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Logitech’s Q3 Sales Grow 85%, Operating Income Triples

Logitech International (SIX: LOGN) (Nasdaq: LOGI) today announced financial results for the third quarter of Fiscal Year 2021.

  • Q3 sales were $1.67 billion, up 85 percent in US dollars and 80 percent in constant currency, compared to Q3 of the prior year.
  • Q3 GAAP operating income grew 248 percent to $448 million, compared to $129 million in the same quarter a year ago. Q3 GAAP earnings per share (EPS) grew 222 percent to $2.22, compared to $0.69 in the same quarter a year ago.
  • Q3 non-GAAP operating income grew 214 percent to $476 million, compared to $152 million in the same quarter a year ago. Q3 non-GAAP EPS grew 192 percent to $2.45, compared to $0.84 in the same quarter a year ago.
  • Cash flow from operations was $530 million, compared to $181 million in the same period a year ago.

“This quarter’s record results demonstrate the strength of our portfolio, addressing long-term growth trends in remote work and education, video collaboration, esports, and digital content creation,” said Bracken Darrell, Logitech president and chief executive officer. “We are increasingly investing in our capabilities and people for the growth potential we see in the future. Logitech has never been more relevant to our customers’ work, play and creativity.”

Outlook

Logitech raised its Fiscal Year 2021 annual outlook to between 57 and 60 percent sales growth in constant currency, and approximately $1.05 billion in non-GAAP operating income. The Company’s previous outlook was between 35 and 40 percent sales growth in constant currency, and a range of $700 million to $725 million in non-GAAP operating income.

Prepared Remarks Available Online

Logitech has made its prepared written remarks for the financial results videoconference and livestream available online on the Logitech corporate website at http://ir.logitech.com .

Financial Results Videoconference and Livestream

Logitech will hold a financial results videoconference to discuss the results for Q3 FY 2021 on Tuesday, January 19, 2021 at 8:30 a.m. Eastern Standard Time and 2:30 p.m. Central European Time. A livestream of the event will be available on the Logitech corporate website at http://ir.logitech.com .

Use of Non-GAAP Financial Information and Constant Currency

To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measures, which exclude share-based compensation expense, amortization of intangible assets, acquisition-related costs, change in fair value of contingent consideration for business acquisition, restructuring charges (credits), loss (gain) on investments, non-GAAP income tax adjustment, and other items detailed under “Supplemental Financial Information” after the tables below. Logitech also presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency 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. Logitech believes this information, used together with the GAAP financial information, will help investors to evaluate its current period performance and trends in its business. With respect to the Company’s outlook for non-GAAP operating income, most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to the GAAP amounts has been provided for Fiscal Year 2021.

About Logitech

Logitech designs products that have an everyday place in people's lives, connecting them to the digital experiences they care about. Almost 40 years ago, Logitech started connecting people through computers, and now it’s a multi-brand company designing products that bring people together through music, gaming, video, and computing. Brands of Logitech include Logitech , Logitech G , ASTRO Gaming , Streamlabs , Blue Microphones , Ultimate Ears and Jaybird . Founded in 1981, and headquartered in Lausanne, Switzerland, Logitech International is a Swiss public company listed on the SIX Swiss Exchange (LOGN) and on the Nasdaq Global Select Market (LOGI). Find Logitech at www.logitech.com , the company blog or @Logitech .

This press release contains forward-looking statements within the meaning of the federal securities laws, including, without limitation, statements regarding: our preliminary financial results for the three months ended December 31, 2020, long-term growth trends, our investment in our capabilities and people, growth potential, our relevance to our customers, and outlook for Fiscal Year 2021 sales growth and non-GAAP operating income. The forward-looking statements in this release involve risks and uncertainties that could cause Logitech’s actual results and events to differ materially from those anticipated in these forward-looking statements, including, without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities or our growth opportunities are more limited than we expect; the effect of pricing, product, marketing and other initiatives by our competitors, and our reaction to them, on our sales, gross margins and profitability; if we are not able to maintain and enhance our brands; if our products and marketing strategies fail to separate our products from competitors’ products; the COVID-19 pandemic and its potential impact; if we do not fully realize our goals to lower our costs and improve our operating leverage; if there is a deterioration of business and economic conditions in one or more of our sales regions or product categories, or significant fluctuations in exchange rates; changes in trade policies and agreements and the imposition of tariffs that affect our products or operations and our ability to mitigate; risks associated with acquisitions. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in Logitech’s periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the fiscal year ended March 31, 2020 and our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020, available at www.sec.gov , under the caption Risk Factors and elsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or events or circumstances occurring after the date of this press release.

