Financial Data and Key Metrics Changes - Net sales grew 58% in constant currency, with profits doubling compared to the previous year [21][26] - Non-GAAP gross margin was 43.8%, up 460 basis points year-over-year, although down from a record level in Q4 [25][26] - Operating profit doubled year-over-year to $235 million, with operating margins at 17.9%, up 310 basis points from the prior year [26] Business Line Data and Key Metrics Changes - PC peripherals category saw a 49% growth in Q1, driven by better availability and a broad portfolio of differentiated products [21][22] - Video collaboration sales increased 72%, with sell-through nearly doubling compared to last year [24] - Gaming sales rose 76%, with double-digit growth across all gaming categories [24] - Tablet sales increased by 66%, while audio and wearable sales rose 57% [25] Market Data and Key Metrics Changes - Sales in the Americas and Asia Pacific remained strong, while EMEA sales declined double digits compared to a record Q4 [24] - Webcam sales grew 73% in the quarter, despite moderating after more than tripling last year [23] Company Strategy and Development Direction - The company is focusing on long-term trends such as gaming, streaming, hybrid work, and video collaboration, which have accelerated during the pandemic [31] - Continued investment in marketing and product development is aimed at driving brand awareness and preference [26][56] - The company is exploring new categories and maintaining a dynamic approach to innovation [17][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the video collaboration business and the overall growth potential in gaming [38][41] - The operating environment remains choppy, with varying reopening timelines across regions [16][31] - The company confirmed its fiscal year '22 outlook of flat sales growth in constant currency, plus or minus 5% [29] Other Important Information - Cash flow from operations was negative $115 million in Q1 due to tactical inventory investments and a one-time tax payment [27] - The company spent $55 million on share repurchases in the quarter [28] Q&A Session Summary Question: Video collaboration segment outlook given EMEA softness - Management maintains a double-digit growth outlook for the video collaboration segment, despite recent softness in EMEA [35][37] Question: Inventory build-up and market share gains - The company gained share across most categories due to supply availability and a strong product lineup [40][42] Question: Gaming product mix and momentum - All segments within the gaming business showed growth, with a strong product portfolio driving market share gains [51][52] Question: Gross margin caution despite pricing power - Management expects gross margins to remain in the range of 39% to 44%, citing several near-term pressures [70][71] Question: Impact of improved notebook camera systems on webcam business - The installed base of PCs presents a significant opportunity, and the company plans to continue innovating in the webcam market [72] Question: Seasonality expectations for Q2 - Typical seasonality may not apply this year, but management is prepared for a good back-to-school season [75][84]

Q1 Fiscal Year 2022 Financial Results July 26, 2021 logitech® | --- | --- | |--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ...

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2021 Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from to Commission File Number: 0-29174 LOGITECH INTERNATIONAL S.A. (Exact name of registrant as specified in its charter) Canton of Vaud, Switzerland None (State or o ...

