Profits Increase 76% and Company Raises Annual
Outlook
Logitech International (SIX: LOGN) (Nasdaq: LOGI) today
announced financial results for the first quarter of Fiscal Year
2021.
- Q1 sales were $792 million, up 23 percent in US dollars and 25
percent in constant currency, compared to Q1 of the prior
year.
- Q1 GAAP operating income grew 76 percent to $83 million,
compared to $47 million in the same quarter a year ago. Q1 GAAP
earnings per share (EPS) grew 56 percent to $0.42, compared to
$0.27 in the same quarter a year ago.
- Q1 non-GAAP operating income grew 75 percent to $117 million,
compared to $67 million in the same quarter a year ago. Q1 non-GAAP
EPS grew 64 percent to $0.64, compared to $0.39 in the same quarter
a year ago.
- Cash flow from operations was $119 million, compared to $37
million in the same period a year ago.
“We delivered an exceptional first quarter and are raising our
fiscal year outlook,” said Bracken Darrell, Logitech president and
chief executive officer. “We grew sales 25% with strong growth in
almost every product category. Our company strategy focuses on four
long-term trends: more of us will work from home; video calls will
replace audio calls; esports will become as big as conventional
sports; and billions of people worldwide will create content, not
just a handful of TV and movie studios. Logitech’s business was
already positioned to grow from these long-term trends, and since
early March they have accelerated, making Logitech more relevant to
customers than ever before.”
Outlook
Logitech raised its Fiscal Year 2021 annual sales outlook from
mid single-digit sales growth, to 10 to 13 percent growth in
constant currency. The Company also raised its annual outlook for
non-GAAP operating income from a range of $380 million to $400
million, to a range of $410 million to $425 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 2021 on
Tuesday, July 21, 2020 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.
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), gain (loss) 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 June 30, 2020, long-term trends, the
pace of long-term trends, our ability to grow, our relevancy to
customers, 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, 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
June 30,
GAAP CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
2020
2019
Net sales
$
791,894
$
644,225
Cost of goods sold
482,638
401,978
Amortization of intangible assets and
purchase accounting effect on inventory
3,523
3,271
Gross profit
305,733
238,976
Operating expenses:
Marketing and selling
133,238
123,033
Research and development
49,725
42,243
General and administrative
29,071
22,159
Amortization of intangible assets and
acquisition-related costs
4,609
3,596
Change in fair value of contingent
consideration for business acquisition
5,716
—
Restructuring charges (credits), net
(53
)
478
Total operating expenses
222,306
191,509
Operating income
83,427
47,467
Interest income
620
2,553
Other income, net
2,029
1,861
Income before income taxes
86,076
51,881
Provision for (benefit from) income
taxes
14,003
6,536
Net income
$
72,073
$
45,345
Net income per share:
Basic
$
0.43
$
0.27
Diluted
$
0.42
$
0.27
Weighted average shares used to compute
net income per share:
Basic
167,612
166,302
Diluted
170,127
168,797
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
June 30, 2020
March 31, 2020
CONDENSED CONSOLIDATED BALANCE
SHEETS
Current assets:
Cash and cash equivalents
$
809,395
$
715,566
Accounts receivable, net
500,306
394,743
Inventories
271,180
229,249
Other current assets
82,470
74,920
Total current assets
1,663,351
1,414,478
Non-current assets:
Property, plant and equipment, net
79,481
76,119
Goodwill
400,934
400,917
Other intangible assets, net
118,809
126,941
Other assets
351,131
345,019
Total assets
$
2,613,706
$
2,363,474
Current liabilities:
Accounts payable
$
429,693
$
259,120
Accrued and other current liabilities
444,826
455,024
Total current liabilities
874,519
714,144
Non-current liabilities:
Income taxes payable
44,261
40,788
Other non-current liabilities
127,445
119,274
Total liabilities
1,046,225
874,206
Shareholders’ equity:
Registered shares, CHF 0.25 par value:
30,148
30,148
Issued shares — 173,106 at June 30 and
March 31, 2020
Additional shares that may be issued out
of conditional capitals — 50,000 at June 30 and March 31, 2020
Additional shares that may be issued out
of authorized capitals — 34,621 at June 30 and March 31, 2020
Additional paid-in capital
54,668
75,097
Shares in treasury, at cost — 4,689 at
June 30, 2020 and 6,210 at March 31, 2020
(158,463
)
(185,896
)
Retained earnings
1,762,099
1,690,579
Accumulated other comprehensive loss
(120,971
)
(120,660
)
Total shareholders’ equity
1,567,481
1,489,268
Total liabilities and shareholders’
equity
$
2,613,706
$
2,363,474
