Logitech International Q3 2025 Earnings Call Transcript

Quartr
Provided by Quartr
January 28, 2025
Skip to Participants
Nathan Melihercik
Nathan Melihercik
Head of Global Investor Relations at Logitech International

Are Hanukkah Faber, our CEO and Matteo Inversa, our CFO. During this call, we will make forward looking statements, including with respect to future operating results under the Safe Harbor of the Private Securities Litigation Reform Act of 1995. We're making these statements based on our views only as of today. Our actual sales results could differ materially. We undertake no obligation to update or revise any of these statements.

Nathan Melihercik
Nathan Melihercik
Head of Global Investor Relations at Logitech International

We will also discuss non GAAP financial results and you can find a reconciliation between GAAP and non GAAP results and information about our use of non GAAP measures and factors that could impact our financial results and forward looking statements in our press release and in our filings with the SEC. These materials as well as the shareholder letter and a webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, comparisons between periods are year over year and in constant currency and net sales. This call is being recorded and will be available for a replay on our website.

Nathan Melihercik
Nathan Melihercik
Head of Global Investor Relations at Logitech International

I will now turn the call over to Hanukkah. Hanukkah?

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Thank you, Nate, and welcome, everyone, to our Q3 earnings call. As you all know, the holiday quarter is a very important quarter for us at Logitech, seasonally our biggest. And I'm thrilled to share that we performed very well this holiday, delivering strong profitable growth for the 4th consecutive quarter. Net sales grew 6% versus last year. Demand or sell out growth accelerated to 8%, and the growth was broad based across categories and regions.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

As a result, we're raising our outlook for the year. Importantly, our growth was driven by the strategic priorities that I shared with you last spring. 1st, superior design led innovation. It's in our DNA, and we went into the holiday quarter with a fantastic lineup of new products, which customers and consumers loved and which translated into strong demand around the world. In gaming, with 16 new products launched in advance of the holidays, sales reached near pandemic highs, growing double digits at plus 13% versus last year.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Our Pro line, developed in collaboration with professional esports athletes, was a standout and achieved record sales. And looking ahead, we just announced an AI streaming assistant developed in collaboration with NVIDIA at CES. This agentic AI innovation is designed for gaming streamers, giving them an instant producer, a co host and a sidekick to better content create and reach their fans. Superior innovation like this has fueled success across our portfolio, particularly in the high end. For example, our premium MX line of mice, keyboards, and webcams, including the new MX Creative console that was developed for digital designers, reached near record sales levels this quarter.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Our innovation increasingly leverages AI to make our products smarter, driving new features that were not possible even 6 months ago. In addition to the AI streaming agent for gamers I just mentioned, our newest headsets offer a truly unique two way noise cancelling experience powered by AI on the edge. And the Logitech Sight, our advanced tabletop meeting room camera, which uses AI driven smart smitching for video framing and sound processing, was recognized as one of Time's best inventions of 2024 last quarter. There's more to come. Just last week, we announced a Rally Board 65, a mobile touchscreen display with video conferencing capabilities that you can easily roll into any room.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

This portable solution creates a digital cocoon for meetings and a more immersive meeting experience in any space. In a short amount of time, we have successfully integrated AI into the work and play flows of nearly all our key categories, and there is much more to come. The developments in AI of just this last week position us even better as they provide more opportunities for edge AI applications into our product development. The second strategic driver of our strong results was Logitech for Business. Doubling down on growth in the B2B channel is an important strategic focus for us.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

This quarter, engagement with customers at Logi work events created strong momentum, resulting in growth in video collaboration and headsets as well as in the personal workspace products that we sell to B2B customers. Services bookings, an important driver of customer satisfaction, more than doubled. And our continued expansion into the new vertical of education yielded growth of more than 20%. The Logitech for Business team continues to meet the evolving needs of modern workplaces. Just this month, they launched a range of innovative smart office tools, including the Rally Board 65 I just mentioned, the Rally Camera Streamline Kit for higher education, and the Logitech Spot Sensor.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