Financial Data and Key Metrics Changes - Logitech reported fiscal year 2021 sales of $5.3 billion, a 74% increase year-over-year, exceeding the revised guidance of 63% growth [17] - Non-GAAP operating income more than tripled to over $1.27 billion, surpassing the previous outlook of $1.1 billion [17] - Non-GAAP gross margin reached 44.8%, up over six percentage points from the previous year, primarily due to lower promotional spending [18] Business Line Data and Key Metrics Changes - PC peripherals sales increased over 50% to $1.9 billion, driven by heightened demand for premium products during the pandemic [10] - Video collaboration sales almost tripled to over $1 billion for the first time, with significant growth in both conference room and personal collaboration products [13] - Gaming category sales rose 77%, with broad-based growth across all gaming segments [14] - Tablet and accessories sales increased nearly 3X, with tablet keyboards for education up over 7X [15] Market Data and Key Metrics Changes - The company noted a significant increase in hybrid work arrangements, with an internal survey suggesting a 2X to 3X increase in remote work [12] - The demand for video-enabled workspaces is expected to grow as companies adapt to hybrid work models [8] Company Strategy and Development Direction - Logitech's long-term strategy remains unchanged, focusing on video collaboration, gaming, and PC peripherals, with an emphasis on environmental sustainability [8] - The company is committed to increasing awareness of its premium products and expanding its market presence through strategic investments in marketing and innovation [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong demand trends and the potential for sustained growth in various product categories [22] - The company anticipates some downward pressure on gross margins due to increased promotional activities in FY 2022, but expects a favorable product mix to help offset this [18] Other Important Information - Logitech announced an increase in its share buyback authorization from $250 million to $1 billion and proposed a 10% increase in its dividend [24] - The company is actively investing in environmental sustainability and diversity initiatives [9] Q&A Session Summary Question: What are the growth levers for the next five years? - Management highlighted the realization of video calling as essential and the need for video-enabled offices as key growth drivers [28] Question: How is the return on marketing spend being tracked? - Management discussed different types of marketing and expressed confidence in the impact of their recent campaigns, including the Super Bowl campaign [30][32] Question: What is the visibility into the next couple of quarters? - Management indicated good visibility for the current quarter but acknowledged that visibility decreases for future quarters due to market dynamics [38] Question: How does the company plan to manage component shortages? - Management stated that they have been managing component availability well and are prepared for potential challenges in the supply chain [48][49] Question: What is the company's approach to capital allocation and M&A? - Management clarified that the increase in buyback authorization does not indicate a decrease in M&A ambitions, as they continue to explore opportunities [56]

Financial Highlights - Q4 FY2021 - Sales increased by a record 108% (CC) to $1.54 billion[4] - Gross margin expanded to 46.6%[4] - Operating profits increased more than fourfold to $325 million[4] - Cash flow from operations was $530 million, up from $101 million last year[4] Financial Highlights - Fiscal Year 2021 - Sales up 74% (CC) and over $2.2 billion versus the prior year[5] - Gross margin increased to 44.8%[5] - Operating profits more than tripled to $1.27 billion[5] - Cash flow from operations reached an all-time high of $1.46 billion, up from $425 million last year[5] Category Performance - Fiscal Year 2021 - Creativity & Productivity (C&P) sales exceeded $2 billion[5] - Video Collaboration sales exceeded $1 billion[5] - Gaming sales exceeded $1 billion[5] Fiscal Year 2022 Outlook - Non-GAAP operating income is raised to $800-850 million (versus prior $750-800 million)[5] - Sales growth is maintained at flat +/- 5% (CC)[5]

