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Logitech’s Q2 Sales Grow 75%, Operating Income Up Over 300%

·21-min read

Company Raises Annual Outlook as Hybrid Work Culture Takes Shape

Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the second quarter of Fiscal Year 2021.

  • Q2 sales were $1.26 billion, up 75 percent in US dollars and 73 percent in constant currency, compared to Q2 of the prior year. This was the first time ever that Logitech’s quarterly sales exceeded the billion-dollar mark.

  • Q2 GAAP operating income grew 372 percent to $322 million, compared to $68 million in the same quarter a year ago. Q2 GAAP earnings per share (EPS) grew 263 percent to $1.56, compared to $0.43 in the same quarter a year ago.

  • Q2 non-GAAP operating income grew 295 percent to $354 million, compared to $89 million in the same quarter a year ago. Q2 non-GAAP EPS grew 274 percent to $1.87, compared to $0.50 in the same quarter a year ago.

  • Cash flow from operations was $280 million, compared to $107 million in the same period a year ago.

"Our growth and profitability accelerated again this quarter, and we are raising our annual outlook," said Bracken Darrell, Logitech president and chief executive officer. "The growth trends that drive our business have accelerated as society adjusts to its new reality. The organization leaders I speak to envision people increasingly working from multiple locations, a hybrid work culture that is emerging as the norm. And at home, the rise of gaming as a spectator and participant sport continues with no end in sight. Our products are essential to helping customers work, play and create wherever they are. Logitech is well positioned for long-term growth."

Outlook

Logitech raised its Fiscal Year 2021 annual outlook to between 35 and 40 percent sales growth in constant currency, and a range of $700 million to $725 million in non-GAAP operating income. The Company’s previous outlook was between 10 and 13 percent sales growth in constant currency, and a range of $410 million to $425 million in non-GAAP operating income.

Prepared Remarks Available Online

Logitech has made its prepared written remarks for the financial results videoconference and livestream available online on the Logitech corporate website at http://ir.logitech.com.

Financial Results Videoconference and Livestream

Logitech will hold a financial results videoconference to discuss the results for Q2 FY 2021 on Tuesday, October 20, 2020 at 8:30 a.m. Eastern Daylight Time and 2:30 p.m. Central European Summer Time. A livestream of the event will be available on the Logitech corporate website at http://ir.logitech.com.

Use of Non-GAAP Financial Information and Constant Currency

To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of intangible assets, purchase accounting effect on inventory, acquisition-related costs, change in fair value of contingent consideration for business acquisition, restructuring charges (credits), loss (gain) on investments in privately held companies, non-GAAP income tax adjustment, and other items detailed under "Supplemental Financial Information" after the tables below. Logitech also presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales. Logitech believes this information, used together with the GAAP financial information, will help investors to evaluate its current period performance and trends in its business. With respect to the Company’s outlook for non-GAAP operating income, most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to the GAAP amounts has been provided for Fiscal Year 2021.

About Logitech

Logitech designs products that have an everyday place in people's lives, connecting them to the digital experiences they care about. More than 35 years ago, Logitech started connecting people through computers, and now it’s a multi-brand company designing products that bring people together through music, gaming, video, and computing. Brands of Logitech include Logitech, Logitech G, ASTRO Gaming, Streamlabs, Ultimate Ears, Jaybird and Blue Microphones. Founded in 1981, and headquartered in Lausanne, Switzerland, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI). Find Logitech at www.logitech.com, the company blog or @Logitech.

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding: our preliminary financial results for the three months ended September 30, 2020, growth trends, the pace of growth trends, gaming trends, our products and their utility to consumers, long-term growth, and outlook for Fiscal Year 2021 operating income and sales growth. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech’s actual results and events to differ materially from those anticipated in these forward-looking statements, including, without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities or our growth opportunities are more limited than we expect; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; if we are not able to maintain and enhance our brands; if our products and marketing strategies fail to separate our products from competitors’ products; the COVID-19 pandemic and its potential impact; if we do not fully realize our goals to lower our costs and improve our operating leverage; if there is a deterioration of business and economic conditions in one or more of our sales regions or product categories, or significant fluctuations in exchange rates; changes in trade policies and agreements and the imposition of tariffs that affect our products or operations and our ability to mitigate; risks associated with acquisitions. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Logitech’s periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020, available at www.sec.gov, under the caption Risk Factors and elsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this press release.

