Logitech International S.A 10-Q for FY2024 Q1
Logitech International S.A. (LOGI)
10-Q
2023-07-27
For: 2023-06-30
View Original
Added on
April 12, 2026
About this 10-Q
Logitech International S.A filed this 10-Q on July 27, 2023, covering the quarter ended June 30, 2023 (FY2024 Q1).
Headline figures
Quarter ended June 30, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $974.5M
- down 16.0% from $1.16B a year earlier
- Net income
- $62.73M
- down 37.8% from net income of $100.84M a year earlier
- Diluted EPS
- $0.39
- down 36.1% from $0.61 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
For the quarterly period ended June 30, 2023
Or
For the Transition Period from to
Commission File Number: 0-29174
(Exact name of registrant as specified in its charter)
| Canton of Vaud, | None | ||||||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
Logitech International S.A.
EPFL - Quartier de l'Innovation
Daniel Borel Innovation Center
(Address of principal executive offices and zip code)
(510) 795-8500
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Registered Shares | LOGN | SIX Swiss Exchange | ||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| ý | Smaller reporting company | ||||||||||||||||
| Accelerated filer | ☐ | Emerging Growth Company | |||||||||||||||
| Non-accelerated filer | ☐ | ||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ý
As of July 13, 2023, there were 158,146,980 shares of the Registrant’s share capital outstanding.
TABLE OF CONTENTS
| Page | ||||||||
| Part I | FINANCIAL INFORMATION | |||||||
In this document, unless otherwise indicated, references to the “Company,” “Logitech,” "we," "our," and "us" are to Logitech International S.A. and its consolidated subsidiaries. Unless otherwise specified, all references to U.S. Dollar, Dollar or $ are to the United States Dollar, the legal currency of the United States of America. All references to CHF are to the Swiss Franc, the legal currency of Switzerland.
Logitech, the Logitech logo, and the Logitech products referred to herein are either the trademarks or the registered trademarks of Logitech. All other trademarks are the property of their respective owners.
Our fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The first quarter of fiscal year 2024 ended on June 30, 2023. The same quarter in the prior fiscal year ended on July 1, 2022. For purposes of presentation, we have indicated our quarterly periods end on the last day of the calendar quarter.
The term “sales” means net sales, except as otherwise specified.
We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission ("SEC").
1
Recordings of our earnings videoconferences and certain events we participate in or host, with members of the investment community are posted on our investor relations website at https://ir.logitech.com. Additionally, we provide notifications of news or announcements regarding our operations and financial performance, including SEC filings, investor events, and press and earnings releases as part of our investor relations website. We intend to use our investor relations website as means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD. Our corporate governance information also is available on our investor relations website.
All references to our websites are intended to be inactive textual references only, and the contents of such websites do not constitute a part of and are not intended to be incorporated into this Quarterly Report on Form 10-Q.
2
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Net sales | $ | $ | ||||||||||||||||||||||||
| Cost of goods sold | ||||||||||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||||||||||
| Gross profit | ||||||||||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||||
| Marketing and selling | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Amortization of intangible assets and acquisition-related costs | ||||||||||||||||||||||||||
| Restructuring charges, net | ||||||||||||||||||||||||||
| Total operating expenses | ||||||||||||||||||||||||||
| Operating income | ||||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Other income (expense), net | ( | |||||||||||||||||||||||||
| Income before income taxes | ||||||||||||||||||||||||||
| Provision for income taxes | ||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||||
| Basic | $ | $ | ||||||||||||||||||||||||
| Diluted | $ | $ | ||||||||||||||||||||||||
| Weighted average shares used to compute net income per share: | ||||||||||||||||||||||||||
| Basic | ||||||||||||||||||||||||||
| Diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||
| Currency translation loss: | ||||||||||||||||||||||||||
| Currency translation loss, net of taxes | ( | ( | ||||||||||||||||||||||||
| Defined benefit plans: | ||||||||||||||||||||||||||
| Net gain and prior service costs, net of taxes | ||||||||||||||||||||||||||
| Reclassification of amortization included in other income (expense), net | ( | ( | ||||||||||||||||||||||||
| Hedging gain (loss): | ||||||||||||||||||||||||||
| Deferred hedging gain (loss), net of taxes | ( | |||||||||||||||||||||||||
| Reclassification of hedging gain (loss) included in cost of goods sold | ( | |||||||||||||||||||||||||
| Total other comprehensive income (loss) | ( | |||||||||||||||||||||||||
| Total comprehensive income | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
| June 30, 2023 | March 31, 2023 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | $ | ||||||||||||
| Accounts receivable, net | ||||||||||||||
| Inventories | ||||||||||||||
| Other current assets | ||||||||||||||
| Total current assets | ||||||||||||||
| Non-current assets: | ||||||||||||||
| Property, plant and equipment, net | ||||||||||||||
| Goodwill | ||||||||||||||
| Other intangible assets, net | ||||||||||||||
Other assets | ||||||||||||||
| Total assets | $ | $ | ||||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | $ | ||||||||||||
| Accrued and other current liabilities | ||||||||||||||
| Total current liabilities | ||||||||||||||
| Non-current liabilities: | ||||||||||||||
| Income taxes payable | ||||||||||||||
Other non-current liabilities | ||||||||||||||
| Total liabilities | ||||||||||||||
| Commitments and contingencies (Note 10) | ||||||||||||||
| Shareholders’ equity: | ||||||||||||||
Registered shares, CHF | ||||||||||||||
Issued shares — | ||||||||||||||
Additional shares that may be issued out of conditional capital — | ||||||||||||||
Additional shares that may be issued out of authorized capital — | ||||||||||||||
| Additional paid-in capital | ||||||||||||||
Shares in treasury, at cost — | ( | ( | ||||||||||||
| Retained earnings | ||||||||||||||
| Accumulated other comprehensive loss | ( | ( | ||||||||||||
| Total shareholders’ equity | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
| Depreciation | ||||||||||||||||||||||||||
| Amortization of intangible assets | ||||||||||||||||||||||||||
| Loss (gain) on investments | ( | |||||||||||||||||||||||||
| Share-based compensation expense | ||||||||||||||||||||||||||
| Deferred income taxes | ||||||||||||||||||||||||||
| Other | ( | |||||||||||||||||||||||||
| Changes in assets and liabilities, net of acquisitions: | ||||||||||||||||||||||||||
| Accounts receivable, net | ( | |||||||||||||||||||||||||
| Inventories | ( | |||||||||||||||||||||||||
| Other assets | ||||||||||||||||||||||||||
| Accounts payable | ( | ( | ||||||||||||||||||||||||
| Accrued and other liabilities | ( | ( | ||||||||||||||||||||||||
| Net cash provided by (used in) operating activities | ( | |||||||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||||||
| Purchases of property, plant and equipment | ( | ( | ||||||||||||||||||||||||
| Investment in privately held companies | ( | ( | ||||||||||||||||||||||||
| Acquisitions, net of cash acquired | ( | |||||||||||||||||||||||||
| Purchases of deferred compensation investments | ( | ( | ||||||||||||||||||||||||
| Proceeds from sales of deferred compensation investments | ||||||||||||||||||||||||||
| Other investing activities | ( | |||||||||||||||||||||||||
| Net cash used in investing activities | ( | ( | ||||||||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||||||
| Purchases of registered shares | ( | ( | ||||||||||||||||||||||||
| Proceeds from exercises of stock options and purchase rights | ||||||||||||||||||||||||||
| Tax withholdings related to net share settlements of restricted stock units | ( | ( | ||||||||||||||||||||||||
| Net cash used in financing activities | ( | ( | ||||||||||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ( | ||||||||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | ( | |||||||||||||||||||||||||
| Cash and cash equivalents, beginning of the period | ||||||||||||||||||||||||||
| Cash and cash equivalents, end of the period | $ | $ | ||||||||||||||||||||||||
| Supplementary Cash Flow Disclosures: | ||||||||||||||||||||||||||
| Non-cash investing and financing activities: | ||||||||||||||||||||||||||
| Property, plant and equipment purchased during the period and included in period end liability accounts | $ | $ | ||||||||||||||||||||||||
| Non-cash contingent consideration for acquisition | $ | $ | ||||||||||||||||||||||||
Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | ||||||||||||||||||||||||
| Supplemental cash flow information: | ||||||||||||||||||||||||||
| Income taxes paid, net | $ | $ | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands)
(unaudited)
Three Months Ended June 30, 2023
| Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Registered Shares | Treasury Shares | Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Purchases of registered shares | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Sales of shares upon exercise of stock options and purchase rights | — | — | ( | ( | — | — | |||||||||||||||||||||||||||||||||||||||||
| Issuance of shares upon vesting of restricted stock units | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| June 30, 2023 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
Three Months Ended June 30, 2022
| Additional Paid-in Capital | Accumulated Other Comprehensive Loss | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||||||||||||||||
| Registered Shares | Treasury Shares | Retained Earnings | |||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| March 31, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Total comprehensive income | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Purchases of registered shares | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares upon vesting of restricted stock units | — | — | ( | ( | — | — | ( | ||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| June 30, 2022 | $ | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
LOGITECH INTERNATIONAL S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 — The Company and Summary of Significant Accounting Policies and Estimates
The Company
Logitech International S.A, together with its consolidated subsidiaries ("Logitech" or the "Company"), designs, manufactures and sells products that help businesses thrive and bring people together when working, creating, gaming and streaming.
The Company sells its products to a broad network of international customers, including direct sales to retailers, e-tailers and end consumers through the Company's e-commerce platform, and indirect sales to end customers through distributors.
Logitech was founded in Switzerland in 1981 and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Hautemorges, Switzerland, and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa ("EMEA") and Asia Pacific. Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange under the trading symbol LOGN and the Nasdaq Global Select Market under the trading symbol LOGI.
Basis of Presentation
The condensed consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2023, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 17, 2023.
In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of only normal and recurring adjustments, necessary and in all material aspects, for a fair statement of the results of operations, comprehensive income, financial position, cash flows and changes in shareholders' equity for the periods presented. Operating results for the three months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2024, or any future periods.
