Logitech (LOGI) Q2 Earnings & Revenues Beat, View Intact

Computer peripherals company, Logitech International SA (NASDAQ:LOGI) , posted an earnings beat for the fourth consecutive quarter, with its second-quarter fiscal 2017 adjusted earnings (including stock-based compensation expense) of 30 cents per share surpassing the Zacks Consensus Estimate of 16 cents.

Also, on a Non-GAAP basis, the company’s earnings per share came in at $0.35, up 40% on a year-over-year basis. The bottom-line growth came on the back of solid cost savings, benefits from targeted investments and decent top-line performance.

Inside the Headlines

Net sales for the quarter rose 8.8% year over year to $564.3 million, ahead of the Zacks Consensus Estimate of $521 million. Revenue growth was attributable to the company’s Retail segment, which posted a record growth of 14% year over year. However, this was partially offset by revenues lost, subsequent to the company’s exit from OEM operations. This, in turn, affected the year-over-year comparison.

The Retail category recorded robust, broad-based growth across its businesses, with six out of the nine sub-segments charting double-digit growth during fiscal second quarter.

Video Collaboration stood out as the strongest category, surging 42.3% year over year to $28.6 million, with growth across all the geographies. Increasing adoption of cloud-based video collaboration solutions have been fuelling growth for Logitech’s webcam and audio technology. This boosted the segment’s growth. During fiscal second quarter, the Video Collaboration segment launched Logitech SmartDock in partnership with Microsoft Corporation (NASDAQ:MSFT) . This product will aid in supporting video calls in large conference rooms.

Audio-PC & Wearables and Mobile Speakers also demonstrated remarkable growth with a robust 34.6% and 20.8% increase in revenues, respectively, to $62.2 million and $97.1 million, on a year-over-year basis. While integration of the previously acquired firm, Jaybird’s products boosted growth in the Audio-PC & Wearables, growth in Mobile Speakers sales were attributable to the phenomenal traction of UE Boom 2 and Megaboom speakers.

Gamingcontinued charting its solid growth trajectory on the back of new product launches and marketing initiatives, improving 17.2% year over year to $79.2 million. Notable product introductions include Logitech G Prodigy family of gaming gear and Logitech G Pro mouse. This segment has acted as one of the strongest profit churners for Logitech, recording double-digit growth in 12 out of the past 14 quarters.

Also, Keyboards & Combos and Tablet & Other Accessories witnessed healthy growth rates of 14.1% and 11.3%, respectively. This was the tenth consecutive quarter of growth for Keyboards & Combos. Robust sales of both traditional keyboards and multi-device keyboards proved conducive for the segment’s growth.

Impressive sales of Create Keyboard Case for Apple Inc.’s (NASDAQ:AAPL) 9.7 iPad Pro proved conducive to the top-line performance of Tablet & Other Accessories.

Moreover, PC Webcams were also up 3.9% on a year-over-year basis. Growth in PC Webcams was supported by strong contribution from C920 webcam and during fiscal second quarter introduced C922 Pro Stream webcam to expand its market share.

However, sales under the Home Control and Pointing Devices witnessed mid-single digit and low-single digit declines of 6.3% and 1.1%, respectively. Lackluster sales in Americas and EMEA region proved to be a drag on Home Control sales. Pointing Devices business remains optimistic, that the introduction of silent mouse (M330 and M220) and multi-device M720 Triathlon mouse, will supplement sales growth in the upcoming quarters.

Non-GAAP operating margin expanded 250 bps year over year to 11.5%, while non-GAAP operating income jumped 39.4% year over year to $64.8 million on cost-saving benefits.

Notable Developments during the Quarter

Logitech acquired Mad Catz Interactive’s Saitek brand, along with the Saitek line of flight, space and farm simulation game controllers, for $13 million in cash. Mad Catz’s divested assets comprise specified trademarks, equipment & tooling, inventory and technical data. It also includes every other element required to design, market and distribute Saitek brand’s interactive simulation controllers. This buyout reflects the company’s strategy to fortify its Logitech G gaming product line.

Liquidity

As on Sep 30, 2016, Logitech’s cash and cash equivalents were $395.2 million compared with $365.8 million as of Sep 30, 2015. Also, the net cash provided by operating activities for the company came in at $74 million, a colossal increase from the year-ago tally of $10.7 million.

Guidance Reiterated

Logitech has reiterated its guidance for fiscal 2017. The company expects non-GAAP operating income to lie in the range of $195–$205 million and projects Retail sales to grow 8–10% in constant currency terms.

LOGITECH INTL Price, Consensus and EPS Surprise

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Written By: Zacks Investment Research