Q4 Growth Category up 45 Percent in Constant
Currency; Company Announces Acceleration of Growth
Transformation
Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced
preliminary financial results for the fourth quarter and full year
of Fiscal Year 2015. Q4 closed a strong fiscal year with
better-than-expected sales of $467 million – up 1 percent in
constant currency – and GAAP operating income of $12 million, with
non-GAAP operating income of $14 million.
For the full Fiscal Year 2015, ended March 31, 2015:
- Sales were $2.11 billion, down 1
percent compared to the previous fiscal year, and up 2 percent in
constant currency. Importantly, Retail Strategic – sales in the
Company’s Profit Maximization and Growth categories – grew by 6
percent in constant currency.
- GAAP operating income was $141 million,
with GAAP earnings per share (EPS) of $0.81, compared to $0.46 a
year ago. This was the Company’s best EPS since FY 2008.
- Non-GAAP operating income was $191
million, with non-GAAP EPS of $1.04, up from $0.75 a year ago (also
the Company’s best since FY 2008).
- Cash flow from operations was $179
million.
“We closed Fiscal Year 2015 with a better-than-expected
performance and good momentum in spite of currency headwinds,” said
Bracken Darrell, Logitech president and chief executive officer.
“Our Growth category – Gaming, Tablet and Other Accessories, Mobile
Speakers and Video Collaboration – sales grew by 28 percent in
constant currency over the full year, accelerating in the fourth
quarter to 45 percent growth, the best performance of the fiscal
year.
“Looking at Fiscal Year 2016, we’re playing offense. We will
accelerate our transformation of Logitech into a simpler, faster,
growing company. We will focus on our growing Retail Strategic
business. Consequently, we plan to exit our OEM business and
reorganize Lifesize to sharpen its focus on its cloud-based
offering. We will also streamline our overall cost structure
through product, overhead and infrastructure cost reductions,
including a targeted resource realignment. As a result, over the
coming year we expect restructuring charges of approximately $15
million to $20 million. The savings from all these actions will be
used to offset currency headwinds and invest in future growth.”
Outlook
Logitech confirmed its FY 2016 outlook of $150 million in
non-GAAP operating income, despite the stronger currency
headwinds, and 7% growth for Retail Strategic sales in constant
currency.
Preliminary Statement
These preliminary Q4 and full year FY15 results are subject to
material adjustments, including completion of our evaluation of
Lifesize goodwill, Lifesize asset impairment and other subsequent
events that may occur through the date of filing our Annual Report
on Form 10-K.
Prepared Remarks Available Online
Logitech has made its prepared written remarks for the financial
results teleconference available online on the Logitech corporate
Web site at http://ir.logitech.com, in the Calendar section.
Financial Results Teleconference and Webcast
Logitech will hold a financial results teleconference to discuss
the results for Q4 and full-year FY 2015 on Thurs., April 23, 2015
at 8:30 a.m. Eastern Standard Time and 14:30 Central European Time.
A live webcast of the call will be available on the Logitech
corporate website at http://ir.logitech.com.
Use of Non-GAAP Financial Information
To facilitate comparisons to Logitech’s historical results,
Logitech has included non-GAAP adjusted measures, which exclude
share-based compensation expense, amortization of other intangible
assets, restructuring charges (credits), other
restructuring-related charges, investment impairment (recovery),
benefit from (provision for) income taxes, one-time special charges
and other items detailed under “Supplemental Financial Information”
after the tables below. Logitech also presents percentage sales
growth in constant currency, a non-GAAP measure, to show
performance unaffected by fluctuations in currency exchange rates.
Percentage sales growth in constant currency is calculated by
translating prior period sales in each local currency at the
current period’s average exchange rate for that currency and
comparing that to current period sales. Logitech believes this
information will help investors to evaluate its current period
performance and trends in its business. With respect to our outlook
for non-GAAP operating income, most of these excluded amounts
pertain to events that have not yet occurred and are not currently
possible to estimate with a reasonable degree of accuracy.
Therefore, no reconciliation to a GAAP amount has been provided for
FY 2016.