These new solutions combined with commercial go to market initiatives from our new dedicated global sales forces are resonating very well with B2B customers. Next, when you look at our growth this quarter, it was broad based across geographies. This underscores our strategic approach, tailing our execution to meet local demands and opportunities and rapidly reapplying best practices across countries. For Q3, I want to congratulate our teams around the world for delivering very effective marketing campaigns and truly excellent in store and online holiday retail execution. Notably, we're making progress in China.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Our end markets there saw robust growth, helping to drive a double digit increase in Logitech's net sales year over year. Our teams are doing admirable work, quickly introducing new products in China that reposition us in the market at both the premium and the lower end and refreshing our use of social media and online sales channels in exciting new ways. It's still early innings in our China execution, but I love the momentum that we're regaining in China. Last and certainly not least, our continued delivery of profitable growth is underpinned by the exceptional execution of our operations team. Once again, cost reductions drove our gross margin above 43%.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And with tariffs on everyone's mind, we continue to prepare for a range of possible outcomes and for an ever more resilient global supply chain. I'm pleased to report that we remain on track to further diversify our manufacturing footprint, with well over half of units shipped to North America coming from locations outside of China by the end of our fiscal year. In summary, a quarter with very strong results, driven by real progress against our strategic priorities. And finally, as a reminder, we have our Analyst and Investor Day scheduled for March 5th, when we will discuss our mission to extend human potential in work and play and our longer term strategy, as well as showcase our industry leading innovation. We'd be thrilled to host you at our Silicon Valley office or online.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Matteo, over to you.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

All right. Thank you, Annika. Thank you all for joining the call today. The team delivered another exceptional quarter with strong profitable growth. The detailed financial results can be found in the press release and shareholder letter.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

But let me briefly share with you the key financial highlights for the quarter. Net sales were up 6% year over year, driven by demand in both our business and consumer channels, which came in ahead of our outlook. Demand was broad based with all regions and key product categories growing year over year. I would like to call out 2 particular high points for the quarter. Gaming grew double digits, approaching net sales levels last seen during the pandemic.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

And the high end of our business did very well. And as Annika mentioned, our pro line hit record net sales and our MX line also hit near record net sales. Regionally, Asia grew high single digits in year over year net sales and Europe and the Americas grew mid single digits. We entered the Q3 with a healthy and balanced channel inventory, which supported a successful holiday season. And as we exit the quarter, both owned and channel inventory levels ended well within our operating targets.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

As we indicated in the prior earnings call, in the Q3 sell through outpaced sell in and we expect this trend to continue also in the Q4. Most importantly, our growth continued to be highly profitable. The non GAAP gross margin rate was 43.2 percent in the 3rd quarter, up 90 basis points year over year, driven by reductions in product costs. And this marks the 5th consecutive quarter of year over year gross margin rate expansion, a real testament to the durability of our cost reduction initiatives and commitment to operational excellence. As a result, we expect the gross margin rate for this fiscal year to be on the higher end of our previously provided range of 42% to 43%.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Moving to operating expenses, Q3 OpEx was impacted by a CHF 40,000,000 charge for bad debt reserve due to the inability of 1 of our e commerce payment providers to pay us. We have since transitioned to a new provider and excluding the impact of this charge, operating expenses would have been 22.3% of net sales, slightly lower than the previous year. Sales and marketing would have been up 6% year over year. And additionally, we continue to invest in R and D, while maintaining G and A flat year over year. Non GAAP operating income increased by 7% compared to the prior year.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

