Logitech International (LOGI) 12 May 202020 Q4 Earnings call transcript

Good morning, welcome to Logitech's a First Video Call to discuss our Financial Results for the Fourth Quarter and Full Year 2020.

Joining us today and sheltering in place, as everyone else, are Bracken Darrell, our President and CEO; and Nate Olmstead, our CFO.

During this call we may make forward-looking statements, including with respect to future operating results under the Safe Harbor of the Securities Litigation Reform Act of 1995. We're making these statements based on our views as of today, May 12, 2020.

Our actual results could differ materially and we undertake no obligation to update or revise any of these statements.

will financial we call, today's discuss results. non-GAAP During

impact between GAAP about press measures, can that use find including well release filings. and most reconciliation a could factors with and information You and as our in the subsequent non-GAAP as recent non-GAAP annual measures financial and filings our results of SEC our our our more report

be the and Investor well materials for as on comparisons page to be the a slides webcast call and year-over-year available as and will you of periods constant materials between website These available carefully. replay our currency. is remarks at Relations of encourage website. will otherwise, ir.logitech.com. This our call this recorded prepared being are in Unless We noted these review and

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Our business. people, important the most in our thing

The and everyone healthy. health and our right are safety has to and continues be people healthy is Our people top priority always of now. our been

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secular long-term will continue. The trends growth three businesses sustainable that our in drive large

bigger global suffering are including e-sports centered working Companies crisis content and and and their interest is of lives our companies are cultures, categories, trends have moving creating adopt other even many While from are of us becoming our may big video into this stay. underlying in gaming the accelerated home, faster to drops in streaming businesses. part an settling for

plans are their continuity more need desktop or home a whether kitchen increasingly and Companies setup, that up are work of involve office, a their distributed the counter. including a setting in mouse companies, setting Independent they at more. business workforce own and employees space and up that's keyboard dedicated personal a

of it will growing from can working to number companies upgrade duplicate speak, goes and that time and are and realizing then on. they office employees as A home their so work,

business less collaboration. video travel, see will virtual We and more more

for real life virtual it's e-racing Fortnite sports now. viewership sports have record or whether replaced been had E-sports, as tournaments, by

but engagements to e-sports to record all-time sports even e-racing. just for will originally viewership, Live. continue return, rise I Twitch faster NASCAR happen, will Traditional the Microsoft virtual So turning Xbox in than set envisioned. highs it's of record perhaps while saw

Streaming becoming and are a only more broadcast form increasingly also more a creation entertainment, for and people. source content income not but of of

on your real happening time must Facebook Instagram, this You see feeds. YouTube and LinkedIn,

on future work is And back to of schools this trends offices crisis offices and global to the an are everywhere, video and gaming exactly more home More new and the remote this over. are normal. even built create when more learning. the upgrade, way we've things Home focus and this round. secular is course, has doubling greater old Much more as broadcasting, led those pop more our of

of operating currency almost in up Logitech spite XX%. negative of great up most with double-digits the constraints. in delivered headwinds, supply sales spite in year China grew the the fiscal another and income the COVID-X X%, and We all recently again, tariff spite year, of XXXX

saw policies place, immediately. the as at we acceleration event, shelter rare course, Of home a went into

biggest X% recent acceleration PC year in in peripherals the fiscal grew the all-time that work is home in our category, seen which of from One we've high. XXXX, beneficiaries to an

On double-digit PC of our in quarter growth. the peripherals was even top achieved QX, that, In sell-through stronger.

