, marine maybe come down after a strong '20. And on aviation, do we stay in this low 20s range? Or does that begin to normalize maybe in 2Q and then as some longer-term R&D investments kind of wane a bit? Any thoughts would be helpful. And I have a follow-up.

Yes, go ahead. As it relates to 2021 on operating margins, we see most of the segments probably being relatively consistent year-over-year. A couple of them will probably be a little bit lower or some lower, I should say, and one of which is auto OEM. As we continue to make investments in auto OEM, you also see there the gross margin came down some as some of our newer programs have a lower gross margin. So in auto OEM, you will see some decline there. And then aviation is all depending upon the growth we have and expansion there, so it depends upon how the revenue growth relates to our operating expenses.

Okay. And then as we think more about kind of a recurring base of revenues kind of across your portfolio, you have inReach plans with hefty kind of monthly premiums across products. But -- and then you also have Tacx subscriptions for video trails, et cetera. These are smaller in scale relative to your whole revenue base, but if you could just expand on where you see those kind of subscription services going. And then it sounds like you expect some nice contribution in '21, but then where do you see potential to maybe drive kind of the higher subscription service-type offerings, maybe across other parts of your portfolio?

inReach continues to have a lot of potential. It's a unique capability that especially appeals to the customer base that we have. And so we believe there's a lot more potential to grow that, both in 2021 and into the future. But as far as other opportunities, I would say that we're targeting areas like inReach that would be recurring revenue opportunities that would appeal to the kind of customer base and the products that we make. And so there's more things in the works that we'll come out with in the future, but we do have an intentional focus on that.

Our next question comes from Ben Bollin with Cleveland Research.

Cliff, could you start a little bit by talking about auto OEM and the operating margin performance over time? Maybe talk a little bit about how you see that scaling. What happens to that business as you bring on new programs? Is it absorbed? Or is there some incremental expenses? Just the right way to think about how you can scale that business over the next several years.

Yes. I think you're hitting definitely the nail on the head there. I feel that we're in a period of significant investment right now and the programs that we've won, definitely establish a base of credibility. But I think what we're working towards now is building the scale that we need. This business, of course, is a different kind of margin profile overall than the rest of our business. And so we recognize that it will be lower gross margins and lower operating margins, which are consistent with the industry. But we're also witnessing one of the biggest transformations in personal transportation taking place right now. And as a result, there's many, many companies that are trying to get into the opportunity presented by this turnover of technology. And so we have things that we're bringing to the market, and so we're continuing to invest. And as we bring on new programs, definitely, there'll be some incremental investments that we have to make, but our belief is that we would be able to leverage the scale of the infrastructure that we're putting in place now.

Okay. Another item I'm interested in is, any thoughts you have on current product availability across channels, for instance, where channel inventory stands today, supply-demand balance for fitness, outdoor and marine. And then a last follow-up.

Yes. I think, for the most part, we believe that the retail channels are very clean. We are entering the new year with a significant level of backlogs as we do have some capacity constraints and is one of the motivations we have for investing in the business in the coming year. And so we do see strong demand for our products right now, and the channel inventory does not appear to be excessive at this point.

Okay. My last one is related to capital structure. Could you give us any updates on where your priorities are with respect to dividends, CapEx, M&A, share repurchase? And also interested in any thoughts about factory utilization and some of the incremental investments you're making in '21 in terms of production expansion.

Yes. I think we've mentioned before, our priorities on our cash is for being a reliable payer of an attractive dividend. And so in our results today, again, we announced that we'll be increasing that significantly in the coming year, which we're excited to do. We're also focused on M&A activity that enhances our business either through technology that we don't have ourselves or through a product line that would be complementary to what we offer. So we're -- that's really our second priority. And then the third priority, of course, is investing in the business. And to that end, again, today, we mentioned that we'll be making some significant capital investments in our production capacity in 2021 and beyond. We want to significantly increase our Taiwan production capacity as well as the ongoing investments that we've made here in Olathe. We'll be restarting our office expansion to support more employees. We're building out the Tacx factory for trainers and of course, the auto OEM factory in Europe for BMW.

Our next question comes from Jeffrey Rand with Deutsche Bank.

Congrats on a good quarter. Now that we are pretty much a year into the pandemic, can you maybe touch on how you have shifted or adjusted your strategy over the past year? And whether there have been any changes in your M&A focus from the pandemic?