Change in Presentation of Sales by Product Category
During the first quarter of fiscal year 2024, the Company changed its presentation of Sales by Product Category, included in Note 12, to provide a simpler and clearer view of the Company's business. The change in presentation did not have an impact on previously reported total sales. These changes included reclassifications of sales between certain product categories resulting in the following:
•The Webcams category (previously PC Webcams) now includes PC webcams and VC webcams;
•Headsets is a new category which includes PC headsets and VC headsets;
•The Mobile Speakers category is no longer a separate category as sales have been reclassified into the Other category;
•The Audio & Wearables category is no longer a separate category as sales have been reclassified into other categories as discussed below.
8
As a result of these changes, certain prior-period amounts for the three months ended June 30, 2022 have been reclassified to conform to the current period presentation as follows (in thousands):
| As previously reported | Reclassifications | As adjusted | ||||||||||||||||||
| Gaming | $ | $ | (1) | $ | ||||||||||||||||
| Keyboards & Combos | ||||||||||||||||||||
| Pointing Devices | ||||||||||||||||||||
| Video Collaboration | ( | (2) (3) | ||||||||||||||||||
Webcams (3) | (3) | |||||||||||||||||||
| Tablet Accessories | ||||||||||||||||||||
| Headsets | (2) | |||||||||||||||||||
| Other | (4) (5) | |||||||||||||||||||
| Mobile Speakers | ( | (4) | ||||||||||||||||||
| Audio & Wearables | ( | (1) (2) (5) | ||||||||||||||||||
| Total Sales | $ | $ | $ | |||||||||||||||||
(1) Reclassification of Blue Microphones from "Audio & Wearables" to the Gaming category.
(2) Reclassification of VC headsets and PC headsets to the new Headsets category from "Video Collaboration" and "Audio & Wearables," respectively.
(3) The Webcams category includes amounts previously reported as "PC Webcams" as well as amounts from VC webcams reclassified from "Video Collaboration."
(4) Reclassification of all amounts previously reported in "Mobile Speakers" to the Other category.
(5) Reclassification of PC speakers previously reported in "Audio & Wearables" to the Other category.
Changes in Significant Accounting Policies
There have been no material changes in the Company’s significant accounting policies during the three months ended June 30, 2023 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve the fair value of goodwill and intangible assets acquired from business acquisitions, contingent consideration for a business acquisition and periodic reassessment of its fair value, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, accruals for customer incentives, cooperative marketing, and pricing programs and related breakage when appropriate, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates.
Risks and Uncertainties
Impacts of Macroeconomic and Geopolitical Conditions on the Company's Business
The Company's business has been impacted by adverse macroeconomic and geopolitical conditions. These conditions include inflation, interest rate and foreign currency fluctuations, slowdown of economic activity around the world, and lower consumer and enterprise spending. In addition, the war in Ukraine resulted in global supply chain, logistics, and inflationary challenges. The Company has had no revenue in Russia and Ukraine since fiscal year
9
2023 as it has indefinitely ceased all sales and shipments to Russia and sales in Ukraine have also been halted due to the ongoing military operations on the Ukrainian territory.
The global and regional economic and political conditions adversely affect demand for the Company's products. These conditions also had an impact on the Company's suppliers, contract manufacturers, logistics providers, and distributors, causing volatility in cost of materials and shipping and transportation rates, and as a result impacting the pricing of the Company's products.
Note 2 — Net Income Per Share
The following table summarizes the computations of basic and diluted net income per share for the three months ended June 30, 2023 and 2022 (in thousands, except per share amounts):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Shares used in net income per share computation: | ||||||||||||||||||||||||||
| Weighted average shares outstanding - basic | ||||||||||||||||||||||||||
| Effect of potentially dilutive equivalent shares | ||||||||||||||||||||||||||
| Weighted average shares outstanding - diluted | ||||||||||||||||||||||||||
| Net income per share: | ||||||||||||||||||||||||||
| Basic | $ | $ | ||||||||||||||||||||||||
| Diluted | $ | $ | ||||||||||||||||||||||||
Share equivalents attributable to outstanding stock options, restricted stock units and employee share purchase plans totaling 2.0 million and 3.4 million for the three months ended June 30, 2023 and 2022, respectively, were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive. A small number of performance-based restricted stock units were not included in the dilutive net income per share calculation because all necessary conditions had not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the performance contingency period.
Note 3 — Employee Benefit Plans
Employee Share Purchase Plans and Stock Incentive Plans
As of June 30, 2023, the Company offers the 2006 Employee Share Purchase Plan (Non-U.S.), as amended and restated ("2006 ESPP"), the 1996 Employee Share Purchase Plan (U.S.), as amended and restated ("1996 ESPP"), and the 2006 Stock Incentive Plan ("2006 Plan") as amended and restated. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.
10
The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three months ended June 30, 2023 and 2022 (in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Cost of goods sold | $ | $ | ||||||||||||||||||||||||
| Marketing and selling | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| General and administrative | ||||||||||||||||||||||||||
| Total share-based compensation expense | ||||||||||||||||||||||||||
| Income tax benefit | ( | ( | ||||||||||||||||||||||||
| Total share-based compensation expense, net of income tax benefit | $ | $ | ||||||||||||||||||||||||
The income tax benefit in the respective periods primarily consisted of tax benefits related to the share-based compensation expense for the period and direct tax benefit realized, including net excess tax benefits recognized from share-based awards vested or exercised during the period.
Share-based compensation costs capitalized as part of inventory were $1.9 million and $1.8 million for the three months ended June 30, 2023 and 2022, respectively.
Defined Benefit Plans
Certain of the Company’s subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee benefit regulations. The Company’s practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. The costs of $1.9 million and $2.8 million for the three months ended June 30, 2023 and 2022, respectively, were primarily related to service costs.
Note 4 — Income Taxes
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company’s income before taxes and the provision for (benefit from) income taxes are generated outside of Switzerland.
The income tax provision for the three months ended June 30, 2023 was $12.5 million based on an effective income tax rate of 16.7 % of pre-tax income, compared to an income tax provision of $21.7 million based on an effective income tax rate of 17.7 % of pre-tax income for the three months ended June 30, 2022.
The change in the effective income tax rate for the three months ended June 30, 2023, compared with the same period ended June 30, 2022 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates and the tax impact from share-based compensation for the three months ended June 30, 2023.
Although the Company has adequately provided for uncertain tax positions, the provisions related to these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. During fiscal year 2024, the Company continues to review its tax positions and provide for or reverse unrecognized tax benefits as they arise. During the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly due to changes in tax law in various jurisdictions, new tax audits and changes in the U.S. dollar as compared to other currencies.
11
Note 5 — Balance Sheet Components
The following table presents the components of certain balance sheet asset amounts (in thousands):
| June 30, 2023 | March 31, 2023 | |||||||||||||
| Accounts receivable, net: | ||||||||||||||
| Accounts receivable | $ | $ | ||||||||||||
| Allowance for doubtful accounts | ( | ( | ||||||||||||
| Allowance for sales returns | ( | ( | ||||||||||||
| Allowance for cooperative marketing arrangements | ( | ( | ||||||||||||
| Allowance for customer incentive programs | ( | ( | ||||||||||||
| Allowance for pricing programs | ( | ( | ||||||||||||
| $ | $ | |||||||||||||
| Inventories: | ||||||||||||||
| Raw materials | $ | $ | ||||||||||||
| Finished goods | ||||||||||||||
| $ | $ | |||||||||||||
| Other current assets: | ||||||||||||||
| Value-added tax ("VAT") receivables | $ | $ | ||||||||||||
| Prepaid expenses and other assets | ||||||||||||||
| $ | $ | |||||||||||||
| Property, plant and equipment, net: | ||||||||||||||
| Property, plant and equipment | $ | $ | ||||||||||||
| Less: accumulated depreciation and amortization | ( | ( | ||||||||||||
| $ | $ | |||||||||||||
| Other assets: | ||||||||||||||
| Deferred tax assets | $ | $ | ||||||||||||
| Right-of-use assets | ||||||||||||||
| Investments in privately held companies | ||||||||||||||
| Investments for deferred compensation plan | ||||||||||||||
| Other assets | ||||||||||||||
| $ | $ | |||||||||||||
12
The following table presents the components of certain balance sheet liability amounts (in thousands):
| June 30, 2023 | March 31, 2023 | |||||||||||||
| Accrued and other current liabilities: | ||||||||||||||
| Accrued customer marketing, pricing and incentive programs | $ | $ | ||||||||||||
| Accrued personnel expenses | ||||||||||||||
| Accrued loss for inventory purchase commitments | ||||||||||||||
| Accrued sales return liability | ||||||||||||||
| Warranty liabilities | ||||||||||||||
| VAT payable | ||||||||||||||
| Income taxes payable | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Contingent consideration | ||||||||||||||
| Other current liabilities | ||||||||||||||
| $ | $ | |||||||||||||
| Other non-current liabilities: | ||||||||||||||
| Operating lease liabilities | $ | $ | ||||||||||||
| Employee benefit plan obligations | ||||||||||||||
| Obligation for deferred compensation plan | ||||||||||||||
| Warranty liabilities | ||||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Other non-current liabilities | ||||||||||||||
| $ | $ | |||||||||||||
Note 6 — Fair Value Measurements
Fair Value Measurements
The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
13
The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands):
| June 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||||||||
| Cash equivalents | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Investments for deferred compensation plan included in other assets: | ||||||||||||||||||||||||||||||||||||||
| Cash | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Common stock | ||||||||||||||||||||||||||||||||||||||
| Money market funds | ||||||||||||||||||||||||||||||||||||||
| Mutual funds | ||||||||||||||||||||||||||||||||||||||
| Total investments for deferred compensation plan | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Currency derivative assets included in other current assets | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||||||||
| Contingent consideration included in accrued and other current liabilities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Currency derivative liabilities included in accrued and other current liabilities | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
Contingent Consideration for Business Acquisitions
| Three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Beginning of the period | $ | $ | ||||||||||||
Fair value of contingent consideration upon acquisition | ||||||||||||||
| Effect of foreign currency exchange rate changes | ( | |||||||||||||
| End of the period | $ | $ | ||||||||||||
The contingent consideration arising from the technology acquisition on May 19, 2021, represents the future potential earn-out payments of up to $10.0 million payable in cash upon the achievement of three technical development milestones to be completed as of December 31, 2021, June 30, 2022, and June 30, 2023. The fair value of the contingent consideration was $10.0 million at the acquisition date, which was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During fiscal year 2022, the Company paid $0.9 million for the contingent consideration related to the first technical development milestone. During fiscal year 2023, the Company paid $4.0 million for the contingent consideration related to the second technical development milestone. The Company expects to pay the contingent consideration for the third technical development milestone within the next twelve months.
