Company Raises Sales and Profit Outlook
Following Better-Than-Expected Q1
Logitech International (SIX:LOGN) (Nasdaq:LOGI) today raised its
outlook for sales and operating income following
better-than-expected financial results for the first quarter of
Fiscal Year 2017.
- Q1 sales were $480 million, up 7
percent compared to Q1 of the prior year. Q1 retail sales grew 13
percent in constant currency, the highest quarterly growth in over
five years.
- Q1 GAAP operating income almost doubled
at $26 million compared to $14 million a year ago. Q1 GAAP earnings
per share (EPS) from continuing operations were $0.13,
compared to $0.08 in the same quarter a year ago.
- Q1 non-GAAP operating income
was $38 million compared to $36 million a year ago, with
non-GAAP EPS of $0.20, compared to $0.19 in the same
quarter a year ago.
- Cash flow from operations in the
quarter was $14 million, compared to a negative cash flow of
$26 million a year ago.
“Our strategy is working, delivering 13 percent retail sales
growth this quarter – our best in over five years,” said Bracken
Darrell, Logitech president and chief executive officer. “Our
growth was better-than-expected and broad-based across regions and
product categories. Virtually all our sales were in growing product
categories and we grew in all our market opportunities – Creativity
& Productivity, Gaming, Video Collaboration, Music, and Home –
most in double digits. It’s a great start to the new year and gives
us the confidence to raise our outlook.”
Outlook
Logitech raised its FY 2017 outlook to 8 to 10 percent retail
sales growth in constant currency, up from its previous forecast of
growth in the mid-single digits. The Company also increased its
non-GAAP operating income outlook for FY 2017 to between $195
million and $205 million, up from $185 million to $200 million.
Prepared Remarks Available Online
Logitech has made its prepared written remarks for the financial
results teleconference available online on the Logitech corporate
website at http://ir.logitech.com.
Financial Results Teleconference and Webcast
Logitech will hold a financial results teleconference to discuss
the results for Q1 FY 2017 on Thurs., July 28, 2016 at 8:30 a.m.
Eastern Daylight Time and 2:30 p.m. Central European Summer Time. A
live webcast of the call will be available on the Logitech
corporate website at http://ir.logitech.com.
Annual Report and Other Information
Logitech has posted its Invitation, Proxy Statement and Annual
Report for the 2016 Annual General Meeting (AGM) on its website at
http://ir.logitech.com.
Continued Operations
Logitech separated its Lifesize division from the Company on
Dec. 28, 2015. Except as otherwise noted, all of the results
reported in this press release as well as comparisons between
periods are focused on results from continuing operations and do
not address the performance of Lifesize, which is now reported in
the Company’s financial statements under discontinued operations or
total Logitech including discontinued operations. For more
information on the impact of the Lifesize separation on Logitech’s
historical results, please refer to the Financial Reporting section
of Logitech’s Financial History, 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, restructuring charges (credits), gain
(loss) on equity-method investment, investigation and related
expenses, 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 2017.
About Logitech
Logitech designs products that have an everyday place in
people's lives, connecting them to the digital experiences they
care about. Over 30 years ago Logitech started connecting
people through computers, and now it’s designing products that
bring people together through music, gaming, video and
computing. Founded in 1981, 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 strategy and our outlook for
Fiscal Year 2017 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; the demand
of our customers and our consumers for our products and our ability
to accurately forecast 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; if sales of PC peripherals are less 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 our products and
marketing strategies fail to separate our products from
competitors’ products; 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. 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, 2016, 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.
2016 Logitech, Logicool, Logi and other Logitech marks are owned
by Logitech and may be registered. 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. (In thousands,
except per share amounts) - unaudited Three Months
Ended June 30, GAAP CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS (A) 2016 2015 Net
sales $ 479,864 $ 447,686 Cost of goods sold 309,625 289,753
Amortization of intangible assets and purchase accounting effect on
inventory 1,613 — Gross profit
168,626 157,933 Operating expenses:
Marketing and selling 83,872 75,796 Research and development 31,951
28,002 General and administrative 25,740 28,812 Amortization of
intangible assets and acquisition-related costs 1,293 168
Restructuring charges (credits), net (85 ) 11,538
Total operating expenses 142,771
144,316 Operating income 25,855 13,617 Interest income, net
151 255 Other expense, net (1,008 ) (1,019 ) Income