Part I FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) The unaudited financial statements for Q3 and nine months ended December 31, 2020, reflect substantial growth in sales and profitability, alongside a strengthened balance sheet and robust cash flow [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q3 & Nine Months FY2021 vs FY2020 Performance (Amounts in thousands, except per share) | Metric | Three Months Ended Dec 31, 2020 | Three Months Ended Dec 31, 2019 | YoY Change | Nine Months Ended Dec 31, 2020 | Nine Months Ended Dec 31, 2019 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net Sales** | $1,667,302 | $902,687 | 84.7% | $3,716,354 | $2,266,603 | 64.0% | | **Gross Profit** | $749,010 | $334,453 | 123.9% | $1,624,466 | $845,505 | 92.1% | | **Operating Income** | $448,063 | $128,828 | 247.8% | $853,043 | $244,350 | 249.1% | | **Net Income** | $382,523 | $117,525 | 225.5% | $721,510 | $235,803 | 205.9% | | **Diluted EPS** | $2.22 | $0.69 | 221.7% | $4.21 | $1.39 | 202.9% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (Amounts in thousands) | Account | Dec 31, 2020 | Mar 31, 2020 | | :--- | :--- | :--- | | **Current Assets** | | | | Cash and cash equivalents | $1,388,743 | $715,566 | | Accounts receivable, net | $894,937 | $394,743 | | Inventories | $476,802 | $229,249 | | **Total Assets** | **$3,812,946** | **$2,363,474** | | **Current Liabilities** | | | | Accounts payable | $811,786 | $259,120 | | Accrued and other current liabilities | $704,573 | $455,024 | | **Total Liabilities** | **$1,711,179** | **$874,206** | | **Total Shareholders' Equity** | **$2,101,767** | **$1,489,268** | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary for Nine Months Ended Dec 31 (Amounts in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $928,419 | $324,154 | | Net cash used in investing activities | ($46,454) | ($119,441) | | Net cash used in financing activities | ($219,196) | ($150,863) | | **Net increase in cash and cash equivalents** | **$673,177** | **$51,530** | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) - The COVID-19 pandemic led to increased demand and sales for certain products, but also caused manufacturing, supply chain, and logistics disruptions and higher costs[39](index=39&type=chunk) - The effective income tax rate for the nine months ended December 31, 2020, increased to **16.5%** from **7.2%** due to income mix across jurisdictions and Swiss tax law changes[51](index=51&type=chunk) - In Q3 FY2021, the company settled **$29.0 million** contingent consideration for the Streamlabs acquisition by issuing **390,397** treasury shares[63](index=63&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) - A new three-year, **$250.0 million** share buyback program was approved in May 2020, with **$177.6 million** remaining available for repurchase as of December 31, 2020[85](index=85&type=chunk) - The company paid a cash dividend of **$0.87 per share**, totaling **$146.7 million**, during the nine months ended December 31, 2020[86](index=86&type=chunk) Sales by Product Category - Nine Months Ended Dec 31 (Amounts in thousands) | Product Category | 2020 Sales | 2019 Sales | YoY Change | | :--- | :--- | :--- | :--- | | Gaming | $916,040 | $541,265 | 69% | | Video Collaboration | $659,278 | $254,941 | 159% | | Keyboards & Combos | $565,246 | $424,061 | 33% | | Pointing Devices | $503,228 | $409,293 | 23% | | PC Webcams | $295,020 | $89,041 | 231% | | Tablet & Other Accessories | $267,186 | $103,442 | 158% | Sales by Geographic Region - Nine Months Ended Dec 31 (Amounts in thousands) | Region | 2020 Sales | 2019 Sales | YoY Change | | :--- | :--- | :--- | :--- | | Americas | $1,603,221 | $970,775 | 65% | | EMEA | $1,147,393 | $719,994 | 59% | | Asia Pacific | $965,740 | $575,834 | 68% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%2E%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the exceptional **85%** sales growth in Q3 FY2021 to strong demand across all regions and product categories, driven by pandemic-related trends, resulting in significant gross margin expansion and operating leverage [Impacts of COVID-19 to Our Business](index=26&type=section&id=Impacts%20of%20COVID-19%20to%20Our%20Business) - The COVID-19 pandemic accelerated work-from-home, study-from-home, gaming, and streaming trends, driving high demand and increased sales for specific products[104](index=104&type=chunk) - Despite strong sales, the company faced manufacturing, supply chain, and logistics disruptions, leading to inventory constraints and increased logistics costs expected to persist through fiscal year 2021[104](index=104&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q3 FY2021 Sales Growth by Region | Region | Sales Growth Rate (USD) | Constant Dollar Sales Growth Rate | | :--- | :--- | :--- | | Americas | 85% | 87% | | EMEA | 77% | 67% | | Asia Pacific | 95% | 89% | Q3 FY2021 Sales Growth by Product Category | Product Category | YoY Change | | :--- | :--- | | Tablet & Other Accessories | 342% | | PC Webcams | 309% | | Video Collaboration | 218% | | Audio & Wearables | 87% | | Gaming | 78% | | Keyboards & Combos | 40% | | Pointing Devices | 38% | | Mobile Speakers | (22)% | | Smart