The contingent consideration arising from the technology acquisition on January 4, 2021, represents the future potential earn-out payments of up to $3.0 million payable in cash upon the achievement of two technical development milestones to be completed as of December 31, 2021 and March 31, 2022. The fair value of the contingent consideration was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During fiscal year 2023, the Company paid $2.0 million for the contingent consideration related to the first technical development milestone. The Company expects to pay the remaining $1.0 million for the second technical development milestone within the next twelve months.
Although the estimate of contingent consideration is based on management’s best knowledge of current events, the estimate could change significantly from period to period. Actual results that differ from the assumptions
14
used and any changes to the significant assumptions and unobservable inputs used could have an impact on future results of operations.
Investments for Deferred Compensation Plan
The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $29.9 million and $28.2 million, as of June 30, 2023 and March 31, 2023, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized gains (losses) related to marketable securities for the three months ended June 30, 2023 and 2022 were not material and were included in other income (expense), net in the Company's condensed consolidated statements of operations.
Equity Method Investments
The Company has certain non-marketable investments included in other assets that are accounted for as equity method investments, with a carrying value of $18.4 million and $20.5 million as of June 30, 2023 and March 31, 2023, respectively. Gains (losses) related to equity method investments for the three months ended June 30, 2023 and 2022 were not material and are included in other income (expense), net in the Company's condensed consolidated statements of operations. There was no
Assets Measured at Fair Value on a Nonrecurring Basis
Financial Assets
The Company has certain equity investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The carrying value is also adjusted for observable price changes with the same or similar security from the same issuer. The amount of these equity investments without readily determinable fair values included in other assets was $12.6 6.9 million for its investment in a private company as a result of observable price changes for similar securities issued by this company (level 2 fair value measurement). There was no
During the three months ended June 30, 2023, the Company recorded an impairment loss, before tax, of $9.6 million as a result of the write-off of a note receivable which has been deemed no longer recoverable. This note receivable was previously obtained in conjunction with an exchange transaction related to the Company's investment in a privately held company. The impairment loss is included in other income (expense), net in the Company's condensed consolidated statement of operations for the three months ended June 30, 2023.
Non-Financial Assets
Note 7 — Derivative Financial Instruments
Under certain agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same type with a single net amount payable by one party to the other. However, the Company presents its derivative assets and derivative liabilities on a gross basis in other current assets and accrued and other current liabilities, respectively, on the condensed consolidated balance sheets as of June 30, 2023 and March 31, 2023. See Note 6 for the fair values of the Company’s derivative instruments as of June 30, 2023 and March 31, 2023.
15
Cash Flow Hedges
The Company enters into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within approximately four months . Gains and losses in the fair value of the effective portion of the hedges are deferred as a component of accumulated other comprehensive loss until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold. Cash flows from such hedges are classified as operating activities in the condensed consolidated statements of cash flows. Hedging relationships are discontinued when the hedging contract is no longer eligible for hedge accounting, or is sold, terminated or exercised, or when the Company removes hedge designation for the contract. Gains and losses in the fair value of the effective portion of the discontinued hedges continue to be reported in accumulated other comprehensive loss until the hedged inventory purchases are sold, unless it is probable that the forecasted inventory purchases will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter.
The notional amounts of foreign currency exchange forward contracts outstanding related to forecasted inventory purchases were $84.2 million and $72.6 million as of June 30, 2023 and March 31, 2023, respectively. The Company had $1.7 million of net losses related to its cash flow hedges included in accumulated other comprehensive loss as of June 30, 2023, which will be reclassified into earnings within the next twelve months.
| Three months ended June 30, | ||||||||||||||||||||||||||||||||||||||
| Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss | Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold | |||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||||||||||||||||||||||||
| Cash flow hedges | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||
The Company presents the earnings impact from forward points in the same line item that is used to present the earnings impact of the hedged item, i.e. cost of goods sold, for hedging forecasted inventory purchases and such amount is not material for all periods presented.
Other Derivatives
The Company also enters into foreign currency exchange forward and swap contracts to reduce the short-term effects of currency exchange rate fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of its subsidiaries. These contracts generally mature within approximately one month. The primary risk managed by using forward and swap contracts is the currency exchange rate risk. The gains or losses on these contracts are not material and included in other income (expense), net in the condensed consolidated statements of operations based on the changes in fair value. The notional amounts of these contracts outstanding as of June 30, 2023 and March 31, 2023 were $98.3 million and $111.2 million, respectively. Foreign currency exchange forward and swap contracts outstanding as of June 30, 2023 primarily consisted of contracts in Brazilian Real, Japanese Yen, and Canadian Dollar to be settled at future dates at predetermined exchange rates.
Note 8 — Goodwill and Other Intangible Assets
16
reporting unit may be less than its carrying amount. There have been no triggering events identified affecting the valuation of goodwill and intangible assets during the three months ended June 30, 2023 and 2022.
The following table summarizes the activities in the Company’s goodwill balance (in thousands):
| As of March 31, 2023 | $ | |||||||
| Effects of foreign currency translation | ( | |||||||
| As of June 30, 2023 | $ | |||||||
The Company's acquired intangible assets were as follows (in thousands):
| June 30, 2023 | March 31, 2023 | |||||||||||||||||||||||||||||||||||||
| Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||||||||||||
| Trademarks and trade names | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
| Developed technology | ( | ( | ||||||||||||||||||||||||||||||||||||
| Customer contracts/relationships | ( | ( | ||||||||||||||||||||||||||||||||||||
| In-process R&D | — | — | ||||||||||||||||||||||||||||||||||||
| Effects of foreign currency translation | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | $ | ( | $ | ||||||||||||||||||||||||||||||
Note 9 — Financing Arrangements
Note 10 — Commitments and Contingencies
Product Warranties
Changes in the Company’s warranty liabilities for the three months ended June 30, 2023 and 2022 were as follows (in thousands):
| Three months ended June 30, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Beginning of the period | $ | $ | |||||||||||||||||||||
| Provision | |||||||||||||||||||||||
| Settlements | ( | ( | |||||||||||||||||||||
| Effects of foreign currency translation | ( | ( | |||||||||||||||||||||
| End of the period | $ | $ | |||||||||||||||||||||
Indemnifications
The Company indemnifies certain of its suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances, includes indemnification for damages and expenses, including reasonable attorneys’ fees. As of June 30, 2023, no material amounts have been accrued for these indemnification provisions. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under its indemnification arrangements.
17
The Company also indemnifies its current and former directors and certain of its current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not limited, the obligations are conditional in nature and the facts and circumstances involved in any situation that might arise are variable.
Legal Proceedings
From time to time the Company is involved in claims and legal proceedings that arise in the ordinary course of its business. The Company is currently subject to several such claims and a small number of legal proceedings. The Company believes that these matters lack merit and intends to vigorously defend against them. Based on currently available information, the Company does not believe that resolution of pending matters will have a material adverse effect on its financial condition, cash flows and results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that the Company's defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on the Company's business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against the Company, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain a necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect the Company's business.
Note 11 — Shareholders’ Equity
Share Repurchases
2020 Share Repurchase Program
In May 2020, the Company's Board of Directors approved the 2020 share repurchase program, which authorized the Company to use up to $250.0 million to purchase Logitech shares. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. In April 2021, the Company's Board of Directors approved an increase of $750.0 million of the 2020 share repurchase program, to an aggregate amount of $1.0 billion. The Swiss Takeover Board approved this increase and it became effective on May 21, 2021. In July 2022, the Company’s Board of Directors approved an increase of $500 million to the 2020 share repurchase program, to an aggregate amount of up to $1.5 billion. The Swiss Takeover Board approved this increase and it became effective on August 19, 2022. As of June 30, 2023, $411.0 million was available for repurchase under the 2020 share repurchase program. The 2020 share repurchase program expired on July 27, 2023.
2023 Share Repurchase Program
In June 2023, the Company's Board of Directors approved a new, three-year share repurchase program, which allows the Company to use up to $1.0 billion to repurchase its shares. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program will become effective on July 28, 2023. Swiss law limits a company’s ability to hold or repurchase its own shares. Generally, the aggregate par value of all shares held by the company and its subsidiaries may not exceed 10 % of the registered share capital of the company, which for Logitech corresponds to 17.3 million shares. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
18
Accumulated Other Comprehensive Income (Loss)
The accumulated other comprehensive income (loss) was as follows (in thousands):
| Cumulative Translation Adjustment | Defined Benefit Plans | Deferred Hedging Gains (Losses) | Total | |||||||||||||||||||||||
| March 31, 2023 | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
| Other comprehensive income (loss) | ( | ( | ||||||||||||||||||||||||
| June 30, 2023 | $ | ( | $ | $ | ( | $ | ( | |||||||||||||||||||
Note 12 — Segment Information
The Company operates in a single operating segment that encompasses the design, manufacturing and marketing of peripherals for gaming, PCs, tablets, video conferencing, and other digital platforms. Operating performance measures are provided directly to the Company's CEO, who is considered to be the Company’s Chief Operating Decision Maker. The CEO periodically reviews information such as sales and adjusted operating income (loss) to make business decisions. These operating performance measures do not include restructuring charges (credits), net, share-based compensation expense, amortization and impairment of intangible assets, acquisition-related costs, and change in fair value of contingent consideration from business acquisitions.
