Retail Sales Up 12 Percent in Constant
Currency
Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced
financial results for the second quarter of Fiscal Year 2016.
- Q2 sales were $540 million, up 2
percent compared to Q2 of the prior year. Q2 retail sales (total
sales excluding OEM and Lifesize) were $496 million and grew 12
percent in constant currency.
- Q2 GAAP operating income was $26
million. Q2 GAAP earnings per share (EPS) were $0.11, compared to
$0.22 in the same quarter a year ago.
- Q2 non-GAAP operating income was $42
million, with non-GAAP EPS of $0.22, compared to $0.31 in the same
quarter a year ago.
“I’m excited by our performance this quarter. We delivered our
best retail sales growth in almost five years, exceeding
expectations,” said Bracken P. Darrell, Logitech president and
chief executive officer. “Our growth was broad-based across
categories and regions. In constant currency, Americas grew 9
percent, EMEA grew 7 percent and Asia Pacific grew 26 percent. In
our Growth category, Gaming, Video Collaboration and Mobile
Speakers each grew more than 50 percent. Our reinvigorated
innovation engine and commitment to design are delivering
powerfully and we have strong momentum heading into the holiday
peak season.”
Outlook
Logitech confirmed its FY 2016 outlook of $150 million in
non-GAAP operating income and 7 percent growth for retail
sales in constant currency.
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.
Financial Results Teleconference and Webcast
Logitech will hold a financial results teleconference to discuss
the results for Q2 FY 2016 on Oct. 22, 2015 at 8:30 a.m. Eastern
Daylight Time and 2:30 p.m. Central European Summer Time. A live
webcast of the call will be available on the Logitech corporate
website at http://ir.logitech.com.
Use of Non-GAAP Financial Information
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 the
Company’s outlook for non-GAAP operating income, most of these
excluded amounts pertain to events that have not yet occurred and
are not currently possible to estimate with a reasonable degree of
accuracy. Therefore, no reconciliation to the GAAP amounts has been
provided for Fiscal Year 2016.
About Logitech
Logitech designs products that have an everyday place in
people's lives, connecting them to the digital experiences they
care about. Over 30 years ago Logitech started connecting
people through computers, and now it’s designing products that
bring people together through music, gaming, video and
computing. Founded in 1981, Logitech International is a
Swiss public company listed on the SIX Swiss Exchange (LOGN)
and on the Nasdaq Global Select Market (LOGI). Find Logitech
at www.logitech.com,
the company blog or @Logitech.
This press release contains forward-looking statements within
the meaning of the federal securities laws, including, without
limitation statements regarding: Logitech’s momentum, results from
its innovation engine and design commitment, 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.
A detailed discussion of these and other risks and uncertainties
that could cause actual results and events to differ materially
from such forward-looking statements is included in Logitech’s
periodic filings with the Securities and Exchange Commission,
including our Annual Report on Form 10-K for the fiscal year ended
March 31, 2015 and our Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 2015, 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.
2015 Logitech, Logicool, Logi and other Logitech marks are owned
by Logitech and may be registered. All other trademarks are the
property of their respective owners. For more information about
Logitech and its products, visit the company’s website at
www.logitech.com.
LOGITECH
INTERNATIONAL S.A.
(In thousands, except per share
amounts) - Unaudited
Three Months Ended Six Months Ended
September 30 September 30 GAAP CONSOLIDATED
STATEMENTS OF OPERATIONS 2015 2014 2015
2014 Net sales $ 539,862 $ 530,311 $ 1,010,182
$ 1,012,514
Cost of goods sold 353,851
325,533 652,442 625,984
Gross
profit 186,011 204,778
357,740 386,530 % of net sales 34.5 % 38.6 %
35.4 % 38.2 %
Operating expenses: Marketing and
selling 89,877 95,862 177,304 186,908 Research and development
34,898 32,325 68,731 63,641 General and administrative 26,851
34,470 57,355 71,149 Restructuring charges, net 8,696
— 21,691 —
Total
operating expenses 160,322 162,657
325,081 321,698
Operating income
25,689 42,121 32,659 64,832 Interest income, net 192 355 456 613
Other expense, net (780 ) (885 ) (1,901 )
(1,083 )
Income before income taxes 25,101 41,591
31,214 64,362 Provision for income taxes 7,004
5,501 5,680 8,596
Net
income $ 18,097 $ 36,090 $ 25,534 $ 55,766
Net income per share: Basic $ 0.11 $ 0.22 $ 0.16 $
0.34 Diluted $ 0.11 $ 0.22 $ 0.15 $ 0.34
Weighted average shares used to compute
net income per share:
Basic 163,515 163,230 163,957 163,121 Diluted 165,841 166,065
166,352 165,949 Cash dividends per share 0.53 — 0.53 —
LOGITECH INTERNATIONAL S.A.