And excluding the charge that I mentioned earlier, it would have been 20.9 percent of net sales, up 110 basis points compared to the Q3 of last year. Our cash generation remains robust. In the quarter, we generated $370,000,000 of cash from operations, contributing to a healthy cash position of $1,500,000,000 In addition, we announced a 5 year $750,000,000 credit facility, which we believe will enhance our financial flexibility and further strengthen our financial position. In the Q3, we returned 200,000,000 to shareholders through share repurchases as part of our ongoing $1,000,000,000 buyback program. And since the beginning of fiscal year 2025, we have returned over €650,000,000 to shareholders through dividends and share repurchases.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Now looking ahead, we have increased our fiscal year 2025 outlook. Our underlying business is performing extremely well and we are confident that we will close out this year in a strong position. There are 2 items that I would like to call out since our update last quarter. Now first, as I mentioned earlier, in this quarter, we faced an isolated $14,000,000 headwind related to our bad debt expense. And second, we believe that it is likely that our results in the Q4 will be negatively impacted by the recent strengthening of the U.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

S. Dollar. Taken together, bad debt and foreign exchange represent an approximate €40,000,000 headwind and these items are not related to our core business and ultimately are transitory. Despite this pressure, the tremendous performance of our underlying business gives us the confidence to raise our fiscal year 2025 outlook for both net sales and operating income. Absorbing an unforeseen €40,000,000 headwind near the end of our fiscal year and raising our full year outlook is a testament to the resiliency and flexibility of our teams.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

We speak often about the dynamic environment in which we operate, inflation, possible tariffs and currency fluctuations. But in the end, our business is executing at a high level and adjusting to these external uncertainties. We delivered another strong quarter and are positioned to end the year with continued strong momentum. So now we are ready for the Q and A.

Operator

Thank you so much, Matteo. We will now move to the Q and A session. If you have a question, please use the raise hand icon located on your Zoom toolbar. When we call your name, please turn on your video and unmute your line. And our first question comes from Asiya Merchant with Citi.

Asiya Merchant
Asiya Merchant
Director - Equity Research at Citigroup

Great. Thank you. I was having a few issues. You're unmuting myself. Very strong results here.

Asiya Merchant
Asiya Merchant
Director - Equity Research at Citigroup

Just on gross margins, you guys continue to obviously deliver towards the high end of that. You've talked about these cost controls that are delivering. And I take it there was no impact from inventory reserves unwinding in this quarter. So just as we look ahead, if you look into the trajectory of momentum that you're exiting December with and entering March and as we look into fiscal 'twenty six, so what are some drivers, the puts and takes that you see for gross margins into fiscal 'twenty six, to continue to deliver here towards the higher end of your range and if we could continue to see further margin momentum? Thank you.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Sure, Asia. Thanks for the question. So you're absolutely right. The quarter was very clean, very operational. There was no impact coming from the inventory exactly as you mentioned.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Really a fantastic job done by the operating team by Sri and his team in keep driving the product cost reductions and this primarily activities such as value engineering. So taking cost out of the bill of material. Now, value engineering is an ongoing process. You're never done. And every year you have to start basically a new set of programs.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

And we have a pretty good pipeline also entering into next year. And this is going to be a continued effort that will continue for years to come. As I said, it's continuous improvement. You're never done. I will right now refrain from giving you a little bit more details on the financials as it pertain to 'twenty six and the longer term.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

We look forward to obviously to updating all of you at the Investor Day in March 5th. But we are super thrilled by the continuous work the team has been doing.

Operator

Okay. Our next question comes from Alex Duvall with Goldman Sachs. Alex?

Alexander Duval
Alexander Duval
Equity Research Analyst at Goldman Sachs

Yes. Hi, Rob. Thank you so much for the question. Just a quick couple if I may. Firstly, we saw another quarter of growth on the VC side and clearly you'd seen some stabilization and talking about further attach of services.