During the first quarter of fiscal year 2024, the Company changed its presentation of Sales by Product Category to provide a simpler and clearer view of the Company's business. The change in presentation did not have an impact on previously reported total sales. As a result of these changes, certain prior-period amounts for the three months ended June 30, 2022 have been reclassified to conform to the current period presentation. See Note 1 for further information on the change in presentation.
Sales by product category in the current presentation for the three months ended June 30, 2023 and 2022 were as follows (in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
Gaming (1) | $ | $ | ||||||||||||||||||||||||
| Keyboards & Combos | ||||||||||||||||||||||||||
| Pointing Devices | ||||||||||||||||||||||||||
| Video Collaboration | ||||||||||||||||||||||||||
| Webcams | ||||||||||||||||||||||||||
| Tablet Accessories | ||||||||||||||||||||||||||
| Headsets | ||||||||||||||||||||||||||
Other (2) | ||||||||||||||||||||||||||
| Total Sales | $ | $ | ||||||||||||||||||||||||
(1) Gaming includes streaming services revenue generated by Streamlabs.
(2) Other primarily consists of mobile speakers and PC speakers.
Sales by geographic region (based on the customers’ locations) for the three months ended June 30, 2023 and 2022 were as follows (in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Americas | $ | $ | ||||||||||||||||||||||||
| EMEA | ||||||||||||||||||||||||||
| Asia Pacific | ||||||||||||||||||||||||||
| Total Sales | $ | $ | ||||||||||||||||||||||||
19
Revenue from sales to customers in the United States, Germany and China each represented 10% or more of the total consolidated sales for each of the periods presented herein. No other countries represented 10% or more of the Company’s total consolidated sales for the periods presented herein.
Switzerland, the Company’s country of domicile, represented 2
Property, plant and equipment, net (excluding software) and right-of-use assets by geographic region were as follows (in thousands):
| June 30, 2023 | March 31, 2023 | |||||||||||||
| Americas | $ | $ | ||||||||||||
| EMEA | ||||||||||||||
| Asia Pacific | ||||||||||||||
| Total | $ | $ | ||||||||||||
Property, plant and equipment, net (excluding software) and right-of-use assets in the United States, China, and Ireland were $69.1 million, $43.7 million and $17.2 million, respectively, as of June 30, 2023, and $58.7 million, $48.8 million, and $17.7 million respectively, as of March 31, 2023. No other countries represented more than 10% of the Company’s total consolidated property, plant and equipment, net (excluding software) and right-of-use assets as of June 30, 2023 or March 31, 2023.
Note 13 — Restructuring
During the second quarter of fiscal year 2023, the Company initiated a restructuring plan to realign its business group and engineering structure with its go-to-market strategy to more effectively compete within the enterprise market and to better serve end-users. During the fourth quarter of fiscal year 2023, the Company undertook further
actions to remove organization layers as well as streamline its marketing organization to increase efficiency. These actions resulted in charges related to employee severance and other termination benefits as well as contract termination and other costs. The Company expects to substantially complete these restructuring activities within the next nine months.
The following table summarizes restructuring-related activities during the three months ended June 30, 2023 (in thousands):
| Termination Benefits | Contract Termination and Other | Total | |||||||||||||||||||||
Accrued restructuring liability at March 31, 2023 (1) | $ | $ | $ | ||||||||||||||||||||
| Charges, net | |||||||||||||||||||||||
| Cash payments | ( | ( | ( | ||||||||||||||||||||
Accrued restructuring liability at June 30, 2023 (1) | $ | $ | $ | ||||||||||||||||||||
(1) The accrual balances are included in accrued and other current liabilities on the Company’s condensed consolidated balance sheets.
20
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on beliefs of our management as of the filing date of this Quarterly Report on Form 10-Q. These forward-looking statements include, among other things, statements related to:
•Our strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position;
•Our business strategy and investment priorities in relation to competitive offerings and evolving consumer demand trends affecting our products and markets, current and future worldwide geopolitical, economic and capital market conditions, including fluctuations in currency exchange rates, inflation, and economic downturns;
•Our expectations regarding our restructuring efforts, including the timing thereof;
•Long-term, secular trends that impact our product categories;
•The scope, nature or impact of acquisition, strategic alliance, and divestiture activities
•Our expectations regarding the success of our strategic acquisitions, including integration of acquired operations, products, technology, internal controls, personnel and management teams;
•Our expectations regarding our effective tax rate, future tax benefits, tax settlements, the adequacy of our provisions for uncertain tax positions;
•Our expectations regarding our potential indemnification obligations, and the outcome of pending or future legal proceedings and tax audits;
•Our business development, product development and innovation, and their impact on future operating results and anticipated operating costs for fiscal year 2024 and beyond;
•Opportunities for growth and our ability to execute on and take advantage of them, including our marketing initiatives and strategy and our expectations regarding the success thereof;
•Potential tariffs, their effects and our ability to mitigate their effects;
•Our expectations regarding our share repurchase and dividend programs;
•The sufficiency of our cash and cash equivalents, cash generated from operations, and available borrowings under our bank lines of credit to fund capital expenditures and working capital needs; and
•The effects of environmental and other laws and regulations in the United States and other countries in which we operate.
Forward-looking statements also include, among others, those statements including the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,” “should,” “will,” and similar language. These statements reflect our views and assumptions as of the date of this Quarterly Report on Form 10-Q. All forward-looking statements involve risks and uncertainties that could cause our actual performance to differ materially from those anticipated in the forward-looking statements depending on a variety of factors. Important information as to these factors can be found in this Quarterly Report on Form 10-Q under the headings of “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Overview of our Company,” “Critical Accounting Estimates,” and “Liquidity and Capital Resources,” among others. Factors that might cause or contribute to such differences include, but are not limited to, those discussed under Part II, Item 1A “Risk Factors” as well as elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the U.S. Securities and Exchange Commission, or “SEC.” You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.
You should read the following discussion in conjunction with the interim unaudited condensed consolidated financial statements and related notes.
21
Overview of Our Company
Logitech’s mission is to help all people pursue their passions in a way that is good for people and the planet. We design, manufacture, and sell products that help businesses thrive and bring people together when working, creating, gaming and streaming. We sell these products through a number of brands: Logitech, Logitech G (including ASTRO Gaming, Streamlabs, and Blue Microphones) and Ultimate Ears.
Our diverse portfolio includes Gaming, Keyboards & Combos, Pointing Devices, Video Collaboration, Webcams, Tablet Accessories, and Headsets. We sell our products to a broad network of international customers, including direct sales to retailers, e-tailers, and end consumers through our e-commerce platform, and indirect sales to end customers through distributors.
From time to time, we may seek to partner with or acquire, when appropriate, companies that have products, personnel, and technologies that complement our strategic direction. We continually review our product offerings and our strategic direction in light of our profitability targets, competitive conditions, changing consumer trends and the evolving nature of the interface between the consumer and the digital world.
Impacts of Macroeconomic and Geopolitical Conditions on our Business
Our business has been impacted by adverse macroeconomic and geopolitical conditions. These conditions include inflation, interest rate and foreign currency fluctuations, slowdown of economic activity around the world, and lower consumer and enterprise spending. In addition, the war in Ukraine resulted in global supply chain, logistics, and inflationary challenges. We have had no revenue in Russia and Ukraine since fiscal year 2023 as we have indefinitely ceased all sales and shipments to Russia and sales in Ukraine have also been halted due to the ongoing military operations on the Ukrainian territory.
The global and regional economic and political conditions adversely affect demand for our products. These conditions also had an impact on our suppliers, contract manufacturers, logistics providers, and distributors, causing volatility in cost of materials and shipping and transportation rates, and as a result, impacting the pricing of our products.
For additional information, see "Liquidity and Capital Resources" below and Part II, Item 1A "Risk Factors".
Trends and Uncertainties
Several long-term secular-trends offer long-term structural growth opportunities across Logitech’s product portfolio, including work and learn from anywhere (hybrid work), video everywhere, the rise of social gaming for participants and spectators, and the democratization of digital content creation. We design, create and sell products that benefit from these secular trends. The culture of hybrid work and learn provides an opportunity to equip meeting rooms, classrooms and personal workspaces, at home or in the office. It also provides an opportunity for increased commercial and consumer adoption of video conferencing. Our video collaboration products are compatible with a variety of video conference platforms, including Zoom, Microsoft Teams, Google Meet, etc. Moving from work to play, Logitech gaming and streaming products benefit from social gaming which continues to gain popularity through online gaming, multi-platform experiences and esports. In addition, the democratization of digital content creation presents an opportunity for anyone to be a content creator because of the accessibility of the tools necessary to code, design, create, make music, game or broadcast to professional standards.
While we believe we will further benefit from these secular trends, we have experienced and will continue to experience challenges that impact our business and financial results. These challenges include (i) the current macroeconomic environment, including interest rate fluctuations, inflation, foreign exchange movements and low economic growth in certain regions, (ii) low consumer confidence and recent declines in enterprise spending leading to reduced demand for some of our products, (iii) the uncertainty in strategy and timing of enterprises’ “return-to-office” impacting demand for our Video Collaboration and other products, and (iv) the timing of further development of our business-to-business go-to-market capabilities.
We expect these challenges to continue in the near-term. We have taken steps to mitigate the impact of these challenges, including but not limited to: (i) reduction in our operating expenses in order to maintain margins and size the business for the current market, (ii) reduction in inventories to more appropriately align with demand, (iii) continued investment in our business-to-business direct sales channel in order to improve performance, and (iv) release of new products to increase the value proposition of our portfolio.
22
Business Seasonality and Product Introductions
We have historically experienced higher sales in our third fiscal quarter ending December 31, compared to other fiscal quarters in our fiscal year, primarily due to the increased consumer demand for our products during the year-end holiday buying season and year-end spending by enterprises. Additionally, new product introductions and business acquisitions can significantly impact sales, product costs and operating expenses. Product introductions can also impact our sales to distribution channels as these channels are filled with new product inventory following a product introduction, and often channel inventory of an earlier model product declines as the next related major product launch approaches. Sales can also be affected when consumers and distributors anticipate a product introduction or changes in business circumstances. However, neither historical seasonal patterns nor historical patterns of product introductions should be considered reliable indicators of our future pattern of product introductions, future sales or financial performance. Furthermore, cash flow is correspondingly lower in the first half of our fiscal year as we typically build inventories in advance for the third quarter and we pay an annual dividend following our Annual General Meeting, which is typically in September.
