LOGITECH INTERNATIONAL SA MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q)

You should read the following discussion in conjunction with the unaudited interim consolidated financial statements and accompanying notes.

This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements include, among other things, statements regarding our
strategy for growth, future revenues, earnings, cash flow, uses of cash and
other measures of financial performance, and market position, our business
strategy, the impact of investment prioritization decisions, product offerings,
sales and marketing initiatives, strategic investments, addressing execution
challenges, trends in consumer demand affecting our products and markets, trends
in the composition of our customer base, our current or future revenue and
revenue mix by product, among our lower- and higher-margin products and by
geographic region, our new product introductions, our expectations regarding the
potential growth opportunities for our products in mature and emerging markets
and the enterprise market, our expectations regarding the duration and overall
impact of COVID-19 on our business and results of operations, including as a
result of global supply chain challenges, our expectations regarding economic
conditions in international markets, including China, Russia and Ukraine, our
expectations regarding trends in global economic conditions and consumer demand
for PCs and mobile devices, tablets, gaming, video collaboration, audio,
pointing devices, wearables, remotes, microphones, streaming and other
accessories and computer devices and related software and services, the
interoperability of our products with third party platforms, our expectations
regarding the convergence of markets for computing devices and consumer
electronics, our expectations regarding the growth of cloud-based services, our
dependence on new products, our competitive position and the effect of pricing,
product, marketing and other initiatives by us and our competitors, the
potential that our new products will overlap with our current products, our
expectations regarding competition from well-established consumer electronics
companies in existing and new markets, potential tariffs, their effects and our
ability to mitigate their effects, our expectations regarding the recoverability
of our goodwill, goodwill impairment charge estimates and the potential for
future impairment charges, the impact of our current and proposed product
divestitures, changes in our planned divestitures, restructuring of our
organizational structure and the timing thereof, our expectations regarding the
success of our strategic acquisitions, including integration of acquired
operations, products, technology, internal controls, personnel and management
teams, significant fluctuations in currency exchange rates and commodity prices,
the impact of new product introductions and product innovation on future
performance or anticipated costs and expenses and the timing thereof, cash
flows, the sufficiency of our cash and cash equivalents, cash generated and
available borrowings (including the availability of our uncommitted lines of
credit) to fund future cash requirements, our expectations regarding future
sales compared to actual sales, our expectations regarding share repurchases,
dividend payments and share cancellations, our expectations regarding our future
working capital requirements and our anticipated capital expenditures needed to
support our product development and expanded operations, our expectations
regarding our future tax benefits, tax settlements, the adequacy of our
provisions for uncertain tax positions, our expectations regarding our potential
indemnification obligations, and the outcome of pending or future legal
proceedings and tax audits, our expectations regarding the impact of new
accounting pronouncements on our operating results, and our ability to achieve
and sustain renewed growth, profitability and future success. Forward-looking
statements also include, among others, those statements including the words
"anticipate," "believe," "could," "estimate," "expect," "forecast," "intend,"
"may," "plan," "project," "predict,", "seek", "should," "will," and similar
language. These forward-looking statements involve risks and uncertainties that
could cause our actual performance to differ materially from that anticipated in
the forward-looking statements. Factors that might cause or contribute to such
differences include, but are not limited to, those discussed below and in the
section titled "Risk Factors" in Part II, Item 1A of this Quarterly Report on
Form 10-Q. You are cautioned not to place undue reliance on the forward-looking
statements, which speak only as of the date of this Quarterly Report on
Form 10-Q. We undertake no obligation to publicly release any revisions to the
forward-looking statements or reflect events or circumstances after the date of
this document.

Overview of Our Company

Logitech is a world leader in designing, manufacturing and marketing products
that help connect people to digital and cloud experiences. Forty years ago,
Logitech created products to improve experiences around the personal computer
("PC") platform, and today it is a multi-brand, multi-category company designing
products that enable people to pursue their passions and connect to the
world. Logitech's products align with several large secular trends including
work and learn from anywhere, video everywhere, the increasing popularity of
gaming as a spectator and participant sport, and the democratization of content
creation. Logitech's brands include Logitech,
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Logitech G, ASTRO Gaming, Streamlabs, Blue Microphones, and Ultimate Ears. Our
Company's website is www.logitech.com.

