EX-99.1 2 exhibit991q2fy21.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
Editorial Contacts:
Ben Lu, Vice President, Investor Relations - USA +1 (510) 713-5568
Nicole Kenyon, Head of Global Corporate & Employee Communications - USA +1 (510) 988-8553
Ben Starkie, Corporate Communications - Europe +41 (0) 79-292-3499


Logitech’s Q2 Sales Grow 75%, Operating Income Up Over 300%

Company Raises Annual Outlook as Hybrid Work Culture Takes Shape

LAUSANNE, Switzerland, Oct. 20, 2020 and NEWARK, Calif., Oct. 19, 2020 - Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the second quarter of Fiscal Year 2021.
•
Q2 sales were $1.26 billion, up 75 percent in US dollars and 73 percent in constant currency, compared to Q2 of the prior year. This was the first time ever that Logitech’s quarterly sales exceeded the billion-dollar mark.
•
Q2 GAAP operating income grew 372 percent to $322 million, compared to $68 million in the same quarter a year ago. Q2 GAAP earnings per share (EPS) grew 263 percent to $1.56, compared to $0.43 in the same quarter a year ago.
•
Q2 non-GAAP operating income grew 295 percent to $354 million, compared to $89 million in the same quarter a year ago. Q2 non-GAAP EPS grew 274 percent to $1.87, compared to $0.50 in the same quarter a year ago.
•
Cash flow from operations was $280 million, compared to $107 million in the same period a year ago.
“Our growth and profitability accelerated again this quarter, and we are raising our annual outlook,” said Bracken Darrell, Logitech president and chief executive officer. “The growth trends that drive our business have accelerated as society adjusts to its new reality. The organization leaders I speak to envision people increasingly working from multiple locations, a hybrid work culture that is emerging as the norm. And at home, the rise of gaming as a spectator and participant sport continues with no end in sight. Our products are essential to helping customers work, play and create wherever they are. Logitech is well positioned for long-term growth.”
Outlook
Logitech raised its Fiscal Year 2021 annual outlook to between 35 and 40 percent sales growth in constant currency and a range of $700 million to $725 million in non-GAAP operating income. The Company’s previous outlook was between 10 and 13 percent sales growth in constant currency, and a range of $410 million to $425 million in non-GAAP operating income.






Prepared Remarks Available Online
Logitech has made its prepared written remarks for the financial results videoconference and livestream available online on the Logitech corporate website at http://ir.logitech.com.
Financial Results Videoconference and Livestream
Logitech will hold a financial results videoconference to discuss the results for Q2 FY 2021 on Tuesday, October 20, 2020 at 8:30 a.m. Eastern Daylight Time and 2:30 p.m. Central European Summer Time. A livestream of the event will be available on the Logitech corporate website at http://ir.logitech.com.
Use of Non-GAAP Financial Information and Constant Currency
To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of intangible assets, purchase accounting effect on inventory, acquisition-related costs, change in fair value of contingent consideration for business acquisition, restructuring charges (credits), loss (gain) on investments in privately held companies, non-GAAP income tax adjustment, and other items detailed under “Supplemental Financial Information” after the tables below. Logitech also presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales. Logitech believes this information, used together with the GAAP financial information, will help investors to evaluate its current period performance and trends in its business. With respect to the Company’s outlook for non-GAAP operating income, most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to the GAAP amounts has been provided for Fiscal Year 2021.
About Logitech
Logitech designs products that have an everyday place in people's lives, connecting them to the digital experiences they care about. More than 35 years ago, Logitech started connecting people through computers, and now it’s a multi-brand company designing products that bring people together through music, gaming, video, and computing. Brands of Logitech include Logitech, Logitech G, ASTRO Gaming, Streamlabs, Ultimate Ears, Jaybird and Blue Microphones. Founded in 1981, and headquartered in Lausanne, Switzerland, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI). Find Logitech at www.logitech.com, the company blog or @Logitech.
# # #






