Key Takeaways from the AI & Semis Symposium Industry Overview - The symposium focused on the **semiconductor industry** and its intersection with **artificial intelligence (AI)**, featuring over 25 speakers from academia and industry, including representatives from **ASML**, **BESI**, **Infineon**, **Logitech**, and **Nokia** [1][4][19]. Core Insights - **Generative AI Capabilities**: The power of Generative AI is being validated, with claims of efficiency improvements equating to a workforce with 6x the bandwidth. AI models have achieved gold-medal scores at the International Mathematical Olympiad, outperforming human participants [1][5]. - **AI in Various Sectors**: AI is proliferating across sectors such as healthcare, retail, and entertainment. For instance, a major streaming company reported a 10x acceleration in production through AI integration in visual effects [1][6]. - **Robotics in Healthcare**: In the US, 95% of certain cancer procedures are performed robotically, utilizing 25 years of kinematic video data for training [1][6]. - **Energy Consumption**: Some newly built data centers consume as much power as New York City, highlighting the need for efficient energy solutions [1][20]. Company-Specific Highlights ASML - **EUV Demand**: Strong demand for Extreme Ultraviolet (EUV) lithography tools is driven by AI-Logic applications, with expectations for increased Memory adoption to meet performance needs [21][23]. - **China Market**: ASML anticipates that China will contribute over 25% of group revenue by 2025, driven by self-sufficiency trends and a broadening customer base [26]. - **Growth Outlook**: While the outlook for 2026 is uncertain, ASML targets 15% growth this year, with recent positive datapoints noted [24][26]. BESI - **Hybrid Bonding Adoption**: Thermal efficiency is accelerating the adoption of hybrid bonding in high-stack memory architectures, with positive feedback from industry leaders [25][27]. - **Growth Opportunities**: BESI sees significant long-term growth linked to chiplet architectures and co-packaged optics [28]. Infineon - **Power Semiconductors**: Infineon’s portfolio across silicon, GaN, and SiC positions it to meet rising energy demands in AI data centers, with power densities increasing significantly [30][32]. - **Vertical Power Delivery**: The shift towards vertical power delivery configurations is driven by the need for efficiency as GPU power requirements rise [30][32]. Logitech - **AI at the Edge**: Logitech is focusing on AI integration in its products, which is expected to drive efficiencies and growth in the Workplace Infrastructure segment [33][37]. - **B2B Strategy**: The company aims to increase its B2B exposure from 40% to around 50%, which could reduce cyclicality and improve profitability [37][38]. Nokia - **AI-Driven Network Demand**: Nokia sees AI as a driver for growth in its portfolio, particularly in IP routing and optical networks, although hyperscaler demand remains unpredictable [39][40]. - **Strategic Investments**: The company is focusing on optical networks and has made strategic investments to enhance its capabilities in this area [40][41]. Additional Insights - **AI Adoption Challenges**: Despite the rapid integration of AI, organizations face challenges related to change management, regulatory demands, and capital intensity [12][10]. - **Guardrails for AI**: Effective guardrails are essential for secure enterprise AI adoption, with a focus on mitigating risks related to output reliability and safety [14][15]. - **Interdisciplinary Collaboration**: There is a need for greater collaboration across technical, legal, and operational domains to navigate AI's evolving demands [15][16]. Conclusion The symposium underscored the transformative potential of AI in the semiconductor industry, highlighting both opportunities and challenges. Companies like ASML, BESI, Infineon, Logitech, and Nokia are strategically positioned to leverage AI advancements, although they must navigate a complex landscape of energy demands, regulatory challenges, and market dynamics.

Core Viewpoint - Logitech is accelerating the relocation of its production lines out of China, aiming to reduce the proportion of Chinese-made products in total U.S. imports to 10% by the end of the year, down from a peak of 40% to approximately 30% currently [2][2][2] Group 1: Production and Supply Chain Strategy - The company is diversifying its production capacity to Malaysia, Thailand, Vietnam, and Mexico, collaborating with local contract manufacturers [2][2] - Logitech's CEO stated that the supply chain diversification is exemplary and has not resulted in increased material costs due to the relocation [2][2] Group 2: Pricing and Market Response - To offset the tariffs imposed by the U.S. on Chinese products, Logitech raised prices by 10% in the U.S. market in the second quarter of this year, with no plans for further price increases [2][2] Group 3: Potential Challenges - Research firm IDC highlighted that Southeast Asian countries still face long-term bottlenecks such as power shortages, skilled labor shortages, and port congestion [2][2] - The ability of Logitech to rapidly scale production in new locations may be uncertain if U.S. tariffs on Chinese goods are escalated again [2][2]

Group 1 - The core investment thesis for Logitech (NASDAQ: LOGI) remains positive due to strong demand and effective strategies to manage tariff uncertainties [1] - Recent results indicate double-digit growth, supporting the long-term investment outlook [1] - The investment approach focuses on medium to long-term strategies, emphasizing bottom-up analysis of individual companies' fundamentals [1] Group 2 - The goal is to identify companies with solid fundamentals, sustainable competitive advantages, and growth potential [1]

PART I — FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Logitech's unaudited condensed consolidated financial statements for Q1 FY26 and FY25, covering key financial statements and accompanying notes [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement details Logitech's revenues, costs, and profitability, including net sales, gross profit, operating income, and net income for the reported periods | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--------------------------------- | :------------------ | :------------------ | :----------- | | Net sales | $1,147,703 | $1,088,217 | +5.5% | | Cost of goods sold | $666,592 | $619,517 | +7.6% | | Gross profit | $478,962 | $466,258 | +2.7% | | Operating income | $162,094 | $153,499 | +5.6% | | Income before income taxes | $174,485 | $167,391 | +4.2% | | Net income | $146,015 | $141,833 | +2.9% | | Basic net income per share | $0.99 | $0.93 | +6.5% | | Diluted net income per share | $0.98 | $0.92 | +6.5% | [Condensed Consolidated Statements of Comprehensive Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) This statement presents Logitech's net income and other comprehensive income components, such as currency translation adjustments and hedging gains/losses | Metric | 2025 (in thousands) | 2024 (in thousands) | | :------------------------------------------ | :------------------ | :------------------ | | Net income | $146,015 | $141,833 | | Currency translation gain (loss), net of taxes | $27,293 | $(5,219) | | Deferred hedging gain (loss), net of taxes | $(12,349) | $1,582 | | Total other comprehensive income (loss) | $16,789 | $(4,570) | | Total comprehensive income | $162,804 | $137,263 | [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of Logitech's financial position, detailing assets, liabilities, and shareholders' equity at specific points in time | Metric | June 30, 2025 (in thousands) | March 31, 2025 (in thousands) | Change (QoQ) | | :--------------------------- | :--------------------------- | :--------------------------- | :----------- | | Cash and cash equivalents | $1,487,822 | $1,503,205 | -1.0% | | Accounts receivable, net | $636,523 | $454,546 | +39.9% | | Inventories | $499,770 | $503,747 | -0.8% | | Total current assets | $2,778,221 | $2,592,709 | +7.1% | | Total assets | $3,742,963 | $3,538,504 | +5.8% | | Accounts payable | $549,936 | $414,586 | +32.7% | | Total current liabilities | $1,222,724 | $1,101,089 | +11.0% | | Total liabilities | $1,555,711 | $1,411,084 | +10.2% | | Total shareholders' equity | $2,187,252 | $2,127,420 | +2.8% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines Logitech's cash inflows and outflows from operating, investing, and financing activities for the reported periods | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--------------------------------- | :------------------ | :------------------ | :----------- | | Net cash provided by operating activities | $125,045 | $176,029 | -29.0% | | Net cash used in investing activities | $(18,100) | $(15,359) | +17.8% | | Net cash used in financing activities | $(134,433) | $(145,134) | -7.4% | | Effect of exchange rate changes on cash and cash equivalents | $12,105 | $(1,998) | N/A | | Net increase (decrease) in cash and cash equivalents | $(15,383) | $13,538 | N/A | | Cash and cash equivalents, end of the period | $1,487,822 | $1,534,380 | -3.0% | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) This statement tracks changes in Logitech's shareholders' equity, including net income, share repurchases, and other comprehensive income - **Total shareholders' equity** increased from **$2,127,420 thousand** as of March 31, 2025, to **$2,187,252 thousand** as of June 30, 2025, primarily due to **total comprehensive income** of **$162,804 thousand**, partially offset by **share repurchases**[26](index=26&type=chunk) - For the three months ended June 30, 2025, **total comprehensive income** was **$162,804 thousand**, including **net income** of **$146,015 thousand** and other comprehensive income of **$16,789 thousand**[26](index=26&type=chunk) - **Share repurchases** for the three months ended June 30, 2025, amounted to **$(124,135) thousand**, while share-based compensation contributed **$33,939 thousand** to equity[26](index=26&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of Logitech's accounting policies, estimates, and specific financial statement components [Note 1 — The Company and Summary of Significant Accounting Policies and Estimates](index=10&type=section&id=Note%201%20%E2%80%94%20The%20Company%20and%20Summary%20of%20Significant%20Accounting%20Policies%20and%20Estimates) This note describes Logitech's business, global sales channels, and the significant accounting policies and estimates used in its financial statements - Logitech designs software-enabled hardware solutions for businesses and consumers, focusing on work, creation, and gaming, with a mission to extend human potential[30](index=30&type=chunk) - The company sells products globally through direct sales to retailers, e-tailers, businesses, and end consumers via e-commerce, as well as indirectly through distributors[31](index=31&type=chunk) - Logitech International S.A. is a Swiss holding company, with shares listed on the SIX Swiss Exchange (LOGN) and Nasdaq Global Select Market (LOGI)[32](index=32&type=chunk) - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information and include normal and recurring adjustments[33](index=33&type=chunk)[34](index=34&type=chunk) - No material changes in significant accounting policies occurred during the three months ended June 30, 2025[35](index=35&type=chunk) - Significant estimates include goodwill and intangible asset fair value, pension obligations, customer incentives, inventory valuation, share-based compensation, uncertain tax positions, and deferred tax asset valuation allowances[36](index=36&type=chunk) - Macroeconomic and geopolitical conditions, including tariffs, inflation, interest rate and foreign currency fluctuations, and geopolitical conflicts, continue to impact demand, costs, and results of operations[37](index=37&type=chunk)[38](index=38&type=chunk) - The company is evaluating the impact of new accounting pronouncements ASU **2023-09** (Income Taxes) and ASU **2024-03** (Expense Disaggregation Disclosures), effective for annual periods beginning after December **15, 2024**, and December **15, 2026**, respectively[39](index=39&type=chunk)[40](index=40&type=chunk) [Note 2 — Net Income Per Share](index=12&type=section&id=Note%202%20%E2%80%94%20Net%20Income%20Per%20Share) This note details the calculation of Logitech's basic and diluted net income per share, including the impact of share equivalents | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Net income (in thousands) | $146,015 | $141,833 | | Weighted average shares outstanding - basic (in thousands) | 147,864 | 153,300 | | Weighted average shares outstanding - diluted (in thousands) | 149,053 | 154,978 | | Basic net income per share | $0.99 | $0.93 | | Diluted net income per share | $0.98 | $0.92 | - Share equivalents totaling **1.6 million (2025)** and **1.1 million (2024)** were excluded from diluted EPS calculation due to their antidilutive effect[41](index=41&type=chunk) [Note 3 — Employee Benefit Plans](index=12&type=section&id=Note%203%20%E2%80%94%20Employee%20Benefit%20Plans) This note outlines Logitech's various employee share purchase and stock incentive plans, along with related share-based compensation and defined benefit plan costs - Logitech offers the **2006 Employee Share Purchase Plan (Non-U.S.)**, **1996 Employee Share Purchase Plan (U.S.)**, and **2006 Stock Incentive Plan**, with shares generally issued from treasury stock[42](index=42&type=chunk) | Share-based Compensation Expense (in thousands) | June 30, 2025 | June 30, 2024 | | :---------------------------------------------- | :------------ | :------------ | | Cost of goods sold | $2,380 | $2,598 | | Marketing and selling | $13,930 | $11,851 | | Research and development | $6,351 | $5,739 | | General and administrative | $10,167 | $3,217 | | Total share-based compensation expense | $32,828 | $23,405 | | Income tax benefit | $(4,906) | $(7,602) | | Total share-based compensation expense, net of income tax benefit | $27,922 | $15,803 | - Share-based compensation costs capitalized as part of inventory were **$2.8 million** for Q1 FY26 and **$2.5 million** for Q1 FY25[44](index=44&type=chunk) - Defined benefit plan costs were **$1.7 million** for both three-month periods ended June 30, 2025 and 2024, primarily related to service costs[45](index=45&type=chunk) [Note 4 — Income Taxes](index=13&type=section&id=Note%204%20%E2%80%94%20Income%20Taxes) This note provides details on Logitech's income tax provision, effective tax rate, and the potential impacts of new tax legislation and global tax reforms | Income Tax Metric | June 30, 2025 (in thousands) | June 30, 2024 (in thousands) | | :------------------------ | :--------------------------- | :--------------------------- | | Income tax provision | $28,500 | $25,600 | | Effective income tax rate | **16.3%** | **15.3%** | - The **effective income tax rate increased** primarily due to changes in the mix of income/losses across tax jurisdictions, less tax incentives for foreign derived intangible income and R&D, and less benefit on stock-based compensation, partially offset by a change in uncertain tax positions[48](index=48&type=chunk) - The company does not expect the recently enacted U.S. One Big Beautiful Bill Act (OBBBA), effective FY27, to have a **material impact** on its income taxes, but is still evaluating its full impact[49](index=49&type=chunk) - For FY26, most jurisdictions are expected to qualify for the OECD Pillar Two transitional Country-by-Country Reporting safe harbor, with the estimated top-up tax being **immaterial**[50](index=50&type=chunk) [Note 5 — Balance Sheet Components](index=14&type=section&id=Note%205%20%E2%80%94%20Balance%20Sheet%20Components) This note provides a detailed breakdown of key asset and liability components on Logitech's condensed consolidated balance sheets | Asset Component (in thousands) | June 30, 2025 | March 31, 2025 | | :----------------------------- | :------------ | :------------- | | Accounts receivable, net | $636,523 | $454,546 | | Inventories | $499,770 | $503,747 | | Other current assets | $154,106 | $131,211 | | Property, plant and equipment, net | $116,103 | $113,858 | | Other assets | $362,525 | $344,077 | | Liability Component (in thousands) | June 30, 2025 | March 31, 2025 | | :--------------------------------- | :------------ | :------------- | | Accrued and other current liabilities | $672,788 | $686,503 | | Other non-current liabilities | $235,913 | $221,512 | | Accrued customer marketing, pricing and incentive programs | $203,412 | $173,401 | | Accrued personnel expenses | $134,992 | $180,763 | | Deferred revenue (current) | $29,768 | $25,798 | | Deferred revenue (non-current) | $43,382 | $38,216 | [Note 6 — Fair Value Measurements](index=15&type=section&id=Note%206%20%E2%80%94%20Fair%20Value%20Measurements) This note explains Logitech's fair value hierarchy for financial instruments and provides details on various asset and liability valuations - The company uses a three-level fair value hierarchy (Level **1**: quoted prices in active markets; Level **2**: observable inputs other than Level **1**; Level **3**: unobservable inputs) for financial assets and liabilities[55](index=55&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) | Financial Assets (in thousands) | June 30, 2025 (Level 1) | March 31, 2025 (Level 1) | | :------------------------------------ | :---------------------- | :----------------------- | | Cash equivalents | $822,300 | $852,467 | | Investments for deferred compensation plan | $33,657 | $29,006 | | Currency derivative assets (Level 2) | $731 | $90 | | Currency derivative liabilities (Level 2) | $10,038 | $2,849 | - Equity method investments had a carrying value of **$18.3 million** as of June 30, 2025, with no material income/loss or impairment during the period[60](index=60&type=chunk) - Non-marketable equity