LOGITECH INTERNATIONAL S.A. 10-K

ITEM 1. BUSINESS Company Overview Logitech is a world leader in designing, manufacturing and marketing products that help connect people to digital and cloud experiences. Almost 40 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, Logitech G, ASTRO Gaming, Streamlabs, Blue Microphones, Ultimate Ears, and Jaybird. Our Company's website is www.logitech.com. Logitech was founded in Switzerland in 1981, and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Apples, Switzerland, which conducts its business through subsidiaries in the Americas (including North and South America), EMEA (Europe, Middle East, Africa) and Asia Pacific (including, among other countries, China, Taiwan, Japan, India and Australia). Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange, under the trading symbol LOGN, and the Nasdaq Global Select Market, under the trading symbol LOGI. References in this Annual Report on Form 10-K to the "Company," "Logitech," "we," "our," and "us" refer to Logitech International S.A. and its consolidated subsidiaries. We operate in a single operating segment: Peripherals. For more information, see Note 15 - Segment Information in our Notes to the consolidated financial statements included in this Annual Report on Form 10-K. Our products participate in five large markets: 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 and e-tailers 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. 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. For more information, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations and Note 3—Business Acquisitions in our Notes to consolidated financial statements. Industry Overview Historically, Logitech's business has been driven by the same trends that drove the adoption of desktop and laptop PCs for consumers and businesses, including the growth in affordable processing power, communications bandwidth, the increased accessibility of digital content, and the growing and pervasive use of the Internet for productivity, communication and entertainment. More recently, remote and hybrid work and learning, the democratization of content creation, the rising trend of gaming becoming one of the largest participant and spectator sports, the growth of streamers and creators and the expansion of video everywhere have created multiple opportunities for Logitech to drive greater interaction and engagement between people and digital content. In the past year, new PC shipments have steadily increased and, combined with increased interest in smaller, mobile computing devices (such as smartphones and tablets), the market for PC peripherals has greatly expanded. We see opportunities within the large installed base of PCs, created by consumers' desire to refresh their current PC experiences with new peripherals, as well as new trends developing within the connected device ecosystems. In addition, the increasing adoption of hybrid work will likely increase the number of new workspaces, thereby creating expanded opportunities to attach multiple peripherals. Consumers are also enhancing their tablet experience with a range of keyboards and cases that enable them to create, consume and do more with their tablets conveniently and comfortably. The recent shift toward remote and hybrid learning environments has also significantly increased the addressable education market for tablet keyboards and cases, as well as for other PC peripherals. Growing adoption of cloud-based experiences in gaming, video, music and smart home has also increased our addressable market opportunities. More and more consumers today interact with cloud-based content platforms, such as Steam and Twitch for gaming, or Zoom and Microsoft Teams for video collaboration. Logitech offers peripherals and accessories to enhance the use of such cloud-based content platforms. Logitech International S.A. | Fiscal 2021 Form 10-K | 3 Table of Contents In the gaming market, the rapid rise of esports and the growth of live streamers on platforms such as Twitch and broadcasters on platforms such as YouTube continue to drive growth. We leverage our deep research and development (R&D) capabilities in the area of PC peripherals that include Pointing Devices, Keyboards & Combos and PC Webcams, to develop industry-leading gaming gear that enhances consumers' overall gaming experience and performance. As consumers increasingly watch various esports tournaments or other gaming broadcasts on cloud-based platforms such as Twitch, the gaming industry is becoming both a source of entertainment and participation by mainstream consumers. We sponsor and work closely with esports athletes to improve our brand and the quality and functionality of our gaming products. We also offer gaming peripherals that enhance the experience of more casual gamers. The adoption of video everywhere - in large and small conference rooms and at home -- is a continuing trend that has accelerated during the COVID-19 pandemic. The video communication industry continues to make progress toward a vision in which people can conduct a video call from any of a variety of platforms - video-enabled rooms, PCs, laptops and mobile devices such as tablets and smartphones - to any other platform. This trend to embrace cloud video conferencing by businesses and institutions and, in particular, the growing adoption of remote work, learning, and telemedicine, is driving sales of our Video Collaboration category and offers a long-term growth opportunity for Logitech. For businesses and