Home | (33)% | - Gross margin for Q3 FY2021 increased by **780 basis points** to **44.9%**, driven by higher sales volume, restrained promotional spending, favorable product mix, and favorable exchange rates, offsetting higher logistics costs[152](index=152&type=chunk) - Operating expenses for Q3 FY2021 were **18.0% of sales**, a significant improvement from **22.8%** in the prior-year period, demonstrating strong operating leverage[153](index=153&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) - Cash and cash equivalents increased to **$1.39 billion** as of December 31, 2020, up from **$715.6 million** as of March 31, 2020[168](index=168&type=chunk) - Working capital increased to **$1.36 billion** from **$700.3 million** at March 31, 2020, driven by higher cash, accounts receivable, and inventories[170](index=170&type=chunk) Key Working Capital Metrics (Q3 FY2021 vs Q3 FY2020) | Metric | Q3 2020 | Q3 2019 | | :--- | :--- | :--- | | Days Sales Outstanding (DSO) | 48 days | 53 days | | Days Payable Outstanding (DPO) | 80 days | 70 days | | Inventory Turnover (ITO) | 7.7x | 7.4x | - As of December 31, 2020, the company had non-cancelable inventory purchase commitments of **$853.1 million** to support anticipated high demand[186](index=186&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is currency exchange rate fluctuations, with **54%** of Q3 sales in non-U.S. currencies, and a hypothetical **10%** adverse change impacting pre-tax income by **$36.2 million** - The company's main market risk is currency exchange rate volatility, as it transacts business in over 30 currencies[194](index=194&type=chunk)[196](index=196&type=chunk) - Approximately **54%** of sales in Q3 FY2021 were denominated in currencies other than the U.S. Dollar, with the Euro being the most significant at **26%** of total sales[196](index=196&type=chunk) - A hypothetical adverse **10%** foreign currency exchange rate change would have resulted in an adverse effect on pre-tax income of approximately **$36.2 million** as of December 31, 2020[198](index=198&type=chunk) [Item 4. Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that as of December 31, 2020, the company's disclosure controls and procedures are effective at the reasonable assurance level[201](index=201&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[204](index=204&type=chunk) Part II OTHER INFORMATION [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various ordinary course legal proceedings, which management believes will not materially adversely affect its financial condition or operations - Logitech is subject to several claims and legal proceedings arising in the ordinary course of business[205](index=205&type=chunk) - The company does not believe that the resolution of pending legal matters will have a material adverse effect on its financial condition or results of operations[205](index=205&type=chunk) [Item 1A. Risk Factors](index=41&type=section&id=Item%201A.%20Risk%20Factors) The company faces key risks including business innovation challenges, operational dependencies on manufacturing and supply chains, regulatory and global trade policy changes, intellectual property and cybersecurity threats, and financial unpredictability - **Business Risks:** The company's success depends on its ability to innovate in a market with short product life cycles and intense competition. The full effect of the COVID-19 pandemic remains uncertain and could adversely affect business operations and financial condition[209](index=209&type=chunk)[217](index=217&type=chunk) - **Operational Risks:** A significant portion of manufacturing is located in China and Southeast Asia, exposing the company to geopolitical risks, tariffs, and supply chain disruptions. The company also relies on a limited number of sources for key components[209](index=209&type=chunk)[214](index=214&type=chunk)[277](index=277&type=chunk) - **Regulatory & Global Risks:** Changes in international trade policy, particularly tariffs, could adversely affect costs and gross margins. Fluctuations in currency exchange rates also pose a significant risk to financial performance[214](index=214&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) - **Intellectual Property & Cybersecurity Risks:** The company faces risks from claims of infringing on others' proprietary technology, challenges in protecting its own IP, and potential security breaches of its IT systems and user data, especially with increasing data privacy regulations like GDPR[212](index=212&type=chunk)[306](index=306&type=chunk)[312](index=312&type=chunk) - **Financial Risks:** Operating results are difficult to predict due to fluctuating demand and economic conditions. Gross margins can vary significantly, and