(In thousands) September 30
March
31,
CONSOLIDATED BALANCE SHEETS 2015 2015
(Unaudited) Current assets: Cash and cash equivalents
$ 365,774 $ 537,038 Accounts receivable, net 274,730 179,823
Inventories 328,054 270,730 Other current assets 73,504
64,429 Total current assets 1,042,062 1,052,020
Non-current assets: Property, plant and equipment, net
108,184 91,593 Goodwill 218,207 218,213 Other intangible assets 666
1,866 Other assets 60,656 62,988
Total
assets $ 1,429,775 $ 1,426,680
Current
liabilities: Accounts payable $ 356,686 $ 299,995 Accrued and
other current liabilities 231,688 194,912
Total current liabilities 588,374 494,907
Non-current
liabilities: 172,428 173,639
Total
liabilities 760,802 668,546
Total shareholders'
equity 668,973 758,134
Total liabilities and
shareholders' equity $ 1,429,775 $ 1,426,680
LOGITECH INTERNATIONAL S.A.
(In thousands) - Unaudited
Three Months Ended Six Months Ended
September 30 September 30 CONSOLIDATED STATEMENTS
OF CASH FLOWS 2015 2014 2015 2014
Operating activities: Net income $ 18,097 $ 36,090 $
25,534 $ 55,766
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 11,721 9,741 22,237 19,692 Amortization of other
intangible assets 494 2,576 1,226 5,358 Share-based compensation
expense 6,508 6,061 13,257 12,999 Impairment of investments 77 105
180 105 Gain on disposal of property, plant and equipment — (32 ) —
(10 ) Excess tax benefits from share-based compensation (498 ) (285
) (1,163 ) (666 ) Deferred income taxes 7,684 (526 ) 952 (2,358 )
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable, net (54,195 ) (36,898 ) (95,403 ) (73,561 )
Inventories (1,278 ) (8,521 ) (55,442 ) (26,984 ) Other assets
(6,128 ) (3,577 ) (8,511 ) (5,640 ) Accounts payable 15,820 19,337
50,361 60,112 Accrued and other liabilities 12,435
8,875 31,910 15,891
Net cash provided by (used in) operating activities
10,737 32,946 (14,862 ) 60,704
Investing activities: Purchases of property,
plant and equipment (15,987 ) (13,721 ) (31,277 ) (24,964 )
Investment in privately held companies (240 ) (1,500 ) (480 )
(2,550 ) Purchase of trading investments (1,746 ) (1,776 ) (2,649 )
(2,230 ) Proceeds from sales of trading investments 2,015
2,039 2,855 2,545
Net cash used in investing activities (15,958 )
(14,958 ) (31,551 ) (27,199 )
Financing activities: Payment of cash dividends (85,915 ) —
(85,915 ) — Contingent consideration related to prior acquisition —
— — (100 ) Purchases of treasury shares (39,988 ) — (48,802 ) —
Repurchase of ESPP awards — (1,078 ) — (1,078 ) Proceeds from sales
of shares upon exercise of options and purchase rights 7,037 959
11,103 1,533 Tax withholdings related to net share settlements of
restricted stock units (2,206 ) (628 ) (3,502 ) (1,323 ) Excess tax
benefits from share-based compensation 498 285
1,163 666
Net cash used in
financing activities (120,574 ) (462 )
(125,953 ) (302 ) Effect of exchange rate changes on
cash and cash equivalents (659 ) (2,285 )
1,102 (2,393 ) Net increase (decrease) in cash and
cash equivalents (126,454 ) 15,241
(171,264 ) 30,810 Cash and cash equivalents,
beginning of the period 492,228 484,981
537,038 469,412
Cash and cash
equivalents, end of the period $ 365,774 $ 500,222
$ 365,774 $ 500,222
LOGITECH
INTERNATIONAL S.A. (In thousands, except per
share amounts) - Unaudited
NET SALES Three
Months Ended Six Months Ended September 30
September 30 SUPPLEMENTAL FINANCIAL INFORMATION
2015 2014 Change 2015 2014
Change Net sales by channel: Retail $ 496,263
$ 473,463 5 % $ 921,651 $ 897,276 3 % OEM 22,231 28,394 (22 )