Summary of Financial Results
Our total sales for the three months ended June 30, 2023 decreased 16% compared to the three months ended June 30, 2022, driven by a decline in sales of most of our product categories, as a result of lower demand.
Sales for the three months ended June 30, 2023 decreased 11%, 11% and 26% in the Americas, EMEA, and Asia Pacific regions, respectively, compared to the three months ended June 30, 2022.
Gross margin was 38.5% for the three months ended June 30, 2023 and decreased by 110 basis points compared to the three months ended June 30, 2022, primarily due to unfavorable impacts from changes in currency exchange rates and unfavorable product mix, partially offset by lower material costs and a reduction in our use of expedited shipping.
Operating expenses for the three months ended June 30, 2023 were $297.2 million, or 30.5% of sales, compared to $344.1 million, or 29.7% of sales, for the three months ended June 30, 2022. The decrease in operating expense was primarily driven by a reduction in marketing and advertising spend.
Net income for the three months ended June 30, 2023 was $62.7 million compared to $100.8 million for the three months ended June 30, 2022.
Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires us to make assumptions, judgments, and estimates, that affect reported amounts of assets, liabilities, sales and expenses, and the disclosure of contingent assets and liabilities.
We consider an accounting estimate critical if it: (i) requires management to make judgments and estimates about matters that are inherently uncertain; and (ii) is important to an understanding of our financial condition and operating results.
We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.
We believe that the assumptions, judgments and estimates involved in the accounting for accruals for customer incentives and related breakage when appropriate, accrued sales return liability, inventory valuation, and uncertain tax positions, have the greatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.
There have been no material changes in our critical accounting estimates during the three months ended June 30, 2023 compared with the critical accounting estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
23
Inflation Reduction Act in the U.S.
On August 16, 2022, the “Inflation Reduction Act” (H.R. 5376) ("IRA") was signed into law in the U.S. The IRA establishes a new corporate alternative minimum tax based on financial statement income adjusted for certain items. The new minimum tax is effective for tax years beginning after December 31, 2022. The IRA does not have a material impact on our financial statements for tax year ending March 31, 2024.
Constant Currency
We refer to our net sales growth rates excluding the impact of currency exchange rate fluctuations as "constant currency" sales growth rates. Percentage of constant currency sales growth 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.
Given our global sales presence and the reporting of our financial results in U.S. Dollars, our financial results could be affected by significant shifts in currency exchange rates. See “Results of Operations” for information on the effect of currency exchange rate fluctuations on our sales. If the U.S. Dollar appreciates or depreciates in comparison to other currencies in future periods, this will affect our results of operations in future periods as well.
References to Sales
The term “sales” means net sales, except as otherwise specified and the sales growth discussion and sales growth rate percentages are in U.S. Dollars, except as otherwise specified.
Results of Operations
Net Sales
Our sales for the three months ended June 30, 2023 decreased 16% compared to the three months ended June 30, 2022, primarily due to a decline in sales of most of our product categories as a result of lower demand. If currency exchange rates had been constant in the three months ended June 30, 2023 and 2022, our constant dollar sales reduction rate would have been 15%.
Sales Denominated in Other Currencies
Although our financial results are reported in U.S. Dollars, a portion of our sales was generated in currencies other than the U.S. Dollar, such as the Euro, Chinese Renminbi, Australian Dollar, Canadian Dollar, Japanese Yen, Pound Sterling and New Taiwan Dollar. During the three months ended June 30, 2023, approximately 48% of our sales were denominated in currencies other than the U.S. Dollar.
24
Sales by Region
The following table presents the change in sales by region for the three months ended June 30, 2023, compared with the three months ended June 30, 2022:
| Sales Growth Rate | Constant Dollar Sales Growth Rate | |||||||||||||||||||||||||
| Americas | (11) | % | (11) | % | ||||||||||||||||||||||
| EMEA | (11) | % | (11) | % | ||||||||||||||||||||||
| Asia Pacific | (26) | % | (24) | % | ||||||||||||||||||||||
Americas:
The decrease in sales in the Americas region for the three-month period presented above was primarily driven by a decrease in sales of Video Collaboration, Webcams, and Keyboards & Combos.
EMEA:
The decrease in sales in our EMEA region for the three-month period presented above was primarily driven by the decrease in sales of all of our product categories other than Pointing Devices.
Asia Pacific:
The decrease in sales in our Asia Pacific region for the three-month period presented above was primarily driven by the decrease in sales of Gaming, Keyboards & Combos, Webcams, and Pointing Devices.
Sales by Product Category
During the first quarter of fiscal year 2024, we changed the presentation of sales by product category to provide a simpler and clearer view of our business. The change in presentation did not have an impact on previously reported total sales. As a result of these changes, certain prior-period amounts for the three months ended June 30, 2022 have been reclassified to conform to the current period presentation. See Note 1 to the condensed consolidated financial statements for further information on the change in presentation.
Sales by product category in the current presentation for the three months ended June 30, 2023 and 2022 were as follows (dollars in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||||||||||||||||
Gaming (1) | $ | 266,429 | $ | 297,921 | (11) | % | ||||||||||||||||||||||||||||||||
| Keyboards & Combos | 180,855 | 227,720 | (21) | |||||||||||||||||||||||||||||||||||
| Pointing Devices | 174,454 | 183,283 | (5) | |||||||||||||||||||||||||||||||||||
| Video Collaboration | 139,346 | 181,632 | (23) | |||||||||||||||||||||||||||||||||||
| Webcams | 75,200 | 109,262 | (31) | |||||||||||||||||||||||||||||||||||
| Tablet Accessories | 70,336 | 66,585 | 6 | |||||||||||||||||||||||||||||||||||
| Headsets | 36,850 | 45,943 | (20) | |||||||||||||||||||||||||||||||||||
Other (2) | 31,029 | 47,519 | (35) | |||||||||||||||||||||||||||||||||||
| Total Sales | $ | 974,499 | $ | 1,159,865 | (16) | % | ||||||||||||||||||||||||||||||||
(1) Gaming includes streaming services revenue generated by Streamlabs.
(2) Other primarily consists of mobile speakers and PC speakers.
25
Gaming
Our Gaming category includes gaming mice, keyboards, headsets, gamepads, steering wheels, simulation controllers, console gaming headsets, studio-quality Blue Microphones and Streamlabs services.
Sales of Gaming decreased 11% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by the decrease in sales of gaming steering wheels and gaming keyboards.
Keyboards & Combos
Our Keyboards & Combos category includes PC keyboards and keyboard/mice combo products.
Sales of Keyboards & Combos decreased 21% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by the decrease in sales of our cordless keyboards and combos.
Pointing Devices
Our Pointing Devices category includes PC- and Mac-related mice including trackballs, touchpads, and presentation tools.
Sales of Pointing Devices decreased 5% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by the decrease in sales of cordless mice.
Video Collaboration
Our Video Collaboration category includes Logitech’s conference room cameras, which combine affordable enterprise-quality audio and high definition 4K video to bring video conferencing to businesses of any size.
Sales of Video Collaboration decreased 23% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, driven by a decrease in sales of most of our Video Collaboration products due primarily to a slowdown in enterprise spending.
Webcams
Our Webcams category includes PC-based webcams that are targeted primarily at consumers, including streaming cameras, and VC webcams that turn any desktop into an instant collaboration space.
Sales of Webcams decreased 31% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by the decrease in sales of our VC webcams as well as our PC-based webcams such as HD Pro Webcam C920 and 1080p Pro Stream Webcam.
Tablet Accessories
Our Tablet Accessories category primarily includes tablet keyboards and styluses.
Sales of Tablet Accessories increased 6% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by the increase in sales of our Rugged Combo 3 Touch as well as Combo Touch and Rugged Combo 4 Touch, introduced in the third quarter of fiscal year 2023, partially offset by the decrease in sales of our Rugged Folio.
Headsets
Our Headsets category includes PC and VC headsets, in-ear headphones, and premium wireless earbuds.
Sales of Headsets decreased 20% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by a decrease in sales of corded PC headsets and VC headsets.
26
Other
Our Other category primarily consists of mobile speakers and PC speakers.
Sales in Other category decreased 35% for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily driven by a decrease in mobile speakers and certain other products that have been discontinued.
Gross Profit
Gross profit for the three months ended June 30, 2023 and 2022 was as follows (Dollars in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||||||||||||||
| 2023 | 2022 | Change | ||||||||||||||||||||||||||||||||||||
| Net sales | $ | 974,499 | $ | 1,159,865 | (16) | % | ||||||||||||||||||||||||||||||||
| Gross profit | $ | 375,642 | $ | 459,603 | (18) | % | ||||||||||||||||||||||||||||||||
| Gross margin | 38.5 | % | 39.6 | % | ||||||||||||||||||||||||||||||||||
Gross profit consists of sales, less cost of goods sold (which includes materials, direct labor and related overhead costs, costs of manufacturing facilities, royalties, costs of purchasing components from outside suppliers, distribution costs, warranty costs, customer support costs, shipping and handling costs, outside processing costs and write-down of inventories), and amortization of intangible assets.
Gross margin was 38.5% for the three months ended June 30, 2023 and decreased by 110 basis points compared to the three months ended June 30, 2022. The gross margin decline was primarily driven by unfavorable impacts from changes in currency exchange rates and unfavorable product mix, partially offset by lower material cost and a reduction in our use of expedited shipping.