Note that unless noted otherwise, comparisons are year over year.

Logitech and other Logitech marks are trademarks or registered trademarks of Logitech Europe S.A and/or its affiliates in the U.S. and other countries. All other trademarks are the property of their respective owners. For more information about Logitech and its products, visit the company’s website at www.logitech.com.

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands, except per share amounts) - unaudited

Three Months Ended

Six Months Ended

September 30,

September 30,

GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

2020

2019

2020

2019

Net sales

$

1,257,158

$

719,691

$

2,049,052

$

1,363,916

Cost of goods sold

684,599

444,344

1,167,237

846,322

Amortization of intangible assets and purchase accounting effect on inventory

2,836

3,271

6,359

6,542

Gross profit

569,723

272,076

875,456

511,052

Operating expenses:

Marketing and selling

158,797

134,155

292,035

257,188

Research and development

53,379

41,964

103,104

84,207

General and administrative

31,664

24,048

60,735

46,207

Amortization of intangible assets and acquisition-related costs

4,331

4,218

8,940

7,814

Change in fair value of contingent consideration for business acquisition

5,716

Restructuring charges (credits), net

(1

)

(364

)

(54

)

114

Total operating expenses

248,170

204,021

470,476

395,530

Operating income

321,553

68,055

404,980

115,522

Interest income

513

2,390

1,133

4,943

Other income (expense), net

1,149

(110

)

3,178

1,751

Income before income taxes

323,215

70,335

409,291

122,216

Provision for (benefit from) income taxes

56,301

(2,598

)

70,304

3,938

Net income

$

266,914

$

72,933

$

338,987

$

118,278

Net income per share:

Basic

$

1.58

$

0.44

$

2.02

$

0.71

Diluted

$

1.56

$

0.43

$

1.99

$

0.70

Weighted average shares used to compute net income per share:

Basic

168,645

166,662

168,140

166,484

Diluted

171,382

169,027

170,766

168,914

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands) - unaudited

September 30, 2020

March 31, 2020

CONDENSED CONSOLIDATED BALANCE SHEETS

Current assets:

Cash and cash equivalents

$

917,221

$

715,566

Accounts receivable, net

750,749

394,743

Inventories

394,708

229,249

Other current assets

94,753

74,920

Total current assets

2,157,431

1,414,478

Non-current assets:

Property, plant and equipment, net

86,386

76,119

Goodwill

400,953

400,917

Other intangible assets, net

111,702

126,941

Other assets

339,397

345,019

Total assets

$

3,095,869

$

2,363,474

Current liabilities:

Accounts payable

$

662,873

$

259,120

Accrued and other current liabilities

541,977

455,024

Total current liabilities

1,204,850

714,144

Non-current liabilities:

Income taxes payable

54,507

40,788

Other non-current liabilities

130,549

119,274

Total liabilities

1,389,906

874,206

Shareholders’ equity:

Registered shares, CHF 0.25 par value:

30,148

30,148

Issued shares — 173,106 at September 30 and March 31, 2020

Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2020

Additional shares that may be issued out of authorized capital — 17,311 at September 30 and 34,621 at March 31, 2020

Additional paid-in capital

78,617

75,097

Shares in treasury, at cost — 4,357 at September 30, 2020 and 6,210 at March 31, 2020

(166,258

)

(185,896

)

Retained earnings

1,882,308

1,690,579

Accumulated other comprehensive loss

(118,852

)

(120,660

)

