David MacGregor: Yes. And you’re not seeing any mix down or any dynamic like that?
Clifton Pemble: Actually, I would say that the response to our higher-end products in the recent quarter or two, the back half of 2023 has been very good.
David MacGregor: Okay. As a follow-up, I just wanted to ask on the automotive business. You noted that you expect the business to turn profitable in the second half. How are you thinking about an end of your exit run rate on segment margins?
Clifton Pemble: Well, we’ve guided people to think about gross margins in the range of mid- to upper teens and operating margins in the mid-single-digits.
David MacGregor: That’s for the full-year, right?
Clifton Pemble: No. That’s really on a run rate basis. I think for the full-year, we mentioned in the remarks that we expect to exit the back half profitable on a quarterly basis. We don’t expect 2024 to be profitable as a full-year but then we’ll work into 2025 on that basis.
David MacGregor: Got it. Thanks very much. Good luck.
Operator: Our next question comes from Jordan Lyonnais from Bank of America. Please go ahead. Your line is open.
Jordan Lyonnais: Good morning. Thanks for taking the time. Would you guys be able to give more color on what drove the lower revenue in aviation aftermarket?
Clifton Pemble: Yes. I think aviation aftermarket, Jordan is an interesting market because it’s a very narrow distribution channel through specialty installers, doesn’t have the same kind of retail dynamic. And we did come off of 2022 and into 2023, with significant supply chain challenges, which drove behaviors on the part of those dealers and installers to have more inventory on their shelves. During 2023, we saw them essentially burning that off as they had installs come in, and they were working on aircraft. And we expect some of that to continue also in 2024.
Jordan Lyonnais: Got it, thank you so much.
Clifton Pemble: Thank you.
Operator: Our next question comes from Erik Woodring from Morgan Stanley. Please go ahead. Your line is open.
Erik Woodring: Awesome. Thank you very much for taking my questions guys and good morning. Maybe my first question for you, Cliff, is a bit of like a philosophical question, which is if we look back historically at kind of the Garmin story, it was always about kind of premiumization. Obviously, amazing gross margins that generally have trended higher over time. Your strongest growing segment is now also going to be your largest — sorry, your lowest gross margin segment. So how should we think about the — what the model really is now? Is it more about maximizing operating profit dollars as opposed to margins? Can you just help us think through how that change is taking place now that you have this really kind of exploding auto OEM opportunity? And then I have a follow-up. Thank you.
Clifton Pemble: Yes. I would say, Erik, that there’s probably no one mold to put Garmin in when it comes to the breadth and depth of our businesses. We still and always will serve those premium niche markets in our traditional markets. And we see new opportunities like auto OEM as a way to leverage the strength we have in vertical integration, our smart factories, our supply chain capability and our ability to serve customers, which has been very attractive. So at the end of the day, it’s profit dollars that we can put in the bank. And going about doing that, we simply try to play to all the strengths that we have.
Erik Woodring: Okay. Okay. That’s really helpful. And then maybe the second question is over the last few years, we’ve seen a bit of a deviation or gap, somewhat unusually between the outdoor and fitness businesses, somewhat kind of reflective of kind of key product launches. For 2024, obviously, you’ve kind of guided those businesses back to tracking in line with one another. So just maybe my question is when we think about maybe the product launch cadence and the importance of those product launches, should we think about this being a bit more evenly split across both of those product lines as opposed to maybe focusing on one or the other? Is that the right way of thinking kind of your emphasis on product launches for the entirety of 2024 just in these two segments specifically?
Clifton Pemble: Well, I would say that ideally, we would want to have a very even cadence between those two segments when it comes to product launches. It doesn’t always work out that way just because of the nature of product development and the complexity of the various product lines that we take on. I would expect in 2024 that outdoor will be more active than fitness. But then again, in 2023, fitness was more active than outdoor.
Erik Woodring: Okay. That’s really helpful. Thank you very much for the color, Cliff.
Clifton Pemble: Thank you.
Operator: Our next question comes from Noah Zatzkin from KeyBanc Capital Markets. Please go ahead. Your line is open.
Noah Zatzkin: Hi, thanks for taking my questions. Maybe just one on kind of marine for me. Just wondering if you could kind of expand upon how you’re thinking about end market dynamics this year? And just any color on your OEM business versus aftermarket and how you’re thinking about that dynamic playing out as we look into 2024? Thanks.
Clifton Pemble: Let’s say, Noah, that the market, as we mentioned in the remarks is softer. I think in general, I would say that we estimate the market declined about 10% in 2023. When you look at all the various players, we outperformed with market share gains. So we’re thrilled with that, and we expect in 2024 that we’ll continue to perform ahead of the market. In terms of the dynamic between OEM and aftermarket in marine, the aftermarket is really the bigger slice of the pie, if you will. So we’re influenced more by those dynamics. We do expect 2024 will be offset in terms of any softness will be offset by new revenue from JL Audio, which we expect to be about 15% of the segment revenue for the year.