Operating Expenses
Operating expenses for the three months ended June 30, 2023 and 2022 were as follows (Dollars in thousands):
| Three months ended June 30, | |||||||||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||||||||
| Marketing and selling | $ | 179,185 | $ | 229,378 | |||||||||||||||||||||||||
| % of sales | 18.4 | % | 19.8 | % | |||||||||||||||||||||||||
| Research and development | 70,559 | 75,517 | |||||||||||||||||||||||||||
| % of sales | 7.2 | % | 6.5 | % | |||||||||||||||||||||||||
| General and administrative | 41,297 | 35,860 | |||||||||||||||||||||||||||
| % of sales | 4.2 | % | 3.1 | % | |||||||||||||||||||||||||
| Amortization of intangible assets and acquisition-related costs | 2,685 | 3,369 | |||||||||||||||||||||||||||
| % of sales | 0.3 | % | 0.3 | % | |||||||||||||||||||||||||
| Restructuring charges, net | 3,511 | — | |||||||||||||||||||||||||||
| % of sales | 0.4 | % | N/A | ||||||||||||||||||||||||||
| Total operating expenses | $ | 297,237 | $ | 344,124 | |||||||||||||||||||||||||
| % of sales | 30.5 | % | 29.7 | % | |||||||||||||||||||||||||
The decrease in total operating expenses during the three months ended June 30, 2023, compared to the three months ended June 30, 2022, was mainly due to decreases in marketing and selling expenses.
27
Marketing and Selling
Marketing and selling expenses consist of personnel and related overhead costs, corporate and product marketing, promotions, advertising, trade shows, technical support for customer experiences and facilities costs.
During the three months ended June 30, 2023, marketing and selling expenses decreased $50.2 million, compared to the three months ended June 30, 2022, primarily driven by our reduction in third-party marketing and advertising spend as well as decreases in personnel-related costs as a result of headcount reduction.
Research and Development
Research and development expenses consist of personnel and related overhead costs for contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existing products.
During the three months ended June 30, 2023, research and development expenses decreased $5.0 million, compared to the three months ended June 30, 2022, primarily driven by lower personnel-related costs and outsourcing expenses. Research and development expenses as a percentage of sales increased from 6.5% in the three months ended June 30, 2022 to 7.2% in the three months ended June 30, 2023, reflecting our continued investment in innovation.
General and Administrative
General and administrative expenses primarily consist of personnel and related overhead, information technology, and facilities costs for the infrastructure functions such as finance, information systems, executives, human resources and legal.
During the three months ended June 30, 2023, general and administrative expenses increased $5.4 million, compared to the three months ended June 30, 2022, primarily driven by higher accrued litigation costs.
Amortization of Intangible Assets and Acquisition-Related Costs
Amortization of intangible assets consists of amortization of acquired intangible assets, including customer relationships and trademarks and trade names. Acquisition-related costs include legal expenses, due diligence costs, and other professional costs incurred for business acquisitions.
During the three months ended June 30, 2023, amortization of intangible assets and acquisition-related costs decreased $0.7 million, compared to the three months ended June 30, 2022, primarily due to certain acquired intangible assets becoming fully amortized.
Restructuring Charges, Net
The restructuring charges of $3.5 million for the three months ended June 30, 2023 was primarily related to employee severance and other termination benefits, incurred as a result of our restructuring plan initiated during fiscal year 2023. We expect to substantially complete this restructuring plan within the next nine months.
See Note 13 to our condensed consolidated financial statements for additional information.
Interest Income
Interest income for the three months ended June 30, 2023 and 2022 was as follows (in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Interest Income | $ | 9,826 | $ | 1,449 | ||||||||||||||||||||||
We invest in highly liquid instruments with an original maturity of three months or less at the date of purchase, which are classified as cash equivalents. During the three months ended June 30, 2023 interest income increased $8.4 million compared to the three months ended June 30, 2022, primarily driven by the increase in interest rates.
28
Other Income (Expense), Net
Other income (expense), net for the three months ended June 30, 2023 and 2022 was as follows (Dollars in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Investment gain (loss) related to the deferred compensation plan | $ | 1,024 | $ | (3,386) | ||||||||||||||||||||||
| Currency exchange loss, net | (3,086) | (2,960) | ||||||||||||||||||||||||
| Gain (loss) on investments, net | (11,823) | 11,357 | ||||||||||||||||||||||||
| Non-service cost net pension income and other | 913 | 613 | ||||||||||||||||||||||||
| Total | $ | (12,972) | $ | 5,624 | ||||||||||||||||||||||
Investment gain (loss) related to the deferred compensation plan represents earnings, gains, and losses on marketable securities related to a deferred compensation plan offered by one of our subsidiaries. The increase in investment income for three months ended June 30, 2023, compared to the three months ended June 30, 2022, primarily relates to the change in market performance of the underlying securities.
Currency exchange loss, net, relates to balances denominated in currencies other than the functional currency in our subsidiaries, as well as to the sale of currencies, and gains or losses recognized on currency exchange forward contracts. We do not speculate in currency positions, but we are alert to opportunities to maximize currency exchange gains and minimize currency exchange losses. The loss for the three months ended June 30, 2023 was primarily due to the weakening of the Japanese Yen against the U.S. Dollar. The loss for the three months ended June 30, 2022 was primarily due to the weakening of the Brazilian Real, Australian Dollar and Japanese Yen against the U.S. Dollar.
Gain (loss) on investments, net, includes unrealized gain (loss) from the fair value change of investment, gain (loss) on equity-method investments and impairment of investments during the periods presented, as applicable. The loss on investments, net for the three months ended June 30, 2023 was primarily due to an impairment loss, as a result of the write-off of a note receivable which has been deemed no longer recoverable. This note receivable was previously obtained in conjunction with an exchange transaction related to our investment in a privately held company. The gain for the three months ended June 30, 2022 was primarily due to the unrealized gain resulting from observable price changes on equity investments without a readily determinable fair value and gains on equity-method investments. See Note 6 to our condensed consolidated financial statements for additional information.
Provision for Income Taxes
The provision for income taxes and effective income tax rates for the three months ended June 30, 2023 and 2022 were as follows (Dollars in thousands):
| Three months ended June 30, | ||||||||||||||||||||||||||
| 2023 | 2022 | |||||||||||||||||||||||||
| Provision for income taxes | $ | 12,532 | $ | 21,716 | ||||||||||||||||||||||
| Effective income tax rate | 16.7 | % | 17.7 | % | ||||||||||||||||||||||
The change in the effective income tax rate for the three months ended June 30, 2023 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate and the tax impact from share-based compensation in the period ended June 30, 2023.
29
Liquidity and Capital Resources
Cash Balances, Available Borrowings, and Capital Resources
As of June 30, 2023, we had cash and cash equivalents of $1,251.1 million, compared with $1,149.0 million as of March 31, 2023. Our cash and cash equivalents consist of bank demand deposits and short-term time deposits, of which 68% is held in Switzerland and 15% were held in China (including Hong Kong). We do not expect to incur any material adverse tax impact except for what has already been recognized, or to be significantly inhibited by any country in which we do business from the repatriation of funds to Switzerland, our country of domicile.
As of June 30, 2023, our working capital was $1,540.5 million, compared to $1,555.1 million as of March 31, 2023. The decrease was driven by the decreases in inventories, accounts receivable, net, and other current assets, partially offset by an increase in cash balances as well as decreases in accrued and other current liabilities and accounts payable.
We had several uncommitted, unsecured bank lines of credit and letters of credit aggregating $172.0 million as of June 30, 2023. There are no financial covenants under these lines of credit with which we must comply. As of June 30, 2023, we had outstanding bank guarantees of $9.2 million under these lines of credit.
The following tables present selected financial information and statistics as of and for the three months ended June 30, 2023 and 2022 (Dollars in thousands):
As of June 30, | |||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
| Accounts receivable, net | $ | 562,602 | $ | 706,886 | |||||||||||||
| Accounts payable | $ | 386,599 | $ | 558,983 | |||||||||||||
| Inventories | $ | 572,344 | $ | 917,356 | |||||||||||||
| Three months ended June 30, | |||||||||||||||||
| 2023 | 2022 | ||||||||||||||||
Days sales in accounts receivable (“DSO”) (Days)(1) | 52 | 55 | |||||||||||||||
Days accounts payable outstanding (“DPO”) (Days)(2) | 58 | 72 | |||||||||||||||
Inventory turnover (“ITO”) (x)(3) | 4.2 | 3.1 | |||||||||||||||
(1) DSO is determined using ending accounts receivable, net as of the most recent quarter-end and sales for the most recent quarter.
(2) DPO is determined using ending accounts payable as of the most recent quarter-end and cost of goods sold for the most recent quarter.
(3) ITO is determined using ending inventories and annualized cost of goods sold (based on the most recent quarterly cost of goods sold).
DSO for the three months ended June 30, 2023 decreased by 3 days to 52 days, compared to 55 days for the three months ended June 30, 2022, primarily due to the timing of sales within the quarter.
DPO for the three months ended June 30, 2023 decreased by 14 days, compared to 72 days for the three months ended June 30, 2022, primarily due to lower inventory purchases resulting from softened demand as well as lower marketing spend.
ITO for the three months ended June 30, 2023 increased by 1.1, compared to 3.1 for the three months ended June 30, 2022, primarily due to lower inventory balance as of June 30, 2023, partially offset by softened demand.
If we are not successful in launching and phasing in our new products, or market competition increases, or we are not able to sell the new products at the prices planned, it could have a material impact on our sales, gross profit margin, operating results including operating cash flow, and inventory turnover in the future.
30
The following table summarizes our condensed consolidated statements of cash flows (Dollars in thousands):
| Three months ended June 30, | ||||||||||||||
| 2023 | 2022 | |||||||||||||
| Net cash provided by (used in) operating activities | $ | 239,795 | $ | (35,668) | ||||||||||
| Net cash used in investing activities | (17,530) | (27,469) | ||||||||||||
| Net cash used in financing activities | (117,159) | (144,763) | ||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (3,043) | (14,159) | ||||||||||||
| Net increase (decrease) in cash and cash equivalents | $ | 102,063 | $ | (222,059) | ||||||||||
For the three months ended June 30, 2023, net cash provided by operating activities was $239.8 million resulting from net income of $62.7 million, a favorable impact from adding back non-cash expenses totaling $59.6 million, and a favorable net change in operating assets and liabilities of $117.4 million. Non-cash expenses were primarily related to depreciation and amortization and share-based compensation expenses. The decrease in accounts receivable, net was primarily driven by lower sales and the timing of sales within the quarter. The decrease in inventories was primarily driven by a reduction in inventory purchases to align with lower demand. The decrease in accrued and other liabilities was primarily driven by reduction in accrued Customer Program liabilities and payment of personnel related liabilities.