institutions, video conferencing is increasingly substituted for travel, because of high travel costs as well as the productivity gain that can be achieved by a high-quality, face-to-face meeting that does not require travel away from the office. For some schools, remote learning has become a complementary or, in some cases, an alternative way to educate students. Further, with the increased availability of high Internet bandwidth, video conferencing is becoming a key component of Unified Communications, which is the integration of communications solutions such as voicemail, e-mail, chat, presentation sharing and live video meetings. The market opportunity to provide innovative, affordable, and easy-to-use video collaboration products to the millions of small- medium- and large-sized meeting rooms lacking video is substantial, and we are well-positioned to take advantage of that opportunity. Cloud-based music services have experienced growth across the industry, fueled by smartphones, tablets, and other connected devices. 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. Within the music category, the market for mobile speakers has matured and the integration of personal voice assistants has increased competition in the speaker category. Consumers are increasingly listening with wireless earphones while they undertake activities such as sports and fitness. The innovation in truly wireless headphones has led to industry growth in revenue, which highlights a growth opportunity for Logitech. In addition, consumers are increasingly streaming and broadcasting using microphones and other peripherals which also expands our opportunities. The home is also an important place for technological development, particularly as an increasing number of objects become connected smart home devices such as home security cameras, light bulbs, security locks, thermostats and others. Logitech’s line of universal remotes and hubs control electronic and connected devices around the home, including these and other smart devices. Business Strategy Logitech's foundation for future growth is built on five core capabilities that apply to all of our product categories: • Design; • Engineering; • Go-to-market; • Marketing; and • Operations. Logitech International S.A. | Fiscal 2021 Form 10-K | 4 Table of Contents Design In the past few years, Logitech has strengthened its design capabilities by building a world-class team of internal designers. Our designs have an everyday place in people’s lives, connecting them to the digital experiences they care about. These products have been earning prestigious design awards - 127 design awards during the past three fiscal years - and enthusiastic reviews in the media. This is one indication that Logitech’s strategic aim to become a design company is working. During fiscal year 2021, we won 23 design awards. As Logitech establishes itself as a design company, design thinking and culture are used as a strategic and cultural differentiator. Design also helps to reduce product costs through increased collaboration between our design, engineering and manufacturing teams. Our key design centers are in Switzerland, Ireland, the United States, and Taiwan. Engineering Our decades-long expertise in key engineering disciplines such as sensors, acoustics, optics, wireless, and power management is a core competitive advantage of Logitech. Furthermore, we continue to extend our engineering capabilities into more advanced technologies such as software, apps, cloud, data analytics and machine learning. Our engineering team has expertise in developing products for a broad array of platforms such as PCs, mobile and personal voice assistants (such as Amazon Alexa and Google Assistant). These engineering capabilities combined with our award-winning design team form the basis of Logitech's key innovation engine. Go-To-Market Over the past 30-plus years, Logitech has built an extensive global go-to-market network that can be leveraged as we introduce new products, enter new market categories and optimize the value of our existing products and product categories. We have multiple opportunities to drive growth - existing products in existing and new retailers, and new products in existing and new retailers. Beyond online and offline retail and distribution channels, we have also strengthened other commercial channels. As we increase our investments in Video Collaboration, we are also expanding our enterprise sales coverage through our sales force as well as various channel partners. And with expansions into new channels, there are numerous cross-selling opportunities across our broad product portfolio. We have established Logitech as a neutral technology supplier that can work with a variety of leading technology vendors and platforms as well as provide connections among their products and ecosystems. Marketing As Logitech expands into multiple categories with multiple brands, we are focusing on enhancing our marketing capabilities around brand strategy and execution, digital marketing, and marketing technology. More recently, we are meaningfully increasing our brand marketing investments to drive greater brand awareness and consideration, as we pivot to a demand pull model from a demand push model. Most of the marketing and creative efforts that were once outsourced to outside marketing agencies are now executed through our internal teams from concept to execution, which improves speed and cost efficiency. We are increasing our leverage of digital media channels