Our XX%, all quarter were highest growth past was three growth peripherals in this our product PC which in regions. with cams, web double-digit up

working that of hard video lion's a we our with starting web in quarter. that learning surprise sudden essential constraints and a led of this ups, set be supply is we an many experienced home demand that are industry, March, cam remote the part shouldn't to office to in share alleviate spike and It

up We yet. haven't caught

not at future at continue growth we the work double we for double-digit sell-out Most the peripherals will as see the rates Will time, learning this likely digits, and the emerge saw at we remote momentum same crisis. toward in from distance but PC for QX?

home when that as least to from home to time. even work of are at this working upgrade more I home offices permanently and comfortable on people That's home will work them an Companies getting of establish, already lot over. bandwagon have percentage and and a of they're from More larger more lot said, a found the part at later. of it's

up XX% from the with XX%. and trend, and an both acceleration same collaboration sales video sales Our benefited with to also in XXXX work-from-home sell-through fiscal category up to QX in

friends, to all became for work, we've social turning lot on adapt to connect became clear world doctors as for surprisingly trend coworkers, distancing. learning video patients, people. for Video video As we experience of is transitioning and essential, a to teachers, students, the toward good and a a remote work social seen to

fiscal gaming was our in to by range. XX% While gap constraints. driven X% grew sales sell-through the The in XX% grew supply XXXX,

the recommend and industry month way gaming sell-through as was gaming the with connect up Even of of the people accelerated teamed Organization many #playaparttogether. in Our April, gaming sense with escape growth a World a to Health to the friends. families further provided

grew year, X%. third and Tablet for accessories straight a up other

to As well Pro. Pro pad, Touch, we iPad brought keyboard XX-inch newest the a our saw XX-inch case for Apple launched of Slim Combo Folio initial trackpad integrated strong their that as latest our touch support with and iPad, iPadOS sales an the as

the each the really now. device addition, potential about In of delivered robust channel. iPad needs education for into particularly second I'm excited computing education, child a a keyboard as we year sales consecutive

closed. line and slightly in term. brick were the in significant the COVID-XX itself market month mortar market. The strong a the as the full speakers further around expectations March, for market market expect impact world and of fell near The experienced has down speaker deterioration stores we our broader double mobile speaker and the year, Mobile digits X% retailers' in outperforming Bluetooth with from

flexibility and opportunities and promising. to longer with adjust thought look to always speed new We've markets no it's important away from market

we've their reallocated to resources from to accelerate initiatives performance. So some speakers Bluetooth several growth

headsets sell-through of growth Two the that major uptick doubled, Headset were XX%, April. other over with accelerating products month increased in in saw Microphones. sell-through Blue and while Blue's Blue a more than in March further

many to As their times started canceled, live with Blue and concerts, Yeti musicians online Mic. often tours, stream a music performance performances

The long-term Blue the that also rise. favor is on which more the is or also the The of video our in bloggers, March. XX% were trends business accelerated that voice of bottom line

call our Now, metrics you walk in year. past let turn over financial the to key to me Nate the through

Bracken. Thanks

at good strong about but next the fiscal challenges face. quarter realistic growth we year and a very excited macro about the finished into we our the a time, same very year head potential, fourth We with

and unusual executed ' well, although, operational was times. better. during on focus even and 'XX This display Our I do constant discipline critical execution believe consistency fiscal and remains financial throughout on can we we these

Analyst Retail stores, Investor closed be adapted we volatile, on and quarter of the between period were processes quickly logistics quarter. the large manage particularly out with and our significant global short and closed disrupted challenges connections X demand. The was to run new rate end in March to Day our needed as partners swings

financial challenges, despite strong performance. year out we another of closed of And these all

end currency, at As XXXX sales Bracken billion, in X% of very $X high in up double-digit of fifth a shy our the year year our constant just guidance. That's said, nearly were of row fiscal growth.

that of non-GAAP operating at to also million of fact, exceeded in delivered profit Analyst March our million. higher also original We guidance $XXX growth XX% provided guidance revised we Day, the $XXX to million, our we $XXX than and

supply in China savings of reached a cost XXX gross points, We're our XX up points spite and in improvements 'XX parts from of of own margin fiscal and currency global basis efficiency our record network, headwinds. logistics our roughly plant Our our and chain and business, XX.X%, go-to-market manufacturing across basis tariff to all driving strategies.

