Company Confirms Annual Guidance
Logitech International (SIX: LOGN) (Nasdaq: LOGI) today
announced financial results for the second quarter of Fiscal Year
2020.
- Q2 sales were $720 million, up 4 percent in US dollars and 6
percent in constant currency, compared to Q2 of the prior
year.
- Q2 GAAP operating income grew 4 percent to $68 million,
compared to $65 million in the same quarter a year ago. Q2 GAAP
earnings per share (EPS) grew 13 percent to $0.43, compared to
$0.38 in the same quarter a year ago.
- Q2 non-GAAP operating income grew 6 percent to $89 million,
compared to $85 million in the same quarter a year ago. Q2 non-GAAP
EPS grew 2 percent to $0.50, compared to $0.49 in the same quarter
a year ago.
- Cash flow from operations was $107 million, compared to $85
million in the same period a year ago.
“Our solid Q2 demonstrates Logitech’s resilience as we continue
to execute on our strategy,” said Bracken Darrell, Logitech
president and chief executive officer. “This quarter, we delivered
record sales in Video Collaboration, which grew nearly 60 percent,
as well as strong growth in our PC Peripherals categories. We
continue to perform in spite of the challenging macroeconomic
environment and are confirming our annual guidance heading into the
second half of the fiscal year.”
Outlook
Logitech confirmed its Fiscal Year 2020 outlook of mid to high
single-digit sales growth in constant currency and $375 million to
$385 million in non-GAAP operating income.
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 Q2 FY 2020 on Tuesday, October 22, 2019 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), loss (gain) on investments, 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 2020.
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 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 U.S. federal securities laws, including, without
limitation, statements regarding: our preliminary financial results
for the three and six months ended September 30, 2019 and outlook
for Fiscal Year 2020 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 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; 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, 2019 and our
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
2019, 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
2019
2018
2019
2018
Net sales
$
719,691
$
691,146
$
1,363,916
$
1,299,626
Cost of goods sold
444,344
432,063
846,322
814,234
Amortization of intangible assets and
purchase accounting effect on inventory
3,271
2,966
6,542
5,338
Gross profit
272,076
256,117
511,052
480,054
Operating expenses:
Marketing and selling
134,155
121,801
257,188
236,385
Research and development
41,964
39,542
84,207
78,529
General and administrative
24,048
25,206
46,207
50,679
Amortization of intangible assets and
acquisition-related costs
4,218
4,317
7,814
6,838
Restructuring charges (credit), net
(364
)
119
114
10,040
Total operating expenses
204,021
190,985
395,530
382,471
Operating income
68,055
65,132
115,522
97,583
Interest income
2,390
1,858
4,943
4,227
Other income (expense), net
(110
)
3,389
1,751
1,818
Income before income taxes
70,335
70,379
122,216
103,628
Provision for (benefit from) income taxes
(A)
(2,598
)
6,203
3,938
986
Net income
$
72,933
$
64,176
$
118,278
$
102,642
Net income per share:
Basic
$
0.44
$
0.39
$
0.71
$
0.62
Diluted
$
0.43
$
0.38
$
0.70
$
0.61
Weighted average shares used to compute
net income per share:
Basic
166,662
165,630
166,484
165,474
Diluted
169,027
169,234
168,914
168,996
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
September 30,
March 31,
CONDENSED CONSOLIDATED BALANCE
SHEETS
2019
2019
Current assets:
Cash and cash equivalents
$
574,464
$
604,516
Accounts receivable, net
465,969
383,309
Inventories
338,314
293,495
Other current assets
79,630
69,116
Total current assets
1,458,377
1,350,436
Non-current assets:
Property, plant and equipment, net
75,568
78,552
Goodwill
343,686
343,684
Other intangible assets, net
105,264
118,999
Other assets (B)
173,425
132,453
Total assets
$
2,156,320
$
2,024,124
Current liabilities:
Accounts payable
$
411,043
$
283,922
Accrued and other current liabilities
(B)
424,963
433,897
Total current liabilities
836,006
717,819
Non-current liabilities:
Income taxes payable
36,374
36,384
Other non-current liabilities (B)
116,403
93,582
Total liabilities
988,783
847,785
Shareholders’ equity:
Registered shares, CHF 0.25 par value:
30,148
30,148
Issued shares — 173,106 at September 30
and March 31, 2019
Additional shares that may be issued out
of conditional capital — 50,000 at September 30 and March 31,
2019