before income taxes 24,998 12,853 Provision for (benefit from)
income taxes 3,057 (7 ) Net income from
continuing operations 21,941 12,860
Loss from discontinued operations, net of taxes —
(5,423 ) Net income $ 21,941 $ 7,437
Net income (loss) per share - basic: Continuing operations $
0.14 $ 0.08 Discontinued operations — (0.03 )
Net income per share - basic $ 0.14 $ 0.05 Net
income (loss) per share - diluted: Continuing operations $ 0.13 $
0.08 Discontinued operations — (0.04 ) Net
income per share - diluted $ 0.13 $ 0.04
Weighted average shares used to compute net income (loss) per
share: Basic 162,130 164,431 Diluted 164,303 166,895
LOGITECH INTERNATIONAL S.A. (In thousands) -
unaudited June 30, March 31, CONDENSED
CONSOLIDATED BALANCE SHEETS (A) 2016 2016
Current assets: Cash and cash equivalents $ 440,111 $
519,195 Accounts receivable, net 192,242 142,778 Inventories
247,792 228,786 Other current assets 36,533
35,488 Total current assets 916,678 926,247
Non-current
assets: Property, plant and equipment, net 87,044 92,860
Goodwill 244,880 218,224 Other intangible assets 49,262 — Other
assets 87,090 86,816
Total
assets $ 1,384,954 $ 1,324,147
Current
liabilities: Accounts payable $ 292,664 $ 241,166 Accrued and
other current liabilities 167,317 173,764
Total current liabilities 459,981 414,930
Non-current
liabilities: Income taxes payable 59,720 59,734 Other
non-current liabilities 106,333 89,535
Total liabilities 626,034 564,199
Shareholders'
equity: Registered shares, CHF 0.25 par value: 30,148 30,148
Issued and authorized shares—173,106 at June 30, 2016 and March 31,
2016 Conditionally authorized shares—50,000 at June 30, 2016 and
March 31, 2016 Additional paid-in capital — 6,616 Less shares in
treasury, at cost—11,374 at June 30, 2016 and 10,697 at March 31,
2016 (144,663 ) (128,407 ) Retained earnings 983,268 963,576
Accumulated other comprehensive loss (109,833 )
(111,985 )
Total shareholders' equity 758,920
759,948
Total liabilities and shareholders'
equity $ 1,384,954 $ 1,324,147
LOGITECH INTERNATIONAL S.A. (In thousands) -
unaudited Three Months Ended June 30,
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (A)
2016 2015 Cash flows from operating
activities: Net income $ 21,941 $ 7,437 Non-cash items included
in net income: Depreciation 13,105 10,516 Amortization of
intangible assets 1,708 732 Loss (gain) on equity-method investment
(1 ) 103 Share-based compensation expense 8,517 6,749 Excess tax
benefits from share-based compensation (3,280 ) (665 ) Deferred
income taxes (1,048 ) (6,732 ) Changes in operating assets and
liabilities, net of acquisitions: Accounts receivable, net (48,661
) (41,208 ) Inventories (10,007 ) (54,164 ) Other assets (1,171 )
(2,383 ) Accounts payable 42,769 34,541 Accrued and other
liabilities (10,135 ) 19,475 Net cash provided
by (used in) operating activities 13,737 (25,599 )
Cash flows
from investing activities: Purchases of property, plant and
equipment (7,420 ) (15,290 ) Investment in privately held companies
(320 ) (240 ) Acquisition, net of cash acquired (53,987 ) —
Purchase of other intangible asset (715 ) — Release of restricted
cash 715 — Purchase of trading investments (4,229 ) (903 ) Proceeds
from sales of trading investments 4,231 840
Net cash used in investing activities (61,725 )
(15,593 )
Cash flows from financing activities:
Purchases of treasury shares (24,422 ) (8,814 ) Proceeds from sales
of shares upon exercise of options and purchase rights 599 4,066
Tax withholdings related to net share settlements of restricted
stock units (9,185 ) (1,296 ) Excess tax benefits from share-based
compensation 3,280 665 Net cash used in
financing activities (29,728 ) (5,379 ) Effect of
exchange rate changes on cash and cash equivalents (1,368 )
1,761 Net decrease in cash and cash equivalents
(79,084 ) (44,810 ) Cash and cash equivalents,
beginning of the period 519,195 537,038
Cash and cash equivalents, end of the period $ 440,111
$ 492,228
Non-cash investing
activities: Property, plant and equipment purchased during the
period and included in period end liability accounts $ 3,502 $
10,358
The following amounts reflected in the statements
of cash flows are included in discontinued operations:
Depreciation $ — $ 705 Amortization of other intangible assets $ —
$ 564 Share-based compensation expense $ — $ 226 Purchases of
property, plant and equipment $ — $ 385 Cash and cash equivalents,
beginning of the period $ — $ 3,659 Cash and cash equivalents, end
of the period $ — $ 1,911
LOGITECH
INTERNATIONAL S.A. (In thousands) - unaudited
NET SALES Three Months Ended June 30,
SUPPLEMENTAL FINANCIAL INFORMATION 2016 2015
Change Net sales by channel: Retail $ 479,864
$ 425,388 13 % OEM — 22,298 (100 )
Total net sales
$ 479,864 $ 447,686 7
Net retail sales by
product category: Mobile Speakers $ 57,296 $ 40,544 41 %
Audio-PC & Wearables 56,579 45,699 24 Gaming 56,500 43,670 29
Video Collaboration 23,910 21,176 13 Home Control 11,167 10,254 9
Pointing Devices 116,783 116,985 — Keyboards & Combos 118,019
105,829 12 Tablet & Other Accessories 13,885 18,809 (26 ) PC
Webcams 25,262 21,681 17 Other (*) 463 741
(38 )
Total net retail sales $ 479,864 $
425,388 13
__________________
* Other category includes products that we
currently intend to transition out of, or have already transitioned
out of, because they are no longer strategic to our business.