Our products participate in five large market opportunities: Creativity &
Productivity, Gaming, Video Collaboration, Music and Smart Home. We sell our
products to a broad network of domestic and international customers, including
direct sales to retailers, e-tailers and enterprise customers, and indirect
sales through distributors. Our worldwide channel network includes consumer
electronics distributors, retailers, mass merchandisers, specialty stores,
computer and telecommunications stores, value-added resellers and online
merchants. We primarily sell our services directly to end customers.
From time to time, we may seek to partner with or acquire, when appropriate,
companies that have products, personnel, and technologies that complement our
strategic direction. We continually review our product offerings and our
strategic direction in light of our profitability targets, competitive
conditions, changing consumer trends and the evolving nature of the interface
between the consumer and the digital world.
Impacts of COVID-19 to Our Business
In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus ("COVID-19") as a pandemic, which continues to spread throughout the
world. The spread of COVID-19 has caused public health officials to recommend
precautions to mitigate the spread of the virus and, in certain markets in which
we operate, government authorities have from time to time issued orders that
require the closure of or restrictions on non-essential businesses and people to
be quarantined or to shelter-at-home. The COVID-19 pandemic has curtailed global
economic activity, caused volatility and disruption in global financial and
commercial markets, and is likely to continue to cause uncertainty for an
indeterminate amount of time. While most of our offices have at least partially
reopened or will be reopening in the near future, we are conducting our business
with substantial modifications, such as employee remote work in many
non-manufacturing facilities and travel limitations, among other changes. We are
continuing to actively monitor the situation and may take further actions that
alter our business operations as may be required by federal, state or local
authorities in the countries in which we operate, or that we determine are in
the best interest of our employees, customers, partners, suppliers or
shareholders.
In fiscal year 2021, we experienced disruptions to our supply chain and
logistics, inventory constraints, and increased logistics costs, as we attempted
to address the effects of COVID-19. At the same time, due to the shelter-at-home
requirements or other restrictions in many countries, there was an acceleration
of work-from-anywhere, learn-from-anywhere, gaming, video collaboration and
streaming trends and high demand and consumption of certain of our products that
led to increased sales and operating income. While we continued to experience
increased sales in the first nine months of fiscal year 2022 compared to the
first nine months of fiscal year 2021, we also experienced supply and demand
volatility, as the COVID-19 pandemic and related safety measures and
restrictions have evolved differently across the world. Further, the demand
volatility has led to, and could continue to lead to in the future, higher
promotions and marketing expenses, or excess inventories, or both, which could
have an adverse impact on our results of operations.
In addition, the continued COVID-19 pandemic has resulted in industry-wide
global supply chain challenges, including manufacturing, transportation and
logistics. We purchase certain products and key components from a limited number
of sources, and depend on the supply chain, including freight, to receive
components, transport finished goods and deliver our products across the world.
While we proactively manage our supply chain, we expect to continue to be
impacted by higher logistics and component costs, prolonged delays, and
challenges with component availability. We believe that our long-term supplier
relationships, as well as our hybrid model that includes in-house manufacturing
in Suzhou, China, will help to mitigate the effects of these supply chain
challenges.
It is difficult to predict the progression, the duration and all of the effects
of COVID-19, how business restrictions and shelter-at-home guidelines may evolve
on a global basis, how consumer demand, supply chain challenges, including
inventory and logistical effects and costs, may change over time, and the impact
on our future sales and results of operations. The full extent of the impact of
COVID-19 on our business and our operational and financial performance is
currently uncertain and will depend on many factors outside our control. For
additional information, see "Liquidity and Capital Resources" below and Item 1A
"Risk Factors," including under the caption "The full effect of the COVID-19
pandemic is still uncertain and cannot be predicted, and could adversely affect
our business, results of operations and financial condition," "If we do not
successfully coordinate the worldwide manufacturing and distribution of our
products, we could lose sales" and "We purchase key components and products from
a limited number of sources, and our business and operating results could be
adversely affected if supply were delayed or constrained or if there were
shortages of required components."
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Contents

Summary of financial results

Our total sales for the three and nine months ended December 31, 2021 decreased
2% and increased 14%, respectively, compared to the three and nine months ended
December 31, 2020. Our condensed consolidated statements of operations for the
three and nine months ended December 31, 2021 include the results of operations
for our first quarter acquisition from its date of acquisition.

Sales for the three months ended December 31, 2021 increased 1% in the EMEA
region, and decreased 4% and 2% in the Americas and Asia Pacific regions,
respectively, compared to the same period of the prior fiscal year. Sales for
the nine months ended December 31, 2021 increased 14%, 14%, and 15% in the
Americas, EMEA and Asia Pacific, respectively, compared to the same period of
the prior fiscal year.

Gross margin for the three months ended December 31, 2021 decreased by 460 basis
points to 40.3% from 44.9% for the three months ended December 31, 2020. Gross
margin for the nine months ended December 31, 2021 decreased by 210 basis points
to 41.6% from 43.7% for the nine months ended December 31, 2020.

Operating expenses for the three months ended December 31, 2021 were $395.3
million, or 24.2% of sales, compared to $300.9 million, or 18.0% of sales, in
the same period of the prior fiscal year. Operating expenses for the nine months
ended December 31, 2021 were $1,123.9 million, or 26.4% of sales, compared to
$771.4 million, or 20.8% of sales, in the same period of the prior fiscal year.
Net income for the three and nine months ended December 31, 2021 was $210.0
million and $536.3 million, respectively, compared to $382.5 million and $721.5
million for the three and nine months ended December 31, 2020, respectively.