invested to marketing-led QX, You've spend. was talk our evident model. we promotions about and particularly more this our into and And us a price our reduced where during heard transition OpEx demand-pull business marketing more

push next generation can You us from transition several to pull demand expect years. continue to this over the

On well as also better from margins of several gross led as profit and initiatives categories. our product by top across gaming, peripherals, other video PC benefited this, mix, collaboration improvement

operating This spend invest operating expenses fiscal demonstrates opportunities. million, in attractive X% to top-line leverage most Streamlabs. or by growth both with non-GAAP excluding increased balancing discipline 'XX continuing up margin gross and driving X% Our in our while our our continued growth to expansion, to capture $XXX

of the to the X.X% top at growth sales X%, and future, and Our R&D year G&A flat record we spend our for and a support strong respectively, while keep sales. low were marketing up in and X% year line this spending

gross specifically sales we into force result both various these expansion our and net to video initiatives into growth ' dollar was strong projects marketing operating introductions the QX, fiscal profit innovations. and QX and multiple profit XX. dynamics and The and sales support and margin decisions growth future operating product of In collaboration for strong into R&D reinvested business

talk XX. an delivered cash fiscal full briefly million record $XXX cash all-time ' in We about $XXX flow. up me of flow from from let million Now, year, our for significantly operations the

performance. to were and addition conversion in was growth, flow by In cycle our turns QX better earnings drivers this our of year. versus prior improvement main collections cash inventory a the helped decrease The faster XX-day strong cash

across results management emphasis strong and to is and our operations offset capital pressures an to from supply while we able transforming I'm achieve even were that Company, these our China cost pleased tariffs. Working chain

while replenish be holiday like year everyone supply typically first to our half I in flow of our first weaker constraints and flow would by distribution cash first the we to year this upcoming half Therefore, QX. center I to half expect season, non-GAAP full-year inventory our demand the the our seasonality. for surge build cash as and income, our impacted is remind further equal stock following full lowest will the than flow cash forward, that Looking still approximately need be may our period normal operating

QX than won't detail non-GAAP and our I Before our I want created highlight items comments, each spread impacted press a and between have my but more that each make to into results and we but non-cash material, wider one-time now, three final release. GAAP normal in in I information go GAAP our about one in earnings. item

as out First, profit. expense unfavorably GAAP we expense an million booked Streamlabs business. this $XX of good estimate impacted a reflecting the and in This GAAP earn operating growth

and in This a we income. minority retained gain company due our net of GAAP stake $XX to sale which expense in in Second, but other divested increased Lifesize, we the income recognized million XXXX, a investment. small in the a we gain

reform. GAAP This net income. Finally, Swiss tax enactment income QX the recognized increased related we also the $XXX a to tax million of benefit our

let confusing, non-cash Now, you just all some of and may items events. three they reiterate I me one-time are but that these find realize

In various a anticipated macro out headwinds fiscal year when summary, closed we we in spite cost had started the the very not and good year. challenges that we of

and the Looking upcoming around macroeconomic forward, well depth as cost as well, and behaviors. potential logistics changes year our many purchasing disruptions recovery, or fiscal has related any the of customer as of unknowns in COVID pace declines particularly increases

stock to first prior operating example, and impact we our X year by X will one incremental QX versus points the of demand As air the gross the sell in and freight out to year. margins points use XXXX fulfill negatively will of cost quarter fiscal our replenish

as we our QX already much nearly incremental factored as spent guidance. have and normally in full in In freight into do air on a we fact, profit have year we this cost

offerings, and our term logistics positions But our products objectives. pressured are will that cannot even the though FY'XX and and confident said, we by even Bracken our and as deliver margins to longer relevant we against pace increases well believe more sales targets recent maybe us if both continue, feel be temporarily certain we becoming of this cost growth

me With pass that, back let to Bracken. it

Thank you, Nate.