investments without readily determinable fair values amounted to **$8.8 million** as of June 30, 2025, with no impairment during the period[61](index=61&type=chunk) - No impairment of non-financial assets (**goodwill**, **intangible assets**, property, plant and equipment) occurred during the three months ended June 30, 2025 and 2024[62](index=62&type=chunk) [Note 7 — Derivative Financial Instruments](index=17&type=section&id=Note%207%20%E2%80%94%20Derivative%20Financial%20Instruments) This note describes Logitech's use of derivative financial instruments to manage currency exchange rate risks for inventory purchases and other transactions - Logitech uses cash flow hedge contracts to protect against exchange rate exposure for forecasted inventory purchases, extending coverage from four months to **up to twelve months** starting Q1 FY26[64](index=64&type=chunk) - **Notional amounts of foreign currency exchange forward contracts for inventory purchases were $314.8 million** as of June 30, 2025, up from **$74.6 million** as of March 31, 2025[65](index=65&type=chunk) - A **net loss of $13.4 million** related to cash flow hedges was included in accumulated other comprehensive loss as of June 30, 2025, expected to be reclassified to earnings within twelve months[65](index=65&type=chunk) | Cash Flow Hedges (in thousands) | June 30, 2025 | June 30, 2024 | | :------------------------------------------------------------------------------------------------ | :------------ | :------------ | | Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss | $(12,349) | $1,582 | | Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold | $2,002 | $(733) | - Other foreign currency exchange forward and swap contracts are used to reduce short-term effects of currency fluctuations on receivables/payables, with **notional amounts of $156.9 million** as of June 30, 2025[67](index=67&type=chunk) [Note 8 — Goodwill and Other Intangible Assets](index=18&type=section&id=Note%208%20%E2%80%94%20Goodwill%20and%20Other%20Intangible%20Assets) This note details Logitech's goodwill and acquired intangible assets, including impairment analysis and carrying amounts - **Goodwill** impairment analysis is conducted annually at December **31** or more frequently if triggering events occur; no triggering events were identified during the three months ended June 30, 2025 and 2024[69](index=69&type=chunk) | Goodwill Balance (in thousands) | Amount | | :---------------------- | :----- | | As of March 31, 2025 | $463,230 | | Effects of foreign currency translation | $2,560 | | As of June 30, 2025 | $465,790 | | Acquired Intangible Assets (Net Carrying Amount in thousands) | June 30, 2025 | March 31, 2025 | | :------------------------------------------- | :------------ | :------------- | | Trademarks and trade names | $2,981 | $3,715 | | Developed technology | $8,825 | $10,957 | | Customer contracts/relationships | $8,544 | $10,441 | | Total | $20,324 | $24,630 | [Note 9 — Financing Arrangements](index=18&type=section&id=Note%209%20%E2%80%94%20Financing%20Arrangements) This note outlines Logitech's credit facilities and bank lines, including terms, covenants, and outstanding borrowings - On January **27, 2025**, Logitech entered into an unsecured revolving credit facility of up to **$750.0 million**, terminating on January **27, 2030**, with options for increase and extension[71](index=71&type=chunk) - The credit agreement includes a maximum net debt to adjusted EBITDA ratio covenant and interest rates based on benchmark rates plus a spread[72](index=72&type=chunk) - No borrowing was outstanding under the credit agreement as of June 30, 2025[73](index=73&type=chunk) - The company also had uncommitted, unsecured bank lines of credit totaling **$174.3 million** as of June 30, 2025, with no outstanding borrowings[74](index=74&type=chunk) [Note 10 — Commitments and Contingencies](index=19&type=section&id=Note%2010%20%E2%80%94%20Commitments%20and%20Contingencies) This note details Logitech's warranty liabilities, indemnification obligations, and involvement in legal proceedings | Warranty Liabilities (in thousands) | June 30, 2025 | June 30, 2024 | | :---------------------------------- | :------------ | :------------ | | Beginning of the period | $49,184 | $44,654 | | Provision | $8,622 | $10,186 | | Settlements | $(8,249) | $(10,038) | | Effects of foreign currency translation | $649 | $(300) | | End of the period | $50,206 | $44,502 | - The company indemnifies suppliers and customers for intellectual property disputes and product safety defects, but no material amounts have been accrued as of June 30, 2025[76](index=76&type=chunk) - Logitech is involved in legal proceedings but does not believe their resolution will have a material adverse effect on its financial condition, cash flows, and results of operations[78](index=78&type=chunk) [Note 11 — Shareholders' Equity](index=20&type=section&id=Note%2011%20%E2%80%94%20Shareholders'%20Equity) This note provides information on Logitech's share capital, treasury shares, share repurchase programs, and accumulated other comprehensive loss - As of June 30, 2025, Logitech's nominal share capital is **CHF 42.2 million**, consisting of **168,994,142 issued shares (CHF 0.25 par value each)**, with **21,442,654 shares held in treasury**[79](index=79&type=chunk) - The 2023 share repurchase program, increased to **$1.6 billion** in March 2025, had **$524.3 million** available for repurchase as of June 30, 2025[81](index=81&type=chunk) | Share Repurchase Activity (in thousands) | June 30, 2025 | June 30, 2024 | | :--------------------------------------- | :------------ | :------------ | | Number of shares repurchased | 1,531 | 1,444 | | Aggregate cost of shares repurchased | $124,135 | $132,132 | - In June 2025, the Board approved the cancellation of **8.2 million treasury shares (repurchased for $712.2 million)**, expected to take effect in Q2 FY26[86](index=86&type=chunk) | Accumulated Other Comprehensive Loss (in thousands) | March 31, 2025 | June 30, 2025 | | :-------------------------------------------------- | :------------- | :------------ | | Currency Translation Adjustment | $(118,652) | $(91,359) | | Defined Benefit Plans | $(25,276) | $(25,433) | | Deferred Hedging Losses | $(3,024) | $(13,371) | | Total | $(146,952) | $(130,163) | [Note 12 — Segment Information](index=21&type=section&id=Note%2012%20%E2%80%94%20Segment%20Information) This note details Logitech's single operating segment, Peripherals, and provides a breakdown of sales by product category and geographic region - Logitech operates as a single operating segment: Peripherals, encompassing design, manufacturing, and sales of peripherals for gaming, PCs, tablets, video conferencing, and other digital platforms[88](index=88&type=chunk) | Sales by Product Category (in thousands) | June 30, 2025 | June 30, 2024 | | :----------------------- | :------------ | :------------ | | Gaming | $315,875 | $309,475 | | Keyboards & Combos | $222,492 | $215,333 | | Pointing Devices | $195,780 | $189,946 | | Video Collaboration | $166,716 | $147,042 | | Webcams | $84,374 | $72,904 | | Tablet Accessories | $91,227 | $78,539 | | Headsets | $45,523 | $44,236 | | Other | $25,716 | $30,742 | | Total Sales | $1,147,703 | $1,088,217 | | Sales by Geographic Region (in thousands) | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Americas | $461,690 | $485,289 | | EMEA | $346,840 | $309,817 | | Asia Pacific | $339,173 | $293,111 | | Total Sales | $1,147,703 | $1,088,217 | - Sales to customers in the United States, China, and Germany each represented **10% or more of total consolidated sales** for the periods presented[92](index=92&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Logitech's Q1 FY26 financial condition and results, covering performance drivers, macroeconomic impacts, and liquidity, noting a 5% net sales increase [Company Overview](index=25&type=section&id=Company%20Overview) This section provides a high-level description of Logitech's business, product portfolio, and global sales strategy - Logitech designs software-enabled hardware solutions for businesses and consumers, focusing on work, creation, and gaming, with a mission to extend human potential[99](index=99&type=chunk) - The product portfolio includes Gaming, Keyboards & Combos, Pointing Devices, Video Collaboration, Webcams, Tablet Accessories, and Headsets, all classified under a single operating segment: Peripherals[100](index=100&type=chunk) - Products are sold internationally through direct sales to retailers, e-tailers, businesses, and end consumers via e-commerce, and indirectly through distributors[101](index=101&type=chunk) [Impacts of Macroeconomic and Geopolitical Conditions on our Business](index=25&type=section&id=Impacts%20of%20Macroeconomic%20and%20Geopolitical%20Conditions%20on%20our%20Business) This section discusses how macroeconomic and geopolitical factors, including tariffs, inflation, and currency fluctuations, affect Logitech's