and programs to drive consumer brand engagement and purchase. We are also increasing our focus on marketing analytics platforms to improve our understanding of marketing investments and to maximize return on investment (ROI). And we are making investments to upgrade and expand all aspects of our marketing technology infrastructure, including the re-platforming of our websites to support the global expansion of our brands across countries, languages and devices and to provide the foundation for the acceleration of our digital marketing efforts and evolution to personalized consumer communication. Operations Logitech’s operations capability consists of a hybrid model of in-house manufacturing and third-party contract manufacturers, which allows us to effectively respond to rapidly changing demand and leverage economies of scale. Our supply chain’s extensive global reach, key distribution channels, adoption of factory automation and strategic business relationships combined with extensive analytic modeling expertise, optimization tools and global processes provide a competitive advantage against many of our competitors. Logitech International S.A. | Fiscal 2021 Form 10-K | 5 Table of Contents Products Logitech designs, manufactures and markets products that allow people to connect through computing, gaming, video, music, and other digital platforms. The large majority of our revenue has historically been derived from sales of our products for use by consumers while more recently we have experienced growth in sales of our products to enterprise customers. Creativity & Productivity Pointing Devices: Logitech offers a variety of pointing devices. Some of our key products in this category include: • The Logitech MX Master 3 and MX Anywhere 3 wireless mice, our flagship wireless mouse products. Enabled with Logitech Flow cross-computer control software, these products represent the new paradigm for precise, fast, comfortable cross-computer digital navigation. • The Logitech Wireless Mouse M325, which offers micro-precise scrolling, 18-month battery life and comfortable design. • The Logitech Wireless Mouse M185, a wireless mouse with nano receiver technology that is compatible with any computer. • The Logitech Pebble Mouse, a wireless mobility mouse with dual connectivity (BT and unifying nano technology) that is compatible with any computer. Keyboards & Combos: Logitech offers a variety of corded and cordless keyboards, living room keyboards, and combos (keyboard-and-mouse combinations). Some of our key products in this category include: • The Logitech Wireless Combo MK270, a full-size keyboard and mouse combination with a tiny USB receiver. • The Logitech MX Keys Wireless keyboard, a premium backlit keyboard with customizable keys to directly access menus and shortcuts within leading creativity and productivity apps. • The Logitech K380 wireless minimalist keyboard with multi-switch functionality to easily navigate from one screen to another (from PC to Phone to tablets) that is compatible with any computer. PC Webcams: Our PC Webcams category comprises webcams targeted primarily at video conferencing users purchasing for individual use. A key market driver includes people upgrading their work-from-home video conferencing setup. The Logitech HD Pro Webcam C920 and C922 were top revenue-generating webcams during fiscal year 2021. Tablet & Other Accessories: Our Tablet & Other Accessories category includes keyboards for tablets and smartphones as well as other accessories for mobile devices. These products are mostly for iPads but are also for select Samsung and other Android tablets. Some of our key products in this category include : • The Logitech Slim Folio Keyboard for the iPad Pro 12.9 and 11, bringing a bluetooth backlit keyboard with a folio design for optimal working and viewing angle, light front and back protection and an Apple Pencil holder. The Logitech Slim Folio Keyboard for the 7th generation iPad for a light protection folio with a bluetooth keyboard. • The Rugged Folio Keyboard for the iPad 7th Generation, bringing a more protective rugged folio, with a wipeable fabric keyboard, a rugged and protective holder and an any-angle kickstand to allow multiple viewing angles. The Rugged Folio uses Smart Connector technology to connect to the iPad seamlessly, with no need for batteries or bluetooth pairing. • The Combo Touch for the iPad 7th Generation and iPad Air, which is our newest design offering a Smart Connected backlit full-size keyboard, any-angle kickstand for flexible viewing angles and a trackpad for gestures, clicks and navigation. Gaming Logitech G provides gamers of all levels with industry-leading keyboards, mice, headsets and simulation products such as steering wheels and flight sticks, incorporating innovative design and advanced technologies . Some of our key products in this category include: Logitech International S.A. | Fiscal 2021 Form 10-K | 6 Table of Contents • The Logitech G915 LIGHTSPEED Wireless, RGB Mechanical Gaming Keyboard, which features high-performance low-profile mechanical switches that provide all the speed, accuracy, and performance of traditional switches, at half the height. • The Logitech G PRO Wireless Gaming Mouse that was designed in collaboration with the world's top esports professionals, and features our LIGHTSPEED TM professional grade wireless technology, our exclusive high-performance HERO gaming sensor, a flexible ambidextrous design, and support for our POWERPLAY TM wireless charging solution, for