than this And our month original is and a in more said, stretching year We ago, Nate our to guide deliver was constant $XXX in $XXX million just enable but growth it of of our today March. income fiscal the still confirming we're maintaining should of currency outlook today, feel, single-digits gave us our No million. non-GAAP to we as for to sales trends the doubt, XXXX operating strength in guidance. that favor mid

take Nate to and ready with are that, And your questions. I

guys. Great. Thank you

you Let are Alex, open. now me queue questions. the up

congrats real from on and of Couple ones strong there the Hi me. quarter. quick

just out key appreciated you've wondered varying rates, two various and like countries seen First lock be that about the color or as versus in other learnings weeks? what you I downs start if three could economies for US. coming Europe all, given Asian and any places to are compare and of last the China regions example, Any share would we at

or going conferencing maybe The And you see obviously, about talked then, investors in see secondly, you is competition new about could video that momentum to extent which some cases larger start-ups the strongly, the from tech are companies. from and there. very you've asking

what new and seeing future for what to entrants your you this how there, that you So into are position, extent coming years? in and can extent wondered you're I protect year to guidance factoring your

start your question, me second Alex. let with So

and to always time right the question, I have get had same question I think, our a now. I've every reaction that I said your this, I competition think, have

makes category. all the competitive Company of in been and think the strong more competition think our not have stronger we the we're growth comes all categories. more without time in with are better, over I competition, I And growth the growth we I time in the you would markets think interest the

have will will And surely the But and that. to our we important the more the customer. certainly we're most if in competition have be of XX% thing go market customer it better more off focus and is of on of So planning do we're up where it both what more job in the and going that's out going video require categories, have the and us some and for to to innovation more we engaged, we're us inside cost, efficient, step to putting effective, as makes we our if understanding we're effort. better a and

in have a we're look So great that business. going optimistic collaboration video scenario to any I'm

In question opening little up a about terms say to of how the world is different you from too asked there the that. it's early is to places, learn in what

one the I this think never up world, of experiencing step Within we're closed. China at sort that all and a certainly part time opened small of fastest. Taiwan

of think I realizing Hsinchu our walk what place. between - we started temperature door temperatures people, door. We a checking few people the taking learned a from sheltered in where in out happening, chairs pulled And walked we as temperature we we've our the never was office, days closed lot in people office. the never as Within

a this of realized for a rest us that we is petridish And of in the kind to reapply the world.

now parts that's think, rest seeing Europe things of up, we're the and to normalized China of later and I happen in and Switzerland Asia. expect back I more somewhat to US going a started level the and open in to as return

say I I'm practical. but early an learn, what but we too to optimist, can am So say, I'd exactly

we slowly step things more I the will think for make re-apply the to from is that learnings sure parts time as up, effective of it's successive open different going and every us. to world take these

Company. our really the also lives, doing It's Alex. that, in adapting things. we're to That about add maybe we're own in doing I'd

some those many Company, As that situations. more to It's logistics And adapt our in run may different I and are go-to-market the models, processes offline, rate versus had about meet cases. countries sharing we've times for learnings insights. frequently have different online different mentioned, more having those to reasons within

make a to learn are that, is generalizations, key Bracken continue internally but about think I So adapt the as and seeing. point what early and bit it's to we said, to have communicate little we

your line now is open. Tom, Okay.

and well staying taking is for thanks everyone question. my Hope Great.

Tom. Thanks,

one-time the confidence in we're ask in about wanted to gaming, is, I seeing both we get often most when gives you a video investors from that what pull and the that question demand not forward take in I opportunity surge versus to of or efforts a collaboration question those sustainability your think and categories?