operations - Increased import tariffs in the U.S. and responsive policies in other countries continue to adversely impact results of operations[103](index=103&type=chunk) - Ongoing macroeconomic and geopolitical conditions, including inflation, interest rate and foreign currency fluctuations, uncertain demand, low economic growth, and conflicts, cause volatility in product demand and costs[103](index=103&type=chunk)[104](index=104&type=chunk) [Trends and Uncertainties](index=25&type=section&id=Trends%20and%20Uncertainties) This section identifies key long-term growth trends and challenges, along with Logitech's strategies to mitigate associated risks - Long-term secular trends offering growth opportunities include AI (for productivity and innovation), new ways of working (hybrid work driving demand for peripherals and video conferencing), and gaming growth (online, multi-platform, esports)[105](index=105&type=chunk) - Challenges include tariff uncertainty, macroeconomic environment (inflation, interest rates, currency fluctuations), uncertain consumer/enterprise demand, timing of enterprise investments, and B2B go-to-market capabilities development[105](index=105&type=chunk)[106](index=106&type=chunk) - Mitigation steps include diversifying manufacturing, disciplined operating expenses, managing inventory, investing in B2B capabilities, and releasing new products[107](index=107&type=chunk) [Seasonality](index=26&type=section&id=Seasonality) This section explains the seasonal patterns in Logitech's sales and cash flow, typically peaking in the third fiscal quarter - Sales are generally highest in the **third fiscal quarter** (October to December) due to holiday season consumer demand and year-end enterprise spending[108](index=108&type=chunk) - Cash flow is typically lower in the first half of the fiscal year due to inventory build-up for Q3 and annual dividend payments[108](index=108&type=chunk) [Summary of Financial Results](index=26&type=section&id=Summary%20of%20Financial%20Results) This section provides a concise overview of Logitech's net sales, gross margin, operating expenses, and net income for the reporting period - **Net sales** for the three months ended June 30, 2025, increased **5% year-over-year** to **$1,147.7 million**, driven by Video Collaboration, Tablet Accessories, and Webcams, with improved demand in Asia Pacific and EMEA[109](index=109&type=chunk) - **Gross margin** decreased by **110 basis points to 41.7%** due to increased tariffs, higher promotional spend, and a prior year release in inventory reserves, partially offset by price increases and cost reductions[111](index=111&type=chunk) - **Operating expenses** remained relatively flat at **$316.9 million (27.6% of sales)** for the three months ended June 30, 2025, reflecting efforts to offset higher tariff costs[112](index=112&type=chunk)[141](index=141&type=chunk) - **Net income** for the three months ended June 30, 2025, was **$146.0 million**, up from **$141.8 million** in the prior year[112](index=112&type=chunk) [Critical Accounting Estimates](index=26&type=section&id=Critical%20Accounting%20Estimates) This section highlights Logitech's key accounting estimates, such as customer incentives, inventory valuation, and uncertain tax positions - Critical accounting estimates include accruals for customer incentives and related breakage, accrued sales return liability, inventory valuation, and uncertain tax positions[116](index=116&type=chunk) - No material changes in critical accounting estimates occurred during the three months ended June 30, 2025[118](index=118&type=chunk) [New Accounting Pronouncements](index=27&type=section&id=New%20Accounting%20Pronouncements) This section refers to Note 1 for details on new accounting pronouncements that Logitech will adopt - Refer to Note **1** for information on new accounting pronouncements to be adopted[119](index=119&type=chunk) [Constant Currency](index=27&type=section&id=Constant%20Currency) This section defines constant currency sales growth and explains its calculation, highlighting susceptibility to exchange rate shifts - Constant currency sales growth rates exclude the impact of currency exchange rate fluctuations, calculated by translating prior period sales at current period's average exchange rates[120](index=120&type=chunk) - Financial results are reported in U.S. Dollars, making them susceptible to significant shifts in currency exchange rates[121](index=121&type=chunk) [References to Sales](index=27&type=section&id=References%20to%20Sales) This section clarifies that 'sales' refers to net sales and that growth discussions are in U.S. Dollars - The term 'sales' refers to **net sales**, unless otherwise specified, and sales growth discussions are in U.S. Dollars[122](index=122&type=chunk) [Results of Operations](index=27&type=section&id=Results%20of%20Operations) This section analyzes Logitech's financial performance, including net sales, gross profit, and operating expenses, for the reported periods [Net Sales](index=27&type=section&id=Net%20Sales) This section analyzes Logitech's net sales performance, including growth drivers and currency denomination - **Net sales** increased **5%** for the three months ended June 30, 2025, compared to the prior year, driven by Video Collaboration, Tablet Accessories, and Webcams[123](index=123&type=chunk) - Sales growth in constant currency was also **5%** for the three months ended June 30, 2025[123](index=123&type=chunk) - Approximately **53% of sales** were denominated in non-U.S. currencies during the three months ended June 30, 2025[124](index=124&type=chunk) [Sales by Region](index=28&type=section&id=Sales%20by%20Region) This section provides a breakdown of Logitech's sales performance across different geographic regions, highlighting growth rates | Region | Sales Growth Rate (USD) | Constant Dollar Sales Growth Rate | | :----------- | :---------------------- | :-------------------------------- | | Americas | (5)% | (4)% | | EMEA | 12% | 9% | | Asia Pacific | 16% | 15% | - The decrease in Americas sales was primarily due to a decline in **Gaming sales**[126](index=126&type=chunk) - EMEA sales increased due to growth in **Gaming, Video Collaboration, Keyboards & Combos, and Tablet Accessories**[127](index=127&type=chunk) - Asia Pacific sales increased primarily driven by **Gaming and Tablet Accessories**[128](index=128&type=chunk) [Sales by Product Category](index=28&type=section&id=Sales%20by%20Product%20Category) This section details Logitech's sales performance across various product categories, identifying key growth areas | Product Category | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :----------------------- | :------------------ | :------------------ | :----------- | | Gaming | $315,875 | $309,475 | +2% | | Keyboards & Combos | $222,492 | $215,333 | +3% | | Pointing Devices | $195,780 | $189,946 | +3% | | Video Collaboration | $166,716 | $147,042 | +13% | | Webcams | $84,374 | $72,904 | +16% | | Tablet Accessories | $91,227 | $78,539 | +16% | | Headsets | $45,523 | $44,236 | +3% | | Other | $25,716 | $30,742 | -16% | | **Total Sales** | **$1,147,703** | **$1,088,217** | **+5%** | - **Gaming sales increased 2%**, primarily from gaming mice[131](index=131&type=chunk) - **Video Collaboration sales increased 13%**, mainly due to conference room cameras[134](index=134&type=chunk) - **Webcams and Tablet Accessories sales both increased 16%**, driven by PC-based webcams and strong demand from the education sector, respectively[135](index=135&type=chunk)[136](index=136&type=chunk) - Sales in the 'Other' category **decreased 16%**, primarily due to a decline in mobile speakers[138](index=138&type=chunk) [Gross Profit](index=30&type=section&id=Gross%20Profit) This section analyzes Logitech's gross profit and gross margin, discussing factors influencing changes, such as tariffs and promotional spend | Gross Profit Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :------------------ | :------------------ | :------------------ | :----------- | | Net sales | $1,147,703 | $1,088,217 | +5% | | Gross profit | $478,962 | $466,258 | +3% | | Gross margin | 41.7% | 42.8% | -110 bps | - **Gross margin** decreased by **110 basis points to 41.7%**, primarily due to unfavorable impacts from increased tariffs, higher promotional spend, and a prior year release in inventory reserves, partially offset by price increases in North America and product cost reductions[140](index=140&type=chunk) [Operating Expenses](index=30&type=section&id=Operating%20Expenses) This section details Logitech's operating expenses, including marketing, R&D, G&A, and restructuring charges, and their impact on profitability | Operating Expense (in thousands) | 2025 | % of sales (2025) | 2024 | % of sales (2024) | | :--------------------------------------------- | :--- | :---------------- | :--- | :---------------- | | Marketing and selling | $195,796 | 17.1% | $196,905 | 18.1% | | Research and development | $74,587 | 6.5% | $75,307 | 6.9% | | General and administrative | $41,797 | 3.6% | $37,458 | 3.5% | | Amortization of intangible assets and acquisition-related costs | $2,646 | 0.2% | $2,703 | 0.2% | | Restructuring charges, net | $2,042 | 0.2% | $386 | — % | | Total operating expenses | $316,868 | 27.6% | $312,759 | 28.7% | - Total **operating expenses** remained relatively flat, reflecting efforts to reduce expenses and offset higher tariff costs[141](index=141&type=chunk) - General and administrative expenses increased by **$4.3 million**, primarily due to higher performance-based stock compensation expense[145](index=145&type=chunk) - Restructuring charges, net, increased significantly from **$386 thousand** in 2024 to **$2,042 thousand** in 2025, related to a restructuring plan initiated in Q4 FY25[148](index=148&type=chunk) [Interest Income](index=31&type=section&id=Interest%20Income) This section reports Logitech's interest income and explains the factors contributing to its changes | Interest Income (in thousands) | 2025 | 2024 | | :----------------------- | :--- | :--- | | Interest income | $11,229 | $15,790 | - Interest income decreased by **$4.6 million**, primarily due to decreases in cash equivalents balance and interest rates[149](index=149&type=chunk) [Other Income (Expense), Net](index=32&type=section&id=Other%20Income%20(Expense)%2C%20Net) This section details Logitech's other income and expenses, including investment gains, currency exchange losses, and pension income | Other Income (Expense), Net (in thousands) | 2025 | 2024 | | :----------------------------------------- | :--- | :--- | | Investment gain related to the deferred compensation plan | $2,060 | $447 | | Currency exchange loss, net | $(2,003) | $(2,318) | | Loss on investments, net | $(393) | $(1,186) | | Non-service cost net pension income and other | $1,498 | $1,159 | | Total | $1,162 | $(1,898) | - The increase in investment gain from the deferred compensation plan is due to changes in market performance of underlying securities[150](index=150&type=chunk) - Currency exchange loss in 2025 was primarily due to fluctuations of the **Swiss Franc** and **New Taiwan dollar** against the U.S. Dollar[151](index=151&type=chunk) [Provision for Income Taxes](index=32&type=section&id=Provision%20for%20Income%20Taxes) This section outlines Logitech's income tax provision and effective tax rate, discussing factors influencing changes and future tax impacts | Income Tax Metric | 2025 | 2024 | | :------------------------ | :--- | :--- | | Provision for income taxes (in thousands) | $28,470 | $25,558 | | Effective income tax rate | 16.3% | 15.3% | - The **effective income tax rate increased** primarily due to changes in the mix of income/losses across tax jurisdictions, less tax incentives, and less benefit on stock-based compensation, offset by changes in uncertain tax positions[153](index=153&type=chunk) - The company does not expect the U.S. One Big Beautiful Bill Act (OBBBA) to have a **material impact** on its income taxes, but is still evaluating its full impact[154](index=154&type=chunk)[155](index=155&type=chunk) - Most jurisdictions are expected to qualify for the OECD Pillar Two transitional safe harbor for FY26, with the estimated top-up tax being **immaterial**[156](index=156&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses Logitech's financial liquidity and capital resources, including cash balances, available borrowings, and working capital management [Cash Balances, Available Borrowings, and Capital Resources](index=33&type=section&id=Cash%20Balances%2C%20Available%20Borrowings%2C%20and%20Capital%20Resources) This section details Logitech's cash position, available credit facilities, and key liquidity metrics like DSO, DPO, and inventory turnover - **Cash and cash equivalents** were **$1,487.8 million** as of June 30, 2025, a slight decrease from **$1,503.2 million** as of March 31, 2025[157](index=157&type=chunk) - **Working capital** increased to **$1,555.5 million** as of June 30, 2025, from **$1,491.6 million** as of March 31, 2025, primarily due to an increase in accounts receivable, net, partially offset by an increase in accounts payable[158](index=158&type=chunk) - The company has an undrawn unsecured revolving credit facility of up to **$750.0 million** and uncommitted, unsecured bank lines of credit totaling **$174.3 million** as of June 30, 2025[159](index=159&type=chunk)[161](index=161&type=chunk) | Financial Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------ | :------------ | :------------ | | Days sales in accounts receivable (DSO) | **50 days** | **49 days** | | Days accounts payable outstanding (DPO) | **74 days** | **80 days** | | Inventory turnover (ITO) | **5.4x** | **5.4x** | - **Net cash provided by operating activities** decreased to **$125.0 million** for the three months ended June 30, 2025, from **$176.0 million** in the prior year, mainly due to an unfavorable net change in operating assets and liabilities[166](index=166&type=chunk)[167](index=167&type=chunk) - **Net cash used in financing activities** was **$134.4 million**, primarily due to **$121.7 million in share repurchases**[168](index=168&type=chunk) - The Board recommended a cash dividend of **CHF 1.26 per share** for fiscal year 2025, totaling approximately **CHF 187.1 million**[171](index=171&type=chunk) - The company plans to target **share repurchases of $2 billion** over the three-year period ending March 31, 2028[172](index=172&type=chunk) [Operating Leases Obligations](index=36&type=section&id=Operating%20Leases%20Obligations) This section describes Logitech's commitments under operating leases for facilities and any material changes to contractual obligations - The company leases facilities under operating leases, with remaining non-cancelable terms expiring through **2035**[176](index=176&type=chunk) - No material changes to contractual obligations were reported compared to the Annual Report on Form **10-K** for FY25[176](index=176&type=chunk) [Purchase Commitments](index=36&type=section&id=Purchase%20Commitments) This section outlines Logitech's non-cancelable purchase commitments for inventory and capital expenditures - As of June 30, 2025, non-cancelable purchase commitments for inventory were **$368.7 million**, mostly expected to be fulfilled within **12 months**[177](index=177&type=chunk) - A liability of **$23.5 million** was recorded for firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand[177](index=177&type=chunk) - Firm purchase commitments for capital expenditures, primarily tooling and equipment, totaled **$19.1 million**[178](index=178&type=chunk) [Other Contractual Obligations and Commitments](index=36&type=section&id=Other%20Contractual%20Obligations%20and%20Commitments) This section refers to the Annual Report on Form 10-K for additional details on Logitech's contractual obligations and commitments - Further details on contractual obligations and commitments are available in the Annual Report on Form **10-K** for fiscal year ended March **31, 2025**[179](index=179&type=chunk) [Indemnifications](index=36&type=section&id=Indemnifications) This section describes Logitech's indemnification obligations to suppliers, customers, directors, and officers - Logitech indemnifies suppliers and customers for intellectual property and product safety issues, but no material amounts have been accrued as of June 30, 2025[180](index=180&type=chunk) - The company also indemnifies directors and officers, but the maximum payable amount cannot be reasonably estimated due to the conditional and variable nature of these obligations[181](index=181&type=chunk) [Legal Proceedings](index=37&type=section&id=Legal%20Proceedings) This section provides an overview of Logitech's involvement in legal proceedings and management's assessment of their potential financial impact - The company is involved in claims and legal proceedings in the ordinary course of business, as detailed in Part II Item **1** Legal Proceedings[183](index=183&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=37&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details Logitech's market risk exposure from currency exchange rates and interest rates, and its mitigation strategies using derivatives [Market Risk](index=37&type=section&id=Market%20Risk) This section defines market risk and identifies Logitech's primary exposures to currency exchange rates and interest rates - Market risk represents potential loss from adverse changes in fair value of financial instruments, primarily due to currency exchange rates and interest rates[184](index=184&type=chunk) [Currency Exchange Rates](index=37&type=section&id=Currency%20Exchange%20Rates) This section details Logitech's exposure to currency exchange rate fluctuations and its hedging strategies using derivative instruments - Logitech reports in U.S. Dollars, but transacts in approximately **30 currencies**, with **53% of sales in non-U.S. currencies (24% in