maximum performance and comfort over long gameplay sessions. • The Logitech G29 Driving Force Steering Wheel for PC and Sony PlayStation 4 & 5, which features a powerful dual-motor force feedback transmission, hand-stitched leather-wrapped rim, and stainless steel throttle, brake and clutch pedals for an ultra-realistic driving experience. ASTRO Gaming is a performance gaming and lifestyle brand focused on the console gaming peripherals market with a cross-platform lineup consisting of four primary headset models for PlayStation 4 and PC: • The A50 Wireless Headset and Base Station that targets the discerning “prosumer” consumer, featuring integrated MixAmp technology, Dolby ® Digital surround sound and the ASTRO Command Center Software system. • The A40TR Headset and MixAmp Pro, a wired solution that targets the esport professional and live streamer, featuring Dolby ® Digital surround sound, daisy-chain chat, live stream port and the ASTRO Command Center Software system. • The A20 Wireless Headset, a stereo headset delivering the signature ASTRO comfort and audio customization via the ASTRO Command Center Software. • The A10 wired headset, an ultra-durable robust headset delivering ASTRO signature comfort and sound quality at a more accessible price point. Video Collaboration The Video Collaboration category includes Logitech’s ConferenceCams, which combine enterprise-quality audio and high definition (HD) 1080p video with affordability to bring video conferencing to businesses of any size, as well as state of the art webcams and headsets that turn any desktop into an instant collaboration space. Our key products in this category include: • Logitech Rally Bar, an all-in-one video bar purpose-built for midsize rooms, featuring brilliant video, room-filling audio, and the flexibility to deploy in PC or appliance mode. • Logitech Rally, which offers best-in-class video conferencing with Ultra HD 4K video and professional audio that easily turns medium- to large-sized conference rooms into video-enabled collaboration rooms. • Logitech MeetUp, which is Logitech’s premier ConferenceCam designed for huddle rooms, with a room-capturing 120° field of view ( FOV), 4K optics and exceptional audio performance. • Logitech Tap touch-screen controller connects to any computer via USB and serves as an ideal controller for video conferencing room solutions from Google®, Microsoft®, and Zoom. • Logitech BRIO, which has 4K video, RightLight 3 and high dynamic range (HDR) to improve challenging lighting, and Windows Hello facial recognition support for secure login using just a user's face. Music Mobile Speakers: Our Mobile Speakers category is a portfolio of portable wireless Bluetooth and Wi-Fi connected speakers for music on the go. The top revenue-generating product in our Mobile Speakers category during fiscal year 2021 was the Ultimate Ears WONDERBOOM 2, our small sized ruggedized portable Bluetooth wireless speaker. During fiscal year 2021,our collection of portable bluetooth speakers included, WONDERBOOM, WONDERBOOM2, BOOM2, BOOM3, MEGABOOM,MEGABOOM3, MEGABLAST, BLAST, and our largest most powerful speaker HYPERBOOM that delivers the loudest and most rich audio performance in the portfolio. Logitech International S.A. | Fiscal 2021 Form 10-K | 7 Table of Contents Audio & Wearables: Our Audio & Wearables category comprises PC speakers, PC headsets, Blue Microphones, in-ear headphones and premium wireless audio wearables designed to enhance the audio experience and studio-quality microphones for professionals and consumers. We offer both the Jaybird wireless audio wearables for sports and active lifestyles and our custom in-ear headphones, made by Ultimate Ears. Jaybird is a digitally native brand that pioneered the wireless in-ear headphone category and continues to be a leading brand in headphones made for athletes. Designed for sport & IPX 7 rated, Jaybird’s Flashship Vista wireless earbuds offer great sound with the durability that athletes demand. All Jaybird products are accompanied by software supported on both Android and iOS that offers a rich personalized listening experience. Our Blue Microphones product line has a 25-year legacy of innovative design and premium performance across both professional and consumer markets. Blue Microphones offers a range of audio tools for recording or broadcasting applications, from YouTube and podcast production to music and gaming. Examples of products in the Blue Microphones lineup include: • Yeti: A premium USB microphone for game streaming, podcasting, YouTube, Skype/VoIP and music. With its proprietary 3-capsule array, it delivers astounding details and presence and includes four recording patterns (cardioid, omni, bi-directional and stereo) for versatility. • Yeti Nano: A premium USB microphone with broadcast sound quality in a more compact format. Dual capsule design enables cardioid and omni patterns. • Yeti X: The next generation of Yeti, featuring a new proprietary 4-capsule array, fully digital architecture that is compatible with Blue Sherpa control software and Logi-G G-Hub gaming software, and Blue VO!CE, a new software application that allows the user to control and manipulate the sound of their voice through the microphone. Smart Home Our Smart Home category includes our Harmony line of advanced home entertainment controllers, products dedicated to controlling emerging categories of connected smart home devices such as lighting, thermostats and door locks, and home security cameras. Research and Development