This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding: our preliminary financial results for the three months ended September 30, 2020, growth trends, the pace of growth trends, gaming trends, our products and their utility to consumers, long-term growth, and outlook for Fiscal Year 2021 operating income and sales growth. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech’s actual results and events to differ materially from those anticipated in these forward-looking statements, including, without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities or our growth opportunities are more limited than we expect; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; if we are not able to maintain and enhance our brands; if our products and marketing strategies fail to separate our products from competitors’ products; the COVID-19 pandemic and its potential impact; if we do not fully realize our goals to lower our costs and improve our operating leverage; if there is a deterioration of business and economic conditions in one or more of our sales regions or product categories, or significant fluctuations in exchange rates; changes in trade policies and agreements and the imposition of tariffs that affect our products or operations and our ability to mitigate; risks associated with acquisitions. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Logitech’s periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020, available at www.sec.gov, under the caption Risk Factors and elsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this press release.

Note that unless noted otherwise, comparisons are year over year.

Logitech and other Logitech marks are trademarks or registered trademarks of Logitech Europe S.A and/or its affiliates in the U.S. and other countries. All other trademarks are the property of their respective owners. For more information about Logitech and its products, visit the company’s website at www.logitech.com.

(LOGIIR)







LOGITECH INTERNATIONAL S.A.
 
 
 
 
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
 
 
 
 
(In thousands, except per share amounts) - unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Net sales
 
$
1,257,158

 
$
719,691

 
$
2,049,052

 
$
1,363,916

Cost of goods sold
 
684,599

 
444,344

 
1,167,237

 
846,322

Amortization of intangible assets and purchase accounting effect on inventory
 
2,836

 
3,271

 
6,359

 
6,542

Gross profit
 
569,723

 
272,076

 
875,456

 
511,052

 
 
 
 
 
 
 
 
 
Operating expenses:
 
 
 
 
 
 
 
 
Marketing and selling
 
158,797

 
134,155

 
292,035

 
257,188

Research and development
 
53,379

 
41,964

 
103,104

 
84,207

General and administrative
 
31,664

 
24,048

 
60,735

 
46,207

Amortization of intangible assets and acquisition-related costs
 
4,331

 
4,218

 
8,940

 
7,814

Change in fair value of contingent consideration for business acquisition
 
—

 
—

 
5,716

 
—

Restructuring charges (credits), net
 
(1
)
 
(364
)
 
(54
)
 
114

Total operating expenses
 
248,170

 
204,021

 
470,476

 
395,530

 
 
 
 
 
 
 
 
 
Operating income
 
321,553

 
68,055

 
404,980

 
115,522

Interest income
 
513

 
2,390

 
1,133

 
4,943

Other income (expense), net
 
1,149

 
(110
)
 
3,178

 
1,751

Income before income taxes
 
323,215

 
70,335

 
409,291

 
122,216

Provision for (benefit from) income taxes 
 
56,301

 
(2,598
)
 
70,304

 
3,938

Net income
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278

 
 
 
 
 
 
 
 
 
Net income per share:
 
 

 
 

 
 

 
 

Basic
 
$
1.58

 
$
0.44

 
$
2.02

 
$
0.71

Diluted
 
$
1.56

 
$
0.43

 
$
1.99

 
$
0.70

 
 
 
 
 
 
 
 
 
Weighted average shares used to compute net income per share:
 
 

 
 

 
 

 
 

Basic
 
168,645

 
166,662

 
168,140

 
166,484

Diluted
 
171,382

 
169,027

 
170,766

 
168,914






LOGITECH INTERNATIONAL S.A.
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
(In thousands) - unaudited
 
 
 
 
 
 
 
 
 
 
 
September 30, 2020
 
March 31, 2020
CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
917,221

 
$
715,566

Accounts receivable, net 
 
750,749

 
394,743

Inventories
 
394,708

 
229,249

Other current assets
 
94,753

 
74,920

Total current assets
 
2,157,431

 
1,414,478

Non-current assets:
 
 

 
 