For the three months ended June 30, 2023, net cash used in investing activities was $17.5 million, primarily resulting from $16.2 million of purchases of property, plant, and equipment.
For the three months ended June 30, 2023, net cash used in financing activities was $117.2 million, primarily resulting from repurchases of our registered shares of $95.1 million and tax withholdings related to net share settlements of restricted stock units of $24.2 million.
For the three months ended June 30, 2023, there was a $3.0 million loss from currency exchange rate effect on cash and cash equivalents, primarily due to exchange rate fluctuations of Chinese Renminbi and Euro versus the U.S. Dollar and timing of our cash transactions over the period. The loss from currency translation exchange rate effect during the three months ended June 30, 2022 was primarily due to the weakening of the Euro, Chinese Renminbi, Swiss Franc, Australian Dollar versus the U.S. Dollar by 6%, 5%, 4%, and 10%, respectively.
Cash Outlook
Our principal sources of liquidity are our cash and cash equivalents, cash flow generated from operations and, to a much lesser extent, capital markets and borrowings. Our future working capital requirements and capital expenditures may increase to support investments in product innovations and growth opportunities or to acquire or invest in complementary businesses, products, services, and technologies. Market volatility driven by the current macroeconomic and geopolitical environment may increase our costs of capital and otherwise adversely affect our business, results of operations, financial condition and liquidity.
In May 2023, our Board of Directors recommended that we pay cash dividends for fiscal year 2023 of CHF 1.06 per share (approximately $1.16 per share based on the exchange rate on March 31, 2023). Based on our shares outstanding, net of treasury shares, as of March 31, 2023 (159,343,273 shares), this would result in an aggregate gross dividend of approximately CHF 168.9 million (approximately $184.2 million based on the exchange rate on March 31, 2023). In fiscal year 2023, we paid a cash dividend of CHF 156.1 million (U.S. Dollar amount of $158.7 million based on the exchange rate on the date of payment) out of fiscal year 2022 retained earnings. In fiscal year 2022, we paid a cash dividend of CHF 147.0 million (U.S. Dollar amount of $159.4 million) out of fiscal year 2021 retained earnings.
In May 2020, our Board of Directors approved a share repurchase program, which authorized us to invest up to $250.0 million to purchase our own shares. In April 2021, our Board of Directors approved an increase of $750.0 million to the 2020 share repurchase program, to an aggregate amount of $1.0 billion. The Swiss Takeover Board approved this increase and it became effective on May 21, 2021. In July 2022, our Board of Directors approved an increase of $500 million to the 2020 share repurchase program to an aggregate amount of up to $1.5 billion. The Swiss Takeover Board approved this increase and it became effective on August 19, 2022. As of June 30, 2023, $411.0 million was available for repurchase under the 2020 repurchase program. The 2020 share repurchase program expired on July 27, 2023.
31
In June 2023, our Board of Directors approved a new, three-year share repurchase program, which allows us to use up to $1.0 billion to repurchase our shares. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program will become effective on July 28, 2023. Swiss law limits a company’s ability to hold or repurchase its own shares. Generally, the aggregate par value of all shares held by the company and its subsidiaries may not exceed 10% of the registered share capital of the company, which for Logitech corresponds to 17.3 million shares.
Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our 2023 share repurchase program provides us with the opportunity to make opportunistic repurchases during periods of favorable market conditions and is expected to remain in effect for a period of three years through July 27, 2026. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Opportunistic purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
If we do not generate sufficient operating cash flows to support our operations and future planned cash requirements, our operations could be harmed and our access to credit facilities could be restricted or eliminated. However, we believe that the trend of our historical cash flow generation, our projections of future operations and our available cash balances will provide sufficient liquidity to fund our operations for at least the next 12 months.
Operating Leases Obligations
We lease facilities under operating leases, certain of which require us to pay property taxes, insurance and maintenance costs. Operating leases for facilities are generally renewable at our option and usually include escalation clauses linked to inflation. There have been no material changes to our contractual obligations as previously disclosed in our Annual Report on Form 10-K for the year ended March 31, 2023. The remaining terms of our non-cancelable operating leases expire in various years through 2033.
Purchase Commitments
As of June 30, 2023, we had non-cancelable purchase commitments of $357.3 million for inventory purchases made in the normal course of business from original design manufacturers, contract manufacturers and other suppliers, the majority of which are expected to be fulfilled within the next 12 months. We recorded a liability for firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand or net realizable value consistent with our valuation of excess and obsolete inventory. As of June 30, 2023, the liability for these purchase commitments was $39.5 million and is recorded in accrued and other current liabilities in the condensed consolidated balance sheet.
We have firm purchase commitments of $11.8 million for capital expenditures primarily related to commitments for tooling and equipment for new and existing products and commitments to vendors to fit out and furnish office facilities. We expect to continue making capital expenditures in the future to support product development activities and ongoing and expanded operations. Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us to reschedule or adjust our requirements based on business needs prior to delivery of goods or performance of services.
Other Contractual Obligations and Commitments
For further detail about our contractual obligations and commitments, refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2023.
Indemnifications
We indemnify certain suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances includes indemnification for damages and expenses, including reasonable attorneys’ fees. As of June 30, 2023, no material amounts have been accrued for indemnification provisions. We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under our indemnification arrangements.
We also indemnify our current and former directors and certain current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. We are unable to
32
reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable.
Legal Proceedings
From time to time we are involved in claims and legal proceedings that arise in the ordinary course of our business. For more information about Legal Proceedings, see Part II Item 1 Legal Proceedings of this quarterly report on Form 10-Q for the period ended June 30, 2023.
33
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. As a company with global operations, we face exposure to adverse movements in currency exchange rates and interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results.
Currency Exchange Rates
We report our results in U.S. Dollars. Changes in currency exchange rates compared to the U.S. Dollar can have a material impact on our results when the financial statements of our non-U.S. subsidiaries are translated into U.S. Dollars. The functional currency of our operations is primarily the U.S. Dollar. Certain operations use the Swiss Franc or the local currency of the country as their functional currencies. Accordingly, unrealized currency gains or losses resulting from the translation of net assets or liabilities denominated in other currencies to the U.S. Dollar are accumulated in the cumulative translation adjustment component of accumulated other comprehensive income (loss) ("AOCI") in shareholders' equity.
We are exposed to currency exchange rate risk as we transact business in multiple currencies, including exposure related to anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. Dollar. We transact business in approximately 30 currencies worldwide, of which the most significant to operations are the Euro, Chinese Renminbi, Japanese Yen, Canadian Dollar, Australian Dollar, Pound Sterling and New Taiwan Dollar. For the three months ended June 30, 2023, approximately 48% of our sales were in non-U.S. denominated currencies, with 20% of our sales denominated in Euro. The mix of our costs of goods sold and operating expenses by currency are significantly different from the mix of our sales, with a larger portion denominated in U.S. Dollar and less denominated in Euro and other currencies. A strengthening U.S. Dollar has a more unfavorable impact on our sales compared to the favorable impact on our cost of goods sold and operating expenses, resulting in an adverse impact on our operating results.
We enter into currency forward and swap contracts to reduce the short-term effects of currency fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of our subsidiaries. These contracts generally mature within approximately one month. The gains or losses on these contracts are recognized in earnings based on the changes in fair value.
If an adverse 10% foreign currency exchange rate change had been applied to total monetary assets and liabilities denominated in currencies other than the functional currencies at the balance sheet dates, it would have resulted in an adverse effect on income before income taxes of approximately $10.4 million and $17.0 million as of June 30, 2023 and March 31, 2023, respectively. The adverse effect as of June 30, 2023 and March 31, 2023 is after consideration of the offsetting effect of approximately $9.1 million and $8.1 million, respectively, from foreign exchange contracts in place as of such dates.
We enter into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within approximately four months. Gains and losses in the fair value of the effective portion of the hedges are deferred as a component of AOCI until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold.
If the U.S. dollar had weakened by 10%, the amount recorded in AOCI related to our foreign exchange contracts before tax effect as of June 30, 2023 and March 31, 2023 would have been approximately $8.4 million and $7.3 million lower, respectively. The change in the fair value recorded in AOCI would be expected to offset a corresponding foreign currency change in cost of goods sold when the hedged inventory purchases are sold.
34
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Logitech's management, with the participation of the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, the CEO and the CFO have concluded that, as of such date, our disclosure controls and procedures are effective at the reasonable assurance level.
Definition of Disclosure Controls
Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in the Company’s reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. The Company’s Disclosure Controls include components of its internal control over financial reporting, which consists of control processes designed to provide reasonable assurance regarding the reliability of its financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States. To the extent that components of the Company’s internal control over financial reporting are included within its Disclosure Controls, they are included in the scope of the Company’s annual controls evaluation.
Limitations on the Effectiveness of Controls
The Company’s management, including the CEO and the CFO, does not expect that the Company’s Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting during the fiscal quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II — OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time we are involved in claims and legal proceedings that arise in the ordinary course of our business. We are currently subject to several such claims and a small number of legal proceedings. We believe that these matters lack merit and we intend to vigorously defend against them. Based on currently available information, we do not believe that resolution of pending matters will have a material adverse effect on our financial condition, cash flows or results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that our defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on our business, financial condition, cash flows and results of operations in a particular period. Any claims or
35
proceedings against us, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain a necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.
ITEM 1A. RISK FACTORS
The Company’s business, reputation, results of operations, financial condition and stock price can be affected by a number of factors, whether currently known or unknown, including those described in Part I, Item 1A of the 2023 Form 10-K under the heading “Risk Factors.” When any one or more of these risks materialize from time to time, the Company’s business, reputation, results of operations, financial condition and stock price can be materially and adversely affected. There have been no material changes to the Company’s risk factors since the 2023 Form 10-K, except as indicated below.