We recognize that continued investment in product research and development is critical to facilitate innovation of new and improved products, technologies and experiences. Our research and development expenses for fiscal years 2021, 2020 and 2019 were $226.0 million, $177.6 million and $161.2 million, respectively. We expect to continue to devote significant resources to research and development, including devices for digital platforms, video communications, wireless technologies, power management, user interfaces and device database management to sustain our competitive position. Sales and Distribution Principal Markets Sales by geographic region for fiscal years 2021, 2020 and 2019 (based on the customers' location) are as follows (in thousands): Year Ended March 31, 2021 2020 2019 Americas $ 2,206,552 $ 1,286,527 $ 1,190,216 EMEA 1,735,682 941,211 861,731 Asia Pacific 1,310,045 748,113 736,375 Total Sales $ 5,252,279 $ 2,975,851 $ 2,788,322 Revenues from sales to customers in Switzerland, our home domicile, represented 3%, 4% and 3% of our sales in fiscal years 2021, 2020 and 2019, respectively. In fiscal years 2021, 2020 and 2019, revenues from sales to customers in the United States represented 35%, 36% and 36% of our sales, respectively. In fiscal years 2021, 2020 and 2019, revenues from sales to customers in Germany represented 16%, 15% and 18% of our sales, respectively. Revenues from sales to customers in China represented 10% of our sales for fiscal year 2019. No other country represented more than 10% of our sales for fiscal years 2021, 2020 or 2019. Logitech International S.A. | Fiscal 2021 Form 10-K | 8 Table of Contents Sales and Distribution Our sales and marketing activities are organized into three geographic regions: the Americas (North and South America), EMEA (Europe, Middle East, Africa) and Asia Pacific (China, Japan, Australia, Taiwan, India and other countries). We sell our products primarily to a network of distributors, retailers and e-tailers. We support these channels with our direct sales force and third-party distribution centers located in North America, South America, Europe and Asia Pacific. Our distributor customers typically resell products to retailers, value-added resellers, systems integrators and other distributors with whom Logitech does not have a direct relationship. Logitech's products can be purchased in a number of major retail chains, where we typically have access to significant shelf space. In addition, Logitech products can be purchased online either directly or indirectly from Logitech.com or through e-tailers, the websites of our major retail chains, and others. Logitech products are also carried by business-to-business direct market resellers. In fiscal years 2021, 2020 and 2019, Ingram Micro Inc. and its affiliated entities together accounted for 14%, 12% and 13% of our gross sales, respectively. In fiscal years 2021, 2020 and 2019, Amazon Inc. and its affiliated entities together accounted for 13%, 14% and 14% of our gross sales, respectively. No other customer individually accounted for more than 10% of our gross sales during fiscal years 2021, 2020 or 2019. Customer Service and Technical Support Our customer service organization provides user technical support, support related to product inquiry, and order support. We support these customer service functions with two outsourced operations that have support centers located in China, South Korea, India, the Philippines, Mexico, the United States, and Bulgaria. Our customer service and technical personnel in each of our regions provide support services to retail purchasers of products through telephone, e-mail, forums, chat, and the Logitech Support website. For some of our brands, dedicated support websites, dedicated internal support teams and channels are available. To improve our customers' experience and operate efficiently, we use technology to facilitate chatbot interactions, enable self-help and apply Artificial Intelligence to optimize support searches. Logitech provides warranties on our branded products that range from one to five years. For our Video Collaboration category, we also work with channel partners to offer bundled support services with Logitech Video Collaboration solutions. In Korea, India, and China, there are multiple locations where consumers may obtain service for their Logitech products. These locations are managed by third-party logistics providers. Consumers who have purchased Logitech products can visit these locations for product inspection, testing and return or exchange of products. Within China, there is also a mail-in center to provide these services for more remote locations in China. Manufacturing Logitech's manufacturing operations consist principally of final assembly and testing. Since 1994, we have had our own manufacturing operations in Suzhou, China, which currently handles approximately half of our total production of products. We continue to focus on ensuring the efficiency of the Suzhou facilities, through the implementation of quality management, automation, process improvements, and employee involvement programs. We outsource the remaining production to contract manufacturers and original design manufacturers located in Asia. Both our in-house and outsourced manufacturing operations are managed by our worldwide operations group. The worldwide operations group also supports the business units and marketing and sales organizations through the management of distribution centers and the supply chain and