Total shareholders’ equity

1,705,963

1,489,268

Total liabilities and shareholders’ equity

$

3,095,869

$

2,363,474

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands) - unaudited

Three Months Ended

Six Months Ended

September 30,

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

2020

2019

2020

2019

Cash flows from operating activities:

Net income

$

266,914

$

72,933

$

338,987

$

118,278

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation

10,854

10,584

22,601

21,386

Amortization of intangible assets

7,107

6,868

15,239

13,735

Loss on investments

2,693

274

2,519

63

Share-based compensation expense

24,785

14,252

44,900

26,470

Deferred income taxes

16,563

(5,597

)

20,152

(8,978

)

Change in fair value of contingent consideration for business acquisition

5,716

Other

(1,886

)

2

(1,877

)

(2

)

Changes in assets and liabilities, net of acquisitions:

Accounts receivable, net

(244,746

)

(51,691

)

(346,838

)

(85,955

)

Inventories

(120,735

)

(45,092

)

(161,120

)

(47,773

)

Other assets

(15,797

)

(8,696

)

(31,567

)

(14,083

)

Accounts payable

230,830

73,509

399,176

129,101

Accrued and other liabilities

103,090

39,157

90,631

(9,223

)

Net cash provided by operating activities

279,672

106,503

398,519

143,019

Cash flows from investing activities:

Purchases of property, plant and equipment

(15,466

)

(8,752

)

(27,774

)

(18,092

)

Investment in privately held companies

(3,375

)

(3,405

)

(170

)

Acquisitions, net of cash acquired

(366

)

(366

)

Purchases of trading investments

(5,775

)

(1,370

)

(8,199

)

(2,525

)

Proceeds from sales of trading investments

6,477

1,375

8,839

2,571

Net cash used in investing activities

(18,139

)

(9,113

)

(30,539

)

(18,582

)

Cash flows from financing activities:

Payment of cash dividends

(146,705

)

(124,180

)

(146,705

)

(124,180

)

Purchases of registered shares

(22,454

)

(22,454

)

(15,127

)

Proceeds from exercises of stock options and purchase rights

16,074

8,938

26,066

9,331

Tax withholdings related to net share settlements of restricted stock units

(2,623

)

(1,538

)

(25,744

)

(20,908

)

Net cash used in financing activities

(155,708

)

(116,780

)

(168,837

)

(150,884

)

Effect of exchange rate changes on cash and cash equivalents

2,001

(3,102

)

2,512

(3,605

)

Net increase (decrease) in cash and cash equivalents

107,826

(22,492

)

201,655

(30,052

)

Cash and cash equivalents, beginning of the period

809,395

596,956

715,566

604,516

Cash and cash equivalents, end of the period

$

917,221

$

574,464

$

917,221

$

574,464

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands) - unaudited

NET SALES

Three Months Ended

Six months ended

September 30,

September 30,

SUPPLEMENTAL FINANCIAL INFORMATION

2020

2019

Change

2020

2019

Change

Net sales by product category:

Pointing Devices

$

169,121

$

132,770

27

%

$

289,590

$

254,753

14

%

Keyboards & Combos

201,617

139,049

45

346,977

267,728

30

PC Webcams

102,469

28,748

256

163,320

56,876

187

Tablet & Other Accessories

83,086

33,847

145

129,134

72,186

79

Gaming

297,711

161,014

85

479,614

295,529

62

Video Collaboration

236,704

89,553

164

366,778

162,977

125

Mobile Speakers

43,581

57,232

(24

)

72,590

107,648

(33

)

Audio & Wearables

114,275

68,018

68

185,640

126,642

47

Smart Home

8,573

9,434

(9

)

15,383

19,298

(20

)

Other (1)

21

26

(19

)

26

279

(91

)

Total sales

$

1,257,158

$

719,691

75

%

$

2,049,052

$

1,363,916

50

%

(1) Other category includes products that we currently intend to phase out, or have already phased out, because they are no longer strategic to our business.