As a result of changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation, of Switzerland or any other country in which we operate, the loss of a major tax dispute or a successful challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, or other factors, our effective income tax rates may increase, which could adversely affect our net income and cash flows.
As a result of the Federal Act on the Tax Reform and AHV Financing (“TRAF”), the canton of Vaud in Switzerland, where we are incorporated, enacted tax reforms on March 10, 2020 that took effect as of January 1, 2020. As a result of the reform, Logitech will incur cash income taxes that will increase over time as the deferred income tax benefit established in connection with the reform diminishes. The canton’s tax authority is primarily delegated by the Swiss federal government and its implementation of TRAF in general or with respect to Logitech is subject to Swiss federal review and challenge. Implementation of any material change in tax laws or policies or the adoption of new interpretations of existing tax laws and rulings, or termination or replacement of our tax arrangements with the canton of Vaud, by Switzerland or the canton of Vaud could result in a higher effective income tax rate, or a decreased tax asset, a charge to earnings and an accelerated pace of increase in our effective income tax rate, or a combination of such impacts, on our worldwide earnings and any such change will adversely affect our net income. Changes in our effective income tax rate may also make it more difficult to compare our net income and earnings per share between periods.
Further changes in the tax laws of Switzerland and any other country in which we operate, are expected to arise as a result of the base erosion and profit shifting project that was undertaken by the Organization for Economic Co-operation and Development, who recommends changes to numerous long-standing tax principles, including establishing a minimum tax on global income. If the changes are implemented as recommended, such changes could materially impact our provision for income taxes and cash taxes.
We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions. Our effective income tax rate may be affected by changes in or interpretations of tax laws, treaties, rulings, regulations or agreements in any given jurisdiction, or changes in international tax reform by the Organization for Economic Co-operation and Development and similar organizations, utilization of net operating loss and tax credit carryforwards, changes in geographical allocation of income and expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets. In the past, we have experienced fluctuations in our effective income tax rate. Our effective income tax rate in a given fiscal year reflects a variety of factors that may not be present in the succeeding fiscal year or years. There is no assurance that our effective income tax rate will not change in future periods.
We file Swiss and foreign tax returns. We are frequently subject to tax audits, examinations and assessments in various jurisdictions. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective income tax rate could increase. For example, policy changes in Switzerland, the United States or China predicated on our presence in those countries could adversely affect where we recognize profit and our effective income tax rate. A material assessment by a governing tax authority could adversely affect our profitability. If our effective income tax rate increases in future periods, our net income and cash flows could be adversely affected.
36
We cannot ensure that our share repurchase programs will be fully utilized or that it will enhance long-term shareholder value. Share repurchases may also increase the volatility of the trading price of our shares. We similarly cannot ensure that we will continue to increase our dividend payments or to pay dividends at all. Share repurchases and dividends diminish our cash reserves.
In June 2023, our Board of Directors authorized a new $1.0 billion three-year share repurchase program. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program will become effective on July 28, 2023. As of June 30, 2023, $411.0 million was available for repurchase under the 2020 repurchase program. We have also paid cash dividends and increased the size of our dividend, each year since fiscal year 2013. Our share repurchase programs and dividend policy may be affected by many factors, including general business and economic conditions, our financial condition and operating results, our views on potential future capital requirements, restrictions imposed in any future debt agreements, the emergence of alternative investment or acquisition opportunities, changes in our business strategy, legal requirements, changes in tax laws, and other factors. Our share repurchase programs do not obligate us to repurchase all or any of the dollar value of shares authorized for repurchase. The programs could also increase the volatility of the trading price of our shares. Similarly, we are not obligated to pay dividends on our registered shares. Under Swiss law, we may only pay dividends upon the approval of a majority of our shareholders, which is under the discretion of and generally follows a recommendation by our Board of Directors that such a dividend is in the best interests of our shareholders. There can be no assurance that our Board of Directors will continue to recommend, or that our shareholders will approve, dividend increases or any dividend at all. If we do not pay a regular dividend, we may lose the interest of investors that focus their investments on dividend-paying companies, which could create downward pressure on our share price. Any announcement of termination or suspension of our share repurchase programs or dividend may result in a decrease in our share price. The share repurchase programs and payment of cash dividends could also diminish our cash reserves that may be needed for investments in our business, acquisitions or other purposes. Without dividends, the trading price of our shares must appreciate for investors to realize a gain on their investment.
We use artificial intelligence in our business, and challenges with properly managing its use could result in reputational harm, competitive harm, and legal liability, and adversely affect our results of operations.
We incorporate artificial intelligence solutions into our products, services and platforms. We may incorporate generative artificial intelligence ("AI") and this application may become important in our operations over time. Our competitors or other third parties may incorporate AI into their products more quickly or more successfully than us, which could impair our ability to compete effectively and adversely affect our results of operations. Additionally, if the content, analyses, or recommendations that AI applications assist in producing are or are alleged to be deficient, inaccurate, or biased, our business, financial condition, and results of operations may be adversely affected.
AI also presents emerging ethical issues and if our use of AI becomes controversial, we may experience brand or reputational harm, competitive harm, or legal liability. The rapid evolution of AI, including potential government regulation of AI, will require significant resources to develop, test and maintain our products and services to help us implement AI ethically in order to minimize unintended, harmful impact.
37
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Share Repurchases
In the first quarter of fiscal year 2024, the following approved share repurchase program was in place (in thousands):
| Share Repurchase Program | Shares Approved | Approved Amounts (1) | ||||||||||||
| May 2020 | 17,311 | $ | 1,500,000 | |||||||||||
(1) As of June 30, 2023, $411.0 million was available for repurchase under the 2020 share repurchase program. The 2020 share repurchase program expired on July 27, 2023.
In June 2023, our Board of Directors approved a new, three-year share repurchase program, which allows us to use up to $1.0 billion to repurchase our shares. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program will become effective on July 28, 2023. Swiss law limits a company’s ability to hold or repurchase its own shares. Generally, the aggregate par value of all shares held by the company and its subsidiaries may not exceed 10% of the registered share capital of the company, which for Logitech corresponds to 17.3 million shares. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.
The following table presents certain information related to purchases made by Logitech of its equity securities under the 2020 share repurchase program (in thousands, except per share amounts):
| Total Number of Shares Repurchased | Weighted Average Price Paid Per Share | Remaining Amount that May Yet Be Repurchased under the Program | ||||||||||||||||||||||||
During the three months ended June 30, 2023 | CHF (LOGN) | USD (LOGI) | ||||||||||||||||||||||||
| Month 1 | ||||||||||||||||||||||||||
| April 1, 2023 to April 28, 2023 | ||||||||||||||||||||||||||
| SIX | 578 | 51.67 | N/A | $ | 472,684 | |||||||||||||||||||||
| Nasdaq | 32 | N/A | $ | 56.48 | 470,859 | |||||||||||||||||||||
| Month 2 | ||||||||||||||||||||||||||
| April 29, 2023 to May 26, 2023 | ||||||||||||||||||||||||||
| SIX | 314 | 55.97 | N/A | 451,197 | ||||||||||||||||||||||
| Nasdaq | 45 | N/A | $ | 62.05 | 448,429 | |||||||||||||||||||||
| Month 3 | ||||||||||||||||||||||||||
| May 27, 2023 to June 30, 2023 | ||||||||||||||||||||||||||
| SIX | 533 | 53.15 | N/A | 416,969 | ||||||||||||||||||||||
| Nasdaq | 105 | N/A | $ | 56.74 | 410,971 | |||||||||||||||||||||
| 1,607 | 53.06 | $ | 59.03 | $ | 410,971 | |||||||||||||||||||||
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
None.
38
ITEM 5. OTHER INFORMATION
Securities Trading Plans of Directors and Executive Officers
During the first quarter of fiscal year 2024, no director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement
.
39
ITEM 6. EXHIBITS
Exhibit Index
| Exhibit No. | Description | ||||||||||
| 10.1 | ** | ||||||||||
| 31.1 | |||||||||||
| 31.2 | |||||||||||
| 32.1 | * | ||||||||||
| 101.INS | XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | ||||||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document | ||||||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||
| 101.DEF | XBRL Taxonomy Definition Linkbase Document | ||||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | ||||||||||
* This exhibit is furnished herewith, but not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we explicitly incorporate it by reference.
** Indicates management compensatory plan, contract or arrangement.
40
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
| LOGITECH INTERNATIONAL S.A. | |||||||||||
| July 27, 2023 | /s/ Guy Gecht | ||||||||||
| Date | Guy Gecht | ||||||||||
| Interim Chief Executive Officer | |||||||||||
| July 27, 2023 | /s/ Charles Boynton | ||||||||||
| Date | Charles Boynton | ||||||||||
| Chief Financial Officer | |||||||||||
41
Exhibit 31.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 13a-14(a)
I, Guy Gecht, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Logitech International S.A.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| July 27, 2023 | ||||||||
/s/ Guy Gecht | ||||||||
Guy Gecht Interim Chief Executive Officer | ||||||||
Exhibit 31.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECURITIES AND EXCHANGE COMMISSION RULE 13a-14(a)
I, Charles Boynton, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Logitech International S.A.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| July 27, 2023 | ||||||||
/s/ Charles Boynton | ||||||||
Charles Boynton Chief Financial Officer | ||||||||
Exhibit 32.1
CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(B) OR RULE 15D-14(B) AND SECTION 1350 OF CHAPTER 63 OF TITLE 18 OF
THE UNITED STATES CODE
The certification set forth below is being submitted in connection with this quarterly report on Form 10-Q (the “Report”) of Logitech International S.A. (the "Company”) for the purpose of complying with Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Guy Gecht, Interim Chief Executive Officer of the Company, and Charles Boynton, Chief Financial Officer of the Company, each certify that, to the best of his knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| July 27, 2023 | ||||||||
| /s/ Guy Gecht | ||||||||
Guy Gecht | ||||||||
| Interim Chief Executive Officer | ||||||||
| /s/ Charles Boynton | ||||||||
Charles Boynton | ||||||||
| Chief Financial Officer | ||||||||