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Logitech Delivers Strong Q2 Sales and Profit Growth


    Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the second quarter of Fiscal Year 2018.

    • Q2 sales were $634 million, up 12 percent in US dollars and 11 percent in constant currency, compared to Q2 of the prior year.
    • Q2 GAAP operating income grew 12 percent to $60 million, compared to $53 million in the same quarter a year ago. Q2 GAAP earnings per share (EPS) grew 21 percent to $0.34, compared to $0.28 in the same quarter a year ago.
    • Q2 non-GAAP operating income grew 12 percent to $72 million, compared to $65 million in the same quarter a year ago. Q2 non-GAAP EPS grew 14 percent to $0.40, compared to $0.35 in the same quarter a year ago.

    “We delivered another strong quarter of growth,” said Bracken Darrell, Logitech president and chief executive officer. “Gaming and Video Collaboration categories showed particular strength and momentum. And we have a diverse and strong portfolio overall. We’re entering the second half of the year with a wide range of exciting products ahead of the holiday season.”

    Outlook

    Logitech’s outlook for Fiscal Year 2018 is 10 to 12 percent sales growth in constant currency and $260 to $270 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 website at http://ir.logitech.com.

    Financial Results Teleconference and Webcast

    Logitech will hold a financial results teleconference to discuss the results for Q2 FY 2018 on Tuesday, October 24, 2017 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 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), gain (loss) on investments in privately held companies, investigation and related expenses, 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 2018.

    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, Ultimate Ears, Jaybird, Logitech G and ASTRO Gaming. 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 and six months ended September 30, 2017 and potential adjustments to the preliminary financial results (see the Note following the financial statements and supplemental information), innovation, product portfolio and new products, outlook for Fiscal Year 2018 operating income and sales growth, and the timing of filing our periodic reports with the Securities and Exchange Commission (the “SEC”) and the SIX Swiss Exchange. 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 our products and marketing strategies fail to separate our products from competitors’ products; if we are not able to maintain and enhance our brands; if we do not successfully execute on strategic acquisitions and investments; 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. 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 June 30, 2017 and our Annual Report on Form 10-K for the fiscal year ended March 31, 2017, 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.