Note that unless noted otherwise, comparisons are year over year.

Logitech and other Logitech marks are trademarks or registered trademarks of Logitech Europe S.A and/or its affiliates in the U.S. and other countries. All other trademarks are the property of their respective owners. For more information about Logitech and its products, visit the company’s website at www.logitech.com .

LOGITECH INTERNATIONAL S.A.

 

 

 

 

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

 

 

 

 

(In thousands, except per share amounts) - unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

GAAP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

2020

 

2019

 

 

2020

 

 

2019

 

 

 

 

 

 

 

 

 

Net sales

 

$

1,667,302

 

 

$

902,687

 

 

$

3,716,354

 

 

$

2,266,603

 

Cost of goods sold

 

914,851

 

 

564,283

 

 

2,082,088

 

 

1,410,605

 

Amortization of intangible assets

 

3,441

 

 

3,951

 

 

9,800

 

 

10,493

 

Gross profit

 

749,010

 

 

334,453

 

 

1,624,466

 

 

845,505

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

Marketing and selling

 

204,485

 

 

134,950

 

 

496,520

 

 

392,138

 

Research and development

 

53,910

 

 

43,292

 

 

157,014

 

 

127,499

 

General and administrative

 

37,606

 

 

22,344

 

 

98,341

 

 

68,551

 

Amortization of intangible assets and acquisition-related costs

 

4,946

 

 

5,084

 

 

13,886

 

 

12,898

 

Change in fair value of contingent consideration for business acquisition

 

 

 

 

 

5,716

 

 

 

Restructuring charges (credits), net

 

 

 

(45

)

 

(54

)

 

69

 

Total operating expenses

 

300,947

 

 

205,625

 

 

771,423

 

 

601,155

 

 

 

 

 

 

 

 

 

 

Operating income

 

448,063

 

 

128,828

 

 

853,043

 

 

244,350

 

Interest income

 

311

 

 

2,063

 

 

1,444

 

 

7,006

 

Other income, net

 

6,483

 

 

1,101

 

 

9,661

 

 

2,852

 

Income before income taxes

 

454,857

 

 

131,992

 

 

864,148

 

 

254,208

 

Provision for income taxes

 

72,334

 

 

14,467

 

 

142,638

 

 

18,405

 

Net income

 

$

382,523

 

 

$

117,525

 

 

$

721,510

 

 

$

235,803

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Basic

 

$

2.26

 

 

$

0.70

 

 

$

4.28

 

 

$

1.41

 

Diluted

 

$

2.22

 

 

$

0.69

 

 

$

4.21

 

 

$

1.39

 

 

 

 

 

 

 

 

 

 

Weighted average shares used to compute net income per share:

 

 

 

 

 

 

 

 

Basic

 

169,050

 

 

167,063

 

 

168,448

 

 

166,678

 

Diluted

 

172,587

 

 

169,685

 

 

171,378

 

 

169,173

 

LOGITECH INTERNATIONAL S.A.

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

(In thousands) - unaudited

 

 

 

 

 

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

December 31, 2020

 

March 31, 2020

 

 

 

 

 

Current assets:

 

 

 

 

Cash and cash equivalents

 

$

1,388,743

 

 

$

715,566

 

Accounts receivable, net

 

894,937

 

 

394,743

 

Inventories

 

476,802

 

 

229,249

 

Other current assets

 

117,741

 

 

74,920

 

Total current assets

 

2,878,223

 

 

1,414,478

 

Non-current assets:

 

 

 

 

Property, plant and equipment, net

 

96,683

 

 

76,119

 

Goodwill

 

400,993

 

 

400,917

 

Other intangible assets, net

 

103,314

 

 

126,941

 

Other assets

 

333,733

 

 

345,019

 

Total assets

 

$

3,812,946

 

 

$

2,363,474

 

 

 

 

 

 

Current liabilities:

 

 

 

 

Accounts payable

 

$

811,786

 

 

$

259,120

 

Accrued and other current liabilities

 

