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Logitech (LOGI) Q2 Earnings Top Estimates, Revenues Lag

Zacks Equity Research

Logitech International LOGI reported second-quarter fiscal 2020 results, wherein the bottom line surpassed estimates, but the top line missed the same.

Non-GAAP earnings came in at 50 cents per share, surpassing the Zacks Consensus Estimate of 45 cents. The bottom line also improved from the year-ago quarter figure of 49 cents.

Net sales of $720 million missed the consensus estimate of $726 million, but rose 4% year over year in dollars and 6% in constant currency. The year-over-year revenue growth stemmed from consistent strength in Video Collaboration, and solid growth in PC peripherals category. However, macroeconomic headwinds weighed on the top line.

Logitech International S.A. Price, Consensus and EPS Surprise

Logitech International S.A. Price, Consensus and EPS Surprise

Logitech International S.A. price-consensus-eps-surprise-chart | Logitech International S.A. Quote

Segmental Details

Logitech’s Gaming segment’s sales increased 0.2% year over year to $161 million.

Video Collaboration witnessed an outstanding 57% rally to hit $89.6 million.

Mobile Speakers business’ sales, however, plunged 26% to $57.2 million. The segment had witnessed a strong second-quarter fiscal 2018 due to the launches of BOOM and MEGABOOM speakers, which made year-over-year comparison difficult.

Audio & Wearables segment witnessed 10% growth to reach $68 million. Smart Home segment sales grew 2% to $9.4 million.

Logitech’s Creativity and Productivity business comprises four sub-business lines — Keyboards and Combos, Pointing Devices, PC Webcams, and Tablet and Other Accessories. Revenues from Pointing Devices, Keyboards and Combos, and PC Webcams grew 3%, 5%, and 2% year over year, respectively. However, Tablet and Other Accessories dived 8%.

The Other segment, products of which the company is currently in the process of transitioning out of, registered an 81% year-over-year decline in the reported quarter.

Margins & Operating Metrics

Non-GAAP gross profit rose 6.4% year over year to $276.5 million. Non-GAAP gross margin increased 80 basis points (bps) to 38.4%.

Non-GAAP operating expenses jumped 6.7% to $187.1 million.

Non-GAAP operating income climbed 5.7% to $89.4 million. Operating margin of 12.4% expanded 20 bps.

Liquidity

As of Sep 30, 2019, Logitech’s cash and cash equivalents were $574.5 million compared with $597 million in the previous quarter.

Additionally, the company generated operating cash flow of $106.5 million in the fiscal second quarter compared with $36.5 million in the prior quarter.

Guidance

Logitech reaffirmed view for fiscal 2020. The company expects non-GAAP operating income to be $375-$385 million.

Revenue growth is anticipated within mid-high single digits in constant currency.

Zacks Rank & Key Picks

The company currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector are Splunk Inc. SPLK, Alteryx, Inc. AYX and Benefitfocus, Inc. BNFT, each flaunting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Splunk, Alteryx and Benefitfocus is currently pegged at 31.24%, 17.62% and 20%, respectively.

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