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
Three Months Ended
June 30,
CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS
2020
2019
Cash flows from operating
activities:
Net income
$
72,073
$
45,345
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
11,747
10,802
Amortization of intangible assets
8,132
6,867
Gain on investments
(174
)
(211
)
Share-based compensation expense
20,115
12,218
Deferred income taxes
3,589
(3,381
)
Change in fair value of contingent
consideration for business acquisition
5,716
—
Other
9
(4
)
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable, net
(102,092
)
(34,264
)
Inventories
(40,385
)
(2,681
)
Other assets
(15,770
)
(5,387
)
Accounts payable
168,346
55,592
Accrued and other liabilities
(12,459
)
(48,380
)
Net cash provided by operating
activities
118,847
36,516
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(12,308
)
(9,340
)
Investment in privately held companies
(30
)
(170
)
Purchases of trading investments
(2,424
)
(1,155
)
Proceeds from sales of trading
investments
2,362
1,196
Net cash used in investing activities
(12,400
)
(9,469
)
Cash flows from financing
activities:
Purchases of registered shares
—
(15,127
)
Proceeds from exercises of stock options
and purchase rights
9,992
393
Tax withholdings related to net share
settlements of restricted stock units
(23,121
)
(19,370
)
Net cash used in financing activities
(13,129
)
(34,104
)
Effect of exchange rate changes on cash
and cash equivalents
511
(503
)
Net increase (decrease) in cash and
cash equivalents
93,829
(7,560
)
Cash and cash equivalents, beginning of
the period
715,566
604,516
Cash and cash equivalents, end of the
period
$
809,395
$
596,956
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
NET SALES
Three Months Ended
June 30,
SUPPLEMENTAL FINANCIAL
INFORMATION
2020
2019
Change
Net sales by product category:
Pointing Devices
$
120,469
$
121,983
(1
)%
Keyboards & Combos
145,360
128,679
13
PC Webcams
60,851
28,128
116
Tablet & Other Accessories
46,048
38,339
20
Gaming
181,903
134,515
35
Video Collaboration
130,074
73,424
77
Mobile Speakers
29,009
50,416
(42
)
Audio & Wearables
71,365
58,624
22
Smart Home
6,810
9,864
(31
)
Other (1)
5
253
(98
)
Total sales
$
791,894
$
644,225
23
(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
June 30,
SUPPLEMENTAL FINANCIAL
INFORMATION
2020
2019
Gross profit - GAAP
$
305,733
$
238,976
Share-based compensation expense
1,400
1,158
Amortization of intangible assets and
purchase accounting effect on inventory
3,523
3,271
Gross profit - Non-GAAP
$
310,656
$
243,405
Gross margin - GAAP
38.6
%
37.1
%
Gross margin - Non-GAAP
39.2
%
37.8
%
Operating expenses - GAAP
$
222,306
$
191,509
Less: Share-based compensation expense
18,715
11,060
Less: Amortization of intangible assets
and acquisition-related costs
4,609
3,596
Less: Change in fair value of contingent
consideration for business acquisition
5,716
—
Less: Restructuring charges, net
(53
)
478
Operating expenses - Non-GAAP
$
193,319
$
176,375
% of net sales - GAAP
28.1
%
29.7
%
% of net sales - Non - GAAP
24.4
%
27.4
%
Operating income - GAAP
$
83,427
$
47,467
Share-based compensation expense
20,115
12,218
Amortization of intangible assets
8,132
6,867
Change in fair value of contingent
consideration for business acquisition
5,716
—
Restructuring charges (credits), net
(53
)
478
Operating income - Non - GAAP
$
117,337
$
67,030
% of net sales - GAAP
10.5
%
7.4
%
% of net sales - Non - GAAP
14.8
%
10.4
%
Net income - GAAP
$
72,073
$
45,345
Share-based compensation expense
20,115
12,218
Amortization of intangible assets
8,132
6,867
Change in fair value of contingent
consideration for business acquisition
5,716
—
Restructuring charges (credits), net
(53
)
478
Loss (gain) on investments
(174
)
(211
)
Non-GAAP income tax adjustment
3,048
907
Net income - Non - GAAP
$
108,857
$
65,604
Net income per share:
Diluted - GAAP
$
0.42
$
0.27
Diluted - Non - GAAP
$
0.64
$
0.39
Shares used to compute net income per
share:
Diluted - GAAP and Non - GAAP
170,127
168,797
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
SHARE-BASED COMPENSATION
EXPENSE
Three Months Ended
June 30,
SUPPLEMENTAL FINANCIAL
INFORMATION
2020
2019
Share-based Compensation
Expense
Cost of goods sold
$
1,400
$
1,158
Marketing and selling
8,792
6,849
Research and development
3,103
2,154
General and administrative
6,820
2,057
Total share-based compensation
expense
20,115
12,218
Income tax benefit
(8,111
)
(6,800
)
Total share-based compensation expense,
net of income tax benefit
$
12,004
$
5,418
* Note: These preliminary results for the three months ended
June 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
June 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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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
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