704,573

 

 

455,024

 

Total current liabilities

 

1,516,359

 

 

714,144

 

Non-current liabilities:

 

 

 

 

Income taxes payable

 

60,799

 

 

40,788

 

Other non-current liabilities

 

134,021

 

 

119,274

 

Total liabilities

 

1,711,179

 

 

874,206

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

Registered shares, CHF 0.25 par value:

 

30,148

 

 

30,148

 

Issued shares — 173,106 at December 31 and March 31, 2020

 

 

 

 

Additional shares that may be issued out of conditional capitals — 50,000 at December 31 and March 31, 2020

 

 

 

 

Additional shares that may be issued out of authorized capital — 17,311 at December 31 and 34,621 at March 31, 2020

 

 

 

 

Additional paid-in capital

 

108,140

 

 

75,097

 

Shares in treasury, at cost — 4,243 at December 31, 2020 and 6,210 at March 31, 2020

 

(198,435

)

 

(185,896

)

Retained earnings

 

2,264,831

 

 

1,690,579

 

Accumulated other comprehensive loss

 

(102,917

)

 

(120,660

)

Total shareholders’ equity

 

2,101,767

 

 

1,489,268

 

Total liabilities and shareholders’ equity

 

$

3,812,946

 

 

$

2,363,474

 

LOGITECH INTERNATIONAL S.A.

 

 

 

 

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

 

 

 

 

(In thousands) - unaudited

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

382,523

 

 

$

117,525

 

 

$

721,510

 

 

$

235,803

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

13,409

 

 

10,768

 

 

36,010

 

 

32,154

 

Amortization of intangible assets

 

8,388

 

 

8,223

 

 

23,627

 

 

21,958

 

Loss on investments

 

2,173

 

 

709

 

 

4,692

 

 

772

 

Share-based compensation expense

 

19,814

 

 

13,831

 

 

64,714

 

 

40,301

 

Deferred income taxes

 

17,531

 

 

9,458

 

 

37,683

 

 

480

 

Change in fair value of contingent consideration for business acquisition

 

 

 

 

 

5,716

 

 

 

Other

 

207

 

 

(1,010

)

 

(1,670

)

 

(1,012

)

Changes in assets and liabilities, net of acquisitions:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

(129,966

)

 

(61,337

)

 

(476,804

)

 

(147,292

)

Inventories

 

(78,258

)

 

32,603

 

 

(239,378

)

 

(15,170

)

Other assets

 

(21,714

)

 

16,949

 

 

(53,281

)

 

2,866

 

Accounts payable

 

141,848

 

 

26,089

 

 

541,024

 

 

155,190

 

Accrued and other liabilities

 

173,945

 

 

7,327

 

 

264,576

 

 

(1,896

)

Net cash provided by operating activities

 

529,900

 

 

181,135

 

 

928,419

 

 

324,154

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property, plant and equipment

 

(18,389

)

 

(10,575

)

 

(46,163

)

 

(28,667

)

Investment in privately held companies

 

(120

)

 

(140

)

 

(3,525

)

 

(310

)

Acquisitions, net of cash acquired

 

(360

)

 

(91,203

)

 

(360

)

 

(91,569

)

Proceeds from the sale of property, plant and equipment

 

 

 

1,037

 

 

 

 

1,037

 

Proceeds from return of strategic investments

 

2,934

 

 

 

 

2,934

 

 

 

Purchases of trading investments

 

(2,473

)

 

(546

)

 

(10,672

)

 

(3,071

)

Proceeds from sales of trading investments

 

2,493

 

 

568

 

 

11,332

 

 

3,139

 

Net cash used in investing activities

 

(15,915

)

 

(100,859

)

 

(46,454

)

 

(119,441

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Payment of cash dividends

 

 

 

 

 

(146,705

)

 

(124,180

)

Purchases of registered shares

 

(50,271

)

 

 

 

(72,725

)

 

(15,127

)

Proceeds from exercises of stock options and purchase rights

 

3,643

 

 

2,209

 

 

29,709

 

 

11,540

 

Tax withholdings related to net share settlements of restricted stock units

 

(3,731

)

 

(2,188

)

 

(29,475

)

 

(23,096

)

Net cash provided (used) in financing activities

 

(50,359

)

 

21

 

 

(219,196

)

 

(150,863

)

Effect of exchange rate changes on cash and cash equivalents

 

7,896

 

 

1,285

 

 

10,408

 

 

(2,320

)

Net increase in cash and cash equivalents

 

471,522

 

 

81,582

 

 

673,177

 

 

51,530

 

Cash and cash equivalents, beginning of the period

 

917,221

 

 

574,464

 

 

715,566

 

 

604,516

 

Cash and cash equivalents, end of the period

 

$

1,388,743

 

 

$

656,046

 

 

$

1,388,743

 

 

$

656,046

 

LOGITECH INTERNATIONAL S.A.