44,529 61,027 (27 ) Video Conferencing 21,368 28,454
(25 ) 44,002 54,211 (19 )
Total net sales $
539,862 $ 530,311 2 $ 1,010,182 $ 1,012,514 —
Net retail
sales by product category(*): Mobile Speakers $ 80,550 $ 48,538
66 121,094 77,367 57 Gaming 67,624 47,506 42 $ 111,294 $ 94,382 18
Video Collaboration 20,059 13,808 45 41,235 29,033 42 Tablet &
Other Accessories 18,549 28,158 (34 ) 37,358
59,874 (38 )
Growth 186,782 138,010 35
310,981 260,656 19 Pointing Devices 124,668 127,693
(2 ) 241,653 240,735 — Keyboards & Combos 102,098 105,677 (3 )
207,927 211,166 (2 ) Audio-PC & Wearables 46,342 57,191 (19 )
92,041 105,739 (13 ) PC Webcams 23,360 25,282 (8 ) 45,041 45,745 (2
) Home Control 12,610 18,776 (33 ) 22,864
31,108 (27 )
Profit Maximization 309,078
334,619 (8 ) 609,526 634,493 (4 )
Retail
Strategic Sales 495,860 472,629 5 920,507
895,149 3
Non-Strategic 403 834 (52 )
1,144 2,127 (46 )
Total net retail sales $
496,263 $ 473,463 5 $ 921,651 $ 897,276 3 __________________
* Certain products within the retail
product categories as presented in prior periods have been
reclassified to conform to the current periods' presentation, with
no impact on previously reported total net retail sales.
LOGITECH INTERNATIONAL S.A. (In
thousands, except per share amounts) - Unaudited
GAAP TO NON GAAP RECONCILIATION
(A) Three Months Ended Six Months Ended
September 30 September 30 SUPPLEMENTAL FINANCIAL
INFORMATION 2015 2014 2015 2014
Gross profit - GAAP $ 186,011 $ 204,778 $ 357,740 $
386,530 Share-based compensation expense 580 627 1,185 1,165
Amortization of other intangible assets 279
543 787 1,093
Gross profit -
Non-GAAP $ 186,870 $ 205,948 $ 359,712 $
388,788 Gross margin - GAAP 34.5 % 38.6 % 35.4 % 38.2
% Gross margin - Non-GAAP 34.6 % 38.8 % 35.6 % 38.4 %
Operating expenses - GAAP $ 160,322 $ 162,657 $ 325,081 $
321,698 Less: Share-based compensation expense 5,928 5,434 12,065
11,834 Less: Amortization of other intangible assets 215 2,033 439
4,265 Less: Restructuring charges, net 8,696 — 21,691 — Less: One
time special charge 321 8,020
4,370
*
16,996
Operating expenses - Non-GAAP $ 145,162
$ 147,170 $ 286,516 $ 288,603 %
of net sales - GAAP 29.7 % 30.7 % 32.2 % 31.8 % % of net sales -
Non - GAAP 26.9 % 27.8 % 28.4 % 28.5 %
Operating income -
GAAP $ 25,689 $ 42,121 $ 32,659 $ 64,832 Share-based
compensation expense 6,508 6,061 13,250 12,999 Amortization of
other intangible assets 494 2,576 1,226 5,358 Restructuring
charges, net 8,696 — 21,691 — One time special charge 321
8,020 4,370 * 16,996
Operating income - Non - GAAP $ 41,708 $
58,778 $ 73,196 $ 100,185 % of net
sales - GAAP 4.8 % 7.9 % 3.2 % 6.4 % % of net sales - Non - GAAP
7.7 % 11.1 % 7.2 % 9.9 %
Net income - GAAP $ 18,097 $
36,090 $ 25,534 $ 55,766 Share-based compensation expense 6,508
6,061 13,250 12,999 Amortization of other intangible assets 494
2,576 1,226 5,358 Restructuring charges, net 8,696 — 21,691 — One
time special charge 321 8,020 4,370 * 16,996 Impairment of
investment 77 105 180 105 Provision for income taxes 2,082
(1,803 ) (3,238 ) (3,907 )
Net
income - Non - GAAP $ 36,275 $ 51,049 $ 63,013
$ 87,317
Net income per share: Diluted
- GAAP $ 0.11 $ 0.22 $ 0.15 $ 0.34 Diluted - Non - GAAP $ 0.22 $
0.31 $ 0.38 $ 0.53
Shares used to compute net income per
share: Diluted - GAAP and Non - GAAP 165,841 166,065 166,352
165,949
* These expenses include an increase of
$3.5 million in the accrual for a proposed settlement of the SEC
investigation and other expenses related to that investigation.
