Harman (HAR, Financial), the premier audio, visual, infotainment and enterprise automation group have already touched our lives. More than 80% of the world's luxury cars are equipped with HAR’S premium audio and infotainment systems.
But HAR stands for more than just great sound. It helps create great lifestyle experiences for today's connected generation. Its flagship brands include AKG, Harman Kardon, Infinity, JBL, Lexicon, Mark Levinson and Revel.
Recent Quarter Earnings
Net sales for the second quarter were $1.58 billion, an increase of 19% compared to last year's 24%, excluding the impact of foreign currency translation. Infotainment net sales increased 12%, or 18% excluding foreign currency translation (ex-FX), due to platform expansion, stronger automotive production, and higher take rates. Lifestyle net sales grew 26% (31% ex-FX) driven by strong demand for the Company's home and multimedia product lines and increased automotive production levels and higher take rates in car audio. Net sales in the professional division increased 29% (32% ex-FX), primarily as a result of the expansion of the company's product portfolio into enterprise automation and control and video switching.
On a GAAP basis, second quarter operating income was $149 million, compared to last year's $102 million, and earnings per diluted share were $1.65 for the quarter compared to $1.03 last year. Excluding restructuring and other non-recurring items, second quarter operating income was $162 million, compared to $108 last year, and earnings per diluted share were $1.79 compared to $1.09 the previous year.
"I am extremely pleased to report double-digit, top-line growth in each of HARMAN's divisions, making this HARMAN's sixth consecutive quarter of such outstanding performance. Despite foreign exchange headwinds, our fiscal year is off to a solid start with 21% year-to-date, top-line growth, driving over 150 basis point expansion of our EBITDA margin. As a result, we are raising our 2015 EPS guidance from $5.25 to $5.85," said Dinesh C. Paliwal, the Company's Chairman, President and Chief Executive Officer. "We are confident that the demand for a rich connected car experience is sustainable and will continue to drive take rates, particularly for embedded infotainment systems and branded car audio solutions."
Paliwal continued, "together with our progress in Infotainment and Professional, groundbreaking innovations in Lifestyle and on-going focus on disciplined execution, we are optimistic about the second half of fiscal year 2015," added Paliwal. "Longer term, we have been reinforcing the importance of software and services to HARMAN as the technology leader for the connected lifestyle, including enterprise, home, car and mobile markets. With the transformative acquisitions of Red Bend and Symphony Teleca and expanded capabilities in cloud, mobility and analytics, HARMAN will accelerate Internet of Things solutions for a broader set of industries and markets."
Summary of Operations - Gross Margin and SG&A
Non-GAAP gross margin for the second quarter of fiscal 2015 increased 155 basis points to 30.2%. The improvement was primarily due to the impact of higher sales volume utilizing a more efficient fixed production cost base and favorable product mix.
In the second quarter of fiscal 2015, SG&A expense as a percentage of net sales decreased 59 basis points to 20.0 percent on a non-GAAP basis primarily due to improved operating leverage on higher sales.
2015 Guidance Update
HARMAN raised its financial outlook for fiscal 2015. The Company now forecasts operational EBITDA and operational earnings per share of $715 million and $5.85, respectively, based on: a Euro/USD weighted average rate of 1.22 (1.15 for the second half of fiscal year 2015); an effective tax rate of 24% for the full year; and approximately 70.5 million shares outstanding for the full year.
To End
HAR is reaching new heights after its recent earnings release. HAR has been living up to its reputation for more than 60 years now and with the recent scenario it is expected to do so in the coming future. Known for its legendary brands, HAR has been responsible for changing the way people experience entertainment. Investors may benefit by adding this company to their portfolio.