 

 

 

 

 

 

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

 

 

 

 

 

 

(In thousands) - unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

NET SALES

 

2020

 

2019

 

Change

 

2020

 

2019

 

Change

 

 

 

 

 

 

 

 

 

 

 

 

 

Net sales by product category:

 

 

 

 

 

 

 

 

 

 

 

 

Pointing Devices

 

$

213,638

 

 

$

154,540

 

 

38

%

 

$

503,228

 

 

$

409,293

 

 

23

%

Keyboards & Combos

 

218,269

 

 

156,333

 

 

40

 

 

565,246

 

 

424,061

 

 

33

 

PC Webcams

 

131,700

 

 

32,165

 

 

309

 

 

295,020

 

 

89,041

 

 

231

 

Tablet & Other Accessories

 

138,052

 

 

31,256

 

 

342

 

 

267,186

 

 

103,442

 

 

158

 

Gaming (1)

 

436,426

 

 

245,736

 

 

78

 

 

916,040

 

 

541,265

 

 

69

 

Video Collaboration

 

292,500

 

 

91,964

 

 

218

 

 

659,278

 

 

254,941

 

 

159

 

Mobile Speakers

 

72,566

 

 

92,969

 

 

(22

)

 

145,156

 

 

200,617

 

 

(28

)

Audio & Wearables

 

152,952

 

 

81,934

 

 

87

 

 

338,592

 

 

208,576

 

 

62

 

Smart Home

 

10,593

 

 

15,790

 

 

(33

)

 

25,976

 

 

35,088

 

 

(26

)

Other (2)

 

606

 

 

 

 

 

 

632

 

 

279

 

 

127

 

Total sales

 

$

1,667,302

 

 

$

902,687

 

 

85

%

 

$

3,716,354

 

 

$

2,266,603

 

 

64

%

(1) Gaming revenue includes streaming services revenue generated by Streamlabs.

(2) Other category includes products that we currently intend to phase out, or have already phased out, because they are no longer strategic to our business.

LOGITECH INTERNATIONAL S.A.

 

 

 

 

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

 

 

 

 

(In thousands, except per share amounts) - Unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

GAAP TO NON-GAAP RECONCILIATION (A)

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Gross profit - GAAP

 

$

749,010

 

 

$

334,453

 

 

$

1,624,466

 

 

$

845,505

 

Share-based compensation expense

 

1,747

 

 

1,210

 

 

4,919

 

 

3,552

 

Amortization of intangible assets

 

3,441

 

 

3,951

 

 

9,800

 

 

10,493

 

Gross profit - Non-GAAP

 

$

754,198

 

 

$

339,614

 

 

$

1,639,185

 

 

$

859,550

 

 

 

 

 

 

 

 

 

 

Gross margin - GAAP

 

44.9

%

 

37.1

%

 

43.7

%

 

37.3

%

Gross margin - Non-GAAP

 

45.2

%

 

37.6

%

 

44.1

%

 

37.9

%

 

 

 

 

 

 

 

 

 

Operating expenses - GAAP

 

$

300,947

 

 

$

205,625

 

 

$

771,423

 

 

$

601,155

 

Less: Share-based compensation expense

 

18,067

 

 

12,621

 

 

59,795

 

 

36,749

 

Less: Amortization of intangible assets and acquisition-related costs

 

4,946

 

 

5,084

 

 

13,886

 

 

12,898

 

Less: Change in fair value of contingent consideration for business acquisition

 

 

 

 

 

5,716

 

 

 

Less: Restructuring charges (credits), net

 

 

 

(45

)

 

(54

)

 

69

 

Operating expenses - Non-GAAP

 

$

277,934

 

 

$

187,965

 

 

$

692,080

 