About Logitech
Logitech is a world leader in products that connect people to
the digital experiences they care about. Spanning multiple
computing, communication and entertainment platforms, Logitech’s
combined hardware and software enable or enhance digital
navigation, music and video entertainment, gaming, social
networking, audio and video communication over the Internet, video
security and home-entertainment control. Founded in 1981, Logitech
International is a Swiss public company listed on the SIX Swiss
Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI).
This press release contains forward-looking statements within
the meaning of the federal securities laws, including, without
limitation statements regarding: Logitech’s momentum,
transformation, growth, value and cost structure, exiting our OEM
business, reorganizing Lifesize, product, overhead and
infrastructure cost reductions, restructuring, the expected cost of
and use of savings from restructuring, our ability to offset
currency exchange rate fluctuations, investment in growth, and
Fiscal Year 2016 operating income and sales growth. The
forward-looking statements in this release involve risks and
uncertainties that could cause Logitech’s actual results and events
to differ materially from those anticipated in these
forward-looking statements, including, without limitation: if our
product offerings, marketing activities and investment
prioritization decisions do not result in the sales, profitability
or profitability growth we expect, or when we expect it; the demand
of our customers and our consumers for our products and our ability
to accurately forecast it; if we fail to innovate and develop new
products in a timely and cost-effective manner for our new and
existing product categories; if we do not successfully execute on
our growth opportunities in our new product categories or our
growth opportunities are more limited than we expect; if sales of
PC peripherals are less than we expect; the effect of pricing,
product, marketing and other initiatives by our competitors, and
our reaction to them, on our sales, gross margins and
profitability; if our products and marketing strategies fail to
separate our products from competitors’ products; if we do not
fully realize our goals to lower our costs and improve our
operating leverage; if there is a deterioration of business and
economic conditions in one or more of our sales regions or
operating segments, or significant fluctuations in exchange rates;
the effect of changes to our effective income tax rates. A detailed
discussion of these and other risks and uncertainties that could
cause actual results and events to differ materially from such
forward-looking statements is included in Logitech’s periodic
filings with the Securities and Exchange Commission, including our
Quarterly Report on Form 10-Q for the fiscal quarter ended December
31, 2014 and our Annual Report on Form 10-K for the fiscal year
ended March 31, 2014, available at www.sec.gov, under the caption
Risk Factors and elsewhere. Logitech does not undertake any
obligation to update any forward-looking statements to reflect new
information or events or circumstances occurring after the date of
this press release.
Note that unless noted otherwise, comparisons are year over
year.
Logitech, the Logitech logo, and other Logitech marks are
registered in Switzerland and other countries. All other trademarks
are the property of their respective owners. For more information
about Logitech and its products, visit the company’s Web site at
www.logitech.com.
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands, except per share
amounts) - Unaudited
Three Months Ended Fiscal Years Ended March
31, March 31, GAAP CONSOLIDATED STATEMENTS OF
OPERATIONS 2015 2014 2015 2014
Net sales $ 467,229 $ 490,321 $ 2,113,947 $
2,128,713
Cost of goods sold 310,845
328,977 1,339,750 1,400,844
Gross profit
156,384
161,344
774,197
727,869
% of net sales 33.5 % 32.9 % 36.6 % 34.2 %