logistics networks. New product launches, process engineering, commodities management, logistics, quality assurance, operations management and management of Logitech's contract manufacturers occur in China, Taiwan, Hong Kong, Malaysia, Vietnam and Thailand. Certain components are manufactured to Logitech's specifications by vendors in Asia, the United States, and Europe. We also use contract manufacturers to supplement internal capacity and to reduce volatility in production volumes. In addition, some products, including most keyboards, certain gaming devices and certain audio products are manufactured by contract manufacturers to Logitech's specifications. Logitech International S.A. | Fiscal 2021 Form 10-K | 9 Table of Contents Our hybrid model of in-house manufacturing and contract manufacturers allows us to effectively respond to rapidly changing demand and leverage economies of scale. Through our high-volume manufacturing operations located in Suzhou, China, we believe we have been able to maintain strong quality process controls and have realized significant cost efficiencies. Our Suzhou operation provides for increased production capacity, manufacturing know-how, IP protection and greater flexibility in responding to product demand. Further, by outsourcing the manufacturing of certain products, we seek to reduce volatility in production volumes as well as improve time to market. Competition Our product categories are characterized by large, well-financed competitors, short product life cycles, continual performance enhancements, and rapid adoption of technological and product advancements by competitors in our retail markets. We have experienced aggressive price competition and other promotional activities from our primary competitors and less-established brands, including brands owned by some retail customers known as house brands. We may also encounter more competition if any of our competitors in one or more categories decide to enter other categories in which we currently operate. As we target opportunities in new categories and markets and as some of our product categories demonstrate growth, we are confronting new competitors, many of which may have more experience in the categories or markets and have greater marketing resources and brand name recognition than we have. In addition, because of the continuing convergence of the markets for computing devices and consumer electronics, we expect greater competition in the future from well-established consumer electronics companies in our developing categories, as well as future ones we might enter. Many of these companies have greater financial, technical, sales, marketing, and other resources than we have. We expect continued competitive pressure in our business, including in the terms and conditions that our competitors offer customers, which may be more favorable than our terms and conditions and may require us to take actions to increase our customer incentive programs, which could impact our sales and operating margins. Creativity and Productivity Pointing Devices: Apple Inc., Microsoft Corporation and HP Inc. are our main competitors worldwide. We also experience competition and pricing pressure from less-established brands, including house brands and local competitors in Asian markets, such as Elecom Co., Ltd., Buffalo Inc., Shenzhen Rapoo Technology Co., Ltd., and Xiaomi Inc. Keyboards & Combos: Microsoft and Apple are the main competitors in our PC keyboard and combo product lines. We also experience competition and pricing pressure for corded and cordless keyboard and combos from less-established brands, including house brands and local competitors in Asian markets, such as Shenzhen Rapoo, and Xiaomi. PC Webcams: Our primary competitors for PC webcams are Microsoft and other manufacturers taking smaller market share such as Razer Inc. Tablet & Other Accessories: Competitors in the tablet keyboard market are Apple, Zagg Inc., Kensington Computer Products Group, Belkin International, Inc., Targus Corporation and other less-established brands. Although we are one of the leaders in the tablet keyboard market and continue to bring innovative offerings to the market, we expect the competition may increase. Competitors in the tablet case market include Apple, Otter Products LLC, Speck Products and a large number of small brands. Gaming Competitors for our Gaming products include Razer, Corsair Components, Inc., SteelSeries, Turtle Beach Corporation and HyperX (recently announced to be acquired by HP Inc.), among others. Video Collaboration Our competitors for Video Collaboration products include Cisco Systems, Inc., Poly, Inc., GN Netcom/Jabra, and AVer Information Inc., among others. Logitech International S.A. | Fiscal 2021 Form 10-K | 10 Table of Contents Music Mobile Speakers: Our competitors for Bluetooth wireless speakers include Bose Corporation, Harman International Industries, Inc (owned by Samsung Electronics Co., Ltd., Harman owns JBL and has Harman Kardon as a division), and Beats Electronics LLC (owned by Apple), among others. Harman is our largest competitor. Personal voice assistants and other devices that offer music, such as Sonos, Amazon's Echo, Google Home (owned by Alphabet, Inc.) and Apple HomePod, also compete with our products. Amazon is also a significant customer of our products. Audio & Wearables: For PC speakers, our competitors include Bose, Cyber Acoustics, LLC, Philips Consumer Lifestyle (a division of Royal Philips), Creative Labs, Inc., Apple and Samsung, among