Alexander Duval
Alexander Duval
Equity Research Analyst at Goldman Sachs

So wondered if you could expand on that. And then I guess the other question just on the PC side showing growth there. Clearly there's been talk of Windows refresh and also upgrades to devices purchased early in COVID. So wondered if you could give your latest perspectives on those. Many thanks.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Yes, happy to do that. Hi. VC, yes, we're seeing from the many customer discussions that we're having, we're seeing the market improving a little bit. IT budgets overall still flattish, but I think the AI spending is getting a little smarter. And of course, there's return to office and customers making choices of how they want to work going forward, how many days in office, and that then in turn leads to office remodelings, which are always a good thing for us.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

So the market is becoming a little better. And then within that, we think we're executing really, really well. Both VC demand and the overall B2B channel sales are quite a bit higher, maybe even than the VC sales you saw here in the quarter. And that's driven by superior products and innovation. I touched on some of those in the remarks, strengthening our go to market capabilities with increased sales coverage, better talent, which we're excited about.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And indeed, as you said, our services attach doubled, which is great because that drives customer satisfaction. It's also very profitable. And then some of the verticals, especially education, are really starting to get to some scale with 20% growth. So we're bullish on Logitech for Business. In terms of PC and PC refresh cycles and super PCs, that cycle is definitely underway.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And as I've said before, there's no direct correlation with PC refreshes in our business. But certainly, people buying or receiving a new PC at work is a good time to also think about adding one of our products. So it is underway and those new super PCs need super mice and keyboards with them.

Operator

Okay. Our next question comes from Eric Woodring with Morgan Stanley. Eric?

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Great. Thanks so much for taking my question guys. I have 2 if I may. Hanukkah, just I was wondering if you could kind of double click on your comments on China. It's been a very challenging market overall.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

You've called out specifically for Logitech over the last handful of quarters. But I guess maybe my question, do you feel like things have turned kind of turned around this quarter? And specifically, maybe what I'm trying to get at is, is there a market dynamic that's inflecting that you see? Is there something that you're doing specifically in China that's also inflecting? I'd love if you could just double click kind of market and then Logitech positioning, within China and what's changing?

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

And then I have a follow-up. Thank you.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Yes, absolutely. And Eric, it's both of the above. So I'm really pleased with the improving momentum that we're seeing in our business in China. As you know, we don't break it out, you've seen the double digit net sales growth for APAC. And within that, China did even a little better than the average.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

So that's good. And what's driving that? It's both of the things you mentioned. So first of all, the market in gaming continues to grow at a really fast clip in China. And what's driving that market?

Hanneke Faber
Hanneke Faber
CEO at Logitech International

I came from beauty in the past, and we called it the lipstick effect. When consumers are a little cash strapped, that actually is true for gaming as well. This is a cheaper form of entertainment than going out to eat, going to the movies. So the gaming market is doing well. Another driver of this is the increasing popularity of first person shooters in China.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And of course, the competitive environment continues to be really dynamic, which means there's a lot of innovation in gaming. So that market is very robust and that is one driver of our gaming growth and our overall growth in China. 2nd piece though is our teams are doing really great work, and they're quickly introducing new products in China for China, both at the premium end and the lower end. And they're really doing some exciting new stuff when it comes to marketing and social selling, both on Douyin, which is TikTok and on Pinduoduo. And so we're seeing encouraging share progress, especially at the premium and especially on those channels I just mentioned as well.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And I'm really liking the momentum we're regaining in China.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Awesome. Really helpful commentary. Thank you, Hanan. And then Matteo, maybe just one clarification question is, again, not necessarily specific to Logitech, but taking a step back, the kind of threat of potential tariffs has been something that we've seen pull forward demand a little bit. And I'm just wondering from your perspective, is this something that you see from your channel partners?

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Again, I understand sell through was strong, so it's not trying to get a channel inventory. But just wondering what you're hearing from your channel partners and whether there is a bit of a pull forward of demand to make sure they can kind of get products at the right price before the potential of tariffs arise? That's it for me. Thanks so much.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Sure, Eric. Not really, at least not yet for what we could see. Things have been progressing pretty normally. What I can tell you, to Anika's point earlier, we feel we are very prepared. We have been working on this diversification of our own supply chain for quite some time.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

We have multiple manufacturing sites, multiple countries. So we think we are ready. It's really about supply chain resilience. More related, even more to your question, when you look at the inventory, for example, you saw the inventory sequentially, we went down Q3 versus the second, but we did actually pull in a few inventory on the right hires in order to protect ourselves and customers upon in case there is then a final determination on tariffs.