Operating expenses: Marketing and selling 88,378 90,930
378,593 379,747 Research and development 33,755 30,796 131,012
139,385 General and administrative 27,239 28,693 128,196 118,940
Restructuring charges (credit), net (4,742 ) 5,190
(4,888 ) 13,811
Total operating
expenses
144,630
155,609
632,913
651,883
Operating income
11,754
5,735
141,284
75,986
Interest income (expense), net 388 465 1,225 (397 ) Other income
(expense), net 1,347 632 (2,752 ) 1,993
Income before income
taxes
13,489
6,832
139,757
77,582
Provision for (benefit from) income taxes (3,228 )
(3,786 ) 4,490 3,278
Net income
$
16,717
$
10,618
$
135,267
$
74,304
Net income per share: Basic $ 0.10 $ 0.07
$ 0.83 $ 0.46 Diluted $ 0.10 $ 0.06
$ 0.81 $ 0.46 Shares used to compute net
income per share : Basic 164,319 162,255 163,536 160,619 Diluted
166,424 165,766 166,174 162,526
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands) - Unaudited March 31
March 31, CONSOLIDATED BALANCE SHEETS 2015
2014 Current assets: Cash and cash equivalents
$ 537,038 $ 469,412 Accounts receivable, net 179,823 182,029
Inventories 270,231 222,402 Other current assets 64,996
59,157 Total current assets $ 1,052,088 933,000
Non-current assets: Property, plant and equipment, net
91,593 88,391 Goodwill 340,782 345,010 Other intangible assets
1,866 10,529 Other assets 62,679 74,460
Total
assets $ 1,549,008 $ 1,451,390
Current
liabilities: Accounts payable $ 299,995 $ 242,815 Accrued and
other current liabilities 191,163 211,972 Total
current liabilities $ 491,158 454,787
Non-current
liabilities: 173,639 192,475
Total
liabilities $ 664,797 647,262
Total shareholders'
equity 884,211 804,128
Total liabilities and
shareholders' equity $ 1,549,008 $ 1,451,390
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands) - Unaudited Three Months
Ended Fiscal Years Ended March 31, March
31, CONSOLIDATED STATEMENTS OF CASH FLOWS
2015
2014
2015 2014 Operating activities: Net
income $ 16,717 $ 10,618 $ 135,267 $ 74,304 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation 11,745 16,212 41,304 48,967 Amortization of other
intangible assets 737 2,781 8,361 17,771 Share-based compensation
expense 5,779 8,134 25,825 25,546 Impairment of investments 39 56
2,298 624 Loss (gain) on disposal of property, plant and equipment
— 533 (44 ) 4,411 Excess tax benefits from share-based compensation
(298 ) (1,674 ) (2,831 ) (2,246 ) Deferred income taxes and other
5,133 (1,267 ) 1,982 (4,828 ) Changes in operating assets and
liabilities, net of acquisitions: Accounts receivable, net 123,008
130,652 (8,018 ) (219 ) Inventories (29,840 ) 35,975 (60,011 )
49,471 Other assets 2,308 1,580 (4,284 ) (1,388 ) Accounts payable
(50,897 ) (82,745 ) 60,413 (21,322 ) Accrued and other liabilities
(42,857 ) (26,133 ) (21,630 ) 14,330
Net cash provided by operating activities
41,574
94,722
178,632 205,421 Investing activities:
Purchases of property, plant and equipment (10,476 ) (11,748 )
(45,253 ) (46,658 ) Investments in privately held companies — (300
) (2,550 ) (300 ) Acquisitions, net of cash acquired (926 ) — (926
) (650 ) Proceeds from return of investment from strategic
investments — — — 261 Purchases of trading investments (1,571 )
(619 ) (5,034 ) (8,450 ) Proceeds from sales of trading investments
1,618 683 5,474
8,994
Net cash used in investing activities
(11,355
) (11,984 ) (48,289 )
(46,803 ) Financing activities: Payment
of cash dividends — — (43,767 ) (36,123 ) Purchase of treasury
shares (1,663 ) — (1,663 ) — Contingent consideration related to
prior acquisition — — (100 ) — Repurchase of ESPP awards — — (1,078
) — Proceeds from sales of shares upon exercise of options and
purchase rights 1,672 8,449 4,138 16,914 Tax withholdings related
to net share settlements of restricted stock units (1,759 ) (2,781
) (9,215 ) (5,718 ) Excess tax benefits from share-based
compensation 298 1,674 2,831
2,246
Net cash provided by (used in)
financing activities
(1,452
)
7,342
(48,854
)
(22,681