Well, M&A-wise, really no shift. And we were able to successfully complete some of those transactions even during the pandemic. So we had Firstbeat on board as well as GEOS. And so again, as I just mentioned, we'll be continuing to look for opportunities, especially those that bring some kind of technology or product category to us that we don't presently have. In terms of how we run the business, we've -- it's been different, but we've been very successful in collaborating electronically. We do have many of our offices and employees coming in on a rotating basis. So we're seeing more and more faces of people, which is a good thing, but we don't necessarily have full utilization of our space because we're keeping people distant and making sure that everyone can stay safe. So all of that kind of remains the same. I think the biggest thing for me is kind of stop predicting when it's going to end and simply kind of manage through and do the best things for the business right now.

Great. And then just as a follow-up, can you talk about the demand trends you're seeing in your indoor cycling business and if you're still running a backlog there?

The demand is very strong for indoor cycling. And so we're leveraging the new facility that we have built in the Netherlands for Tacx to increase our capacity. But even with increased output, we're seeing a very strong backlog for that product. So we're continuing to work very hard to fill those orders.

Our next question comes from Will Power with Baird.

Yes, congratulations on the results. I guess a couple of questions. Yes, thanks again for the auto breakdown. I know you touched a bit on the OEM opportunities. I guess, on the consumer front, how do we think about what the growth looks like there going forward? I think you actually -- Cliff may have indicated you expected specialty consumer to grow year-over-year in '21. If I heard that right, I'm just trying to understand the puts and takes of the consumer piece.

Yes. So you heard right. We're expecting all 5 of our business segments to contribute to growth in 2021 and specifically, in auto. Both the OEM operating segment and the consumer operating segment are expected to achieve growth in the year.

And any other color as to what's going to drive the consumer growth within auto?

Well, these specialty product categories that we've developed are very strong for some of the same reasons that we're seeing in other areas of the business. So we've developed products for overlanding and as well as specialty products for motorcycles and trucks, and all of these are very popular categories right now.

Okay. Great. And then my second question, on fitness. I think in your prepared remarks, you mentioned integrating Firstbeat and that providing opportunities in '21. Maybe just remind us, where are you with respect to integration of that today in terms of some of those capabilities versus what's to come? And as you think about strategic M&A and the opportunities, are there -- what do you see as kind of the big opportunities in fitness?

Yes. So Firstbeat is -- it was purely a software technology company, and so -- and a company that we had been working with previously in terms of incorporating their technology into our wearables and cycling products. And so with the acquisition, we've been able to accelerate the incorporation of features across the product lines that broadens our feature list for our customers. And so that's underway. And for the most part, many of our new products already have some of the expanded feature sets that we wanted them to have, thanks to the Firstbeat acquisition. And in terms of the other opportunity there, I mean, again, probably can't comment on specifics, but we see a few pop up here and there. And as we have done historically, we look at each of those and make sure that what we engage in really matches our criteria for a technology or a product category that would be beneficial to us.

Our next question comes from Ron Epstein with Bank of America.

A couple of questions, maybe some detailed ones and then maybe a bigger picture one. So when we think about the tax rate for '21 and then going forward, how should we think about that? Because I think the tax rate you guys are talking about is a little bit lower than what I was thinking.

Yes. So yes, the tax rate we have for 2021 is consistent with what we had for 2020. So we think not a lot of change from that standpoint. Now we do not give any guidance for future years. There's a lot of things that really play into that, Ron, depending upon operating income, income by segment, even by jurisdiction, reserve releases as such. But I think it'd probably be in that same type of a range, we think, in the next -- in the future, depending upon obviously things that may change with tax law enactments and those type of things in there. But I think it's relatively consistent between '21 and '20.

Got it. Got it. And then, Cliff, you mentioned about aviation growth. If you pro forma-ed it for ADS-B, how big a headwind is -- was ADS-B?

Well, it was definitely a significant once-in-a-generation opportunity to equip every aircraft with technology. And so we worked very hard to supply every aircraft with ADS-B that we possibly could, and we were wildly successful, which is demonstrated by the fact that we have some headwinds right now, but those are headwinds that I'm very proud of.

No. Yes, my question -- I mean, obviously, it's all good stuff. But I guess what I'm trying to get at, if you -- when you remove that ADS-B piece, and we think about aviation into '21 and maybe into '22, right, I mean, it seems like we're potentially in a recovery in business aviation, as evidenced by the capacity utilization of business jets. I mean it -- they got hit far less than other parts of aviation, and the business piece of private aviation really hasn't come back yet. So if we were to get into a more meaningfully robust upturn in business, private aviation, I'm just trying to get at, like, what that would mean for you guys. So it's sort of like -- understand the question?