of ago, March could and driving both of things. ago have couple is that decisions happening hit truth in a secular collaboration, in gaming two year them years it's you consistent This last very are came is, One dramatic, look that, same but and years are that the the really feels two trends been month the guess I measured that interest very, have what's and long-term that Yes. the three are and months happening and video of and people set sudden ago. underneath that. and

into step one interesting. categories, you if of those really it's Now, each

So into web know and bought many if home number working look either to video on many you you from had are so keyboard many actually people to fraction couldn't. buy last now time people do you demand of mouse web cams or part will if our a they from But cams, us of math really big or how a we and but some tried a the web from the you month. time, have or gosh, our of cam say, work people that surge full within level, those how the it's of on a adopted and home continue the small in or

forward? the long-term and seen be pull remains continue then it really ones to of how Absolutely. be those Will in I So could is they each have? that. some be to much of to It there the case. upgrade trend bring believe those a to

stronger stay the a is until gaming don't I and we'll think, sports think growth here too. gaming won't varying growth significant a freight that On but will stop. and just sometimes think is biggest the I sometimes it's gaming really have see and conventional the to rates, will gaming we business weaker, be in And train is front, it I change

is Paul, your now open. line

taking my Thanks questions. for

your mentioned remarks. workers in you kind home So prepared setting telemedicine, up in offices of VC teachers,

So to it's consumers to buy VC course is year, a help nice PC for And made evolve can kind over themselves? it the drivers, webcam the purchase understand do the the a enterprise level of better like decision the the at to relative for VC from you that stay us distributed Are but and decision how of home buying being products solution a is employees? to as see webcam you looks then the work while? versus here home,

Yes. Thanks, Paul.

decision buy individual Firstly, a it's done companies all I think the the to webcam is for your by by the home, done over the place. whether or

have I companies ordering think are bulk. we in that

where individuals are couldn't have reaching including the that We one. all equipment ways today, calling to personally, get buying can find - through out me different you they

So actually who guess to done right and that companies I call to you've the whole are have this And banks their going I got of webcams on you're now. of that people - distribute range think things have that those There more to are or buying on is a happening. more many working workforce.

In - mentioned, VC. it you terms what's of a don't think webcam really happening. versus I that's is

don't all they from preoccupied once world, into is, go this into their world equipment. or are have installing that a people webcams can't it's of there, we continue if with you in offices equipment while because the fact truth home, around and think really the team back. offices I video video to working I the just in suspect you lull going to that's The enabled, because may VC get get action are

just spaces enabled enclosed to are aren't that those before. to they all were like So be going need

I it don't be I be think will a So choice of can either and. think or

online channel And my websites. on see more and pushing reducing footprint Okay. company to channels, we're then then some to change follow-up particularly firms retail starting is, products strategy,

assume up in margin more I to online upside on from strategy you. e-commerce mix possibly your any sales future time? So the over probably gross is Thank capture shift website and more Is online to there both considerably. change

Thanks, Paul. Yes.

a as Our - quite did suspect, directly six last total the We a that to, to really buy online eight actually weeks And I increase we products stay significant can want transpired. sales sales. going see of they that's make weeks, including relatively are their small have us. And or anywhere from consumers to our sure want percentage higher.

like don't partners, we partners competing some variety or of retail with sure that idea our our to sometimes e-tail the our are channels, own want can are. our a we but and products offer than We certainly products available, make of of and wider

investing to we're make to to buy website right So they going from do keep want they that research then just people if our can in sure us, and can. the directly

six increased percent And like weeks. anybody. to they're where do big what to I margin matter are them the that That's we're a certainly probably you're e-tail after achievable, no stay a no over and I in think going our now. increase it's targets going to lot know is, last it sold. see of permanent How is, surprise don't yet, but

line open. Michael, now is Thanks. your

live. see to you have short three I Good actually questions.

penetration over talked as video next at you last general. how expectations how the rooms have is much your develop of of way two desks by the this if is, in two to question My expectations question on accelerating, one your to meeting sharing in how changed those equipment is, thoughts is going it mean, months? first this? The penetration also in you second The about I to years, any three and have will have how be…

that question. you stop after Let me

hasn't two across Let Nate rooms, one spaces changed? changed what years. enablement with me hasn't time What the video answer expectation I if video video, enclosed one not over all, happen at time three Let to all, have that belief around will our the is over and will a me answer start almost our at How time. changed. next the world - or

a that fast rate. think still that's going happen very in I to

So equipment side in the office hasn't changed. video the

enclosed I low not but people of of enablement could going much as here those is in companies spaces on have much, rate inside was. the You as continue to a imagine offices as it action same are at video the