) Effect of exchange rate changes on cash and cash
equivalents (8,342 ) (533 ) (13,863 )
(349 ) Net increase in cash and cash equivalents 20,425
89,547 67,626 135,588
Cash and cash equivalents, beginning of the period
516,613 379,865 469,412
333,824
Cash and cash equivalents, end of the period
$
537,038
$
469,412
$
537,038
$
469,412
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands, except per share amounts) - Unaudited
NET SALES Three Months Ended Fiscal Years
Ended March 31, March 31, SUPPLEMENTAL
FINANCIAL INFORMATION 2015 2014 Change
2015 2014 Change Net sales by
channel: Retail $ 416,144 $ 424,193 (1.9
)
%
$ 1,887,446 $ 1,866,279 1.1
%
OEM $ 26,139 $ 35,168 (25.7
)
%
$ 117,462 $ 141,749 (17.1
)
%
Video conferencing $ 24,946 $ 30,960 (19.4
)
%
$ 109,039 $ 120,685 (9.6
)
%
Total net sales
$ 467,229 $ 490,321 (4.7
)
%
$ 2,113,947 $ 2,128,713 (0.7
)
%
From P&L 467,229 490,321 2,113,947 2,128,713
Net retail sales by product family(*): Gaming $ 47,341 $
45,281 4.5
%
$ 211,911 $ 186,926 13.4
%
Tablet & Other Accessories 26,021 22,221 17.1
%
140,994 172,484 (18.3
)
%
Mobile Speakers 38,406 19,382 98.2
%
178,038 87,414 103.7
%
Video collaboration 16,248 6,761 140.3
%
62,215 29,058 114.1
%
Growth 128,016 93,645 36.7
%
593,158 475,882 24.6
%
Pointing Devices 104,686 119,820 (12.6
)
%
487,210 506,884 (3.9
)
%
Keyboards & Combos 100,900 103,528 (2.5
)
%
426,117 415,314 2.6
%
Audio-PC & Wearables 51,015 59,435 (14.2
)
%
213,496 250,037 (14.6
)
%
PC Webcams 19,225 25,699 (25.2
)
%
96,680 113,791 (15.0
)
%
Home Control 11,836 13,421 (11.8
)
%
68,060 67,371 1.0
%
Profit Maximization 287,662 321,903 (10.6
)
%
1,291,563 1,353,397 (4.6
)
%
Retail Strategic Sales 415,678 415,548 0.0
%
1,884,721 1,829,279 3.0
%
Other Non-Strategic 466 8,645 (94.6
)
%
2,725 37,000 (92.6
)
%
Total net retail sales $ 416,144 $ 424,193 (1.9
)
%
$ 1,887,446 $ 1,866,279 1.1
%
__________________ * Certain products within the retail
product families as presented in prior years have been reclassified
to conform to the current year presentation, with no impact on
previously reported total net retail sales.
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands, except per share amounts) - Unaudited
GAAP TO NON GAAP RECONCILIATION (A) Three
Months Ended Fiscal Years Ended March 31,
March 31, SUPPLEMENTAL FINANCIAL INFORMATION
2015 2014 2015 2014 Net sales 467,229
490,321 2,113,947 2,128,713
Gross profit - GAAP $
156,384 $ 161,344 $ 774,197 $ 727,869 Share-based compensation
expense 749 675 2,473 2,518 Amortization of other intangible assets
515 549 2,141 7,910 Restructuring-related charges —
— — 5,194
Gross profit
- Non-GAAP $ 157,648 $ 162,568 $ 778,811 $
743,491 Gross margin - GAAP 33.5 % 32.9 % 36.6 % 34.2
% Gross margin - Non-GAAP 33.7 % 33.2 % 36.8 % 34.9 %
Operating expenses - GAAP $ 144,630 $ 155,609 $ 632,913 $
651,883 Less: Share-based compensation expense 5,030 7,459 23,352
23,028 Less: Amortization of other intangible assets 222 2,232
6,220 9,861 Less: Restructuring charges (credits), net (4,742 )
5,190 (4,888 ) 13,811 Less: One time special charge 963
— 20,487 —
Operating expenses - Non-GAAP $ 143,157 $ 140,728
$ 587,742 $ 605,183 % of net sales -
GAAP 31.0 % 31.7 % 29.9 % 30.6 % % of net sales - Non - GAAP 30.6 %
28.7 % 27.8 % 28.4 %
Operating income - GAAP $ 11,754
$ 5,735 $ 141,284 $ 75,986 Share-based compensation expense 5,779
8,134 25,825 25,546 Amortization of other intangible assets 737
2,781 8,361 17,771 Restructuring charges (credits), net (4,742 )
5,190 (4,888 ) 13,811 Restructuring related charges — — — 5,194 One
time special charge 963 — 20,487
—
Operating income - Non - GAAP $
14,491 $ 21,840 $ 191,069 $ 138,308
% of net sales - GAAP 2.5 % 1.2 % 6.7 % 3.6 % % of net sales
- Non - GAAP 3.1 % 4.5 % 9.0 % 6.5 %
Net income -
GAAP $ 16,717 $ 10,618 $ 135,267 $ 74,304 Share-based
compensation expense 5,779 8,134 25,825 25,546 Amortization of
other intangible assets 737 2,781 8,361 17,771 Restructuring
related charges — — — 5,194 Restructuring charges (credits), net