Property, plant and equipment, net
 
86,386

 
76,119

Goodwill
 
400,953

 
400,917

Other intangible assets, net
 
111,702

 
126,941

Other assets 
 
339,397

 
345,019

Total assets
 
$
3,095,869

 
$
2,363,474

 
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
662,873

 
$
259,120

Accrued and other current liabilities
 
541,977

 
455,024

Total current liabilities
 
1,204,850

 
714,144

Non-current liabilities:
 
 

 
 

Income taxes payable
 
54,507

 
40,788

Other non-current liabilities
 
130,549

 
119,274

Total liabilities
 
1,389,906

 
874,206

 
 
 
 
 
Shareholders’ equity:
 
 
 
 
Registered shares, CHF 0.25 par value:
 
30,148

 
30,148

Issued shares — 173,106 at September 30 and March 31, 2020
 
 
 
 
Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2020
 
 
 
 
Additional shares that may be issued out of authorized capital — 17,311 at September 30 and 34,621 at March 31, 2020
 
 
 
 
Additional paid-in capital
 
78,617

 
75,097

Shares in treasury, at cost — 4,357 at September 30, 2020 and 6,210 at March 31, 2020
 
(166,258
)
 
(185,896
)
Retained earnings
 
1,882,308

 
1,690,579

Accumulated other comprehensive loss
 
(118,852
)
 
(120,660
)
Total shareholders’ equity
 
1,705,963

 
1,489,268

Total liabilities and shareholders’ equity
 
$
3,095,869

 
$
2,363,474







LOGITECH INTERNATIONAL S.A.
 
 
 
 
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
 
 
 
 
(In thousands) - unaudited
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 

 
 

 
 
 
 
Net income
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
 
 
 
 
Depreciation
 
10,854

 
10,584

 
22,601

 
21,386

Amortization of intangible assets
 
7,107

 
6,868

 
15,239

 
13,735

Loss on investments
 
2,693

 
274

 
2,519

 
63

Share-based compensation expense
 
24,785

 
14,252

 
44,900

 
26,470

Deferred income taxes
 
16,563

 
(5,597
)
 
20,152

 
(8,978
)
Change in fair value of contingent consideration for business acquisition
 
—

 
—

 
5,716

 
—

Other
 
(1,886
)
 
2

 
(1,877
)
 
(2
)
Changes in assets and liabilities, net of acquisitions:
 
 
 
 
 
 
 
 
Accounts receivable, net
 
(244,746
)
 
(51,691
)
 
(346,838
)
 
(85,955
)
Inventories
 
(120,735
)
 
(45,092
)
 
(161,120
)
 
(47,773
)
Other assets
 
(15,797
)
 
(8,696
)
 
(31,567
)
 
(14,083
)
Accounts payable
 
230,830

 
73,509

 
399,176

 
129,101

Accrued and other liabilities
 
103,090

 
39,157

 
90,631

 
(9,223
)
Net cash provided by operating activities
 
279,672

 
106,503

 
398,519

 
143,019

Cash flows from investing activities:
 
 

 
 

 
 
 
 
Purchases of property, plant and equipment
 
(15,466
)
 
(8,752
)
 
(27,774
)
 
(18,092
)
Investment in privately held companies
 
(3,375
)
 
—

 
(3,405
)
 
(170
)
Acquisitions, net of cash acquired
 
—

 
(366
)
 
—

 
(366
)
Purchases of trading investments
 
(5,775
)
 
(1,370
)
 
(8,199
)
 
(2,525
)
Proceeds from sales of trading investments
 
6,477

 
1,375

 
8,839

 
2,571

Net cash used in investing activities
 
(18,139
)
 
(9,113
)
 
(30,539
)
 
(18,582
)
Cash flows from financing activities:
 
 

 
 

 
 
 
 
Payment of cash dividends
 
(146,705
)
 
(124,180
)
 
(146,705
)
 
(124,180
)
Purchases of registered shares
 
(22,454
)
 
—

 
(22,454
)
 