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands, except per share amounts) - Unaudited

GAAP TO NON-GAAP RECONCILIATION (A)

Three Months Ended

Six Months Ended

September 30,

September 30,

SUPPLEMENTAL FINANCIAL INFORMATION

2020

2019

2020

2019

Gross profit - GAAP

$

569,723

$

272,076

$

875,456

$

511,052

Share-based compensation expense

1,772

1,184

3,172

2,342

Amortization of intangible assets and purchase accounting effect on inventory

2,836

3,271

6,359

6,542

Gross profit - Non-GAAP

$

574,331

$

276,531

$

884,987

$

519,936

Gross margin - GAAP

45.3

%

37.8

%

42.7

%

37.5

%

Gross margin - Non-GAAP

45.7

%

38.4

%

43.2

%

38.1

%

Operating expenses - GAAP

$

248,170

$

204,021

$

470,476

$

395,530

Less: Share-based compensation expense

23,013

13,068

41,728

24,128

Less: Amortization of intangible assets and acquisition-related costs

4,331

4,218

8,940

7,814

Less: Change in fair value of contingent consideration for business acquisition

5,716

Less: Restructuring charges (credits), net

(1

)

(364

)

(54

)

114

Operating expenses - Non-GAAP

$

220,827

$

187,099

$

414,146

$

363,474

% of net sales - GAAP

19.7

%

28.3

%

23.0

%

29.0

%

% of net sales - Non - GAAP

17.6

%

26.0

%

20.2

%

26.6

%

Operating income - GAAP

$

321,553

$

68,055

$

404,980

$

115,522

Share-based compensation expense

24,785

14,252

44,900

26,470

Amortization of intangible assets

7,107

6,868

15,239

13,735

Acquisition-related costs

60

621

60

621

Change in fair value of contingent consideration for business acquisition

5,716

Restructuring charges (credits), net

(1

)

(364

)

(54

)

114

Operating income - Non - GAAP

$

353,504

$

89,432

$

470,841

$

156,462

% of net sales - GAAP

25.6

%

9.5

%

19.8

%

8.5

%

% of net sales - Non - GAAP

28.1

%

12.4

%

23.0

%

11.5

%

Net income - GAAP

$

266,914

$

72,933

$

338,987

$

118,278

Share-based compensation expense

24,785

14,252

44,900

26,470

Amortization of intangible assets

7,107

6,868

15,239

13,735

Acquisition-related costs

60

621

60

621

Change in fair value of contingent consideration for business acquisition

5,716

Restructuring charges (credits), net

(1

)

(364

)

(54

)

114

Loss on investments

2,693

274

2,519

63

Non-GAAP income tax adjustment

18,351

(9,506

)

21,399

(8,599

)

Net income - Non - GAAP

$

319,909

$

85,078

$

428,766

$

150,682

Net income per share:

Diluted - GAAP

$

1.56

$

0.43

$

1.99

$

0.70

Diluted - Non - GAAP

$

1.87

$

0.50

$

2.51

$

0.89

Shares used to compute net income per share:

Diluted - GAAP and Non - GAAP

171,382

169,027

170,766

168,914

LOGITECH INTERNATIONAL S.A.

PRELIMINARY RESULTS *

(In thousands) - unaudited

SHARE-BASED COMPENSATION EXPENSE

Three Months Ended

Six Months Ended

September 30,

September 30,

SUPPLEMENTAL FINANCIAL INFORMATION

2020

2019

2020

2019

Share-based Compensation Expense

Cost of goods sold

$

1,772

$

1,184

$

3,172

$

2,342

Marketing and selling

10,377

6,951

19,169

13,800

Research and development

3,763

2,248

6,866

4,402

General and administrative

8,873

3,869

15,693

5,926

Total share-based compensation expense

24,785

14,252

44,900

26,470

Income tax benefit

(3,958

)

(2,723

)

(12,069

)

(9,523

)

Total share-based compensation expense, net of income tax benefit

$

20,827

$

11,529

$

32,831

$

16,947

* Note: These preliminary results for the three and six months ended September 30, 2020 are subject to adjustments, including subsequent events that may occur through the date of filing our Quarterly Report on Form 10-Q.