(4,742 ) 5,190 (4,888 ) 13,811 One time special charge 963 — 20,487
— Investment impairment, net 39 56 2,298 203 Provision for income
taxes (2,434 ) (5,443 ) (14,682 )
(15,590 )
Net income - Non - GAAP 17,059
21,336 172,668 121,239
Net income per share: Diluted - GAAP $ 0.10 $ 0.06 $
0.81 $ 0.46 Diluted - Non - GAAP $ 0.10 $ 0.13 $ 1.04 $ 0.75
Shares used to compute net income per share: Diluted - GAAP
and Non GAAP 166,424 165,766 166,174 162,526
PRELIMINARY RESULTS - The following
financial statements and supplemental information may be subject to
material adjustment. Please see note below the
tables.
(In thousands, except per share amounts) - Unaudited
SHARED BASED COMPENSATION EXPENSE Three
Months Ended Fiscal Years Ended March 31,
March 31, SUPPLEMENTAL FINANCIAL INFORMATION
2015 2014 2015 2014
Share-based Compensation Expense Cost of goods sold $ 749 $
675 $ 2,473 $ 2,518 Marketing and selling 2,099 2,318 9,094 8,298
Research and Development 762 706 3,224 4,546 General and
administrative 2,169 4,435 11,034 10,184 Income tax benefit
(838 ) (2,559 ) (5,558 ) (4,902 )
Total
share-based compensation expense after income taxes $ 4,941
$ 5,575 $ 20,267 $ 20,644
__________________
NOTE: The preliminary results for the three months and full year
ended March 31 of Fiscal Year 2015 contained in this release are
subject to material adjustments based on the completion of our
evaluation of Lifesize goodwill, Lifesize asset impairment and
other subsequent events that may occur through the date of filing
our Annual Report on Form 10-K with the U.S. Securities and
Exchange Commission.
(A) Non-GAAP Financial Measures
To supplement our condensed consolidated financial results
prepared in accordance with GAAP, we use a number of financial
measures, both GAAP and non-GAAP, in analyzing and assessing our
overall business performance, for making operating decisions and
for forecasting and planning future periods. We consider the use of
non-GAAP financial measures helpful in assessing our current
financial performance, ongoing operations and prospects for the
future as well as understanding financial and business trends
relating to our financial condition and results of operations.
While we use non-GAAP financial measures as a tool to enhance
our understanding of certain aspects of our financial performance
and to provide incremental insight into the underlying factors and
trends affecting both our performance and our cash-generating
potential, we do not consider these measures to be a substitute
for, or superior to, the information provided by GAAP financial
measures. Consistent with this approach, we believe that disclosing
non-GAAP financial measures to the readers of our financial
statements provides useful supplemental data that, while not a
substitute for GAAP financial measures, can offer insight in the
review of our financial and operational performance and enables
investors to more fully understand trends in our current and future
performance. In assessing our business during the quarter and year
ended March 31, 2015, we excluded items in the following general
categories, each of which are described below:
Share-based compensation expenses. We
believe that providing non-GAAP measures excluding share-based
compensation expense, in addition to the GAAP measures, allows for
a more transparent comparison of our financial results from period
to period. We prepare and maintain our budgets and forecasts for
future periods on a basis consistent with this non-GAAP financial
measure. Further, companies use a variety of types of equity awards
as well as a variety of methodologies, assumptions and estimates to
determine share-based compensation expense. We believe that
excluding share-based compensation expense enhances our ability and
the ability of investors to understand the impact of non-cash
share-based compensation on our operating results and to compare
our results against the results of other companies.