Trends in our business

Our products participate in five large multi-category market opportunities,
including Creativity & Productivity, Gaming, Video Collaboration, Music and
Smart Home. The following discussion represents key trends specific to our
market opportunities.
Trends Specific to Our Five Market Opportunities
Creativity & Productivity: New PC shipments have continued to be strong due to
work-from-home and learn-from-home trends. We believe that innovative PC
peripherals, such as our mice and keyboards, can renew the PC usage experience
and help improve the productivity and engagement of remote work and learning,
thus providing growth opportunities. Hybrid work culture will also greatly
expand the number of new workspaces to which we can attach our PC peripherals.
Increasing adoption of various cloud-based applications has led to multiple
unique consumer use cases, which we are addressing with our innovative product
portfolio and a deep understanding of our customer base. The increasing
popularity of streaming and broadcasting, as well as the continuing
work-from-home trend, provides additional growth opportunities for our webcam
products as well as other products in our portfolio. Smaller mobile computing
devices, such as tablets, have created new markets and usage models for
peripherals and accessories. We offer a number of products to enhance the use of
mobile devices, including a combo backlit keyboard case with trackpad for the
iPad.
Gaming: The PC gaming and console gaming platforms continue to show strong
structural growth opportunities as online gaming, multi-platform experiences,
and esports gain greater popularity and gaming becomes more social, particularly
as other recreational activities have been curtailed or restricted during the
COVID-19 pandemic. We expect gaming will increasingly become one of the largest
participant and spectator sports in the world. We believe Logitech is well
positioned to benefit from the overall gaming market growth. In addition, our
acquisition of Streamlabs provides a solid platform to deliver recurring
services and subscriptions to gamers and streamers.
Video Collaboration: The near and long-term structural growth opportunities in
the video collaboration market ("VC") have never been more prevalent than in
today's environment, as commercial and consumer adoption of video has seen
substantial growth since the start of the COVID-19 pandemic. Video meetings
continue to be an opportunity as companies want lower-cost, cloud-based
solutions that can provide their employees with the ability to work from
anywhere. We are continuing our efforts to create and sell innovative products
to accommodate the
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increasing demand from home offices and small-size meeting rooms, such as huddle
rooms, to medium and large-sized meeting rooms. We will continue to invest in
the development of select business-specific products (both hardware and
software), targeted product marketing and sales channel development. The
digitization of learning and hybrid learning environments have also created
demand and growth opportunities in the education market.
Music: Consumers are optimizing their audio experiences on their tablets and
smartphones with a variety of music peripherals including wireless mobile
speakers and in-ear and other headphones. However, the mobile speaker market has
matured and the integration of personal voice assistants has increased
competition in the speaker category. In addition, the retail footprint has
decreased significantly due to the COVID-19 pandemic. These factors have led to
a decline in our Mobile Speakers category sales in the past three years. In the
wireless headphone industry, the largest growth in recent years has been in true
wireless headphones while traditional wireless headphones have declined
significantly. We will continue developing wireless audio products as growth in
the wireless headphone market is expected for the next several years.
Smart Home: Sales of our Harmony universal remote and Circle security family of
products declined substantially in the three and nine months ended December 31,
2021. In general, our sales of Harmony and Circle products are under pressure as
the way people consume content is changing and as retail stores have been closed
or subject to restrictions. The smart home market opportunity is broad, and we
will continue to explore other innovative experiences to drive growth in the
Smart Home category.
Business Seasonality and Product Introductions
We have historically experienced higher sales in our third fiscal quarter ending
December 31, compared to other fiscal quarters in our fiscal year, primarily due
to the increased consumer demand for our products during the year-end holiday
buying season and year-end spending by enterprises. Additionally, new product
introductions and business acquisitions can significantly impact sales, product
costs and operating expenses. Product introductions can also impact our sales to
distribution channels as these channels are filled with new product inventory
following a product introduction, and often channel inventory of an earlier
model product declines as the next related major product launch approaches.
Sales can also be affected when consumers and distributors anticipate a product
introduction or changes in business circumstances. However, neither historical
seasonal patterns nor historical patterns of product introductions should be
considered reliable indicators of our future pattern of product introductions,
future sales or financial performance. Furthermore, cash flow is correspondingly
lower in the first half of our fiscal year as we typically build inventories in
advance for the third quarter and we pay an annual dividend following our Annual
General Meeting, which is typically in September.
Swiss Federal Tax Reform
As described in our Annual Report on Form 10-K for the fiscal year ended
March 31, 2021, the canton of Vaud in Switzerland enacted the Tax Reform and AHV
Financing ("TRAF") on March 10, 2020 that took effect as of January 1, 2020. Our
cash tax payments have increased in Switzerland beginning in fiscal year 2020 as
a result of our transition out of our longstanding tax ruling from the canton of
Vaud.

Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity
with U.S. GAAP requires us to make assumptions, judgments, and estimates, that
affect reported amounts of assets, liabilities, sales and expenses, and the
disclosure of contingent assets and liabilities. We base our assumptions,
judgments and estimates on historical experience and various other factors that
we believe to be reasonable under the circumstances. Actual results could differ
materially from these estimates under different assumptions or conditions. On a
regular basis, we evaluate our assumptions, judgments and estimates. We also
discuss our critical accounting policies and estimates with the Audit Committee
of the Board of Directors.
We believe that the assumptions, judgments and estimates involved in the
accounting for accruals for customer incentives and related breakage when
appropriate, accrued sales return liability, inventory valuation, uncertain tax
positions, and business acquisitions have the greatest potential impact on our
condensed consolidated financial statements. These areas are key components of
our results of operations and are based on complex rules requiring us to make
judgments and estimates and consequently, we consider these to be our critical
accounting policies. Historically, our assumptions, judgments and estimates
relative to our critical accounting policies have not differed materially from
actual results.

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There have been no material changes in our critical accounting policies and
estimates during the nine months ended December 31, 2021 compared with the
critical accounting policies and estimates disclosed in Management's Discussion
and Analysis of Financial Condition and Results of Operations included in our
Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Adoption of new accounting standards

Refer to Note 1 to the condensed consolidated financial statements included in
this Quarterly Report on Form 10-Q for recent accounting pronouncements adopted
and to be adopted.

Impact of Constant Currency
We refer to our net sales growth rates excluding the impact of currency exchange
rate fluctuations as "constant currency" sales growth rates. Percentage of
constant currency sales growth is calculated by translating prior period sales
in each local currency at the current period's average exchange rate for that
currency and comparing that to current period sales.
Given our global sales presence and the reporting of our financial results in
U.S. Dollars, our financial results could be affected by significant shifts in
currency exchange rates. See "Results of Operations" for information on the
effect of currency exchange results on our sales. If the U.S. Dollar appreciates
or depreciates in comparison to other currencies in future periods, this will
affect our results of operations in future periods as well.
References to Sales
The term "sales" means net sales, except as otherwise specified and the sales
growth discussion and sales growth rate percentages are in U.S. Dollars, except
as otherwise specified.