others. For PC headsets, our main competitors include Poly (formerly Plantronics Inc.) and GN Netcom, among others. In-ear headphones competitors include Beats, Bose, Apple, Sony, JBL and Sennheiser, among others. The platform providers (e.g., Apple and Samsung) are able to craft tighter experiences for their consumers due to their ability to control both ends of the ecosystem (the headphone and the mobile device). Our competitors for Blue Microphones products include Rode Microphones LLC, Audio Technica Corporation, Samson Technologies Corp., Shure Incorporated, Razer Inc. and Apogee Electronics Corp., among others. Smart Home Direct competitors in the remote control market include pro-installer-focused Universal Remote Control Inc., and new “DIY” entrants. Indirect competition exists in the form of low-end “replacement remotes” such as Sony Corporation, RCA Corporation, and General Electric Company (GE), pure app-based solutions such as Peel Technologies, as well as device and/or subscriber-specific solutions from TV makers such as Samsung and Vizio, Inc. and multiple-system operators (MSOs) such as Comcast Corporation and DirecTV (owned by AT&T, Inc.). Competition in the home control market also exists in the form of home automation platforms such as Smart Things (owned by Samsung), Amazon with its Echo product, Google Home and Nest (owned by Alphabet Inc.), Wink and many other startups in the space. Many of these products and brands are partners with Logitech as well as via integrations with Harmony remotes. Intellectual Property and Proprietary Rights Intellectual property rights that apply to Logitech's products and services include patents, trademarks, copyrights, and trade secrets. We hold various United States patents and pending applications, together with corresponding patents and pending applications from other countries. While we believe that patent protection is important, we also believe that patents are of less competitive significance than factors such as technological innovation, ease of use, and quality design. No single patent is in itself essential to Logitech as a whole. From time to time we receive claims that we may be infringing on patents or other intellectual property rights of others. As appropriate, claims are referred to legal counsel, and current claims are in various stages of evaluation and negotiation. If necessary or desirable, we may seek licenses for certain intellectual property rights. Refer also to the discussion in Item 1A "Risk Factors—"We may be unable to protect our proprietary rights. Unauthorized use of our technology may result in the development of products that compete with our products." and "Claims by others that we infringe their proprietary technology could adversely affect our business." To distinguish genuine Logitech products from competing products and counterfeit products, Logitech has used, registered, or applied to register certain trademarks and trade names in the United States and other countries and jurisdictions. Logitech enforces its trademark and trade name rights in the United States and other countries. In addition, the software for Logitech's products and services is entitled to copyright protection, and we generally require our customers to obtain a software license before providing them with that software. We also protect details about our products and services as trade secrets through employee training, license and non-disclosure agreements, technical measures and other reasonable efforts to preserve confidentiality. Environmental Regulation We are subject to environmental regulations in a number of jurisdictions regulating our activities, products and operations. Targeted Substances. In Europe, we are subject to the European Union’s (EU) Restriction of Hazardous Substances (RoHS) in Electrical and Electronics Equipment Directive 2011/65/EU, as amended. This directive Logitech International S.A. | Fiscal 2021 Form 10-K | 11 Table of Contents restricts the use of certain hazardous substances in electrical and electronic equipment, including lead, mercury, cadmium, hexavalent chromium, phthalates and halogenated flame-retardants. Similar legislation exists in other countries worldwide including but not limited to China, India, and South Korea. We provide declarations of conformity and mark products, where required by law. In Europe, we also are subject to the European Registration, Evaluation, Authorization, and Restrictions of Chemicals (REACH) Regulation. REACH establishes procedures for collecting and assessing information on the properties and hazards of substances. In addition, as part of the Waste Framework Directive (WFD) (2008/98/EC), the European Chemicals Agency (ECHA) has built a database for storing safe-use information for substances of very high concern (SVHCs) present in products placed on the market in the EU. It is referred to as the Substances of Concern In articles, as such or in complex objects (Products) (SCIP) database. Effective January 5, 2021, where we supply to the EU market products containing substances considered of very high concern (SVHCs) in a concentration above 0.1% weight by weight, we submit required substance information to European Chemicals Agency (ECHA). In the U.S., Logitech products are regulated by California's Proposition 65, which requires that clear and reasonable warnings be given to consumers who are exposed to certain chemicals. Logitech products containing composite wood are regulated under the Toxic Substances Control Act (TSCA), Title