(15,127
)
Proceeds from exercises of stock options and purchase rights
 
16,074

 
8,938

 
26,066

 
9,331

Tax withholdings related to net share settlements of restricted stock units
 
(2,623
)
 
(1,538
)
 
(25,744
)
 
(20,908
)
Net cash used in financing activities
 
(155,708
)
 
(116,780
)
 
(168,837
)
 
(150,884
)
Effect of exchange rate changes on cash and cash equivalents
 
2,001

 
(3,102
)
 
2,512

 
(3,605
)
Net increase (decrease) in cash and cash equivalents
 
107,826

 
(22,492
)
 
201,655

 
(30,052
)
Cash and cash equivalents, beginning of the period
 
809,395

 
596,956

 
715,566

 
604,516

Cash and cash equivalents, end of the period
 
$
917,221

 
$
574,464

 
$
917,221

 
$
574,464






LOGITECH INTERNATIONAL S.A.
 
 
 
 
 
 
 
 
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
 
 
 
 
 
 
(In thousands) - unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NET SALES
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
SUPPLEMENTAL FINANCIAL INFORMATION
 
2020
 
2019
 
Change
 
2020
 
2019
 
Change
 
 
 
 
 
 
 
 
 
 
 
 
 
Net sales by product category:
 
 
 
 
 
 
 
 
 
 
 
 
Pointing Devices
 
$
169,121

 
$
132,770

 
27
 %
 
$
289,590

 
$
254,753

 
14
 %
Keyboards & Combos
 
201,617

 
139,049

 
45

 
346,977

 
267,728

 
30

PC Webcams
 
102,469

 
28,748

 
256

 
163,320

 
56,876

 
187

Tablet & Other Accessories
 
83,086

 
33,847

 
145

 
129,134

 
72,186

 
79

Gaming
 
297,711

 
161,014

 
85

 
479,614

 
295,529

 
62

Video Collaboration
 
236,704

 
89,553

 
164

 
366,778

 
162,977

 
125

Mobile Speakers
 
43,581

 
57,232

 
(24
)
 
72,590

 
107,648

 
(33
)
Audio & Wearables
 
114,275

 
68,018

 
68

 
185,640

 
126,642

 
47

Smart Home
 
8,573

 
9,434

 
(9
)
 
15,383

 
19,298

 
(20
)
Other (1)
 
21

 
26

 
(19
)
 
26

 
279

 
(91
)
Total sales
 
$
1,257,158

 
$
719,691

 
75
 %
 
$
2,049,052

 
$
1,363,916

 
50
 %
(1) Other category includes products that we currently intend to phase out, or have already phased out, because they are no longer strategic to our business.






LOGITECH INTERNATIONAL S.A.
 
 
 
 
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
 
 
 
 
(In thousands, except per share amounts) - Unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
GAAP TO NON-GAAP RECONCILIATION (A)
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
SUPPLEMENTAL FINANCIAL INFORMATION
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Gross profit - GAAP
 
$
569,723

 
$
272,076

 
$
875,456

 
$
511,052

Share-based compensation expense
 
1,772

 
1,184

 
3,172

 
2,342

Amortization of intangible assets and purchase accounting effect on inventory
 
2,836

 
3,271

 
6,359

 
6,542

Gross profit - Non-GAAP
 
$
574,331

 
$
276,531

 
$
884,987

 
$
519,936

 
 
 
 
 
 
 
 
 
Gross margin - GAAP
 
45.3
%
 
37.8
%
 
42.7
%
 
37.5
%
Gross margin - Non-GAAP
 
45.7
%
 
38.4
%
 
43.2
%
 
38.1
%
 
 
 
 
 
 
 
 
 
Operating expenses - GAAP
 
$
248,170

 
$
204,021

 
$
470,476

 
$
395,530

Less: Share-based compensation expense
 
23,013

 
13,068

 
41,728

 
24,128

Less: Amortization of intangible assets and acquisition-related costs
 
4,331

 
4,218

 
8,940

 
7,814

Less: Change in fair value of contingent consideration for business acquisition 
 
—

 
—

 
5,716

 
—

Less: Restructuring charges (credits), net
 
(1
)
 