Sales denominated in other currencies

Although our financial results are reported in U.S. Dollars, a portion of our
sales was generated in currencies other than the U.S. Dollar, such as the Euro,
Chinese Renminbi, Japanese Yen, Canadian Dollar, Taiwan New Dollar, British
Pound and Australian Dollar. During the three months ended December 31, 2021,
approximately 53% of our sales were denominated in currencies other than the
U.S. Dollar.
Results of Operations
Net Sales
Our sales in the three months ended December 31, 2021, decreased 2% and
increased 14% for the nine months ended December 31, 2021, compared to the same
periods of the prior fiscal year. The decrease in sales for the three month
period was primarily driven by a decline in sales for Tablet and Other
Accessories, Audio & Wearables, Mobile Speakers and PC Webcams, partially offset
by an increase in sales for Keyboards & Combos, Gaming and Pointing Devices. For
the nine months ended December 31, 2021, strong sales growth in Gaming,
Keyboards & Combos, and Pointing Devices was partially offset by a decline in
sales of Mobile Speakers and Tablet and Other Accessories. Our sales in both the
three and nine month periods were negatively impacted by higher promotions and
industry-wide supply chain challenges, including supply availability and
logistics delays, as compared to the same periods in the prior fiscal year. If
currency exchange rates had been constant in the three and nine months ended
December 31, 2021 and 2020, our constant dollar sales growth rate would have
been a decrease of 2% for the three months ended and an increase of 13% for the
nine months ended December 31, 2021.

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Sales by Region

The following table presents the change in sales by region for the three and
nine months ended December 31, 2021, compared with the three and nine months
ended December 31, 2020:
                                                  Sales Growth Rate                                        Constant Dollar
                                                                                                          Sales Growth Rate
                                   Three Months Ended           Nine Months Ended          Three Months Ended           Nine Months Ended
                                    December 31, 2021           December 31, 2021           December 31, 2021           December 31, 2021
Americas                                          (4) %                       14  %                       (5) %                       13  %
EMEA                                               1  %                       14  %                        3  %                       12  %
Asia Pacific                                      (2) %                       15  %                       (2) %                       13  %



Americas:

The decrease in sales in the Americas region for the three-month period
presented above was primarily driven by a decrease in sales of Tablet and Other
Accessories, Audio & Wearables, Mobile Speakers and PC Webcams, partially offset
by an increase in sales of Keyboards & Combos and Video Collaboration. The
increase in sales for the nine-month period was primarily driven by growth in
sales of Video Collaboration, Keyboards & Combos and Gaming, partially offset by
a decline in sales of Mobile Speakers.

EMEA:

The increase in sales in our EMEA region for the three-month period was
primarily driven by growth in sales of Keyboards & Combos, Tablets and Other
Accessories, Gaming and Pointing Devices, partially offset by a decline in sales
of the other product categories. The increase in sales for the nine-months ended
period was primarily driven by growth in sales of Tablets and Other Accessories,
Keyboards & Combos, Gaming, Pointing Devices, and PC Webcams, partially offset
by a decline in sales of the other product categories.


Asia Pacific:

The decrease in sales in our Asia Pacific region for the three-month period
presented above was primarily driven by a decrease in sales of Tablet and Other
Accessories, Mobile Speakers, and Audio & Wearables, partially offset by an
increase in sales of the other product categories. The increase in sales for the
nine-month period was primarily driven by growth in sales across a majority of
our product categories, partially offset by a decline in sales of Tablet & Other
Accessories.



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Sales by Product Categories

Sales by product category for the three and nine months ended December 31, 2021 and 2020 were as follows (in thousands of dollars):

                                                         Three Months Ended                                               Nine Months Ended
                                                            December 31,                                                    December 31,
                                           2021                 2020                Change                 2021                 2020                Change
Pointing Devices                      $   231,090          $   213,638                     8  %       $   602,982          $   503,228                    20  %
Keyboards & Combos                        281,608              218,269                    29              736,237              565,246                    30
PC Webcams                                115,115              131,700                   (13)             319,504              295,020                     8
Tablet & Other Accessories                 82,859              138,052                   (40)             242,932              267,186                    (9)
Gaming (1)                                469,282              436,426                     8            1,135,456              916,040                    24
Video Collaboration                       287,187              292,500                    (2)             753,725              659,278                    14
Mobile Speakers                            56,748               72,566                   (22)             124,724              145,156                   (14)
Audio & Wearables                         104,280              152,952                   (32)             318,965              338,592                    (6)
Smart Home                                  4,559               10,593                   (57)              16,380               25,976                   (37)
Other (2)                                      54                  606                   (91)                 202                  632                   (68)

Total Sales                           $ 1,632,782          $ 1,667,302                    (2) %       $ 4,251,107          $ 3,716,354                    14  %


(1) Games include streaming services revenue generated by Streamlabs. (2) Other includes products that we currently intend to phase out or have already phased out because they are no longer strategic to our business.

Creativity and Productivity Market:

Pointing Devices Our Pointing Devices category includes mice for PC and Mac, including trackballs, touchpads and presentation tools.

Sales of Pointing Devices increased 8% and 20% in the three and nine months
ended December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. The increases in both periods were primarily driven by the increase
in sales for cordless and corded mice, and presentation tools. Trackball mice
also contributed to the increase in sales for the nine-month period.

Keyboards & Combo Our Keyboards & Combo category includes PC keyboards, keyboard/mouse combo products, and parlor keyboards.

Sales of Keyboards & Combos increased 29% and 30% in the three and nine months
ended December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. The increases for both periods were primarily driven by an increase
in sales of our keyboard/mice combos as well as our cordless and corded PC
keyboards.

PC Webcams Our PC Webcams category includes PC webcams aimed primarily at consumers, including streaming cameras.

Sales of PC Webcams decreased 13% for the three months ended and increased 8%
for the nine months ended December 31, 2021, compared to the same periods of the
prior fiscal year. The decrease in sales for the three-month period was
primarily driven by a decline in sales of our Streamcam, HD Webcam C505, HD Pro
Webcam C920, and 1080 PRO Stream Webcam, partially offset by an increase in
sales of our BRIO 4K Stream Edition, and HD Webcam C615.

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The increase for the nine-month period was driven by sales of our HD Webcam 505,
BRIO 4K Stream Edition, and 1080P PRO Stream Webcam, partially offset by a
decrease in sales of our Streamcam and HD Webcam C615.

Tablet & Other Accessories Our Tablet & Other Accessories category primarily includes tablet keyboards.