Erik Woodring
Erik Woodring
Managing Director - Equity Research at Morgan Stanley

Thanks so much.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

You bet.

Operator

Okay. Our next question comes from Jorn Eifert with UBS. Jorn?

Joern Iffert
Joern Iffert
Head Equity Research Switzerland at UBS Group

Thank you for taking my questions. The first one is please pretty basic one on your Q4 implied outlook, which means sales is more or less flattish year over year and gross profit margin, I think, going back to the 41% 42% range and also non GAAP EBIT being down around, what is it, 10%, 20% year over year, if I'm not totally wrong, on the back of the envelope calculation. Can you clarify if you're really seeing it or it's the concept of prudence? This would be the first question, please.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Okay. I will take that one. So the, let me peel the onion for you, Jorgen. So starting from the top, we continue to see strong demand on the back of the very successful holiday quarter that we just had. Demand in constant currency is expected to be in the mid single digit, okay.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

And this translates in depending on which side of the range you are. But in our net sales, when you factor in the FX impact that I mentioned in my prepared remarks, net sales to be up low to mid single digit. Okay. As far as the gross margin point of your question, that is correct. So we are expecting gross margin rate to be around 41.5% in the Q4.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

So there are fundamentally 2 things happening year over year. 1 is the FX impact that I mentioned in my prepared remarks. As you've seen in recent weeks, the U. S. Dollar has strengthened quite substantially compared to the other major currencies and for us it's primarily the euro.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

So that's about year over year, it's about 150 basis points pressure on the gross margin rate. And then last year, we were still enjoying a little bit of tailwinds coming from release of inventory reserves as the channel was coming down. That's not going to repeat in the Q4. So that's why the gross margin rate is about, call it, roughly 200 basis points down year over year. So however,

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

if

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

you exclude the impact of the FX and if you exclude the impact of this inventory dynamic, the operating income would be pretty much flat. So now we stand in all these pressures that I just mentioned. I think we are really a testament to the great work that the team has done by really allowing us to raise further the guidance for the year. And if you take a step back a little bit, rewind a little bit what we said in the last earnings call, basically our outlook is improving by about $100,000,000 in revenue and about $20,000,000 in margin. It's a pretty nice flow through considering some of the challenges that I mentioned in my prepared remarks.

Joern Iffert
Joern Iffert
Head Equity Research Switzerland at UBS Group

Thank you, Fabrice. Yeah, sorry, Hanneke.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Oh, no, I was just going to add, Yaron, I mean, because we've been talking about this all year. So again, in the Q4, we do expect in constant currency that the sellout, the demand will continue to be robust mid single digits. But as we've said many times before, towards the end of the year, the sell in will be lower than the sellout. So that's the dynamic you're seeing, but we do expect it to be positive.

Joern Iffert
Joern Iffert
Head Equity Research Switzerland at UBS Group

Thank you. And this brings me to the second question, if I may. When I look into the first half twenty twenty six, and just mechanically, your, sell in was much higher versus sell out. Is this something we should be prepare ourselves for that maybe sell in against the tight comps is more flattish in the first half 'twenty six and sell out will maintain the pace we are seeing around mid single digit? Or is it not a big deviation you would expect for the first half twenty twenty six?

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Sure. If we rewind the tape a little bit, right, we, if you remember at the beginning of the year, we fiscal year 2025, we mentioned that the channel exiting fiscal year 2024 was a bit light. We were surprised to the positive on some of the growth that we saw in the revenue in the last couple of months or the Q4 of 2024. And this created a bit of an imbalance in the channel inventory. And we spent basically the first half of fiscal year 2025 in fixing this.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

And that's why we said first half of twenty twenty five, sell in will outpace sell out, but then this dynamic reverse itself in the second half of twenty twenty five, which is exactly what has been happening in the Q3 and what Annika mentioned for the 4th. Our plan is to continue to maintain and health a healthy channel inventory. This is really what enabled us in a way to have such a strong holiday quarter. So we want to continue to do that. And if we are successful, then you should not see the same dynamic happening next year.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

So you will see next year sell in and sell through mirror closer to each other throughout the year.

