Logitech's 1Q Earnings Beat Comprehensively - Analyst Blog

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Logitech International SA ( LOGI ) reported net income of a penny per share in the first quarter of fiscal 2014, well above the Zacks Consensus Estimate of a loss of 11 cents and a prior-year quarter loss of 32 cents per share. The company posted net income of $1.0 million in the reported quarter compared with net loss of $51.4 million in the year-earlier quarter.

The year-over-year increase in earnings was due to a solid performance in its growth categories, namely tablet accessories, PC gaming and wireless speakers. Moreover, Logitech experienced growth across all its operating regions in the Americas, Asia and EMEA (Europe, the Middle East and Africa) in tablet accessories.  

Revenues

Net sales in the first quarter of fiscal 2014 were up 2% year over year and stood at $477.9 million, compared with $468.6 million in the year-ago quarter and exceeded the Zacks Consensus Estimate of $428 million by 11.7%. The year-over-year rise in revenues was primarily due to an improved sales performance in the company's growth categories such as tablet accessories, PC gaming and wireless speakers. Sales in these categories surged 90% year over year.

Sales by Channel

The company's Retail sales increased 4.6% year over year to $413.2 million. The growth was due to an improvement in sales from the Americas (up 12%) and Asia (up 4%), partially offset by declining sales from the EMEA region (down 3%).

However, total Retail sales excluding the company's 'Retail-Other' product category, which the company is at present exiting from, was up 8% year over year. 

Sales for Life size and OEM divisions declined by 18% and 6% respectively.

Sales by Product Division

Tablet Accessories was the best-performing retail product category in the reported quarter, with sales rising 143% year over year to $38.6 million. There was also a 48% rise in sales from PCGaming to $39.6 million.

Other categories contributing to growth in sales were Audio-Wearables & Wireless (sales up 31% to 19.1 million), Remotes (up6% to 14.6 million) and PC Keyboards & Desktops (up 4% 97.5 million).

However, year-over-year sales reduced in other categories such as Retail-Other (sales down 89% to 1.6 million), PC Audio (down 16% to 51.9 million), fall from Video (down 5% 35.2 million) and Pointing Devices (down 1% to 114.6 million).

Margins

Gross margin for the quarter improved by 420 basis points to 35.2%, compared with 31% in the year-ago quarter. This increase in gross margin was due to product cost improvements across all PC-related categories, streamlining of product portfolio and cost savings due to restructuring.

Operating income for the reported quarter was a modest $0.05 million, compared with an operating loss of $58.5 million in the prior-year quarter. Operating expenses were down 17% year over year to $168.3 million due to restructuring charges.

Balance Sheet & Cash Flow

As of Jun 30, 2013, cash and cash equivalents were $318.9 million, down 11.6 % from the year-ago level.

Net cash provided by operating activities was a negative $1.3 million at the end of the quarter versus a negative $7.1 million in the prior-year period.

Repurchase

During the reported quarter, Logitech has not made any share repurchases under its $250 million repurchase program. Currently, the company has $4 million worth of shares remaining under this share repurchase program that expires in Aug 2013.

Looking Ahead

The company re-affirmed its outlook for full-year fiscal year 2014 and expects to generate sales of $2 billion and an operating income of $50 million with a gross margin of approximately 34%.

Logitech believes that by divesting non-profit making assets, its costs will reduce and the focus will become more concentrated. Furthermore, management has identified a number of product categories that no longer fit well with the company's strategic direction. As a result, Logitech has initiated the process to divest its non-strategic categories and do away with extra costs by the end of 2014. The company is currently exiting its "Retail-Other" product from its Retail product category and has shortened key product cycles as well.

Currently, Logitech carries a Zacks Rank #2 (Buy).  Other industry participants such as Electronics for Imaging, Inc . ( EFII ) has a Zacks Rank #1 (Stong Buy), Stratasys Ltd . ( SSYS ) and Synaptics Inc. ( SYNA ) both carry a Zacks Rank # 2 (Buy).



ELECTRN IMAGING (EFII): Free Stock Analysis Report

LOGITECH INTL (LOGI): Free Stock Analysis Report

STRATASYS LTD (SSYS): Free Stock Analysis Report

SYNAPTICS INC (SYNA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: EFII , LOGI , SSYS , SYNA

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