 

$

551,439

 

 

 

 

 

 

 

 

 

 

% of net sales - GAAP

 

18.0

%

 

22.8

%

 

20.8

%

 

26.5

%

% of net sales - Non - GAAP

 

16.7

%

 

20.8

%

 

18.6

%

 

24.3

%

 

 

 

 

 

 

 

 

 

Operating income - GAAP

 

$

448,063

 

 

$

128,828

 

 

$

853,043

 

 

$

244,350

 

Share-based compensation expense

 

19,814

 

 

13,831

 

 

64,714

 

 

40,301

 

Amortization of intangible assets and acquisition-related costs

 

8,387

 

 

9,035

 

 

23,686

 

 

23,391

 

Change in fair value of contingent consideration for business acquisition

 

 

 

 

 

5,716

 

 

 

Restructuring charges (credits), net

 

 

 

(45

)

 

(54

)

 

69

 

Operating income - Non - GAAP

 

$

476,264

 

 

$

151,649

 

 

$

947,105

 

 

$

308,111

 

 

 

 

 

 

 

 

 

 

% of net sales - GAAP

 

26.9

%

 

14.3

%

 

23.0

%

 

10.8

%

% of net sales - Non - GAAP

 

28.6

%

 

16.8

%

 

25.5

%

 

13.6

%

 

 

 

 

 

 

 

 

 

Net income - GAAP

 

$

382,523

 

 

$

117,525

 

 

$

721,510

 

 

$

235,803

 

Share-based compensation expense

 

19,814

 

 

13,831

 

 

64,714

 

 

40,301

 

Amortization of intangible assets and acquisition related costs

 

8,387

 

 

9,035

 

 

23,686

 

 

23,391

 

Change in fair value of contingent consideration for business acquisition

 

 

 

 

 

5,716

 

 

 

Restructuring charges (credits), net

 

 

 

(45

)

 

(54

)

 

69

 

Loss on investments

 

2,173

 

 

709

 

 

4,692

 

 

772

 

Non-GAAP income tax adjustment

 

10,165

 

 

2,123

 

 

31,564

 

 

(6,476

)

Net income - Non - GAAP

 

$

423,062

 

 

$

143,178

 

 

$

851,828

 

 

$

293,860

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

Diluted - GAAP

 

$

2.22

 

 

$

0.69

 

 

$

4.21

 

 

$

1.39

 

Diluted - Non - GAAP

 

$

2.45

 

 

$

0.84

 

 

$

4.97

 

 

$

1.74

 

 

 

 

 

 

 

 

 

 

Shares used to compute net income per share:

 

 

 

 

 

 

 

 

Diluted - GAAP and Non - GAAP

 

172,587

 

 

169,685

 

 

171,378

 

 

169,173

 

LOGITECH INTERNATIONAL S.A.

 

 

 

 

 

 

 

 

PRELIMINARY RESULTS *

 

 

 

 

 

 

 

 

(In thousands) - unaudited

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL FINANCIAL INFORMATION

 

Three Months Ended

 

Nine Months Ended

 

 

December 31,

 

December 31,

SHARE-BASED COMPENSATION EXPENSE

 

2020

 

2019

 

2020

 

2019

 

 

 

 

 

 

 

 

 

Share-based Compensation Expense

 

 

 

 

 

 

 

 

Cost of goods sold

 

$

1,747

 

 

$

1,210

 

 

$

4,919

 

 

$

3,552

 

Marketing and selling

 

8,390

 

 

6,216

 

 

27,559

 

 

20,016

 

Research and development

 

3,482

 

 

2,242

 

 

10,348

 

 

6,644

 

General and administrative

 

6,195

 

 

4,163

 

 

21,888

 

 

10,089

 

Total share-based compensation expense

 

19,814

 

 

13,831

 

 

64,714

 

 

40,301

 

Income tax benefit

 

(3,471

)

 

(3,135

)

 

(15,540

)

 

(12,658

)

Total share-based compensation expense, net of income tax benefit

 

$

16,343

 

 

$

10,696

 

 

$

49,174

 

 

$

27,643

 

* Note: These preliminary results for the three and nine months ended December 31, 2020 are subject to adjustments, including subsequent events that may occur through the date of filing our Quarterly Report on Form 10-Q.

