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Logitech Delivers Better-Than-Expected Results in Q2 FY 2015


    Logitech International (SIX:LOGN) (Nasdaq:LOGI) today announced preliminary unaudited and unreviewed financial results for the second quarter of Fiscal Year 2015.

    • Q2 sales were $530 million, essentially flat compared to the prior year, with retail sales up 2 percent.
    • Q2 GAAP operating income was $42 million, with GAAP earnings per share (EPS) of $0.22, compared to $0.09 in the same quarter a year ago.
    • Q2 non-GAAP operating income was $59 million, with non-GAAP EPS of $0.31, compared to $0.20 a year ago.
    • Q2 cash flow from operations was approximately $33 million, doubling year-over-year and the highest Q2 in the last five years.

    “Our performance in Q2 shows continued progress toward our full-year objectives, with growth in retail sales, better-than-expected profitability and improved cash generation,” said Bracken P. Darrell, Logitech president and chief executive officer. “Sales in our Growth category – PC Gaming, Mobile Speakers and Tablet and Other Accessories – grew by double digits for the sixth quarter in a row, increasing 27 percent year-over-year in Q2. It was our sixth consecutive quarter in which Mobile Speakers sales more than doubled. We’ve entered the second half of the year with a robust product portfolio and a pipeline of compelling new products set to launch in the coming quarters. This is our strategy of delivering fewer and bigger products in action.”

    Outlook

    Logitech confirmed its outlook for Fiscal Year 2015 of approximately $2.16 billion in sales, assuming relatively stable currency exchange rates, and approximately $170 million in non-GAAP operating income.

    Prepared Remarks Available Online

    Logitech has made its prepared written remarks for the financial results teleconference available online on the Logitech corporate Web site at http://ir.logitech.com.

    Financial Results Teleconference and Webcast

    Logitech will hold a financial results teleconference to discuss the preliminary results for Q2 FY 2015 on Oct. 24, 2014 at 8:30 a.m. Eastern Daylight Time and 14:30 Central European Summer Time. A live webcast of the call will be available on the Logitech corporate website at http://ir.logitech.com.

    Audit Committee Investigation Closed

    As previously disclosed, Logitech’s Audit Committee, with the assistance of independent advisors, was conducting an independent investigation of certain accounting matters related to the Company’s previously issued financial statements. The investigation is now closed.

    With the investigation closed, Logitech is performing the necessary work to complete and file its Annual Report for FY 2014, Annual Report on Form 10-K for FY 2014 and Quarterly Reports on Form 10-Q for Q1 and Q2 FY 2015. The Company intends to file these reports as soon as possible to regain compliance with Nasdaq and SIX Swiss Exchange listing requirements.

    Last month, Logitech announced the restatement of its financial statements for Fiscal Years 2011 and 2012 and for the first quarter of Fiscal Year 2012, related to inventory valuation reserves for the Company’s discontinued Revue product. In connection with the restatement, there will be other immaterial corrections to the financial statements for Fiscal Years 2010 and 2013, as well as the first and second quarters of Fiscal Year 2014. None of these other corrections are material to the respective years or to the interim period.

    Preliminary financial information for the second quarter of Fiscal Year 2015 was compiled by the Company and has not yet been reviewed by the Company’s independent registered public accounting firm. Accordingly, the preliminary results for the first and second quarters of Fiscal Year 2015 and the results for the corresponding period of Fiscal Year 2014 contained in this press release may be subject to potentially material adjustment.

    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 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 Fiscal Year 2015 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 amount has been provided.

    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: the Company’s product portfolio, new products, timing of new product launches, strategy and Fiscal Year 2015 revenue and operating income; currency exchange rates; the timing of filing periodic reports with the Securities and Exchange Commission and the SIX Swiss Exchange to regain compliance with the Company’s listing requirements; and the impact and materiality of the restatement on and other corrections to the Company’s financial statements. 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: the results of the Audit Committee’s investigation and the completion of the additional work related to the Company’s Fiscal Year 2014 Annual Report, Fiscal Year 2014 Annual Report on Form 10-K, and Fiscal Year 2015 First and Second Quarter Quarterly Reports on Form 10-Q; any adjustments resulting from the review of the preliminary financial results for the first and second quarter of Fiscal Year 2015 by the Company’s independent auditors or from the review of subsequent events, including reserves and estimates, through the dates of filing the Fiscal Year 2014 Annual Report on Form 10-K and the Fiscal Year 2015 First and Second Quarter Quarterly Reports on Form 10-Q; if there is a delay in completing the Fiscal Year 2014 audit of financial statements and internal controls or the First and Second Quarter of Fiscal Year 2015 accounting reviews; 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 in mature markets 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, 2013 and our Amended Annual Report on Form 10-K/A for the fiscal year ended March 31, 2013, 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.