Amortization of other intangible
assets. We incur intangible asset amortization expense,
primarily in connection with our acquisitions of various businesses
and technologies. The amortization of purchased intangibles varies
depending on the level of acquisition activity. We exclude these
various charges in budgeting, planning and forecasting future
periods and we believe that providing the non-GAAP measures
excluding these various non-cash charges, as well as the GAAP
measures, provides additional insight when comparing our operating
expenses and financial results from period to period.
Restructuring and restructuring-related
charges. These expenses are associated with re-aligning our
business strategies based on current economic conditions. We have
undertaken several restructurings in recent years. In connection
with our restructuring initiatives, we incurred restructuring
charges related to employee terminations, facility closures and
early cancellation of certain contracts. Our restructuring
initiatives also resulted in other costs related to restructurings
not qualifying for inclusion in restructuring charges. We believe
that providing the non-GAAP measures excluding these charges, as
well as the GAAP measures, assists our investors because such
charges are not reflective of our ongoing operating results in the
current period.
Investment impairment, net. We incur
investment impairment, primarily related to our investments in
various privately-held companies. The investment impairment varies
depending on the operational and financial performance of the
privately-held companies we invested in. We believe that providing
the non-GAAP measures excluding these charges, as well as the GAAP
measures, assists our investors because such charges are not
reflective of our ongoing operations.
One-time special charges: costs
related to investigations. These expenses are forensic
accounting, audit, consulting and legal fees related to the Audit
Committee’s investigation and the ongoing formal investigation by
the Securities and Exchange Commission. We believe that providing
the non-GAAP measures excluding these charges, as well as the GAAP
measures, assists our investors because such charges are one-time
in nature and not reflective of our ongoing operations.
Other charges. We provided non-GAAP
measures excluding the effect of certain charges and income that
are not reflective of our ongoing operations.
In addition, Logitech presents percentage sales growth in
constant currency, a non-GAAP measure, to show performance
unaffected by fluctuations in currency exchange rates. Percentage
sales growth in constant currency is calculated by translating
prior period sales in each local currency at the current period’s
average exchange rate for that currency and comparing that to
current period sales. Sales for the three months ended March 31,
2015 compared to sales for the three months ended March 31, 2014
grew by 1 percent in constant currency and declined by 5 percent in
U.S. dollars. Retail Strategic sales for the full fiscal year ended
March 31, 2015 compared to the Retail Strategic sales for the full
fiscal year ended March 31, 2014 grew by 6 percent in constant
currency and 3% in U.S. dollars.
Each of the non-GAAP financial measures described above, and
used in this press release, should not be considered in isolation
from, or as a substitute for, a measure of financial performance
prepared in accordance with GAAP. Further, investors are cautioned
that there are inherent limitations associated with the use of each
of these non-GAAP financial measures as an analytical tool. In
particular, these non-GAAP financial measures are not based on a
comprehensive set of accounting rules or principles and many of the
adjustments to the GAAP financial measures reflect the exclusion of
items that are recurring and may be reflected in the Company’s
financial results for the foreseeable future. We compensate for
these limitations by providing specific information in the
reconciliation included in this press release regarding the GAAP
amounts excluded from the non-GAAP financial measures. In addition,
as noted above, we evaluate the non-GAAP financial measures
together with the most directly comparable GAAP financial
information.
(LOGIIR)
Logitech InternationalJoe GreenhalghVice President, Investor
Relations – USA510-713-4430orKrista ToddSr. Director,
Communications – USA510-713-5834orBen StarkieCorporate
Communications – Europe+41-(0) 79-292-3499
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