LOGITECH INTERNATIONAL S.A. (In
thousands, except per share amounts) - Unaudited GAAP
TO NON GAAP RECONCILIATION (A) (B) Three Months
Ended June 30, SUPPLEMENTAL FINANCIAL INFORMATION
2016 2015 Gross profit - GAAP $ 168,626
$ 157,933 Share-based compensation expense 675 605 Amortization of
intangible assets and purchase accounting effect on inventory
1,613 —
Gross profit - Non-GAAP
$ 170,914 $ 158,538 Gross margin - GAAP 35.1 %
35.3 % Gross margin - Non-GAAP 35.6 % 35.4 %
Operating
expenses - GAAP $ 142,771 $ 144,316 Less: Share-based
compensation expense 7,842 5,911 Less: Amortization of intangible
assets and acquisition-related costs 1,293 168 Less: Restructuring
charges (credits), net (85 ) 11,538 Less: Investigation and related
expenses 612 4,049
Operating
expenses - Non-GAAP $ 133,109 $ 122,650 %
of net sales - GAAP 29.8 % 32.2 % % of net sales - Non - GAAP 27.7
% 27.4 %
Operating income - GAAP $ 25,855 $ 13,617
Share-based compensation expense 8,517 6,516 Amortization of
intangible assets 1,708 168 Purchase accounting effect on inventory
703 — Acquisition-related costs 495 — Restructuring charges
(credits), net (85 ) 11,538 Investigation and related expenses
612 4,049
Operating income - Non -
GAAP $ 37,805 $ 35,888 % of net sales -
GAAP 5.4 % 3.0 % % of net sales - Non - GAAP 7.9 % 8.0 %
Net income from continuing operations - GAAP $ 21,941 $
12,860 Share-based compensation expense 8,517 6,516 Amortization of
intangible assets 1,708 168 Purchase accounting effect on inventory
703 — Acquisition-related costs 495 — Restructuring charges
(credits), net (85 ) 11,538 Investigation and related expenses 612
4,049 Loss (gain) on equity-method investment (1 ) 103 Non-GAAP
income tax adjustment (675 ) (3,829 )
Net income
from continuing operations - Non - GAAP $ 33,215 $
31,405
Net income from continuing operations per
share: Diluted - GAAP $ 0.13 $ 0.08 Diluted - Non - GAAP $ 0.20
$ 0.19
Shares used to compute net income per share:
Diluted - GAAP and Non - GAAP 164,303 166,895
LOGITECH INTERNATIONAL S.A. (In thousands) -
unaudited SHARE-BASED COMPENSATION EXPENSE
Three Months Ended June 30, SUPPLEMENTAL FINANCIAL
INFORMATION 2016 2015 Share-based
Compensation Expense Cost of goods sold $ 675 $ 605 Marketing
and selling 3,437 2,064 Research and development 914 673 General
and administrative 3,491 3,174 Restructuring — 7 Income tax benefit
(1,815 ) (1,337 )
Total share-based compensation
expense, net of income taxes $ 6,702 $ 5,186
__________________
(A) Preliminary valuation from the business combination
The preliminary purchase price allocation from the business
combination during the current period is included in the tables.
The fair value of identifiable intangible assets acquired was based
on estimates and assumptions made by us at the time of acquisition.
As additional information becomes available, such as finalization
of the estimated fair value of the assets acquired and liabilities
assumed and the fair value of contingent consideration, we may
further revise our preliminary purchase price allocation during the
remainder of the measurement period (which will not exceed 12
months from the acquisition date). Any such revisions or changes
may be material as we finalize the fair values of the tangible and
intangible assets acquired and liabilities assumed.
(B) 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
June 30, 2016, 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 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 acquisition of Jaybird. We believe the
adjustment is useful to investors because such charges are not
reflective of our ongoing operations.
Acquisition-related costs. We incurred
expenses 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. We believe that providing the non-GAAP
measures excluding these costs, 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.
Gain (loss) on equity-method
investment. We recognized gain (loss) related our investments
in various privately-held companies, which varies depending on the
operational and financial performance of the privately-held
companies in which we invested. 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.
Investigation and related expenses.
These expenses are forensic accounting, audit, consulting and legal
fees related to the Audit Committee’s investigation and the formal
investigation by and settlement with the Securities and Exchange
Commission (SEC), together with accruals based on settlement with
the SEC. 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. Sales for
the three months ended June 30, 2016 compared to sales for the
three months ended June 30, 2015 increased 7 percent in both
constant currency and U.S. Dollars. Retail sales for the three
months ended June 30, 2016 compared to retail sales for the three
months ended June 30, 2015 grew 13 percent in both constant
currency and U.S. Dollars.
(LOGIIR)
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Logitech InternationalBen LuVice President, Investor Relations -
USA510-713-5568orKrista ToddVice President, External Communications
- USA510-713-5834orBen StarkieCorporate Communications - Europe+41
(0) 79-292-3499
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