I at an video have so What and has that's going home to think, more added people changed equipment are is, plus.

but your explosion everyone getting requirement video. anyway, today to in because forward call I doing to of of life video I is I the in terms on connected that mates last your my it's team quarter. of was think and think in - mentioned opening, the wasn't has kind for of video in happening and of what it become social pushed - example we mean I stay this

have to think that's at a is I the accelerating I think home. And need that equipment change. video

uplift mix gross the got from then Thank mix maybe Okay. the in to the the for the you. much quarter regarding was question gross margin. on other effect you And Can Nate how margin? quantify you

most It the quarter, we was in the powerful got benefit Michael.

in a quarter. the leverage strong mix saw, very and collaboration, was higher incremental which, of that of PC and was margin we the gave our you like operating powerful video peripherals. like in That As But positive course, some were are up in categories some us of and volume manufacturing bit and growth driving, fixed particularly places and costs on logistics things little the that. us for like just

us been a all It's year. story actually nice for

whole mix able and to of we've some has the one of year. manage big headwinds there and through well the for You've currency as the how seen been been tariff factors

So points, it's points? probably than XXX basis more XXX basis

but There big. there, mix in that in wasn't it QX, factors was one. are positive particular, the No, most in several

it leave will I Thank two. lot. a Thanks those Okay. at you.

Credit or three Here from Suisse. questions. two have will speaking is [Surge] I

first is on one The

a time. Let's take it at one

Yes.

better. is think it I

Okay.

will Nate line. mid-single the On been top less have the will or has far from for that guidance promotion, deductible so you see digit are guidance, mentioned this and much you

this? promotion would less only So digit I should how or I'm X% then the guidance X% wondering of like, how understand if that in organic you much growth, so this is to is this mid-single

Surge, things I but about that's it. the into many, of mean, at we're say a just detail and into don't shipment to the when line go that guidance. level top That's promotion, we on many think overall think get driving volume, have probably we a need number question our grow I that, to we levers of would I good that's what would

that the the future. do FY'XX to to our to our investing through and in think promotions in is marketing investments We're no and levers promotion that. long-term working being gross brand we're in to been again, sales. for OpEx I continue on for exception we of general, in less one reduced build some the and towards strength aggressive continuing of more going is time have that funding

next probably that And has of we - been high out, secondly, first. sold sell-through. the one mentioned Okay. products is, And Got you seen the it. some have

still So even I'm wondering in pent-up in you that a you for or QX whether will see how this? see QX, do demand

Yes.

channel selling some out. in and First Is reduction catch of webcams we're yes, Well, that's out where in go in we're is do eye playing is there channel pent-up several shipping products, in a on inventories to that places back demand? inventories the let that. to a we and did and were all, not going We're have sure to What we am up. keep an - going question we're I entirely. right they sold particular and

and where to demand part we'll may playing maybe move early keep to how we more you're to be little may sure have see need we going on the we've on. going and eye do. in a that to it's keep bit, inventories to or online, thing some and but see. we of there As early reduce the I'm long is that channel keeps an out, We're that an eye seen to a part pent-up prudent able our in QX,

one it's a days I then half not the these in the the it higher payables? past, today Why Then still the level. it half they are is such collect a for your net very you that are the capital. next DPOs at compare cash are from true on same size DPOs, the low and Why or working on DSO level? high to still probably the the When was Okay.

Yes.

Let each those. me of take

really on last treatment accounts So prior should of compare DSO, the receivable accounts accounting just different for into year, you the for years, had the receivable. rebates we and that some we it to accounted how in because go

So really it's only a clean year-over-year. compare

FY'XX. XXX related implemented the to changes was This in we accounting that

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