Joern Iffert
Joern Iffert
Head Equity Research Switzerland at UBS Group

Thank you very much. The very last question if I may, it's the technical one to be sure because I could not go through all the details, but this SG and A one off you were highlighting, this is included in your non GAAP EBIT, right? So the adjusted non GAAP EBIT for this one would be even higher, just to double check this quickly.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

That that so that is correct. So first of all, the $14,000,000 was booked not in in G and A but in sales and marketing, and, and it is included in our numbers.

Joern Iffert
Joern Iffert
Head Equity Research Switzerland at UBS Group

Thank you very much.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Sure.

Operator

Okay. Our next question comes from Ananda with Loop Capital.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Yeah. Thanks guys. Good afternoon and thanks for taking the questions. I guess just starting real quick on gaming, what's a good way to think about the durability of these results as you go through the year? There's some important new gaming refreshes coming out later in the year.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Typically, there's good pull through ahead of those. There's also tough comp compares, tougher compares coming up as you go through the year. And then you are at record levels of gaming revenues. So just starting there, I'd love to get your take on that. Thanks.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Yeah. Yeah, I'm not going to give you an outlook for the year ahead, but we're bullish on gaming. We're super excited about what we did in the holiday quarter. We're gaining share in the U. S.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And in EMEA in really robust markets. I talked about the momentum we're regaining in China. We're gaining share and we're growing faster on the premium end of our gaming business. So I mentioned Pro, which is back to records. I didn't mention SIM, but that was a 4th quarter of double digit growth on SIM.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

So those are really high ASP products. And then I think AI and innovation, that fun AI streaming agents we just launched, there's a lot more to come there. So bullish on gaming, and we can talk more about at AID.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

I appreciate the context. And I guess quick follow-up, you had mentioned back to office. VC obviously is doing well again. Are you getting I guess would love any context, whether it's anecdotal in your conversations with larger customers or any of the data you're picking up about you know, sort of bodies coming back to office that sort of connecting into, increased activity, you know, any any, context there would be great. Thanks.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Yeah. Yeah. We're definitely seeing increased activity in people moving into new offices, changing their office setups, etcetera, because many companies will continue to be hybrid. So a few days in the office, few days at home, some have decided to go all in and go all back to the office. All of that requires, a new way of thinking about the office, which is really perfect for us.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

We've got very clear points of view on what great offices look like and what great technology in those offices look like. And our teams are being pretty damn effective at sharing those perspectives and sharing our products. So again, another place that we're bullish on. And we can support companies that decide to go back 5 days a week, but we also support companies really well that decide on fewer days.

Ananda Baruah
Stock Analyst at Loop Capital Markets LLC

Thanks a lot. Thanks, guys. Appreciate it.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Thank you.

Operator

Okay. Our next question comes from George Wang with Barclays. George?

George Wang
Vice President at Barclays Investment Bank

Thank you for taking my questions and congrats on the quarter. I have two quick ones. Firstly, can you maybe give a more refreshed start in terms of operating expense? It's nice to see the strong OpEx control. Just curious if there's a tendency to reinvest some of the savings to kind of R and D and the S and M just to increase more sales?

George Wang
Vice President at Barclays Investment Bank

Previously, you guys talked about 24% to 26% in terms of the sales ratio. Just curious if there's a kind of move away to the low end versus kind of reinvesting to the business?