(364
)
 
(54
)
 
114

Operating expenses - Non-GAAP
 
$
220,827

 
$
187,099

 
$
414,146

 
$
363,474

 
 
 
 
 
 
 
 
 
% of net sales - GAAP
 
19.7
%
 
28.3
%
 
23.0
%
 
29.0
%
% of net sales - Non - GAAP
 
17.6
%
 
26.0
%
 
20.2
%
 
26.6
%
 
 
 
 
 
 
 
 
 
Operating income - GAAP
 
$
321,553

 
$
68,055

 
$
404,980

 
$
115,522

Share-based compensation expense
 
24,785

 
14,252

 
44,900

 
26,470

Amortization of intangible assets
 
7,107

 
6,868

 
15,239

 
13,735

Acquisition-related costs
 
60

 
621

 
60

 
621

Change in fair value of contingent consideration for business acquisition
 
—

 
—

 
5,716

 
—

Restructuring charges (credits), net
 
(1
)
 
(364
)
 
(54
)
 
114

Operating income - Non - GAAP
 
$
353,504

 
$
89,432

 
$
470,841

 
$
156,462

 
 
 
 
 
 
 
 
 
% of net sales - GAAP
 
25.6
%
 
9.5
%
 
19.8
%
 
8.5
%
% of net sales - Non - GAAP
 
28.1
%
 
12.4
%
 
23.0
%
 
11.5
%
 
 
 
 
 
 
 
 
 
Net income - GAAP
 
$
266,914

 
$
72,933

 
$
338,987

 
$
118,278

Share-based compensation expense
 
24,785

 
14,252

 
44,900

 
26,470

Amortization of intangible assets
 
7,107

 
6,868

 
15,239

 
13,735

Acquisition-related costs
 
60

 
621

 
60

 
621

Change in fair value of contingent consideration for business acquisition
 
—

 
—

 
5,716

 
—

Restructuring charges (credits), net
 
(1
)
 
(364
)
 
(54
)
 
114

Loss on investments
 
2,693

 
274

 
2,519

 
63

Non-GAAP income tax adjustment
 
18,351

 
(9,506
)
 
21,399

 
(8,599
)
Net income - Non - GAAP
 
$
319,909

 
$
85,078

 
$
428,766

 
$
150,682

 
 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
 
Diluted - GAAP
 
$
1.56

 
$
0.43

 
$
1.99

 
$
0.70

Diluted - Non - GAAP
 
$
1.87

 
$
0.50

 
$
2.51

 
$
0.89

 
 
 
 
 
 
 
 
 
Shares used to compute net income per share:
 
 
 
 
 
 
 
 
Diluted - GAAP and Non - GAAP
 
171,382

 
169,027

 
170,766

 
168,914





LOGITECH INTERNATIONAL S.A.
 
 
 
 
 
 
 
 
PRELIMINARY RESULTS *
 
 
 
 
 
 
 
 
(In thousands) - unaudited
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SHARE-BASED COMPENSATION EXPENSE
 
Three Months Ended
 
Six Months Ended
 
 
September 30,
 
September 30,
SUPPLEMENTAL FINANCIAL INFORMATION
 
2020
 
2019
 
2020
 
2019
 
 
 
 
 
 
 
 
 
Share-based Compensation Expense
 
 
 
 
 
 
 
 
Cost of goods sold
 
$
1,772

 
$
1,184

 
$
3,172

 
$
2,342

Marketing and selling
 
10,377

 
6,951

 
19,169

 
13,800

Research and development
 
3,763

 
2,248

 
6,866

 
4,402

General and administrative
 
8,873

 
3,869

 
15,693

 
5,926

Total share-based compensation expense
 
24,785

 
14,252

 
44,900

 
26,470

Income tax benefit
 
(3,958
)
 
(2,723
)
 
(12,069
)
 
(9,523
)
Total share-based compensation expense, net of income tax benefit
 
$
20,827

 
$
11,529

 
$
32,831

 
$
16,947


* Note: These preliminary results for the three and six months ended September 30, 2020 are subject to adjustments, including subsequent events that may occur through the date of filing our Quarterly Report on Form 10-Q.


