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

Rhea-AI Summary

Logitech International (LOGI) reported its Q2 Fiscal Year 2021 results, achieving record sales of $1.26 billion, up 75% from the previous year. GAAP operating income surged 372% to $322 million, with GAAP earnings per share increasing 263% to $1.56. Non-GAAP measures also showed significant growth, with operating income at $354 million (up 295%) and EPS at $1.87 (up 274%). The company raised its sales growth outlook to 35-40% for the fiscal year, highlighting strong demand in a hybrid work culture and gaming sector.

Positive

• Sales reached $1.26 billion, a 75% increase year-over-year.
• GAAP operating income grew 372% to $322 million.
• GAAP EPS rose 263% to $1.56.
• Raised fiscal year 2021 outlook for sales growth to 35-40%.

Negative

• None.

LAUSANNE, Switzerland & NEWARK, Calif.--(BUSINESS WIRE)--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)