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

Absolutely. So let me dissect the number for you, George. So the we continue to invest in R and D and in sales and marketing. So if you forget one second the bad debt reserve that we had to book this quarter, sales and marketing was up about 6% year over year. The team did a very great job in being very meticulous on how to spend the money.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

They selectively spent some marketing dollars with some of our key e tailers and retailers to drive profitable growth. And you saw the results in the in the numbers that we just posted. So really a great job for the team. He spent the dollars wisely. And the same applies to R and D.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

We continue to see R and D going up. That's part of what we always do. And the and you saw the impact of that. We launched Just in Gaming 16 new NPIs right before the holidays. And you look at what gaming did with it.

Matteo Anversa
Matteo Anversa
Chief Financial Officer at Logitech International

They achieved almost record net sales. So that philosophy is not changing. As far as the range, we confirm the range of 24% to 26%, excluding the bad debt that we recorded in the quarter and will probably be on the higher end of that range. But the philosophy really is not changing. We continue to invest in R and D, in sales and marketing cautiously, and we continue to be to driving efficiency in G and A.

George Wang
Vice President at Barclays Investment Bank

Great. Just a quick follow-up, if I can. Just since you guys have cash reached $1,500,000,000 of cash on the balance sheet, increased a bit sequentially. Just in terms of bolt on tuck in deals, so do you think you are going to addressing a bit more cross sell opportunities like adjacencies versus kind of maybe a new category such as kind of B2B you guys are doubling down? Just curious if there's any refresh thoughts there.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Yeah. So we'll definitely touch on that at the Investor Day. For now though, our priorities, when you look at cap, we have a pristine balance sheet. Our cash situation is great. And the priorities on how we spend that don't change.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

So first of all, we invested in the business. R and D is especially critical for us. 2nd, we prioritize the dividends, nice increases in the dividend every year. The 3rd priority though is M and A. So I'm glad you're bringing it up, but we have to be extremely thoughtful and deliberate and strategic about M and A.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

It's easy to do a deal. It's much harder to do a really great deal. But if I were a betting woman, I would say that you're right. Any M and A would be in the places of work and play and with synergies, especially in B2B or in our B2C go to market. So we are looking.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

And if and when we pull the trigger, I also want to tell you that we'll be ready to really integrate it well. So it's another thing that we're working on. And when we have something to share, you'll obviously be the first to know. But in the meantime, while we're not announcing any new M and A, our 4th priority for capital allocation is share buybacks, really important. We usually buy back around $130,000,000 in a quarter.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

You've seen us buy back $200,000,000 in the last quarter, again, because of that cash situation, but also because we believe it's a really good share to invest in. So it was a little higher than usual.

George Wang
Vice President at Barclays Investment Bank

Great. Thank you.

Operator

Okay. At this time, we do not have any more hands raised.

Nathan Melihercik
Nathan Melihercik
Head of Global Investor Relations at Logitech International

Great. Hanukkah, that's our last question for today.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

Excellent. Well, thank you guys. It's great to see you. Appreciate you joining. Maybe the last thing I'll say is, I am just so proud of our team's performance in this last quarter.

Hanneke Faber
Hanneke Faber
CEO at Logitech International

You've seen us invest strategically and sensibly in product innovation, in our B2B capabilities and around our global markets, and you've seen us do that over the last several quarters. And hopefully, what you've seen is that the return on that investment is on full display this holiday quarter. The business regained top line momentum across products, across geographies and across channels, and it's generating, as we just said, really healthy invested capital and cash returns. We feel we're well positioned to perform in the volatile global environment that will be there this year, but I could not be more excited for what's to come in 2025. So thank you again and we hope to see you all in March here in Silicon Valley at AID.

Remove Ads
Executives
    • Nathan Melihercik
      Nathan Melihercik
      Head of Global Investor Relations
    • Hanneke Faber
      Hanneke Faber
      CEO
    • Matteo Anversa
      Matteo Anversa
      Chief Financial Officer
Analysts
Powered by Quartr
Earnings Conference Call
Open Text Q3 2025
00:00 / 00:00

Transcript Sections

Remove Ads