Euro)**, making it exposed to currency exchange rate risk[186](index=186&type=chunk) - A strengthening **U.S. Dollar** has a more unfavorable impact on sales than a favorable impact on costs, leading to an adverse effect on operating results[186](index=186&type=chunk) - The company uses currency forward and swap contracts to reduce short-term currency fluctuations on receivables/payables and cash flow hedge contracts for forecasted inventory purchases (**up to twelve months**)[187](index=187&type=chunk)[189](index=189&type=chunk) - An adverse **10% foreign currency exchange rate change** would result in an adverse effect on income before income taxes of approximately **$15.9 million** as of June 30, 2025, after considering hedging effects[188](index=188&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded Logitech's disclosure controls and procedures were effective as of June 30, 2025, also clarifying control system limitations [Disclosure Controls and Procedures](index=39&type=section&id=Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of Logitech's disclosure controls and procedures as evaluated by management - Logitech's management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2025[191](index=191&type=chunk) [Definition of Disclosure Controls](index=39&type=section&id=Definition%20of%20Disclosure%20Controls) This section defines disclosure controls as systems designed to ensure timely and accurate reporting of SEC-required information - Disclosure Controls are designed to reasonably assure that information required for SEC reports is recorded, processed, summarized, and reported timely, and communicated to management for disclosure decisions[192](index=192&type=chunk) [Limitations on the Effectiveness of Controls](index=39&type=section&id=Limitations%20on%20the%20Effectiveness%20of%20Controls) This section acknowledges that control systems provide reasonable, not absolute, assurance and are subject to inherent limitations - Control systems provide only reasonable, not absolute, assurance and can be circumvented by errors, individual acts, collusion, or management override due to inherent limitations and resource constraints[193](index=193&type=chunk) [Changes in Internal Control over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section confirms no material changes in Logitech's internal control over financial reporting during the fiscal quarter - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[194](index=194&type=chunk) PART II — OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=Item%201.%20Legal%20Proceedings) Logitech is involved in ordinary course legal proceedings, which management believes will not materially affect financial condition or operations, despite inherent litigation uncertainties - The company is currently subject to several claims and legal proceedings in the ordinary course of business and intends to vigorously defend against them[195](index=195&type=chunk) - Management does not believe that the resolution of pending matters will have a material adverse effect on Logitech's financial condition, cash flows, and results of operations[195](index=195&type=chunk) - Litigation is subject to inherent uncertainties, and any claims or proceedings can adversely impact the company through defense costs, diversion of resources, and negative publicity[195](index=195&type=chunk) [ITEM 1A. RISK FACTORS](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section highlights material risks to Logitech's business, focusing on changes in tax laws, treaties, and global tax reforms like OECD Pillar Two and U.S. OBBBA - Changes in tax laws, treaties, rulings, or their interpretation, or loss of major tax disputes, could increase effective income tax rates and adversely affect **net income** and cash flows[198](index=198&type=chunk) - The U.S. One Big Beautiful Bill Act (OBBBA), effective FY27, includes corporate taxation provisions, but the company currently does not expect a **material impact**, though evaluation is ongoing[198](index=198&type=chunk) - The OECD Pillar Two global minimum tax rules could result in tax increases in Switzerland and other jurisdictions, with the company monitoring developments regarding potential exemptions for non-U.S. parented groups[201](index=201&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=41&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details Logitech's Q1 FY26 share repurchase activities under its 2023 program, including the number of shares repurchased and their aggregate cost [Share Repurchases](index=41&type=section&id=Share%20Repurchases) This section details Logitech's share repurchase activities under its 2023 program, including shares repurchased and remaining authorization - The 2023 share repurchase program was approved for **$1.6 billion**, with **$524.3 million** remaining available as of June 30, 2025[203](index=203&type=chunk)[204](index=204&type=chunk) | Share Repurchase Activity (in thousands) | Total Number of Shares Repurchased | Weighted Average Price Paid (CHF) | | :--------------------------------------- | :--------------------------------- | :-------------------------------- | | During the Three Months Ended June 30, 2025 | 1,531 | 66.95 | - All repurchased shares were for cancellation, executed on the **second trading line of SIX Swiss Exchange**[204](index=204&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item indicates no defaults upon senior securities for the reporting period - Not applicable; no defaults upon senior securities[205](index=205&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item indicates no mine safety disclosures are applicable to the company - None; no mine safety disclosures[206](index=206&type=chunk) [ITEM 5. OTHER INFORMATION](index=42&type=section&id=Item%205.%20Other%20Information) This section confirms no directors or executive officers adopted, modified, or terminated trading arrangements during Q1 FY26 [Securities Trading Plans of Directors and Executive Officers](index=42&type=section&id=Securities%20Trading%20Plans%20of%20Directors%20and%20Executive%20Officers) This section confirms no new, modified, or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements by directors or officers - No director or officer adopted, modified, or terminated **Rule 10b5-1** or **non-Rule 10b5-1 trading arrangements** during the first quarter of fiscal year 2026[207](index=207&type=chunk) [ITEM 6. EXHIBIT INDEX](index=43&type=section&id=Item%206.%20Exhibit%20Index) This section lists exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL taxonomy documents - Key exhibits include performance share unit agreements (**10.1, 10.2**), certifications of Principal Executive Officer and Principal Financial Officer (**31.1, 31.2, 32.1**), and XBRL taxonomy documents (**101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104**)[209](index=209&type=chunk) [Signatures](index=44&type=section&id=Signatures) This section contains the required signatures of Logitech's CEO and CFO, certifying the filing of the report - The report is signed by **Johanna (Hanneke) Faber, Chief Executive Officer**, and **Matteo Anversa, Chief Financial Officer**, on **July 30, 2025**[213](index=213&type=chunk)

Core Insights - Logitech International S.A. (LOGI) reported first-quarter fiscal 2026 non-GAAP earnings of $1.26 per share, exceeding the Zacks Consensus Estimate by 15.6% and reflecting a 12% year-over-year increase [1] - The company achieved revenues of $1.15 billion in the first quarter, surpassing the consensus mark by 3.2% and showing a 5% increase compared to the same quarter last year [1] Revenue Breakdown - Revenues from Keyboards & Combos rose 3% year over year to $222.5 million, while Pointing Devices grew 3% to $195.8 million [2] - Tablet Accessories saw a significant increase of 16% to $91.2 million, and Webcams also increased by 16% to $84.4 million [2] - Gaming revenues increased 2% year over year to $315.9 million, and Video Collaboration sales rose 13% to $166.7 million [3] - Headsets product category revenues increased 3% to $45.5 million, while Other categories' sales decreased by 16% to $25.7 million [3] Margins and Operating Metrics - Non-GAAP gross profit increased to $483.5 million from $471.3 million in the prior year, but non-GAAP gross margin contracted by 120 basis points to 42.1% [4] - Non-GAAP operating expenses decreased by 2.5% year over year to $281.7 million, representing 24.5% of revenues, a decrease of 200 basis points [4] - Non-GAAP operating income increased by 10.6% to $201.8 million, with the operating margin expanding by 80 basis points to 17.6% [5] Liquidity and Shareholder Return - As of June 30, 2025, LOGI's cash and cash equivalents were $1.49 billion, slightly down from $1.5 billion in the previous quarter [6] - The company generated $125 million in cash from operational activities in the first quarter and returned $122 million to shareholders through share repurchases, with no dividends paid during the quarter [6] Future Guidance - Logitech issued strong sales guidance for the second quarter of fiscal 2026, projecting revenues between $1.145 billion and $1.19 billion, indicating year-over-year growth of 3-7% on a reported basis [7][8] - The company also forecasts non-GAAP operating profit in the range of $180 million to $200 million for the upcoming quarter [8]

