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Computer peripherals company, Logitech International SA (LOGI - Free Report) , 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 (MSFT - Free Report) . 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 (AAPL - Free Report) 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’s quarterly results have been benefiting from its robust business model that focuses on optimizing profit in PC peripherals and venturing into new business categories. Growing adoption of new mobile platforms in both mature and emerging markets have been fueling demand for Logitech’s peripherals and accessories. Despite declining PC sales and macroeconomic uncertainty, the company seems to be on a sustainable growth curve.
Relatively new business areas, including Bluetooth Speakers and Video Collaboration via advanced offerings, are raking in strong profits and the company believes there is more room for upside. Going forward, we perceive that Logitech’s innovative product launches and strategic acquisitions will assist the company in improving its sales growth and capture a greater market share.
Stratasys Ltd. (SSYS - Free Report) is a manufacturer of in-office rapid prototyping (RP) and manufacturing systems and 3D printers for automotive, aerospace, defense, electronic, medical and consumer product original equipment manufacturers (OEMs). The company has an excellent earnings surprise history, beating estimates each time over the trailing four quarters. It boasts an average positive surprise of 65.4%.
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Logitech (LOGI) Q2 Earnings & Revenues Beat, View Intact
Computer peripherals company, Logitech International SA (LOGI - Free Report) , 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 (MSFT - Free Report) . 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 (AAPL - Free Report) 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
LOGITECH INTL Price, Consensus and EPS Surprise | LOGITECH INTL Quote
Our Take
Logitech’s quarterly results have been benefiting from its robust business model that focuses on optimizing profit in PC peripherals and venturing into new business categories. Growing adoption of new mobile platforms in both mature and emerging markets have been fueling demand for Logitech’s peripherals and accessories. Despite declining PC sales and macroeconomic uncertainty, the company seems to be on a sustainable growth curve.
Relatively new business areas, including Bluetooth Speakers and Video Collaboration via advanced offerings, are raking in strong profits and the company believes there is more room for upside. Going forward, we perceive that Logitech’s innovative product launches and strategic acquisitions will assist the company in improving its sales growth and capture a greater market share.
Logitech currently holds a Zacks Rank #3 (Hold). A better-ranked stock in the industry is Stratasys Ltd. (SSYS - Free Report) , sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Stratasys Ltd. (SSYS - Free Report) is a manufacturer of in-office rapid prototyping (RP) and manufacturing systems and 3D printers for automotive, aerospace, defense, electronic, medical and consumer product original equipment manufacturers (OEMs). The company has an excellent earnings surprise history, beating estimates each time over the trailing four quarters. It boasts an average positive surprise of 65.4%.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>