goodwill from past acquisitions could be subject to impairment charges[213](index=213&type=chunk)[314](index=314&type=chunk)[316](index=316&type=chunk)[327](index=327&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=68&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Under the May 2020 share buyback program, the company repurchased **603,000** shares in Q3 FY2021, with **$177.6 million** remaining available as of December 25, 2020 Share Repurchases for Q3 FY2021 | Period | Total Shares Repurchased | Exchange | Remaining Authorization | | :--- | :--- | :--- | :--- | | Nov 21 - Dec 25, 2020 | 110,000 | Nasdaq | $177,634,000 | | Nov 21 - Dec 25, 2020 | 493,000 | SIX | $177,634,000 | | **Total for Quarter** | **603,000** | | **$177,634,000** | [Item 6. Exhibit Index](index=69&type=section&id=Item%206.%20Exhibit%20Index) This section lists exhibits filed with the Form 10-Q, including organizational documents, CEO and CFO certifications, and XBRL interactive data files - Key exhibits filed include CEO and CFO certifications under Rule 13a-14(a)/15d-14(a) and Section 1350, as well as XBRL data files[335](index=335&type=chunk)

Logitech International S.A. (NASDAQ:LOGI) Q3 2021 Results Earnings Conference Call January 19, 2021 8:30 AM ET Company Participants Ben Lu - Vice President, Investor Relations Bracken Darrell - President and Chief Executive Officer Nate Olmstead - Chief Financial Officer Conference Call Participants Joern Iffert - UBS Paul Chung - J.P. Morgan Alex Duval - Goldman Sachs Erik Woodring - Morgan Stanley Asiya Merchant - Citigroup Serge Rotzer - Credit Suisse Tom Forte - D.A. Davidson Andreas Mueller - Zurcher K ...

Q3 Fiscal Year 2021 Financial Results January 18, 2021 logitech® | --- ...

Part I — FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) The unaudited financial statements for Q2 and H1 FY21 reflect substantial growth in sales, profit, and balance sheet strength, driven by increased demand [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 and H1 FY21 statements show significant year-over-year growth in net sales, operating income, and net income Consolidated Statements of Operations Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | YoY Change | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Net sales** | $1,257,158 | $719,691 | +75% | $2,049,052 | $1,363,916 | +50% | | **Gross profit** | $569,723 | $272,076 | +109% | $875,456 | $511,052 | +71% | | **Operating income** | $321,553 | $68,055 | +372% | $404,980 | $115,522 | +251% | | **Net income** | $266,914 | $72,933 | +266% | $338,987 | $118,278 | +187% | | **Diluted EPS** | $1.56 | $0.43 | +263% | $1.99 | $0.70 | +184% | [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of September 30, 2020, shows significant asset and liability growth, driven by increased cash, receivables, and payables Balance Sheet Summary (in thousands) | Account | September 30, 2020 | March 31, 2020 | | :--- | :--- | :--- | | **Total current assets** | $2,157,431 | $1,414,478 | | Cash and cash equivalents | $917,221 | $715,566 | | Accounts receivable, net | $750,749 | $394,743 | | Inventories | $394,708 | $229,249 | | **Total assets** | $3,095,869 | $2,363,474 | | **Total current liabilities** | $1,204,850 | $714,144 | | Accounts payable | $662,873 | $259,120 | | **Total liabilities** | $1,389,906 | $874,206 | | **Total shareholders' equity** | $1,705,963 | $1,489,268 | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) H1 FY21 cash flow statements show a substantial increase in operating cash, with financing activities focused on dividends and share repurchases Cash Flow Summary for the Six Months Ended September 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $398,519 | $143,019 | | **Net cash used in investing activities** | ($30,539) | ($18,582) | | **Net cash used in financing activities** | ($168,837) | ($150,884) | | **Net increase (decrease) in cash** | $201,655 | ($30,052) | [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, COVID-19 impact, tax changes, segment performance, and shareholder equity activities including buybacks and dividends - The COVID-19 pandemic had mixed effects on operations, leading to high demand and increased sales for certain products while also causing disruptions to the supply chain, inventory constraints, and increased logistics costs[41](index=41&type=chunk) Sales by Product Category (Three Months Ended Sep 30, in thousands) | Category | 2020 Sales | 2019 Sales | YoY Change | | :--- | :--- | :--- | :--- | | PC Webcams | $102,469 | $28,748 | +256% | | Video Collaboration | $236,704 | $89,553 | +164% | | Tablet & Other Accessories | $83,086 | $33,847 | +145% | | Gaming | $297,711 | $161,014 | +85% | | Mobile Speakers | $43,581 | $57,232 | -24% | - In