Core Insights - Logitech reported $1.15 billion in revenue for the quarter ended June 2025, marking a year-over-year increase of 5.5% and an EPS of $1.26 compared to $1.13 a year ago, exceeding Zacks Consensus Estimate of $1.11 billion by 3.16% [1] - The company delivered an EPS surprise of 15.6%, with the consensus EPS estimate being $1.09 [1] Financial Performance Metrics - Logitech's net sales for Pointing Devices reached $195.78 million, exceeding the average estimate of $193.93 million, with a year-over-year change of 3.1% [4] - Net Sales for Keyboards & Combos were $222.49 million, surpassing the average estimate of $220.75 million, reflecting a year-over-year increase of 3.3% [4] - Webcams generated net sales of $84.37 million, significantly above the average estimate of $73.99 million, with a year-over-year change of 15.7% [4] - Headsets reported net sales of $45.52 million, slightly above the average estimate of $45.07 million, with a year-over-year change of 2.9% [4] - Video Collaboration net sales were $166.72 million, exceeding the average estimate of $148.75 million, representing a year-over-year increase of 13.4% [4] - Gaming net sales reached $315.88 million, slightly below the average estimate of $321.13 million, with a year-over-year change of 2.1% [4] - Other net sales were $25.72 million, below the average estimate of $29.12 million, reflecting a year-over-year decline of 16.4% [4] - Tablet Accessories net sales were $91.23 million, exceeding the average estimate of $79.76 million, with a year-over-year increase of 16.2% [4] Stock Performance - Logitech shares have returned 4.9% over the past month, outperforming the Zacks S&P 500 composite's 3.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Core Insights - Logitech reported quarterly earnings of $1.26 per share, exceeding the Zacks Consensus Estimate of $1.09 per share, and up from $1.13 per share a year ago [1] - The earnings surprise was +15.60%, following a previous surprise of +8.14% in the last quarter [2] - The company achieved revenues of $1.15 billion for the quarter, surpassing the Zacks Consensus Estimate by 3.16% and up from $1.09 billion year-over-year [3] Financial Performance - Logitech has surpassed consensus EPS estimates in all four of the last quarters [2] - The company has also topped consensus revenue estimates three times over the last four quarters [3] - Year-to-date, Logitech shares have increased by approximately 14.8%, outperforming the S&P 500's gain of 8.6% [4] Future Outlook - The company's earnings outlook will be crucial for future stock performance, with current consensus EPS estimates at $1.05 for the coming quarter and $4.49 for the current fiscal year [5][8] - The Zacks Rank for Logitech is currently 3 (Hold), indicating expected performance in line with the market in the near future [7] - The Computer - Peripheral Equipment industry is ranked in the top 26% of over 250 Zacks industries, suggesting a favorable outlook for Logitech [9]

Financial Data and Key Metrics Changes - Net sales grew by 5% year over year in constant currency, with strong demand across both consumer and B2B segments [15][19] - Non-GAAP gross margin for the quarter was 42.1%, reflecting a 120 basis points decline from the previous year due to tariffs and higher promotional spending [16][70] - Operating expenses decreased by 2% year over year, representing 24.5% of net sales, down from 26.5% in the same quarter last year [17][18] Business Line Data and Key Metrics Changes - Video collaboration segment saw a 13% year over year growth, driven by strong demand in North America [15][28] - Personal workspace grew by 6% year over year, with double-digit growth in webcams and tablet accessories [15] - Gaming segment experienced a 6% growth, with significant share gains in North America and a notable recovery in China [36][100] Market Data and Key Metrics Changes - Asia Pacific region grew by 15% year over year, with strong performance in China [16][36] - EMEA region grew by 9%, driven by robust demand across all product categories [16] - North America declined by 4%, primarily due to a pause in product shipments during price negotiations [16] Company Strategy and Development Direction - The company is focused on three guiding principles: playing offense, disciplined cost control, and agility [5][6] - Continued investment in research and development, representing 6% of sales, to drive innovation and superior products [5] - Expansion in B2B markets, particularly in video conferencing, with double-digit growth in this segment [10][33] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing uncertainty regarding tariff policies, inflation, and customer sentiment but expressed confidence in the company's resilience [11][12] - The company expects net sales growth of 1% to 5% year over year in the second quarter, with gross margin rates projected between 41% and 42% [20][70] - Management emphasized the importance of maintaining rigorous cost discipline and agility in response to evolving market conditions [13][19] Other Important Information - The company returned $122 million to shareholders through share repurchases, consistent with its capital allocation priorities [19] - The company launched nine new products during the quarter, including innovative gaming and business solutions [9][10] Q&A Session Summary Question: Consumer reaction to price actions - Management noted a positive impact of price increases in the first quarter, contributing 50 basis points to growth, but it was too early to assess the full consumer reaction [24][25] Question: Strength of video collaboration business - Management expressed confidence in the sustainability of the 13% growth in video collaboration, although some pull-in demand may have occurred ahead of tariffs [28] Question: Economic impact of growing B2B mix - Management confirmed strong demand in the B2B segment, outpacing consumer demand, and highlighted the positive margin contribution from video conferencing products [33][34] Question: Inventory strategy and cash flow - Management indicated a strategy to pull in inventory ahead of tariffs, resulting in a strong cash flow of $125 million from operations [60][61] Question: Guidance for gross margins - Management provided detailed guidance on gross margins, expecting a negative impact from tariffs offset by price increases, with a projected range of 41% to 42% [70][71] Question: Demand patterns in Q1 - Management reported high single-digit demand growth across both B2B and consumer segments, with broad-based strength in various product lines [45][46] Question: Market share and competition - Management noted share gains in key categories but anticipated a temporary softening of shares following price increases [49][50] Question: Future growth in gaming - Management expressed optimism about the gaming segment, citing strong growth in premium segments and a recovery in share in China [36][100]

Financial Data and Key Metrics Changes - Net sales grew by 5% year over year in constant currency, with strong demand across both consumer and B2B segments [14][4] - Non-GAAP gross margin for the quarter was 42.1%, reflecting a 120 basis points decline from the previous year due to tariffs and higher promotional spending [15][16] - Operating expenses decreased by 2% year over year, representing 24.5% of net sales, down from 26.5% [16][5] - Generated $125 million in cash from operations, ending the quarter with a cash balance of $1.5 billion [17] Business Line Data and Key Metrics Changes - Video collaboration segment saw a 13% year over year growth, driven by strong demand in North America [14] - Personal workspace grew by 6% year over year, with double-digit growth in webcams and tablet accessories [14] - Gaming segment experienced a 6% growth, with significant share growth in North America and a notable recovery in China [32][33] Market Data and Key Metrics Changes - Asia Pacific region grew by 15% year over year, led by strong demand in China [15] - EMEA region grew by 9%, while North America declined by 4% due to pauses in product shipments during price negotiations [15] Company Strategy and Development Direction - The company continues to focus on long-term strategies, emphasizing investment in research and development, which accounted for 6% of sales [4] - A strategic shift towards B2B is evident, with demand in this segment outpacing consumer demand, particularly in video conferencing [8] - The company aims to reduce the share of US products originating from China from 40% to 10% by the end of the calendar year [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate uncertainty, citing a globally balanced business model and a strong brand [11] - The company anticipates continued uncertainty regarding tariff policies and inflation, but remains committed to driving growth and market share gains [12][10] - Future net sales growth is expected to be between 1% to 5% year over year in constant currency for the second quarter [18] Other Important Information - The company launched nine new products during the quarter, including a wireless gaming headset and a digital pencil for virtual reality [7] - The company returned $122 million to shareholders through share repurchases, consistent with its capital allocation priorities [17] Q&A Session Summary Question: Consumer reaction to price actions - Management noted a positive impact of 50 basis points from price increases in the first quarter, but it is too early to assess consumer reaction fully [22][24] Question: Strength of video collaboration business - Management confirmed strong demand in North America, with a 13% growth in video collaboration, though some pull-in demand may have occurred ahead of tariffs [25][26] Question: B2B performance and economic impact - B2B demand outpaced consumer demand, with strong growth in video conferencing and education sectors [30] Question: Inventory strategy and cash flow - The company plans to continue leveraging its strong balance sheet to pull in inventory ahead of tariffs, maintaining a healthy cash flow [57][58] Question: Guidance for gross margins - Management provided guidance indicating a gross margin rate between 41% and 42%, factoring in tariff impacts and price increases [67][68] Question: Impact of tariffs on future quarters - The expected tariff impact for the second quarter is between 200 to 300 basis points, with ongoing monitoring of the situation [78][79] Question: Timing to reach top line growth target - Management indicated that while the company is close to its growth target, expansion into new verticals like healthcare and government will take time [108][109]

[Financial Highlights & Management Commentary](index=1&type=section&id=Financial%20Highlights%20%26%20Management%20Commentary) Logitech reported strong Q1 FY2026 results with sales up 5% to $1.15 billion and non-GAAP operating income growing 11% to $202 million, driven by innovation and robust demand - Management attributes the strong quarterly performance to superior innovation, robust demand in B2B and consumer channels, and excellent execution across all regions[2](index=2&type=chunk) - The company returned **$122 million** in cash to shareholders through share repurchases during the quarter[3](index=3&type=chunk) Q1 FY2026 Key Financial Metrics (YoY) | Metric | Value | Change (YoY) | | :--- | :--- | :--- | | Sales | $1.15 billion | +5% (USD & Constant Currency) | | GAAP Gross Margin | 41.7% | -110 bps | | Non-GAAP Gross Margin | 42.1% | -120 bps | | GAAP Operating Income | $162 million | +6% | | Non-GAAP Operating Income | $202 million | +11% | | GAAP EPS | $0.98 | +7% | | Non-GAAP EPS | $1.26 | +12% | | Cash Flow from Operations | $125 million | - | | Quarter-ending Cash | $1.5 billion | - | [Business Outlook](index=2&type=section&id=Business%20Outlook) The company projects Q2 FY2026 sales between $1.145 billion and $1.190 billion, with non-GAAP operating income ranging from $180 million to $200 million Q2 FY2026 Outlook | Metric | Guidance Range | | :--- | :--- | | Sales | $1,145 - $1,190 million | | Sales Growth (USD, YoY) | 3% - 7% | | Sales Growth (Constant Currency, YoY) | 1% - 5% | | Non-GAAP Operating Income | $180 - $200 million | [Preliminary Consolidated Financial Statements](index=4&type=section&id=Preliminary%20Consolidated%20Financial%20Statements) This section presents unaudited GAAP condensed consolidated financial statements for Q1 FY2026, detailing the company's financial position and performance [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 FY2026 net sales reached **$1.148 billion** (+5%), with GAAP operating income at **$162.1 million** (+6%) and diluted EPS at **$0.98** (+7%) Q1 Statement of Operations Highlights (in thousands, except per share) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net Sales | $1,147,703 | $1,088,217 | | Gross Profit | $478,962 | $466,258 | | Operating Income | $162,094 | $153,499 | | Net Income | $146,015 | $141,833 | | Diluted EPS | $0.98 | $0.92 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets were **$3.74 billion**, total liabilities **$1.56 billion**, and cash and cash equivalents **$1.49 billion** Key Balance Sheet Items (in thousands) | Metric | June 30, 2025 | March 31, 2025 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,487,822 | $1,503,205 | | Total Assets | $3,742,963 | $3,538,504 | | Total Liabilities | $1,555,711 | $1,411,084 | | Total Shareholders' Equity | $2,187,252 | $2,127,420 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 FY2026 operating cash flow was **$125.0 million**, a decrease from prior year, with **$134.4 million** used in financing activities, mainly for share repurchases Q1 Cash Flow Summary (in thousands) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Net cash provided by operating activities | $125,045 | $176,029 | | Net cash used in investing activities | ($18,100) | ($15,359) | | Net cash used in financing activities | ($134,433) | ($145,134) | [Supplemental Financial Information](index=7&type=section&id=Supplemental%20Financial%20Information) This section provides supplemental financial details, including net sales by product category, GAAP to non-GAAP reconciliation, and share-based compensation expense [Net Sales by Product Category](index=7&type=section&id=Net%20Sales%20by%20Product%20Category) Sales growth was driven by Video Collaboration (+13%), Webcams (+16%), and Tablet Accessories (+16%), with Gaming as the top revenue category at **$315.9 million** Net Sales by Product Category (in thousands) | Product Category | Q1 FY2026 Sales | Q1 FY2025 Sales | Change YoY | | :--- | :--- | :--- | :--- | | Gaming | $315,875 | $309,475 | 2% | | Keyboards & Combos | $222,492 | $215,333 | 3% | | Pointing Devices | $195,780 | $189,946 | 3% | | Video Collaboration | $166,716 | $147,042 | 13% | | Webcams | $84,374 | $72,904 | 16% | | Tablet Accessories | $91,227 | $78,539 | 16% | | Headsets | $45,523 | $44,236 | 3% | | Other | $25,716 | $30,742 | (16)% | | **Total Net Sales** | **$1,147,703** | **$1,088,217** | **5%** | [GAAP to Non-GAAP Reconciliation](index=8&type=section&id=GAAP%20to%20Non-GAAP%20Reconciliation) Non-GAAP operating income increased 11% to **$201.8 million**, with non-GAAP diluted EPS at **$1.26** (+12%), adjusted for share-based compensation, amortization, and restructuring charges Q1 Operating Income Reconciliation (in thousands) | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | **Operating income - GAAP** | **$162,094** | **$153,499** | | Share-based compensation expense | $32,828 | $23,405 | | Amortization of intangible assets | $4,795 | $5,145 | | Restructuring charges, net | $2,042 | $386 | | **Operating income - Non-GAAP** | **$201,759** | **$182,435** | Q1 Diluted EPS Reconciliation | Metric | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | **Diluted EPS - GAAP** | **$0.98** | **$0.92** | | **Diluted EPS - Non-GAAP** | **$1.26** | **$1.13** | [Share-Based Compensation Expense](index=9&type=section&id=Share-Based%20Compensation%20Expense) Total share-based compensation expense for Q1 FY2026 was **$32.8 million**, primarily driven by Marketing and selling (**$13.9 million**) and General and administrative (**$10.2 million**) Share-Based Compensation Expense by Function (in thousands) | Expense Category | Q1 FY2026 | Q1 FY2025 | | :--- | :--- | :--- | | Cost of goods sold | $2,380 | $2,598 | | Marketing and selling | $13,930 | $11,851 | | Research and development | $6,351 | $5,739 | | General and administrative | $10,167 | $3,217 | | **Total** | **$32,828** | **$23,405** | [Notes on Financial Reporting](index=2&type=section&id=Notes%20on%20Financial%20Reporting) This section explains the use of non-GAAP financial measures and constant currency calculations, along with disclaimers for forward-looking statements and associated risks - The company uses non-GAAP financial measures, excluding items like share-based compensation, amortization of intangibles, and restructuring charges, to facilitate historical comparisons and provide investors with additional insight into performance[6](index=6&type=chunk)[20](index=20&type=chunk)[21](index=21&type=chunk) - Sales growth is also presented in constant currency, a non-GAAP measure, to show performance unaffected by fluctuations in currency exchange rates[6](index=6&type=chunk)[29](index=29&type=chunk) - The press release contains forward-looking statements, including the Q2 FY26 outlook, which are subject to various risks and uncertainties such as macroeconomic conditions, consumer demand, and supply chain challenges[10](index=10&type=chunk)