                      LOGITECH INTERNATIONAL S.A.                   The following financial statements and supplemental information maybe subject to potentially material adjustment. Please see notes below the tables.                   (In thousands, except per share amounts) -Unaudited                       Three Months Ended
    September 30,   Six Months Ended
    September 30, GAAP CONSOLIDATED STATEMENTS OF OPERATIONS   2014   2013   2014   2013                                     Net sales   $ 530,311     $ 531,972     $ 1,012,514     $ 1,009,896   Cost of goods sold     325,533       348,559       625,532       658,128   Gross profit     204,778       183,413       386,982       351,768   % of net sales     38.6 %     34.5 %     38.2 %     34.8 %                   Operating expenses:                 Marketing and selling     95,862       93,710       186,908       194,345   Research and development     32,325       37,633       63,641       73,824   General and administrative     34,470       29,395       71,149       58,543   Restructuring charges, net     -       5,465       -       7,799   Total operating expenses     162,657       166,203       321,698       334,511                     Operating income     42,121       17,210       65,284       17,257                     Interest income, net     355       183       613       160   Other income (expense), net     (885 )     62       (1,083 )     279                     Income before income taxes     41,591       17,455       64,814       17,696   Provision for income taxes     5,501       3,057       8,596       2,255                     Net income   $ 36,090     $ 14,398     $ 56,218     $ 15,441                     Net income per share:                 Basic   $ 0.22     $ 0.09     $ 0.34     $ 0.10   Diluted   $ 0.22     $ 0.09     $ 0.34     $ 0.10   Shares used to compute net income per share :                 Basic     163,230       159,969       163,121       159,637   Diluted     166,065       161,183       165,949       160,875     LOGITECH INTERNATIONAL S.A. The following financial statements and supplemental information maybe subject to potentially material adjustment. Please see notes below the tables.                   (In thousands, except per share amounts) - Unaudited                   GAAP TO NON GAAP RECONCILIATION (A)   Three Months Ended
    September 30,   Six Months Ended
    September 30, SUPPLEMENTAL FINANCIAL INFORMATION  

    2014 (1) (2)

     

    2013 (1)

     

    2014 (1) (2)

     

    2013 (1)

                                        Gross profit - GAAP   $ 204,778     $ 183,413     $ 386,982     $ 351,768   Share-based compensation expense     627       594       1,165       1,171   Amortization of other intangible assets     543       2,593       1,093       5,171   Restructuring-related charges     -       5,194       -       5,194   Gross profit - Non-GAAP   $ 205,948     $ 191,794     $ 389,240     $ 363,304                     Gross margin - GAAP     38.6 %     34.5 %     38.2 %     34.8 % Gross margin - Non-GAAP     38.8 %     36.1 %     38.4 %     36.0 %                   Operating expenses - GAAP   $ 162,657     $ 166,203     $ 321,698     $ 334,511  

    Less: Share-based compensation expense

        5,434       3,515       11,834       7,328   Amortization of other intangible assets     2,033       2,661       4,265       5,347   Restructuring charges, net     -       5,465       -       7,799   One time special charge     8,020       -       17,000       -   Operating expenses - Non-GAAP   $ 147,170     $ 154,562     $ 288,599     $ 314,037                     % of net sales - GAAP     30.7 %     31.2 %     31.8 %     33.1 % % of net sales - Non - GAAP     27.8 %     29.1 %     28.5 %     31.1 %                   Operating income - GAAP   $ 42,121     $ 17,210     $ 65,284     $ 17,257   Share-based compensation expense     6,061       4,109       12,999       8,499   Amortization of other intangible assets     2,576       5,254       5,358       10,518   Restructuring charges, net     -       5,465       -       7,799   Restructuring related charges     -       5,194       -       5,194   One time special charge     8,020       -       17,000       -   Operating income - Non - GAAP   $ 58,778     $ 37,232     $ 100,641     $ 49,267                     % of net sales - GAAP     7.9 %     3.2 %     6.4 %     1.7 % % of net sales - Non - GAAP     11.1 %     7.0 %     9.9 %     4.9 %                   Net income - GAAP   $ 36,090     $ 14,398     $ 56,218     $ 15,441   Share-based compensation expense     6,061       4,109       12,999       8,499   Amortization of other intangible assets     2,576       5,254       5,358       10,518   Restructuring related charges     -       5,194       -       5,194   Restructuring charges, net     -       5,465       -       7,799   One time special charge     8,020       -       17,000       -   Investment impairment, net     105       (261 )     105       109   Benefit from (provision for) income taxes     (1,803 )     (2,638 )     (3,964 )     (5,368 ) Net income - Non - GAAP  

    $

    51,049    

    $

    31,521    

    $

    87,716    

    $

    42,192                     Net income per share:                 Diluted - GAAP  

    $

    0.22     $ 0.09     $ 0.34     $ 0.10   Diluted - Non - GAAP   $ 0.31     $ 0.20     $ 0.53     $ 0.26                     Shares used to compute net income per share:                 Diluted - GAAP and Non GAAP     166,065       161,183       165,949       160,875                     Net sales by channel:                 Retail   $ 473,463     $ 464,853     $ 897,276     $ 878,089   OEM     28,394       37,526       61,027       72,039   Video conferencing     28,454       29,593       54,211       59,768   Total net sales   $ 530,311     $ 531,972     $ 1,012,514     $ 1,009,896                     Net retail sales by product family(*):                 PC Gaming   $ 47,506     $ 43,260     $ 94,382     $