Logitech International SA (NASDAQ: LOGI) stock falls despite decent performance

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Logitech International SA (NASDAQ: LOGI) stock lost over 2.7% in the pre-market session despite delivering decent second quarter of FY 19 performance. Logitech confirmed its FY 19 outlook of 9 to 11 percent sales growth in constant currency and $325 million to $335 million in non-GAAP operating income.

LOGI in the second quarter of FY 19 has reported the adjusted earnings per share of 49 cents, beating the analysts’ estimates for the adjusted earnings per share of 43 cents. The company had reported the adjusted revenue growth of 10 percent to $691 million in the second quarter of FY 19, beating the analysts’ estimates for revenue of $688.93 million. The revenue grew due to continued double-digit growth from our Gaming and Video Collaboration categories and a solid contribution from PC Peripherals. Americas region delivered sales growth of 9% in Q2, roughly consistent with prior quarter performance. In Q2, sales in the EMEA region were up 1% versus last year, with positive contribution from Creativity & Productivity, Video Collaboration, and Gaming. Asia Pacific region reported another impressive quarter, with sales up 26%. Almost all product categories had robust double-digit growth in the quarter.

Q2 non-GAAP operating income grew 18 percent to $85 million, compared to $71 million in the same quarter a year ago. In Q2, non-GAAP operating expenses increased 10% to $175M. Sales & Marketing spending rose 13% and R&D increased 7%, offset in part by a 3% decline in G&A. The company’s total Q2 non-GAAP operating expense ratio was 25.4%, up 20 basis points versus Q2 last year.Q2 cash flow from operations was $85 million, up 24 percent compared to Q2 of the prior year. Cash flow from operations for the fiscal year to date was $97 million, compared to $67 million for the same period a year ago.

LOGI has strategically invested in the inventory ahead of the recent tariff implementation and purchased the inventory on hand at Blue Microphones. Accounts receivable were $460M and accounts payable were $441M at the end of September 2018, up $182M and $54M, respectively. The company’s DSO for Q2 were 60 days (versus 40 days in Q2 last year, with an 18-day impact from 606 implementation) and the DPO were 91 days (versus 86 days in Q2 last year). Both DSO and DPO were impacted by sales linearity and the acquisition of Blue Microphones.

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