    2017 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.
    PRELIMINARY RESULTS *
    (In thousands, except per share amounts) - unaudited                       Three Months Ended
    September 30,   Six Months Ended
    September 30, GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A)   2017   2016   2017   2016                   Net sales   $ 634,212     $ 564,304     $ 1,164,158     $ 1,044,168   Cost of goods sold   403,469     356,268     738,243     665,893   Amortization of intangible assets and purchase accounting effect on inventory   2,011     1,163     3,515     2,776   Gross profit   228,732     206,873     422,400     375,499                     Operating expenses:                 Marketing and selling   107,386     93,792     209,764     177,664   Research and development   36,647     32,632     71,746     64,583   General and administrative   25,205     25,290     50,559     50,945   Amortization of intangible assets and acquisition-related costs   2,491     1,748     3,881     3,041   Change in fair value of contingent consideration for business acquisition   (2,930 )   —     (4,908 )   —   Total operating expenses   168,799     153,462     331,042     296,233                     Operating income   59,933     53,411     91,358     79,266   Interest income (expense), net   1,048     (90 )   2,223     61   Other income (expense), net   459     (683 )   (570 )   (1,691 ) Income before income taxes   61,440     52,638     93,011     77,636   Provision for (benefit from) income taxes   4,087     5,593     (1,349 )   8,650   Net income   $ 57,353     $ 47,045     $ 94,360     $ 68,986                     Net income per share:                 Basic   $ 0.35     $ 0.29     $ 0.58     $ 0.43   Diluted   $ 0.34     $ 0.28     $ 0.56     $ 0.42                     Weighted average shares used to compute net income per share:                 Basic   164,120     162,222     163,765     162,176   Diluted   169,078     165,549     168,710     164,926                     Cash dividend per share   $ 0.63     $ 0.57     $ 0.63     $ 0.57     LOGITECH INTERNATIONAL S.A.
    PRELIMINARY RESULTS *
    (In thousands) - unaudited           CONDENSED CONSOLIDATED BALANCE SHEETS (A)   September 30,
    2017   March 31,
    2017           Current assets:         Cash and cash equivalents   $ 398,848     $ 547,533   Short-term investments   6,789     —   Accounts receivable, net   279,581     185,179   Inventories   329,675     253,401   Other current assets   47,721     41,732   Total current assets   1,062,614     1,027,845   Non-current assets:         Property, plant and equipment, net   87,355     85,408   Goodwill   271,154     249,741   Other intangible assets, net   93,846     47,564   Other assets   138,144     88,119   Total assets   $ 1,653,113     $ 1,498,677             Current liabilities:         Accounts payable   $ 386,963     $ 274,805   Accrued and other current liabilities   229,176     232,273   Total current liabilities   616,139     507,078   Non-current liabilities:         Income taxes payable   33,241     51,797   Other non-current liabilities   80,903     83,691   Total liabilities   730,283     642,566             Shareholders’ equity:         Registered shares, CHF 0.25 par value:   30,148     30,148   Issued and authorized shares —173,106 at September 30 and March 31, 2017         Conditionally authorized shares — 50,000 at September 30 and March 31, 2017         Additional paid-in capital   29,940     26,596   Shares in treasury, at cost — 8,745 at September 30, 2017 and 10,727 at March 31, 2017   (156,589 )   (174,037 ) Retained earnings   1,118,134     1,074,110   Accumulated other comprehensive loss   (98,803 )   (100,706 ) Total shareholders’ equity   922,830     856,111   Total liabilities and shareholders’ equity   $ 1,653,113     $ 1,498,677     LOGITECH INTERNATIONAL S.A.
    PRELIMINARY RESULTS *
    (In thousands) - unaudited       Three Months Ended
    September 30,   Six Months Ended
    September 30, CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (A)   2017   2016   2017   2016                   Cash flows from operating activities:                 Net income   $ 57,353     $ 47,045     $ 94,360     $ 68,986   Adjustments to reconcile net income to net cash provided by operating activities:                 Depreciation   10,220     10,511     19,368     23,616   Amortization of intangible assets   3,645     2,159     6,238     3,867   Gain on investments in privately held companies   (695 )   (171 )   (436 )   (172 ) Loss on disposal of property, plant and equipment   15     —     12     —   Share-based compensation expense   10,978     8,450     21,683     16,967   Deferred income taxes   (2,054 )   663     (11,933 )   (385 ) Change in fair value of contingent consideration for business acquisition   (2,930 )   —     (4,908 )   —   Changes in assets and liabilities, net of acquisitions:                 Accounts receivable, net   (57,762 )   (48,340 )   (93,464 )   (97,001 ) Inventories   (36,938 )   (18,310 )   (57,327 )   (28,317 ) Other assets   (5,402 )   (3,567 )   (8,490 )   (4,738 ) Accounts payable   71,489     40,907     110,136     83,676   Accrued and other liabilities   20,464     35,522     (7,739 )   25,387   Net cash provided by operating activities   68,383     74,869     67,500     91,886   Cash flows from investing activities:                 Purchases of property, plant and equipment   (7,153 )   (6,623 )   (17,188 )   (14,758 ) Investment in privately held companies   (160 )   (160 )   (520 )   (480 ) Acquisitions, net of cash acquired   (85,000 )   (13,000 )   (85,000 )   (66,987 ) Proceeds from return of investment in privately held companies   237     —     237     —   Changes in restricted cash   —     —     —     715   Purchases of short-term investments   (6,789 )   —     (6,789 )   —   Purchases of trading investments   (390 )   (1,042 )   (999 )   (5,271 ) Proceeds from sales of trading investments   410     1,065     1,057     5,296   Net cash used in investing activities   (98,845 )   (19,760 )   (109,202 )   (81,485 ) Cash flows from financing activities:                 Payment of cash dividends   (104,248 )   (93,093 )   (104,248 )   (93,093 ) Purchases of registered shares   (10,058 )   (18,472 )   (10,682 )   (42,894 ) Proceeds from exercises of stock options and purchase rights   17,431     13,885     30,000     14,484   Tax withholdings related to net share settlements of restricted stock units   (2,023 )   (1,862 )   (23,706 )   (11,047 ) Net cash used in financing activities   (98,898 )   (99,542 )   (108,636 )   (132,550 ) Effect of exchange rate changes on cash and cash equivalents   551     (477 )   1,653     (1,845 ) Net decrease in cash and cash equivalents   (128,809 )   (44,910 )   (148,685 )   (123,994 ) Cash and cash equivalents, beginning of the period   527,657     440,111     547,533     519,195   Cash and cash equivalents, end of the period   $ 398,848