May 2020, the Board of Directors approved a new three-year share buyback program authorizing the repurchase of up to **$250.0 million** in shares, with **$227.6 million** remaining available for repurchase as of September 30, 2020[86](index=86&type=chunk) - The company paid a cash dividend of **$0.87 per share** during the six months ended September 30, 2020, totaling **$146.7 million**[87](index=87&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management attributes Q2 FY21's exceptional 75% sales growth to pandemic-driven demand, leading to improved gross margin and strong liquidity [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Q2 FY21 sales surged 75% to **$1.26 billion**, driven by strong regional and product category growth, with gross margin expanding to **45.3%** Sales Growth by Region (Three Months Ended Sep 30, 2020) | Region | Sales Growth Rate | Constant Dollar Sales Growth Rate | | :--- | :--- | :--- | | Americas | 83% | 85% | | EMEA | 68% | 63% | | Asia Pacific | 70% | 69% | Sales Growth by Key Product Categories (Three Months Ended Sep 30, 2020) | Product Category | YoY Change | | :--- | :--- | | PC Webcams | +256% | | Video Collaboration | +164% | | Tablet & Other Accessories | +145% | | Gaming | +85% | | Audio & Wearables | +68% | - Gross margin for the three months ended September 30, 2020, increased by **750 basis points** to **45.3%** from **37.8%** in the prior year, driven by higher sales volume, restrained promotional spending, and favorable product mix[109](index=109&type=chunk)[154](index=154&type=chunk) [Liquidity and Capital Resources](index=35&type=section&id=Liquidity%20and%20Capital%20Resources) Liquidity strengthened with cash and equivalents reaching **$917.2 million**, driven by increased operating cash flow and improved working capital metrics - Cash and cash equivalents increased to **$917.2 million** as of September 30, 2020, from **$715.6 million** as of March 31, 2020[171](index=171&type=chunk) - For the six months ended September 30, 2020, net cash provided by operating activities was **$398.5 million**, a substantial increase from **$143.0 million** in the same period of 2019[176](index=176&type=chunk)[180](index=180&type=chunk) Key Financial Metrics (as of Q2) | Metric | September 30, 2020 | September 30, 2019 | | :--- | :--- | :--- | | DSO (Days) | 54 | 58 | | DPO (Days) | 87 | 83 | | Inventory Turnover (x) | 7.0 | 5.3 | [Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company faces significant market risk from currency fluctuations, with **50% of sales** in non-U.S. currencies, partially hedged by derivatives - The company faces significant currency exchange rate risk, with approximately **50% of sales** for the three months ended September 30, 2020, denominated in currencies other than the U.S. Dollar[198](index=198&type=chunk)[292](index=292&type=chunk) - A hypothetical adverse **10%** foreign currency exchange rate change would have resulted in an adverse effect on income before taxes of approximately **$23.6 million** as of September 30, 2020, after considering offsetting hedges[200](index=200&type=chunk) [Controls and Procedures](index=40&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management, including the CEO and CFO, concluded that disclosure controls were effective, with no material changes to internal controls during the quarter - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period[203](index=203&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[206](index=206&type=chunk) Part II — OTHER INFORMATION [Legal Proceedings](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in ordinary course legal proceedings, which management believes will not materially impact financial condition or operations - The company is subject to several claims and legal proceedings arising in the ordinary course of business[207](index=207&type=chunk) - Management does not believe that the resolution of pending legal matters will have a material adverse effect on its financial condition or results of operations[207](index=207&type=chunk) [Risk Factors](index=41&type=section&id=ITEM%201A.%20RISK%20FACTORS) Key risk factors include unpredictable operating results, market competition, COVID-19 impacts, reliance on third-party platforms, manufacturing concentration, and trade policy changes - The full effect of the COVID-19 pandemic is uncertain and could adversely affect the business through supply chain disruptions, increased costs, and unpredictable demand patterns[239](index=239&type=chunk)[242](index=242&type=chunk) - The business depends on access to third-party platforms (e.g., Apple, Google, Amazon), and if access is withdrawn or terms become unfavorable, operating results could be adversely affected[243](index=243&type=chunk)[245](index=245&type=chunk) - Manufacturing operations are concentrated in China and Southeast Asia, exposing the company to geopolitical risks, labor issues, and potential tariffs, which could adversely affect operations[275](index=275&type=chunk)[290](index=290&type=chunk) - Changes in trade policy, particularly U.S.