Additional shares that may be issued out
of authorized capital — 34,621 at September 30 and March 31,
2019
Additional paid-in capital
50,913
56,655
Shares in treasury, at cost — 6,203 at
September 30, 2019 and 7,244 at March 31, 2019
(163,728
)
(169,802
)
Retained earnings
1,359,134
1,365,036
Accumulated other comprehensive loss
(108,930
)
(105,698
)
Total shareholders’ equity
1,167,537
1,176,339
Total liabilities and shareholders’
equity
$
2,156,320
$
2,024,124
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
2019
2018
2019
2018
Cash flows from operating
activities:
Net income
$
72,933
$
64,176
$
118,278
$
102,642
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation
10,584
11,196
21,386
21,895
Amortization of intangible assets
6,868
5,448
13,735
10,341
Loss (gain) on investments
274
(395
)
63
(382
)
Share-based compensation expense
14,252
12,049
26,470
25,308
Deferred income taxes
(5,597
)
(156
)
(8,978
)
(9,815
)
Other
2
(49
)
(2
)
75
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable, net
(51,691
)
(64,918
)
(85,955
)
(133,475
)
Inventories
(45,092
)
(66,201
)
(47,773
)
(84,401
)
Other assets
(8,696
)
(6,831
)
(14,083
)
(11,056
)
Accounts payable
73,509
86,998
129,101
138,186
Accrued and other liabilities
39,157
43,621
(9,223
)
37,902
Net cash provided by operating
activities
106,503
84,938
143,019
97,220
Cash flows from investing
activities:
Purchases of property, plant and
equipment
(8,752
)
(9,624
)
(18,092
)
(18,368
)
Investment in privately held companies
—
(281
)
(170
)
(506
)
Acquisitions, net of cash acquired
(366
)
(133,665
)
(366
)
(133,908
)
Purchases of short-term investments
—
(1,505
)
—
(1,505
)
Purchases of trading investments
(1,370
)
(1,222
)
(2,525
)
(3,722
)
Proceeds from sales of trading
investments
1,375
1,327
2,571
4,194
Net cash used in investing activities
(9,113
)
(144,970
)
(18,582
)
(153,815
)
Cash flows from financing
activities:
Payment of cash dividends
(124,180
)
(113,971
)
(124,180
)
(113,971
)
Purchases of registered shares
—
(9,919
)
(15,127
)
(19,901
)
Proceeds from exercises of stock options
and purchase rights
8,938
8,903
9,331
10,007
Tax withholdings related to net share
settlements of restricted stock units
(1,538
)
(2,299
)
(20,908
)
(27,380
)
Net cash used in financing activities
(116,780
)
(117,286
)
(150,884
)
(151,245
)
Effect of exchange rate changes on cash
and cash equivalents
(3,102
)
(1,848
)
(3,605
)
(9,157
)
Net decrease in cash and cash
equivalents
(22,492
)
(179,166
)
(30,052
)
(216,997
)
Cash and cash equivalents, beginning of
the period
596,956
604,116
604,516
641,947
Cash and cash equivalents, end of the
period
$
574,464
$
424,950
$
574,464
$
424,950
LOGITECH INTERNATIONAL S.A.
PRELIMINARY RESULTS *
(In thousands) - unaudited
NET SALES
Three Months Ended
Six Months Ended
September 30,
September 30,
SUPPLEMENTAL FINANCIAL
INFORMATION
2019
2018
Change
2019
2018
Change
Net sales by product category:
Pointing Devices
$
132,770
$
128,337
3
%
$
254,753
$
256,127
(1
)%
Keyboards & Combos
139,049
131,872
5
267,728
260,094
3
PC Webcams
28,748
28,221
2
56,876
57,895
(2
)
Tablet & Other Accessories
33,847
36,710
(8
)
72,186
69,146
4
Video Collaboration
89,553
57,176
57
162,977
115,968
41
Mobile Speakers
57,232
77,100
(26
)
107,648
111,427
(3
)
Audio & Wearables
68,018
61,560
10
126,642
113,714
11
Gaming
161,014
160,792
—
295,529
296,818
—
Smart Home
9,434
9,241
2
19,298
18,252
6
Other (1)
26
137
(81
)
279
185
51
Total sales
$
719,691
$
691,146
4
%
$
1,363,916
$
1,299,626
5
%
(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
(C)
Three Months Ended
Six Months Ended
September 30,
September 30,
SUPPLEMENTAL FINANCIAL
INFORMATION
2019
2018
2019
2018
Gross profit - GAAP
$
272,076
$
256,117
$
511,052
$
480,054
Share-based compensation expense
1,184
791
2,342
1,921
Amortization of intangible assets and
purchase accounting effect on inventory
3,271
2,966
6,542
5,338
Gross profit - Non-GAAP
$
276,531
$
259,874
$
519,936
$
487,313
Gross margin - GAAP
37.8
%
37.1
%
37.5
%
36.9
%
Gross margin - Non-GAAP
38.4
%
37.6
%
38.1
%
37.5
%
Operating expenses - GAAP
$
204,021
$
190,985
$
395,530
$
382,471
Less: Share-based compensation expense
13,068
11,258
24,128
23,387
Less: Amortization of intangible assets
and acquisition-related costs
4,218
4,317
7,814
6,838
Less: Restructuring charges (credits),
net
(364
)
119
114
10,040
Operating expenses - Non-GAAP
$
187,099
$
175,291
$
363,474
$
342,206
% of net sales - GAAP
28.3
%
27.6
%
29.0
%
29.4
%
% of net sales - Non - GAAP
26.0
%
25.4
%
26.6
%
26.3
%
Operating income - GAAP
$
68,055
$
65,132
$
115,522
$
97,583
Share-based compensation expense