(A) Non-GAAP Financial Measures

To supplement our condensed consolidated financial results prepared in accordance with GAAP, we use a number of financial measures, both GAAP and non-GAAP, in analyzing and assessing our overall business performance, for making operating decisions and for forecasting and planning future periods. We consider the use of non-GAAP financial measures helpful in assessing our current financial performance, ongoing operations and prospects for the future as well as understanding financial and business trends relating to our financial condition and results of operations.

While we use non-GAAP financial measures as a tool to enhance our understanding of certain aspects of our financial performance and to provide incremental insight into the underlying factors and trends affecting both our performance and our cash-generating potential, we do not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, we believe that disclosing non-GAAP financial measures to the readers of our financial statements provides useful supplemental data that, while not a substitute for GAAP financial measures, can offer insight in the review of our financial and operational performance and enables investors to more fully understand trends in our current and future performance. In assessing our business during the quarter ended December 31, 2020 and previous periods, we excluded items in the following general categories, each of which are described below:

Share-based compensation expense . We believe that providing non-GAAP measures excluding share-based compensation expense, in addition to the GAAP measures, allows for a more transparent comparison of our financial results from period to period. We prepare and maintain our budgets and forecasts for future periods on a basis consistent with this non-GAAP financial measure. Further, companies use a variety of types of equity awards as well as a variety of methodologies, assumptions and estimates to determine share-based compensation expense. We believe that excluding share-based compensation expense enhances our ability and the ability of investors to understand the impact of non-cash share-based compensation on our operating results and to compare our results against the results of other companies.

Amortization of intangible assets. We incur intangible asset amortization expense, primarily in connection with our acquisitions of various businesses and technologies. The amortization of purchased intangibles varies depending on the level of acquisition activity. We exclude these various charges in budgeting, planning and forecasting future periods and we believe that providing the non-GAAP measures excluding these various non-cash charges, as well as the GAAP measures, provides additional insight when comparing our gross profit, operating expenses, and financial results from period to period.

Acquisition-related costs and change in fair value of contingent consideration for business acquisition. We incurred expenses and credits in connection with our acquisitions which we generally would not have otherwise incurred in the periods presented as a part of our continuing operations. Acquisition related costs include all incremental expenses incurred to effect a business combination. Fair value of contingent consideration is associated with our estimates of the value of earn-outs in connection with certain acquisitions. We believe that providing the non-GAAP measures excluding these costs and credits, as well as the GAAP measures, assists our investors because such costs are not reflective of our ongoing operating results.

Restructuring charges (credits). These expenses are associated with re-aligning our business strategies based on current economic conditions. We have undertaken several restructuring plans in recent years. In connection with our restructuring initiatives, we incurred restructuring charges related to employee terminations, facility closures and early cancellation of certain contracts. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges (credits) are not reflective of our ongoing operating results in the current period.

Loss (gain) on investments. We recognized loss (gain) related to our investments in various companies, which varies depending on the operational and financial performance of those companies in which we invested, and sales of these investments. We believe that providing the non-GAAP measures excluding these charges, as well as the GAAP measures, assists our investors because such charges are not reflective of our ongoing operations.

Non-GAAP income tax adjustment. Non-GAAP income tax adjustment primarily measures the income tax effect of non-GAAP adjustments excluded above and other events; the determination of which is based upon the nature of the underlying items, the mix of income and losses in jurisdictions and the relevant tax rates in which we operate.

Each of the non-GAAP financial measures described above, and used in this press release, should not be considered in isolation from, or as a substitute for, a measure of financial performance prepared in accordance with GAAP. Further, investors are cautioned that there are inherent limitations associated with the use of each of these non-GAAP financial measures as an analytical tool. In particular, these non-GAAP financial measures are not based on a comprehensive set of accounting rules or principles and many of the adjustments to the GAAP financial measures reflect the exclusion of items that are recurring and may be reflected in the Company’s financial results for the foreseeable future. We compensate for these limitations by providing specific information in the reconciliation included in this press release regarding the GAAP amounts excluded from the non-GAAP financial measures. In addition, as noted above, we evaluate the non-GAAP financial measures together with the most directly comparable GAAP financial information.

Additional Supplemental Financial Information - Constant Currency

In addition, Logitech presents percentage sales growth in constant currency to show performance unaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency 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.

(LOGIIR)

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