-China tariffs, present significant risks that could increase costs, reduce margins, and diminish customer demand[290](index=290&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Details of share repurchase activities under the May 2020 program, including **312,000 shares** repurchased and **$227.6 million** remaining Share Repurchases (Three Months Ended Sep 30, 2020) | Period | Total Shares Repurchased | Average Price Paid (USD) | Remaining Amount for Repurchase | | :--- | :--- | :--- | :--- | | **Month 2 (Jul 25 - Aug 21)** | 312,000 | ~$72.83 (Nasdaq) | $227,635,000 | | **Total for Quarter** | **312,000** | **N/A** | **$227,635,000** |

Financial Data and Key Metrics Changes - Q2 sales increased by 73%, surpassing $1 billion for the first time in history, with non-GAAP operating profits nearly quadrupling [21][30] - Gross margin expanded by over seven percentage points to 45.7%, driven by higher sales volume, lower sales promotions, and a favorable product mix [31][32] - Cash flow reached $280 million, up from $107 million in Q2 last year, with a record low cash conversion cycle of 19 days [35] Business Line Data and Key Metrics Changes - Creativity and productivity category saw double and triple-digit growth across almost all products, with MICE and keyboard sales growing by 35% and 44% respectively [21][22] - PC webcam sales increased over 250%, with demand exceeding supply [22][23] - Tablet and accessory sales grew over 140%, with education channel sales rising more than fourfold [24] - Video collaboration sales increased over 160%, reaching a quarterly record high of $237 million [26] - Gaming sales grew 84% across all regions and product categories [27] Market Data and Key Metrics Changes - Significant demand from schools for digital learning tools, with governments allocating large budgets for educational technology [25] - Strong growth observed in APAC, particularly in China, which may serve as a leading indicator for other regions [62] Company Strategy and Development Direction - The company is focusing on long-term growth driven by trends in video calls, remote work, esports, and content creation [14][20] - Plans to invest more aggressively in Q3 and Q4 to enhance video collaboration, brand marketing, and hardware/software innovation [34] - The company is transitioning from a push marketing model to a pull model, increasing investments in customer experience and infrastructure [45][46] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term growth potential, emphasizing that the trends accelerated by COVID-19 are here to stay [13][14] - The company anticipates a hybrid work culture, leading to increased demand for workspaces and related products [15][18] - Management is cautious about the holiday season, noting uncertainty regarding consumer behavior due to the pandemic [78] Other Important Information - The company raised its fiscal year sales growth outlook to 35% to 40% and non-GAAP operating income outlook to $700 million to $725 million, an increase of over 80% compared to the previous year [37] Q&A Session Summary Question: Pricing and Mix Impact on Sales Growth - Management indicated that pricing and mix contributed approximately 10 percentage points to sales growth, with restocking in the channel also playing a role [40][43] Question: R&D Allocation and New Categories - The company is willing to experiment with new categories and has several projects in development, maintaining a focus on innovation [44][46] Question: SG&A Investments and Returns - Management plans to increase SG&A investments, particularly in video collaboration and marketing, while ensuring these investments yield a good return [45][46] Question: Long-term Growth Outlook - Management is optimistic about long-term growth, citing increased install base and structural changes in consumer behavior [52][53] Question: APAC Market Performance - Strong growth was reported in APAC, particularly in China, with management optimistic about long-term growth potential across all regions [62] Question: Retail and Direct-to-Consumer Business - Direct-to-consumer sales are still a small part of the business but are growing rapidly and yielding better margins [64][66] Question: Seasonality and Future Growth - Management is cautious about predicting seasonality for the upcoming quarters, noting that consumer behavior during the holiday season is uncertain [78][79]