Sales of Tablet & Other Accessories products decreased 40% and 9% for the three
and nine months ended December 31, 2021, compared to the same periods of the
prior fiscal year. The decrease for both periods were primarily driven by
decrease in sales of our Rugged Folio and Slim Folio Products, partially offset
by an increase in sales of our Combo Touch for iPad Pro 12.9-inch, introduced in
the second quarter of fiscal year 2022, Combo Touch for iPad Pro 11-inch and
Combo Touch for iPad Air, introduced in the first quarter of fiscal year 2022
and POWERED (a wireless 3-in-1 charging dock for Apple products).

Gaming market:
Gaming
Our Gaming category comprises gaming mice, keyboards, headsets, gamepads,
steering wheels, simulation controllers, console gaming headsets, console gaming
controllers, and Streamlabs services.

Sales of Gaming increased 8% and 24% for the three and nine months ended
December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. The increase for both periods was primarily driven by strong
performance in nearly all of our Gaming sub-categories, including our gaming
mice, PC gaming headsets, gaming steering wheels, gaming keyboards, and
Streamlabs services, partially offset by a decline in the sales of our console
gaming controllers, and console gaming headsets.


Video Collaboration market:
Video Collaboration
Our Video Collaboration category includes Logitech's ConferenceCams, which
combine affordable enterprise-quality audio and high definition 1080p video to
bring video conferencing to businesses of any size.

Sales of Video Collaboration products decreased 2% for three months ended and
increased 14% for the nine months ended December 31, 2021, compared to the same
periods of the prior fiscal year. The decrease for the three-month period was
primarily due to a decrease in sales of our Webcam C930e, Webcam 925E, BRIO 4k
Pro Webcam and Rally Bar conference camera, partially offset by an increase in
sales of our MeetUp conference camera. The increase in sales for the nine-month
period was primarily driven by an increase in sales of our MeetUp conference
camera, Webcam 925E and our Rally Bar conference camera, partially offset by a
decline in sales of our Webcam C930e, Brio 4K Pro Webcam and GROUP video
conferencing solution for mid to large-sized meeting rooms.


Music market:

Mobile Speakers Our Mobile Speakers category is all about Bluetooth wireless speakers.

Sales of Mobile Speakers decreased 22% and 14% for the three and nine months
ended December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. The decrease for both periods was primarily due to a decrease in
sales of UE WONDERBOOM, UE Megaboom, BOOM 2 and WONDERBOOM 2 mobile speakers
partially offset by an increase in sales of our BOOM 3 mobile speakers. The
decrease in sales for the nine-month period was further offset by an increase in
sales of our Blast mobile speakers.

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Audio & Wearables
Our Audio & Wearables category comprises PC speakers, PC headsets, in-ear
headphones, premium wireless audio wearables and studio-quality microphones for
professionals and consumers.

Sales of Audio & Wearables decreased 32% and 6% for the three and nine months
ended December 31, 2021, compared to the same periods of the prior fiscal year.
The decrease for both periods was primarily due to a decrease in sales of our
Blue Microphone products, cordless headsets and Jaybird products, partially
offset by an increase in sales of our Ultimate Ears custom headsets. The
decrease in sales for the nine-month period was further offset by an increase in
sales of our corded headsets.

In the third quarter of fiscal 2022, we made a decision to cease future product
launches under the Jaybird brand, but plan to continue developing wireless audio
products such as Ultimate Ears.

Smart Home market:
Smart Home
Our Smart Home category mainly comprises our Harmony line of advanced home
entertainment controllers and home security cameras.

Sales of Smart Home decreased 57% and 37% for the three and nine months ended
December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. The decreases for both periods were primarily due to a decline in
sales of most of our Harmony remotes and our home video products, partially
offset by increases in sales of our Circle View Doorbell, introduced in the
third quarter of fiscal year 2021.

Gross profit

Gross profit for the three and nine months ended December 31, 2021 and 2020 was as follows (in thousands of dollars):

                               Three Months Ended                              Nine Months Ended
                                  December 31,                                    December 31,
                       2021              2020          Change          2021              2020          Change
Net sales         $ 1,632,782       $ 1,667,302          (2) %    $ 4,251,107       $ 3,716,354          14  %

Gross profit      $   658,010       $   749,010         (12) %    $ 1,769,099       $ 1,624,466           9  %
Gross margin             40.3  %           44.9  %                       41.6  %           43.7  %



Gross profit consists of sales less cost of goods sold (which includes
materials, direct labor and related overhead costs, costs of manufacturing
facilities, royalties, costs of purchasing components from outside suppliers,
distribution costs, warranty costs, customer support costs, shipping and
handling costs, outside processing costs and write-down of inventories), and
amortization of intangible assets.

Gross margin decreased by 460 and 210 basis points for the three and nine months
ended December 31, 2021, respectively, compared to the same periods of the prior
fiscal year. Our gross margin for both periods declined due to increased
promotional spending, increased logistics costs, higher reserves for excess
inventories including Jaybird exit costs, partially offset by favorable currency
exchange rates and favorable product mix.