(A) Non-GAAP Financial Measures

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use a number of financial measures, both GAAP and non-GAAP, in analyzing and assessing our overall business performance, for making operating decisions and for forecasting and planning future periods. We consider the use of non-GAAP financial measures helpful in assessing our current financial performance, ongoing operations and prospects for the future as well as understanding financial and business trends relating to our financial condition and results of operations.

While we use non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance and to provide incremental insight into the underlying factors and trends affecting both our performance and our cash-generating potential, we do not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides useful supplemental data that, while not a substitute for GAAP financial measures, can offer insight in the review of our financial and operational performance and enables investors to more fully understand trends in our current and future performance. In assessing our business during the quarter ended September 30, 2020 and previous periods, we excluded items in the following general categories, each of which are described below:

Share-based compensation expenses. We believe that providing non-GAAP measures excluding share-based compensation expense, in addition to the GAAP measures, allows for a more transparent comparison of our financial results from period to period. We prepare and maintain our budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measure. Further, companies use a variety of types of equity awards as well as a variety of methodologies, assumptions and estimates to determine share-based compensation expense. We believe that excluding share-based compensation expense enhances our ability and the ability of investors to understand the impact of non-cash share-based compensation on our operating results and to compare our results against the results of other companies.

Amortization of intangible assets. We incur intangible asset amortization expense, primarily in connection with our acquisitions of various businesses and technologies. The amortization of purchased intangibles varies depending on the level of acquisition activity. We exclude these various charges in budgeting, planning and forecasting future periods and we believe that providing the non-GAAP measures excluding these various non-cash charges, as well as the GAAP measures, provides additional insight when comparing our gross profit, operating expenses, and financial results from period to period.

Purchase accounting effect on inventory. Business combination accounting principles require us to measure acquired inventory at fair value. The fair value of inventory reflects the acquired company’s cost of manufacturing plus a portion of the expected profit margin. The non-GAAP adjustment excludes the expected profit margin component that is recorded under business combination accounting principles associated with our business acquisitions. We believe the adjustment is useful to investors because such charges are not reflective of our ongoing operations. 





Acquisition-related costs and change in fair value of contingent consideration for business acquisition. We incurred expenses and credits in connection with our acquisitions which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related costs include all incremental expenses incurred to effect a business combination. Fair value of contingent consideration is associated with our estimates of the value of earn-outs in connection with certain acquisitions. We believe that providing the non-GAAP measures excluding these costs and credits, as well as the GAAP measures, assists our investors because such costs are not reflective of our ongoing operating results.

Restructuring charges (credits). These expenses are associated with re-aligning our business strategies based on current economic conditions. We have undertaken several restructuring plans in recent years. In connection with our restructuring initiatives, we incurred restructuring charges related to employee terminations, facility closures and early cancellation of certain contracts. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges (credits) are not reflective of our ongoing operating results in the current period.

Loss (gain) on investments. We recognized loss (gain) related to our investments in various companies, which varies depending on the operational and financial performance of those companies in which we invested, and sales of these investments. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges are not reflective of our ongoing operations.

Non-GAAP income tax adjustment. Non-GAAP income tax adjustment primarily measures the income tax effect of non-GAAP adjustments excluded above and other events; the determination of which is based upon the nature of the underlying items, the mix of income and losses in jurisdictions and the relevant tax rates in which we operate. 

Each of the non-GAAP financial measures described above, and used in this press release, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and may be reflected in the Company’s financial results for the foreseeable future. We compensate for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, we evaluate the non-GAAP financial measures together with the most directly comparable GAAP financial information.

Additional Supplemental Financial Information - Constant Currency

In addition, Logitech presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.