Logitech's (LOGI) Q2 Earnings and Revenues Surpass Estimates
Logitech International S.A. LOGI reported better-than-expected results in the second quarter of fiscal 2024. The computer peripheral and software maker’s fiscal second-quarter non-GAAP earnings of $1.09 per share beat the Zacks Consensus Estimate of 66 cents per share and registered a year-over-year increase of 30%.
The company revealed that its second-quarter profits exceeded the pre-pandemic level, mainly driven by improved component costs and reduced operating expenses. However, lower revenues partially offset the positive impacts of the aforementioned factors.
Logitech’s fiscal second-quarter revenues of $1.06 billion marked a year-over-year decline of 8% on a reported basis and 9% on a constant-currency basis. However, the top line outpaced the consensus mark of $978.4 million.
In 2020 and 2021, LOGI benefited from the elevated demand for its video collaboration, keyboards & combos and pointing device tools, mainly driven by the heightening of work-from-home and learn-from-home trends. Additionally, the demand for gaming products shot up due to the growing popularity of online video games and eSports amid the stay-at-home scenario. However, the demand softened due to the reopening of economic and business activities later on.
Logitech International S.A. Price, Consensus and EPS Surprise
Logitech International S.A. price-consensus-eps-surprise-chart | Logitech International S.A. Quote
Segment Details
Logitech registered a sales decline across the majority of key product categories year over year except for Pointing Devices and Tablet Accessories.
Revenues from Pointing Devices improved 3% year over year to $192 million, while Tablet Accessories revenues increased 17% year over year to $64 million. According to our model estimates, Pointing Devices sales were likely to decline 11.1% to $164.6 million, while revenues from Tablet Accessories were expected to increase 13.8% to $61.7 million.
Keyboards & Combos’ sales fell 3% to $195 million. Sales from Webcams were down 14% to $88 million, while Gaming sales plunged 12% to $282 million. Our estimates for Logitech’s Keyboards & Combos, Webcams and Gaming second-quarter revenues were pegged at $173.7 million, $76.4 million and $259 million, respectively. These estimates depicted a year-over-year decline of 13.5%, 25.1% and 19.6%, respectively.
Revenues from Video Collaboration also plunged 15% to $152 million. Our estimates for the segment were pegged at $141 million, suggesting a 21.2% decline.
In the first quarter of fiscal 2024, Logitech reclassified its product segments by removing the Audio & Wearable and Mobile Speakers categories and adding Headsets and Other categories. While the Headsets segment’s sales declined 1% year over year to $44 million in the second quarter, the Other segment’s sales plunged 35% year over year to $40 million.
Margins & Operating Metrics
The non-GAAP gross profit improved to $444 million from $443 million in the year-ago quarter. The non-GAAP gross margin expanded 340 basis points from the prior-year quarter to 42%. The year-over-year increase was driven by cost improvement, lower promotions and less reliance on expedited shipping, partially offset by an unfavorable product mix.
Non-GAAP operating expenses declined 9% to $261 million, mainly due to a 14% reduction in sales and marketing expenses. As a percentage of revenues, non-GAAP operating expenses contracted 30 bps to 24.7%.
The non-GAAP operating income soared 17% to $183 million from $156 million reported in the year-ago quarter. The operating margin improved to 17.3% from 13.6% in the year-ago quarter. The increase in the operating margin mainly reflects improved gross margins and lower operating expenses as a percentage of sales.
Liquidity and Shareholder Return
As of Sep 30, 2023, LOGI’s cash and cash equivalents were $1.16 billion, down from $1.25 billion recorded in the previous quarter. Additionally, the company generated $223 million in cash from operational activities in the second quarter and $463.1 million in the first half of fiscal 2024.
In the second quarter, the company repurchased shares worth $94 million and paid out $182.3 in dividends. In the first half of fiscal 2024, it bought back shares worth $188.9 million.
Fiscal 2024 Guidance Update
Buoyed by the stronger-than-expected second-quarter performance, Logitech raised its forecast for revenues and non-GAAP operating income. The company now expects fiscal 2024 sales in the band of $4.0-$4.15 billion, indicating a decline of 9-12%. Earlier, it had anticipated revenues to decline 12-16% to the $3.8-$4 billion band.
Non-GAAP operating income is anticipated in the range of $525-$575 million, suggesting a 2-11% fall year over year. The company previously forecasted non-GAAP operating income to decline 15-32% to the $400-$500 million range.
Zacks Rank & Other Stocks to Consider
Currently, Logitech sports a Zacks Rank #1 (Strong Buy). Shares of LOGI have soared 9.8% year to date (YTD).
Some other top-ranked stocks from the broader technology sector are Palo Alto Networks PANW, Salesforce CRM and Fortinet FTNT. Palo Alto sports a Zacks Rank #1, while Salesforce and Fortinet each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has been revised upward by 2 cents to $1.16 per share in the past 60 days. For fiscal 2024, earnings estimates have increased by 7 cents to $5.34 per share in the past 60 days.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 76.4% YTD.
The Zacks Consensus Estimate for Salesforce’s third-quarter fiscal 2024 earnings has been revised 23 cents northward to $2.06 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 8.3% upward to $8.06 per share in the past 60 days.
Salesforce’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 14.2%. Shares of CRM have risen 52.3% YTD.
The Zacks Consensus Estimate for Fortinet's third-quarter 2023 earnings has remained unchanged at 37 cents per share in the past 60 days. For 2023, earnings estimates have remained stagnant at $1.51 per share in the past 60 days.
Fortinet’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 17.1%. Shares of FTNT have risen 14.7% YTD.
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