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Operating Expenses

Operating expenses for the three and nine months ended December 31, 2021 and 2020 were as follows (in thousands of dollars):

                                                                  Three Months Ended                       Nine Months Ended
                                                                     December 31,                             December 31,
                                                               2021                2020                 2021                 2020
Marketing and selling                                      $ 269,941           $ 204,485           $   778,882           $ 496,520
% of sales                                                      16.5  %             12.3  %               18.3  %             13.4  %
Research and development                                      75,529              53,910               213,436             157,014
% of sales                                                       4.6  %              3.2  %                5.0  %              4.2  %
General and administrative                                    38,478              37,606               112,291              98,341
% of sales                                                       2.4  %              2.3  %                2.6  %              2.6  %
Amortization of intangible assets and
acquisition-related costs                                      3,662               4,946                13,986              13,886
% of sales                                                       0.2  %              0.3  %                0.3  %              0.4  %
Impairment of intangible assets                                7,000                   -                 7,000                   -
% of sales                                                       0.4  %                -  %                0.2  %                -  %

Change in fair value of contingent consideration for business acquisition

                                          (1,110)                  -                (3,509)              5,716
% of sales                                                      (0.1) %                -  %               (0.1) %              0.2  %
Restructuring charges (credits), net                           1,759                   -                 1,770                 (54)
% of sales                                                       0.1  %                -  %                  -  %                -  %
Total operating expenses                                   $ 395,259           $ 300,947           $ 1,123,856           $ 771,423
% of sales                                                      24.2  %             18.0  %               26.4  %             20.8  %



The increase in total operating expenses during the three and nine months ended
December 31, 2021, compared to the same periods of the prior fiscal year, were
mainly due to increases in marketing and selling expenses, research and
development expenses, and impairment of intangible assets and restructuring
charges related to the Jaybird exit. The increase in the nine month period was
also attributable to increased general and administrative expenses, partially
offset by the change in fair value of contingent consideration for business
acquisition.

Marketing and Selling
Marketing and selling expenses consist of personnel and related overhead costs,
corporate and product marketing, promotions, advertising, trade shows, technical
support for customer experiences and facilities costs.

During the three and nine months ended December 31, 2021, marketing and selling
expenses increased $65.5 million and $282.4 million, respectively, compared to
the same periods of the prior fiscal year. The increases for both periods were
primarily driven by higher advertising and marketing expenses, including
third-party costs and increased headcount, to support our investment in brand
awareness and consideration.

Research and Development
Research and development expenses consist of personnel and related overhead
costs for contractors and outside consultants, supplies and materials, equipment
depreciation and facilities costs, all associated with the design and
development of new products and enhancements of existing products.
During the three and nine months ended December 31, 2021, research and
development expenses increased $21.6 million and $56.4 million, respectively,
compared to the same periods of the prior fiscal year. The increases for both
periods were primarily driven by higher personnel-related costs due to increased
headcount and higher third-party costs to support innovations in both hardware
and software.

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General and Administrative
General and administrative expenses consist primarily of personnel and related
overhead, information technology, and facilities costs for the infrastructure
functions such as finance, information systems, executives, human resources and
legal.

During the three and nine months ended December 31, 2021, general and
administrative expenses increased $0.9 million and $14.0 million, respectively,
compared to the same periods of the prior fiscal year. The increase for both
periods were primarily driven by higher personnel-related costs due to
investment in additional headcount in Information Technology ("IT") and other
functions to support business growth.

Amortization of intangible assets and acquisition-related costs

Amortization of intangible assets includes the amortization of acquired intangible assets, including customer relationships and trade names. Acquisition-related costs include legal fees, due diligence fees and other professional fees incurred for business acquisitions.

During the three months ended December 31. 2021, amortization of intangible
assets and acquisition-related costs decreased $1.3 million, and increased $0.1
million for the nine months ended December 31, 2021, compared to the same
periods of the prior fiscal year. The decrease for the three-month period was
primarily due to the write-off of Jaybird intangible assets, partially offset by
intangible assets acquired through acquisitions completed in the fourth quarter
of fiscal year 2021. The increase for the nine-month period was primarily due to
the intangibles acquired through acquisitions.

Impairment of Intangible Assets
During the three and nine months ended December 31, 2021, we recognized a
pre-tax impairment charge of $7.0 million, related to the intangibles acquired
as part of the Jaybird acquisition due to our decision to cease future product
launches under the Jaybird brand.

Restructuring costs (loans), net

During the three and nine months ended December 31, 2021, we recorded
restructuring charges of $1.8 million, related to our decision to exit
Jaybird-branded products. The total charges consisted of $1.3 million, primarily
related to costs of production cancellation and $0.5 million related to cash
severance and termination benefits. We expect to complete the restructuring
within the next twelve months.


Other income, net

Other income, net for the three and nine month periods ended December 31, 2021 and 2020 was as follows (in thousands of dollars):

                                                                 Three Months Ended                    Nine Months Ended
                                                                    December 31,                          December 31,
                                                                2021               2020              2021               2020
Investment income (loss) related to a deferred
compensation plan                                          $       890          $ 1,049          $    1,985          $ 4,384
Currency exchange gain (loss), net                              (4,562)           7,344              (3,824)           9,070
Gain (loss) on investments                                        (460)          (2,173)             (1,421)          (4,692)
Other                                                              459              263               1,319              899
Total                                                      $    (3,673)         $ 6,483          $   (1,941)         $ 9,661


Investment income (loss) represents gains, gains and losses on trading investments related to a deferred compensation plan offered by one of our subsidiaries.

Currency exchange gain (loss), net, relates to balances denominated in
currencies other than the functional currency in our subsidiaries, as well as to
the sale of currencies, and to gains or losses recognized on currency exchange
forward contracts. We do not speculate in currency positions, but we are alert
to opportunities to
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maximize currency exchange gains and minimize currency exchange losses. The loss
for the three months ended December 31, 2021 was primarily due to the weakening
of the Brazilian Real against the U.S. Dollar. The loss for the nine months
ended December 31, 2021 was primarily related to the strengthening of the
Chinese Renminbi against the U.S. Dollar.

Gain (loss) on investments represents the unrealized gain (loss) from the fair
value change on the available-for-sale securities and equity-method investments
during the periods presented.