Yes, for sure. And we mentioned last year at this time as the pandemic was erupting that we believe that general aviation had a bright future throughout this because of the flexibility and the options that it provides people that might have concerns about how they travel. And we've definitely seen that play out. As I mentioned in my remarks, the smaller aircraft segment, especially owner-flown and also we're hearing the news from charter and fractional companies that they're seeing an uptick in their demand. And so that's playing out exactly as we thought. And as we look forward, again, the demand is just super strong in the smaller aircraft segment. And we're strongly positioned in every one of those platforms to take advantage of that. We're in all the right places in the light jet market, up through medium jets, on the piston side for the owner-flown people as well. And so we're ideally positioned in all of those categories to be able to meet the demand.

Got you. And then shifting maybe to customers and stickiness. Garmin Connect, did you have a sense on once folks are kind of in that universe, does that keep them locked into a Garmin product?

Well, for sure. I have a decade of history on Garmin Connect that I wouldn't ever want to lose. And I know that there's many other customers that feel that way, and it's a place where you store the most important data about yourself and to be able to manage your health. And so the features that are in Garmin Connect are super sticky and are useful tools for people and is something that they continue to use.

Got you. And then maybe one last question, a balance sheet question. So you guys have -- your net cash, $3 billion. I mean, clearly, that's not the most efficient way to use the balance sheet. I think someone else earlier asked you about capital deployment, so on and so forth. But I mean sitting around with $3 billion on the balance sheet. I mean how do you think about that? And shouldn't that be deployed someplace else, either in a new product, back to shareholders or somewhere?

Yes. I think we've obviously demonstrated that we're stepping up our spending on capital investments to support the business that we see going forward. So that's one thing. We've been in an acquisition mode. So we've spent some money in the past year on that, and we're increasing our dividend for sure. The business is growing. So definitely having a little more cash on hand is not a bad thing. And a year ago, as the economy was tanking, everyone was concerned about the fact that some companies didn't have enough cash to weather those things. So we've always been in a strong position, and that's where we'll continue to be. We do have concerns and constraints around the capital structure. We want to make sure that we can distribute dividends to shareholders as efficiently as possible, which means that we have a certain amount of capital that we can deploy, whether it's dividends or buybacks. And that's done at a withholding tax-free rate right now. And so we're being very careful with that to make sure that we can be reliable and attractive for people in the long term.

Our next question comes from Ivan Feinseth with Tigress Financial.

Congratulations on another perfect quarter and a great year, and congratulations on being selected by Joby for -- they're selecting your G3000. Were there or have you been incorporating unique functionality in the G3000 that supports the eval functionality of these new types of planes?

Yes. These e-vehicles that are being designed definitely have unique characteristics. And so the avionics and the electronics, in general, onboard needs to be specific for those platforms, just like we've seen in every other kind of aircraft that we've been incorporated into. So we're doing the same thing with Joby and the others we're working with.

What your competitive advantage is, and what's -- that you won this and hopefully keep winning these new mandates?

Well, we have the most capable avionics systems for these aircraft. And so obviously, that's a major attractive point. We have a significant amount of experience as a company, both in certifying avionics and aircraft as well as being a reliable production partner for our OEMs that use our equipment. And so all of these things are definitely pluses for Garmin as we look at these new opportunities.

Now is Autoland automatically included? Or can be included in this as well?

Yes, I think Autoland would be a case-by-case basis for these new opportunities. I can't comment specifically on Joby with that, but obviously, we're amassing a strong base of autonomous technologies and safety technologies for aircraft that can be applied broadly across fixed-wing as well as helicopters and e-vehicles as well.

Okay. And then on Firstbeat, what type of new functionality can we hope to see as you incorporate more of the Firstbeat acquisition into your products?

Well, we've been really excited about Firstbeat because they are a team of people focused on physiology, especially exercise physiology, but as well as basic health and wellness as well. And so we're leveraging their expertise to be able to improve a lot of capability on our products in terms of health sensing, health data feedback for people and providing guidance to people in terms of how they can modify their life in order to live healthier and to be more fit.

And then will -- what's going on with your developer? Are you going to have a developer -- the IQ developer conference this spring? Or what is the plan for that? And then are you going to open up opportunity for developers to work with Firstbeat functionality to develop new applications to use on your products?