(A) Non-GAAP Financial Measures

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use a number of financial measures, both GAAP and non-GAAP, in analyzing and assessing our overall business performance, for making operating decisions and for forecasting and planning future periods. We consider the use of non-GAAP financial measures helpful in assessing our current financial performance, ongoing operations and prospects for the future as well as understanding financial and business trends relating to our financial condition and results of operations.

While we use non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance and to provide incremental insight into the underlying factors and trends affecting both our performance and our cash-generating potential, we do not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides useful supplemental data that, while not a substitute for GAAP financial measures, can offer insight in the review of our financial and operational performance and enables investors to more fully understand trends in our current and future performance. In assessing our business during the quarter ended September 30, 2020 and previous periods, we excluded items in the following general categories, each of which are described below:

Share-based compensation expenses. We believe that providing non-GAAP measures excluding share-based compensation expense, in addition to the GAAP measures, allows for a more transparent comparison of our financial results from period to period. We prepare and maintain our budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measure. Further, companies use a variety of types of equity awards as well as a variety of methodologies, assumptions and estimates to determine share-based compensation expense. We believe that excluding share-based compensation expense enhances our ability and the ability of investors to understand the impact of non-cash share-based compensation on our operating results and to compare our results against the results of other companies.

Amortization of intangible assets. We incur intangible asset amortization expense, primarily in connection with our acquisitions of various businesses and technologies. The amortization of purchased intangibles varies depending on the level of acquisition activity. We exclude these various charges in budgeting, planning and forecasting future periods and we believe that providing the non-GAAP measures excluding these various non-cash charges, as well as the GAAP measures, provides additional insight when comparing our gross profit, operating expenses, and financial results from period to period.

Purchase accounting effect on inventory. Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment excludes the expected profit margin component that is recorded under business combination accounting principles associated with our business acquisitions. We believe the adjustment is useful to investors because such charges are not reflective of our ongoing operations.

Acquisition-related costs and change in fair value of contingent consideration for business acquisition. We incurred expenses and credits in connection with our acquisitions which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related costs include all incremental expenses incurred to effect a business combination. Fair value of contingent consideration is associated with our estimates of the value of earn-outs in connection with certain acquisitions. We believe that providing the non-GAAP measures excluding these costs and credits, as well as the GAAP measures, assists our investors because such costs are not reflective of our ongoing operating results.

Restructuring charges (credits). These expenses are associated with re-aligning our business strategies based on current economic conditions. We have undertaken several restructuring plans in recent years. In connection with our restructuring initiatives, we incurred restructuring charges related to employee terminations, facility closures and early cancellation of certain contracts. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges (credits) are not reflective of our ongoing operating results in the current period.

Loss (gain) on investments. We recognized loss (gain) related to our investments in various companies, which varies depending on the operational and financial performance of those companies in which we invested, and sales of these investments. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges are not reflective of our ongoing operations.

Non-GAAP income tax adjustment. Non-GAAP income tax adjustment primarily measures the income tax effect of non-GAAP adjustments excluded above and other events; the determination of which is based upon the nature of the underlying items, the mix of income and losses in jurisdictions and the relevant tax rates in which we operate.

Each of the non-GAAP financial measures described above, and used in this press release, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and may be reflected in the Company’s financial results for the foreseeable future. We compensate for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, we evaluate the non-GAAP financial measures together with the most directly comparable GAAP financial information.

Additional Supplemental Financial Information - Constant Currency

In addition, Logitech presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.

(LOGIIR)

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Contacts

Ben Lu,
Vice President, Investor Relations - USA
+1 (510) 713-5568

Nicole Kenyon,
Head of Global Corporate & Employee Communications - USA
+1 (510) 988-8553

Ben Starkie,
Corporate Communications - Europe
+41 (0) 79-292-3499