Logitech(US:LOGI)2024-01-24 16:00Sales Performance - Total sales for the three and nine months ended December 31, 2023 decreased by 1% and 8%, respectively, compared to the same periods in 2022, driven by lower demand across most product categories [121]. - Sales in the Americas region increased by 5% for the three months ended December 31, 2023, while sales in the Asia Pacific and EMEA regions decreased by 8% and 3%, respectively [122]. - Total sales for the three months ended December 31, 2023, decreased by 1% to $1,255,473,000 compared to $1,269,925,000 for the same period in 2022; for the nine months, sales decreased by 8% to $3,286,980,000 from $3,578,741,000 [159]. - Sales in the Americas region increased by 5% for the three months ended December 31, 2023, but decreased by 4% for the nine months; the growth was driven by Keyboards & Combos, Video Collaboration, and Webcams [140]. - EMEA region sales decreased by 3% for the three months and 3% for the nine months, primarily due to declines in Webcams and Video Collaboration, partially offset by increases in Gaming and Pointing Devices [141]. - Asia Pacific region sales decreased by 8% for the three months and 19% for the nine months, driven by declines in Gaming and Video Collaboration [142]. - Sales of Gaming products decreased by 1% for the three months and 7% for the nine months, primarily due to lower sales of gaming keyboards and mice [147]. - Sales of Keyboards & Combos increased by 4% for the three months but decreased by 7% for the nine months, driven by a decrease in cordless keyboards [149]. Financial Performance - Gross margin improved to 42.0% and 40.8% for the three and nine months ended December 31, 2023, an increase of 440 and 240 basis points, respectively, primarily due to lower material and logistics costs [123]. - Net income for the three and nine months ended December 31, 2023 was $244.7 million and $444.5 million, respectively, compared to $140.2 million and $323.1 million for the same periods in 2022 [126]. - Gross profit for the three months ended December 31, 2023, increased by 10% to $526,780,000, while gross margin improved to 42.0%, up from 37.6% in the same period of 2022; for the nine months, gross profit decreased by 3% to $1,341,044,000 [159][160]. - Operating expenses for the three months ended December 31, 2023 were $304.7 million, or 24.3% of sales, compared to $300.5 million, or 23.7% of sales, for the same period in 2022 [124]. - Total operating expenses for the three months ended December 31, 2023, increased to $304,705,000, up from $300,523,000 in the same period of 2022; for the nine months, expenses decreased to $883,925,000 from $956,026,000 [161]. - Research and development expenses increased to 5.8% and 6.4% of sales for the three and nine months ended December 31, 2023, respectively, reflecting continued investment in innovation [166]. - General and administrative expenses increased by $9.9 million and $24.3 million for the three and nine months ended December 31, 2023, respectively, primarily due to higher performance-based compensation [168]. - Interest income for the three months ended December 31, 2023, increased by $8.2 million to $12.8 million compared to $4.7 million in 2022, and for the nine months, it increased by $24.9 million to $34.5 million compared to $9.6 million in 2022, primarily due to rising interest rates [173]. - The provision for income taxes for the three months ended December 31, 2023, was a benefit of $9.6 million, compared to a provision of $42.7 million in 2022, resulting in an effective tax rate of -4.1% versus 23.3% in 2022 [178]. Cash Flow and Working Capital - As of December 31, 2023, cash and cash equivalents totaled $1,412.7 million, up from $1,149.0 million as of March 31, 2023 [182]. - Working capital as of December 31, 2023, was $1,495.0 million, down from $1,555.1 million as of March 31, 2023, driven by reduced inventories and increased accounts payable [183]. - Net cash provided by operating activities for the nine months ended December 31, 2023, was $906.0 million, significantly higher than $317.2 million in 2022 [191]. - Net cash used in investing activities for the nine months ended December 31, 2023, was $59.8 million, primarily for property, plant, and equipment purchases totaling $45.6 million [193]. Shareholder Returns and Commitments - In fiscal year 2024, the company paid a cash dividend of CHF 169.1 million ($182.3 million), an increase from CHF 156.1 million ($158.7 million) in fiscal year 2023 [196]. - The company repurchased 16.7 million shares for an aggregate cost of $1.2 billion under the 2020 share repurchase program, with 2.6 million shares repurchased for $159.1 million in fiscal year 2024 [197]. - A new three-year share repurchase program was approved in June 2023, allowing up to $1.0 billion for share repurchases, with $767.8 million available as of December 31, 2023 [198]. - As of December 31, 2023, the company had non-cancelable purchase commitments of $344.0 million for inventory purchases, with a liability of $33.8 million recorded [204]. - The company has firm purchase commitments of $14.0 million for capital expenditures related to tooling and equipment for new and existing products [205]. Currency Impact - Approximately 52% of sales during the three months ended December 31, 2023, were denominated in currencies other than the U.S. Dollar [138]. - If currency exchange rates had been constant, the constant dollar sales reduction rates would have been 3% and 9% for the three and nine months ended December 31, 2023, respectively [137]. - An adverse 10% foreign currency exchange rate change would have resulted in an adverse effect on income before income taxes of approximately $16.4 million as of December 31, 2023 [215]. - If the U.S. dollar had weakened by 10%, the amount recorded in accumulated other comprehensive income related to foreign exchange contracts would have been approximately $9.1 million lower as of December 31, 2023 [217]. Future Outlook - The company expects challenges from the current macroeconomic environment, including inflation and low consumer confidence, to continue in the near term [116]. - The rapid evolution of generative artificial intelligence presents both growth opportunities and risks for the company as it integrates AI capabilities into its products [119]. - The company has taken steps to mitigate challenges, including reducing operating expenses and aligning inventory with demand [117]. - The company anticipates future working capital requirements may increase to support investments in product innovations and growth opportunities [195]. Efficiency Metrics - Days sales outstanding (DSO) decreased to 49 days for the three months ended December 31, 2023, from 57 days in 2022, indicating improved collection efficiency [186]. - Days payable outstanding (DPO) increased to 65 days for the three months ended December 31, 2023, from 56 days in 2022, reflecting softened demand and higher inventory purchases [188]. - Inventory turnover (ITO) improved to 6.5 times for the three months ended December 31, 2023, compared to 4.0 times in 2022, due to effective inventory management [189].