Yes. Last year, we did it virtually. I would anticipate, based on what we know today that, that's the same approach we'll take this year. But actually, many of our partners appreciated that because it allowed them to participate when some of them wouldn't otherwise be able to take the time or spend the money to travel. So we would anticipate that a virtual approach would be something that's part of our approach for developers going forward. But in terms of what things are opened up on the platform, I probably can't make a specific comment about Firstbeat, but we are continually adding capabilities that allow people to access the unique features of our hardware platforms and also our software stack.

And is there any thoughts about making Connect IQ more of an e-commerce platform for those companies that -- because there are some applications that -- a lot are for free, some you can pay through like PayPal, but there's no real former process -- formal process. Do you see eventually creating this where it goes through Garmin and Garmin earns a commission as well as helping to promote developers and quality number of apps available?

I would say, at a high level, it's something that's still of interest to us and something that we get requests for from our developers. So we're continuing to look at that and trying to determine the best way to work it into our ecosystem.

Our next question comes from Erik Woodring with Morgan Stanley.

Congrats on the great quarter. I just want to start maybe if we take a step back and think high level. We've gone through this pandemic now for, whatever it is, 10-plus months, what are some of the trends you believe will be more permanent even as the pandemic is behind us? And then I guess, how does that impact or influence your product road map as we sit here today?

Yes. I think people have for a long time now basically been conditioning themselves with new lifestyle choices. And many times, coffee pot conversations basically will reveal that many of the changes people actually are excited about and they love. And so people say that it only takes 3 weeks to form a habit. And so as people have focused on healthier lifestyles, on active lifestyles and adventure, these are things that are getting ingrained and embedded in their thinking and something that they value. So we believe that these kinds of trends are positive things for us, and we believe that they will be more longer-term things that we are experiencing. And so that's how we're viewing this.

Okay. And then, I guess, just as we retouch on the auto OEM business, is there anything to call out as we think about the quarterly cadence of revenue in terms of abnormal seasonality, if that can even be a term, or maybe lumpiness of revenue in the certain quarter in 2021?

Well, probably hard to say. I think in addition to the year-on-year effects of ramping up new programs, automakers are experiencing their own challenges when it comes to production, supply chains and constraints on components that they're needing for production. So unfortunately, it's probably going to be a little bit chaotic for -- I'm speaking in a general sense, for automakers, and we would expect that the ones that we serve will probably have to face those challenges as well.

Okay. Fair enough. And then maybe, I guess, last question. Just on tax. I know we've gone through a bit of the supply constraint and then expanding production, but what are -- what have you seen in terms of customer reactions to longer wait times? Do you find demand to be perishable? Or is Tacx the name and the brand that consumers want, and they're willing to wait however long it may be to get one of those products?

I think the constraints are definitely not unique to us. Like the entire industry is -- and cycling, in general, is suffering from supply constraints right now. So people are anxious to get the equipment that they want to equip their houses with indoor cycling. And obviously, most people aren't very happy when they have to wait a long time for sure. We don't expect them to be, but we're working very hard to fulfill the demand. And the good news has been that as we've ramped up production, it seems like our back orders have really also increased. And so we believe that people love the product. We believe it's superior to anything out there, and they're willing to wait to have our product.

Our next question comes from Nik Todorov with Longbow Research.

Yes, guys, quick follow-up. Cliff, I think, on the auto side, I heard that you said that new consumer products will experience growth, but I think then you clarified that you expect the whole auto consumer segment to see growth in 2021. If that's the case, I think that implies that the auto OEM sales have kind of -- in December of $62 million was kind of a peak here for the near term. Am I thinking of this correctly? Or am I missing something? Because I think you were talking about ramping up programs with Daimler and BMW. Is there any reason why December would be peak for the next 2, 3 quarters in auto OEM? I know production is going to be down in March and June, but I thought you would have seen a nice linearity going forward.

Yes. I think the first half of the year is probably going to be favorable as we comp against some challenges from last year as automakers were reducing capacity and shutting down factories. But then it should even out towards the back half as we comp against these new program introductions.

Okay. So you expect to be down sequentially from December is what I'm trying to get in the first half and auto OEM specifically?

Yes, I would expect it actually to grow sequentially into the first half and then level off from there.

Okay. So the whole consumer OEM will also see growth for 2021?

Yes, that's what we mentioned.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Teri Seck for closing remarks.

Thank you, everyone, for joining us today. Doug and I are available for callbacks, and we will talk with a lot of you in the coming days and weeks. Have a great day. Bye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.