Provision for income taxes

The provision for income taxes and effective income tax rates for the three and
nine months ended December 31, 2021 and 2020 were as follows (Dollars in
thousands):
                                    Three Months Ended             Nine Months Ended
                                       December 31,                   December 31,
                                   2021           2020            2021            2020
Provision for income taxes      $ 49,345       $ 72,334       $ 107,789       $ 142,638
Effective income tax rate           19.0  %        15.9  %         16.7  %         16.5  %



The change in the effective income tax rate for the three and nine months ended
December 31, 2021, compared to the same periods ended December 31, 2020 was
primarily due to the mix of income and losses in the various tax jurisdictions
in which we operate. There were discrete tax benefits of $0.8 million and $1.3
million from the recognition of excess tax benefits in the United States and
reversal of uncertain tax positions from the expiration of statutes of
limitations, respectively, in the three-month period ended December 31, 2021,
compared with $1.3 million and $1.4 million, respectively, in the three-month
period ended December 31, 2020. There were discrete tax benefits of $15.2
million and $2.8 million from the recognition of excess tax benefits in the
United States and reversal of uncertain tax positions from the expiration of
statutes of limitations, respectively, in the nine-month period ended
December 31, 2021, compared with $7.2 million and $2.9 million, respectively, in
the nine-month period ended December 31, 2020.

As of December 31, 2021 and March 31, 2021, the total amount of unrecognized tax
benefits due to uncertain tax positions was $178.6 million and $160.3 million,
respectively, all of which would affect the effective income tax rate if
recognized.

Cash and capital resources

Cash balances, available borrowings and capital resources

As of December 31, 2021, we had cash and cash equivalents of $1,364.4 million,
compared to $1,750.3 million as of March 31, 2021. As of December 31, 2021, 73%
of the cash and cash equivalents were held in Switzerland, and 15% were held in
Hong Kong and China. We do not expect to incur any material adverse tax impact
except for what has already been recognized, or be significantly inhibited by
any country in which we do business from the repatriation of funds to
Switzerland, our home domicile.

The decrease in cash and cash equivalents for the nine months ended December 31,
2021 compared to the same period in the prior year, primarily resulted from a
decrease in net cash provided by operating activities, despite positive net
income, and an increase in net cash used in financing activities. The decrease
in net cash provided by operating activities was mainly due to a decline in
accounts payable due to the timing of purchases and related payments and the
timing of an annual income tax payment for fiscal year 2021, partially offset by
timing of sales within the quarter. The increase in net cash used in financing
activities was driven by higher shares repurchased under our share repurchase
program compared to the same period of the prior fiscal year.
As of December 31, 2021, our working capital was $1,637.1 million, compared to
$1,477.5 million as of March 31, 2021. The increase was primarily driven by
higher accounts receivable, net, higher inventories and lower accounts payable,
partially offset by lower cash and cash equivalents. Our working capital
increased by $275.2 million compared to $1,361.9 million as of December 31,
2020, which was primarily driven by higher inventories and higher other current
assets, partially offset by higher accrued and other current liabilities and
lower accounts receivable, net.

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We had several uncommitted, unsecured bank lines of credit aggregating $194.4
million as of December 31, 2021. There are no financial covenants under these
lines of credit with which we must comply. As of December 31, 2021, we had
outstanding bank guarantees of $11.8 million under these lines of credit.

The following table summarizes our condensed consolidated statements of cash flows (in thousands of dollars):

                                                                       Nine Months Ended
                                                                         December 31,
                                                                      2021           2020
Net cash provided by operating activities                         $  198,728      $ 928,419
Net cash used in investing activities                                (89,006)       (46,454)
Net cash used in financing activities                               (492,799)      (219,196)
Effect of exchange rate changes on cash and cash equivalents          (2,839)        10,408
Net increase / (decrease) in cash and cash equivalents            $ 

(385,916) $673,177



The following tables present selected financial information and statistics as of
and for the three months ended December 31, 2021 and 2020 (Dollars in
thousands):
                                  As of December 31,
                                 2021           2020
Accounts receivable, net      $ 845,836      $ 894,937
Accounts payable              $ 738,992      $ 811,786
Inventories                   $ 834,534      $ 476,802



                                                                   Three Months Ended
                                                                      December 31,
                                                                 2021              2020
     Days sales in accounts receivable ("DSO") (Days) (1)        47                48
     Days accounts payable outstanding ("DPO") (Days) (2)        68                80
     Inventory turnover ("ITO") (x)(3)                          4.7               7.7



(1) The DSO is determined on the basis of trade receivables at closing, net at the end of the last quarter and sales for the last quarter. (2) DPO is determined using accounts payable at the end of the most recent quarter and the cost of goods sold for the most recent quarter. (3) ITO is determined from closing inventory and annualized cost of goods sold (based on the most recent quarterly cost of goods sold).

DSO for the three months ended December 31, 2021 decreased by 1 days to 47 days,
compared to 48 days for the same period of the prior fiscal year, primarily due
to timing of sales within the quarter and a continued focus on collections
efficiency.

DPO for the three months ended December 31, 2021 decreased by 12 days, compared
to 80 days for the same period of the prior fiscal year, primarily due to the
timing of purchases and related payments.

ITO for the three months ended December 31, 2021 decreased by 3, compared to 7.7
for the same period of the prior fiscal year, primarily due to lower demand than
prior year and industry wide logistic delays.

If we are not successful in launching and phasing in our new products, or market
competition increases, or we are not able to sell the new products at the prices
planned, it could have a material impact on our sales, gross profit margin,
operating results including operating cash flow, and inventory turnover in the
future.

During the nine months ended December 31, 2021, net cash provided by operating
activities was $198.7 million. The increase in accounts receivable, net was
primarily driven by timing of sales. The increase in inventories was primarily
driven by higher inventory levels compared to the previously constrained supply
from COVID-19
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impacts and industry wide logistic delays. The decrease in accounts payable was
primarily driven by the timing of purchases and related payments. The decrease
in accrued liabilities was primarily driven by payment of the fiscal year 2021
annual bonus and an annual payment for fiscal year 2021 income taxes.