LOGITECH INTERNATIONAL S.A. (In
thousands, except per share amounts) - Unaudited
SHARED BASED COMPENSATION
EXPENSE Three Months Ended
Six Months Ended
September 30 September 30 SUPPLEMENTAL FINANCIAL
INFORMATION 2015 2014 2015 2014
Share-based Compensation Expense Cost of goods sold $
580 $ 627 $ 1,185 $ 1,165 Marketing and selling 2,062 1,653 4,180
4,209 Research and Development 756 552 1,543 1,396 General and
administrative 3,110 3,229 6,342 6,229 Restructuring — — 7 — Income
tax provision (benefit) 304 (1,913 ) (1,033 )
(3,097 )
Total share-based compensation expense,
net of income taxes
$ 6,812 $ 4,148 $ 12,224 $ 9,902
__________________
(A) Non-GAAP Financial Measures
To supplement our condensed consolidated financial results
prepared in accordance with GAAP, we use a number of financial
measures, both GAAP and non-GAAP, in analyzing and assessing our
overall business performance, for making operating decisions and
for forecasting and planning future periods. We consider the use of
non-GAAP financial measures helpful in assessing our current
financial performance, ongoing operations and prospects for the
future as well as understanding financial and business trends
relating to our financial condition and results of operations.
While we use non-GAAP financial measures as a tool to enhance
our understanding of certain aspects of our financial performance
and to provide incremental insight into the underlying factors and
trends affecting both our performance and our cash-generating
potential, we do not consider these measures to be a substitute
for, or superior to, the information provided by GAAP financial
measures. Consistent with this approach, we believe that disclosing
non-GAAP financial measures to the readers of our financial
statements provides useful supplemental data that, while not a
substitute for GAAP financial measures, can offer insight in the
review of our financial and operational performance and enables
investors to more fully understand trends in our current and future
performance. In assessing our business during the quarter ended
September 30, 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 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. 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.
Impairment of investment. 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 and related expenses. These expenses
are forensic accounting, audit, consulting and legal fees related
to the Audit Committee’s investigation and the ongoing formal
investigation by and settlement discussion with the Securities and
Exchange Commission (SEC), together with accruals based on
settlement discussion with the SEC. We believe that providing the
non-GAAP measures excluding these charges, as well as the GAAP
measures, assists our investors because such charges are 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 September
30, 2015 compared to sales for the three months ended September 30,
2014 grew 8 percent in constant currency and grew 2 percent in U.S.
Dollars. Retail sales for the three months ended September 30, 2015
compared to retail sales for the three months ended September 30,
2014 grew 12 percent in constant currency and grew 5 percent 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)
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version on businesswire.com: http://www.businesswire.com/news/home/20151021006838/en/
Logitech InternationalJoe GreenhalghVice President, Investor
Relations – USA510-713-4430orKrista ToddVice President, External
Communications – USA510-713-5834orBen StarkieCorporate
Communications – Europe+41-(0) 79-292-3499
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