14,252
12,049
26,470
25,308
Amortization of intangible assets
6,868
5,448
13,735
10,341
Purchase accounting effect on
inventory
—
379
—
379
Acquisition-related costs
621
1,456
621
1,456
Restructuring charges (credits), net
(364
)
119
114
10,040
Operating income - Non - GAAP
$
89,432
$
84,583
$
156,462
$
145,107
% of net sales - GAAP
9.5
%
9.4
%
8.5
%
7.5
%
% of net sales - Non - GAAP
12.4
%
12.2
%
11.5
%
11.2
%
Net income - GAAP
$
72,933
$
64,176
$
118,278
$
102,642
Share-based compensation expense
14,252
12,049
26,470
25,308
Amortization of intangible assets
6,868
5,448
13,735
10,341
Purchase accounting effect on
inventory
—
379
—
379
Acquisition-related costs
621
1,456
621
1,456
Restructuring charges (credits), net
(364
)
119
114
10,040
Loss (gain) on investments
274
(395
)
63
(382
)
Non-GAAP income tax adjustment
(9,506
)
(116
)
(8,599
)
(9,225
)
Net income - Non - GAAP
$
85,078
$
83,116
$
150,682
$
140,559
Net income per share:
Diluted - GAAP
$
0.43
$
0.38
$
0.70
$
0.61
Diluted - Non - GAAP
$
0.50
$
0.49
$
0.89
$
0.83
Shares used to compute net income per
share:
Diluted - GAAP and Non - GAAP
169,027
169,234
168,914
168,996
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
2019
2018
2019
2018
Share-based Compensation
Expense
Cost of goods sold
$
1,184
$
791
$
2,342
$
1,921
Marketing and selling
6,951
4,864
13,800
10,650
Research and development
2,248
1,935
4,402
3,484
General and administrative
3,869
4,459
5,926
9,253
Total share-based compensation
expense
14,252
12,049
26,470
25,308
Income tax benefit
(2,723
)
(2,650
)
(9,523
)
(12,179
)
Total share-based compensation expense,
net of income tax benefit
$
11,529
$
9,399
$
16,947
$
13,129
* Note: These preliminary results for the three and six months
ended September 30, 2019 are subject to adjustments, including
subsequent events that may occur through the date of filing our
Quarterly Report on Form 10-Q.
(A) Swiss Federal Tax Reform
On May 19, 2019, the Swiss electorate approved the Federal Act
on Tax Reform and AHV Financing ("TRAF"), a major reform to better
align the Swiss tax system with international tax standards. The
legislation was subsequently published in the federal register on
August 6, 2019 to take effect on January 1, 2020. As of September
30, 2019, TRAF has not been enacted in all cantons, including the
canton of Vaud, where the cantonal legislative procedures are in
process.
The change in the effective income tax rate for the three months
ended September 30, 2019, compared to the same period ended
September 30, 2018, was primarily due to the transitional income
tax impact in Switzerland. We have benefited from a longstanding
tax ruling from the canton of Vaud through March 31, 2019. During
the second quarter, the canton of Vaud concluded the longstanding
cantonal tax ruling will only continue to apply through December
31, 2019. The transitional income tax impact, which represents
income tax provision at the current full statutory income tax rate
of 13.63% without taking account of the tax reform yet to be
enacted, resulted in a tax benefit of $5.9 million in the
three-month period ended September 30, 2019. In addition, there was
a discrete tax benefit of $4.0 million from adjusting deferred tax
assets and liabilities in Switzerland in the three months ended
September 30, 2019. We expect a gradual and modest increase in our
cash tax payments in Switzerland each year until we fully reflect
the new Swiss tax rate.
(B) Adoption of ASC Topic 842
We adopted the new standards for leases under Accounting
Standards Codification ("ASC") Topic 842 using the modified
retrospective approach as of April 1, 2019 and did not restate the
financial statements of the comparative periods as is allowed by
election of the transition option under ASC 842. Adoption of the
standard resulted in the recognition of $30.1 million of
right-of-use assets, $11.9 million of short-term lease liabilities
and $24.1 million of long-term lease liabilities related to our
leases on September 30, 2019.
(C) 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, 2019 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. 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)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191021005883/en/
Ben Lu CFA, Vice President, Investor Relations - USA (510)
713-5568
Krista Todd Vice President, Global Communications - USA (510)
713-5834
Ben Starkie Corporate Communications - Europe +41 (0)
79-292-3499
Logitech (NASDAQ:LOGI)
Historical Stock Chart
From Aug 2024 to Sep 2024
Logitech (NASDAQ:LOGI)
Historical Stock Chart
From Sep 2023 to Sep 2024