Net cash used in investing activities was $89.0 millionmainly due to $63.7 million purchases of property, plant and equipment, $15.9 million the purchase price (net of cash acquired) for a business acquisition, and $10.0 million purchase of short-term investments.

Net cash used in financing activities was $492.8 million, primarily due to
$290.6 million used for repurchases of our registered shares, $159.4 million
payment of the annual cash dividend, and $58.5 million for tax withholdings
related to net share settlements of restricted stock units, partially offset by
$16.6 million in proceeds received from exercises of stock options and purchase
rights.

During the nine months ended December 31, 2021, there was a $2.8 million loss
from currency exchange rate effect on cash and cash equivalents, compared to a
gain of $10.4 million during the same period of the prior fiscal year. The loss
from the effect of currency rate changes during the nine months ended
December 31, 2021 was primarily due to the strengthening of the Chinese Renminbi
against the U.S. Dollar by 3%. The gain from the effect of currency rate changes
during the nine months ended December 31, 2020 was primarily due to the
strengthening of the Australian Dollar, Chinese Renminbi, and Swiss Franc
against the U.S. Dollar by 24%, 11%, and 8%, respectively, during the period.

Cash Outlook
Our principal sources of liquidity are our cash and cash equivalents, cash flow
generated from operations and, to a much lesser extent, capital markets and
borrowings. Our future working capital requirements and capital expenditures may
increase to support investments in product innovations and growth opportunities
or to acquire or invest in complementary businesses, products, services, and
technologies. The future impact of COVID-19 cannot be predicted with certainty
and may increase our costs of capital and otherwise adversely affect our
business, results of operations, financial conditions and liquidity.
In fiscal year 2022, we paid a cash dividend of CHF 147.0 million (U.S. Dollar
amount of $159.4 million) out of fiscal year 2021 retained earnings. In fiscal
year 2021, we paid a cash dividend of CHF 134.0 million (U.S. Dollar amount of
$146.7 million) out of fiscal year 2020 retained earnings.
In May 2020, our Board of Directors approved a new share repurchase program,
which authorized us to invest up to $250.0 million to purchase our own shares,
following the expiration date of the 2017 share repurchase program. In April
2021, our Board of Directors approved an increase of $750.0 million of the 2020
share repurchase program, to an aggregate amount of $1.0 billion. The Swiss
Takeover Board approved this increase and it became effective on May 21, 2021.
As of December 31, 2021, $545.0 million is still available for repurchase under
the 2020 repurchase program.
Although we enter into trading plans for systematic repurchases (e.g., 10b5-1
trading plans) from time to time, our share repurchase program provides us with
the opportunity to make opportunistic repurchases during periods of favorable
market conditions and is expected to remain in effect for a period of three
years. Shares may be repurchased from time to time on the open market, through
block trades or otherwise. Opportunistic purchases may be started or stopped at
any time without prior notice depending on market conditions and other factors.
If we do not generate sufficient operating cash flows to support our operations
and future planned cash requirements, our operations could be harmed and our
access to credit could be restricted or eliminated. However, we believe that the
trend of our historical cash flow generation, our projections of future
operations and our available cash balances will provide sufficient liquidity to
fund our operations for at least the next 12 months.

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Operating Leases Obligations

We lease facilities under operating leases, certain of which require us to pay
property taxes, insurance and maintenance costs. Operating leases for facilities
are generally renewable at our option and usually include escalation clauses
linked to inflation. During the nine months ended December 31, 2021, our
operating lease obligations increased $6.6 million, which primarily was related
to renewals of existing office spaces. There have been no other material changes
to our contractual obligations as previously disclosed in our Annual Report on
Form 10-K for the year ended March 31, 2021. The remaining terms of our
non-cancelable operating leases expire in various years through 2031.

Purchase commitments

As of December 31, 2021, we had non-cancelable purchase commitments of
$822.1 million for inventory purchases made in the normal course of business
from original design manufacturers, contract manufacturers and other suppliers,
the majority of which are expected to be fulfilled within the next 12 months. We
recorded a liability for firm, non-cancelable, and unhedged inventory purchase
commitments in excess of anticipated demand or net realizable value consistent
with our valuation of excess and obsolete inventory. As of December 31, 2021,
the liability for these purchase commitments was $40.5 million and is recorded
in accrued and other current liabilities.

We have firm purchase commitments of $27.0 million for capital expenditures
primarily related to commitments for tooling and equipment for new and existing
products. We expect to continue making capital expenditures in the future to
support product development activities and ongoing and expanded operations.
Although open purchase commitments are considered enforceable and legally
binding, the terms generally allow us to reschedule or adjust our requirements
based on business needs prior to delivery of goods or performance of services.

Other contractual obligations and commitments

For details of our contractual obligations and commitments, see our Annual Report on Form 10-K for the year ended March 31, 2021.

Compensation

We indemnify certain suppliers and customers for losses arising from matters
such as intellectual property disputes and product safety defects, subject to
certain restrictions. The scope of these indemnities varies, but in some
instances includes indemnification for damages and expenses, including
reasonable attorneys' fees. As of December 31, 2021, no amounts have been
accrued for indemnification provisions. We do not believe, based on historical
experience and information currently available, that it is probable that any
material amounts will be required to be paid under our indemnification
arrangements.

We also indemnify our current and former directors and certain current and
former officers. Certain costs incurred for providing such indemnification may
be recoverable under various insurance policies. We are unable to reasonably
estimate the maximum amount that could be payable under these arrangements
because these exposures are not capped, the obligations are conditional in
nature, and the facts and circumstances involved in any situation that might
arise are variable.

Legal Proceedings

From time to time we are involved in claims and legal proceedings that arise in
the ordinary course of our business. For more information about Legal
Proceedings, see Part II Item 1 Legal Proceedings of this quarterly report on
Form 10-Q for the period ended December 31, 2021.
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