Logitech (LOGI) Q1 Earnings Top Estimates On Strong Retail

Switzerland-based computer peripherals company Logitech International SA (NASDAQ:LOGI) posted a striking earnings beat for the third consecutive quarter, as its first-quarter fiscal 2017 adjusted earnings (including stock-based compensation expense) of 15 cents per share trumped the Zacks Consensus Estimate of 5 cents by a huge margin. The figure also rose 37.5% from the year-ago quarter figure of 8 cents.

The bottom line showed strong year-over-year growth, driven by robust performance across the company’sgrowing product categories.

Inside the Headlines

Net sales for the quarter rose an impressive 7.8% year over year to $479.9 million, surpassing the Zacks Consensus Estimate of $438 million. The entire growth was attributable to the company’s Retail segment, which grew a remarkable 13% year over year. This was the highest quarterly growth achieved by the segment in over the last five years. This was somewhat offset by revenues lost subsequent to the company’s exit from OEM operations, which affected the year-over-year comparison.

The Retail category saw robust, broad-based growth across its businesses, with most of them charting double-digit growth over first-quarter fiscal 2016. Mobile Speakers stood out as the strongest, growing 41% year over year to $57.3 million, with growth across Americas, EMEA, and Asia Pacific.

Gaming continued charting its robust growth trajectory on the back of new product launches and marketing initiatives, growing 29% year over year to $56.5 million. Driven by growing trend of PC gaming, Asia-Pacific showed particularly strong growth in the quarter.

Audio-PC & Wearables and Video Collaboration also demonstrated remarkable growth with a robust 24% and 13% increase in revenues, respectively, to $56.6 million and $23.9 million on a year-over-year basis. Audio-PC & Wearables numbers benefited from addition of the Jaybird family of wireless earbuds to its portfolio, while Video Collaboration growth was driven by strong sell-through demand for cloud-based video collaboration solutions.

Pointing Devices remained flat year over year, while Keyboards & Combos and PC Webcams showed growth of 12% and 17%, respectively. This was the ninth consecutive quarter of growth for Keyboards & Combos, while growth in PC Webcams wasdriven by strong contribution from C920 webcam.

Also, sales under the Home Control category increased 9% to $11.2 million, driven by growth across EMEA and Asia Pacific.

Tablet & Other Accessories space was the only segment which contracted, with its revenues plunging 26% year over year to $13.9 million, hurt by a slowing product demand. However, the recently launched CREATE Keyboard Case for the 12.9” iPad Pro and Logi BASE Smart Connector Charging Stand for the iPad Pro showed positive growth.

Non-GAAP operating margin expanded 20 bps year over year to 35.6%, while non-GAAP operating income rose 5.3% year over year to $37.8 million on top-line strength.

Divestiture

In third quarter of fiscal 2016, Logitech had announced the split of its Lifesize division from the parent company to form a new private firm called Lifesize, Inc. Logitech sold 62.5% stake in Lifesize to three venture capital firms, namely, Redpoint Ventures, Sutter Hill Ventures and Meritech Capital Partners, for a total of $17.5 million. The remaining 37.5% share will be owned by Logitech.

Logitech’s decision to divest Lifesize demonstrates its focus on its ongoing three-year turnaround plan to reduce operational costs as well as improve profits and margins. This divesture will also help Lifesize strengthen its foothold in the expanding videoconferencing software-as-a-service market, as it capitalizes on the rich market experience of its new investors.

In addition, Logitech recently completed its exit from the OEM mouse business, in order to improve focus on premium products for retail markets.

Liquidity

As on Jun 30, 2016, Logitech’s cash and cash equivalents were $440.1 million compared with $492.2 million as of Jun 30, 2015.

Guidance Raised

In light of such exceptional quarterly results, Logitech raised its guidance for fiscal 2017. It now expects to post non-GAAP operating income to lie in the range of $195–$205 million (up from earlier guidance of $185–$200 million). The company now projects its Retail sales to grow 8–10% in constant currency terms, up from prior projection of growth in the mid-single digits.

h3 LOGITECH INTL Price and EPS Surprise/h3 Original post

Get The News You Want

Read market moving news with a personalized feed of stocks you care about.

Get The App

Written By: Zacks Investment Research