The Switzerland-based computer peripherals company, Logitech International SA LOGI declared second-quarter fiscal 2016 non-GAAP earnings of 22 cents per share, which fell below the year-ago quarter figure of 31 cents by 29.1%.
Adjusting for stock based compensation, non-GAAP earnings of 18 cents was in-line with the Zacks Consensus Estimate. Encouragingly, Mobile Speakers, Gaming and Video collaboration segments fared well.
Inside the Headlines
Net sales for the quarter rose 2% year over year to $539.9 million and beat the Zacks Consensus Estimate of $518 million. While Retail channel performance improved, OEM and Video Conferencing channels continued to perform weakly.
Based on channels, Logitech’s Retail sales increased 5% year over year at $496.3 million. However, OEM sales declined 22% year over year to $22.2 million and Video Conferencing sales slipped 25% to $21.4 million on a year-over-year basis.
Logitech’s Retail – Growth category witnessed a rise of 35% on a year-over-year basis, which is the best performance since 2010. In particular, Mobile Speakers, Gaming and Video Collaboration demonstrated remarkable growth with a robust 66%, 42% and 45% increase in revenues, respectively, to $80.6 million, $67.6 million and $20.1 million on a year-over-year basis. The Mobile Speakers category benefited from the launch of three new speakers – UE MEGABOOM, UE BOOM 2 and UE ROLL.
On the other hand, Video Collaboration category was aided by strong conference cams sales, the Gaming category topped on the back of solid sales of both Gaming wheels, keyboards and headsets. However, Tablet & Other Accessories revenues tumbled 34% year over year to $18.5 million hurt by weak sales.
Non-GAAP gross margin fell 420 bps year over year to 34.6% due to negative impact of currency. Non-GAAP operating expenses dipped 1% year over year at $145.2 million thanks to the disclosed cost management initiatives of Logitech. On the other hand, non-GAAP operating income plummeted 29% year over year to $41.7 million.
Liquidity
As of Sep 30, 2015, Logitech’s cash and cash equivalents stood at $365.8 million, as compared to $537.0 million as of Mar 31, 2015.
Shares Repurchases
During the quarter, Logitech repurchased 2.9 million shares for about $40 million. With this, the company currently has roughly $200 million worth of shares available under its shares buyback plan.
Guidance Reiterated
For fiscal 2016, Logitech reaffirmed its non-GAAP operating income to be around $150 million. The company expects Retail Strategic sales growth of 7% in constant currency.
Looking Ahead
Although Logitech’s earnings results were not so encouraging, the company is optimistic of better results ahead. Accordingly, Logitech expects its sluggish Gaming category to deliver double-digit growth in fiscal 2016 on the back of a strong product portfolio. Additionally, the company anticipates its Logi BLOK cases family and other innovative product offerings to contribute to the growth momentum in near future.
Apart from this, Logitech is streamlining its videoconferencing hardware business to focus on the new cloud-based offerings. In addition, the company is successfully progressing in exiting its OEM business and anticipates it to complete by the end of the calendar year.
Logitech currently carries a Zacks Rank #3 (Hold). Better ranked stocks in the same sector worth considering include Immersion Corporation IMMR, Mercury Systems, Inc. MRCY and Planar Systems Inc. PLNR. All stocks sport a Zacks Rank #2 (Buy).
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