VI, including the formaldehyde and other substance restrictions set out in TSCA Title VI. Stewardship : In Europe, Logitech products are regulated by a number of end-of-life stewardship directives including the Waste Electrical and Electronic Equipment (WEEE) Directive, the Packaging Directive and the Battery Directive, which require producers of electrical goods, packaging, and batteries to finance the collection, recycling, treatment and disposal of relevant products. Similar legislation exists in many countries worldwide. Conflict Minerals: Sourcing of certain metals is regulated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, specifically Section 1502, which addresses the use of "Conflict Minerals" in the supply chain. Similar legislation is emerging in other countries worldwide. We have established systems which facilitate our compliance with the sourcing, traceability and reporting obligations and the reporting requirements of this Act aligned with guidelines published by the Securities and Exchange Commission. As a member of the Responsible Business Alliance (RBA) and the Responsible Minerals Initiative (RMI), we participate in the industry-wide Conflict-Free Sourcing Initiative and its Conflict-Free Smelter Program by which our legal requirements are met. Modern Slavery : Our commitment to combat slavery and human trafficking is underpinned by the Transparency in Supply Chain Act of 2010 (S.B. 657), the United Kingdom Modern Slavery Act of 2015, the California Transparency in Supply Chains Act of 2010, the Australian Modern Slavery Act of 2018 and exiting or emerging similar legislation worldwide. We utilize our adherence to the RBA code of conduct and transparently report our programs to identify and eradicate slavery and human trafficking in global supply chains. Climate & Carbon: Our operations, supply chain and products are not currently subject to carbon pricing or other legally required carbon taxation or penalties. We have made a voluntary adherence to the Paris Accord international agreement for climate action and we have developed and adopted the principle of Carbon Transparency to catalyze reductions in our corporate carbon footprint, uptake of renewable power and materials and our journey to net zero. With our annual Sustainability Report and Carbon Disclosure Project reports, we report progress, risks and opportunities around climate and carbon. Energy: In Europe, our products are subject to the EU's Energy-related Products Directive (ErP Directive), which aims to encourage manufacturers and importers to produce products designed to minimize overall environmental impact. Under the ErP Directive, manufacturers must ensure that their energy-related products comply with applicable requirements, issue a declaration of conformity and mark the product with the 'CE' mark. We have taken steps to ensure that our products meet the requirements. Similar requirements exist in the four member states of the European Free Trade Association (Iceland, Norway, Liechtenstein and Switzerland). In the U.S., our products are subject to, among other laws, the Appliance Efficiency Regulations adopted under the U.S. Energy Independence and Security Act of 2007. The regulations set out standards for the energy consumption performance of products and such standards apply to appliances sold or offered for sale throughout the U.S. Logitech International S.A. | Fiscal 2021 Form 10-K | 12 Table of Contents In Australia and New Zealand, we are subject to the Minimum Energy Performance Standards regulations (MEPS). These regulations set out standards for the energy consumption performance of products within the scope of the regulations, which includes some of our products. The effects on Logitech's business of complying with environmental regulations are limited to the cost of agency fees and testing, as well as the time required to obtain agency approvals. There are also stewardship costs associated with the end-of-life collection, recycling and recovery of Logitech products, packaging and batteries where Logitech is recognized as the steward and participates in relevant programs. The costs and schedule requirements are industry requirements and therefore do not represent an undue burden relative to Logitech's competitive position. As regulations change, we will modify our products or processes to address those changes. In addition to monitoring and managing compliance with environmental regulations, we also monitor and align with international good practice standards for environmental, social and sustainability performance. We joined the RBA (formerly EICC) in 2007 to collaborate with industry peers to drive international good practice across the electronics sector. Since 2007, we have fully adopted the RBA Code of Conduct, and we publish an annual Sustainability Report in alignment with the good practice standards of the Global Reporting Initiative (GRI). For more information on our approach to sustainability management, RBA Code of Conduct compliance and international good practice, refer to our annual Sustainability Report, which is available from the sustainability page on www.logitech.com. Other Government Regulations We conduct operations in a number of countries and we are subject to a variety of laws and regulations which vary from country to country. Such laws and regulations include, in addition to environmental regulations described above, tax, import/export and anti-corruption laws, varying accounting, auditing and financial reporting standards, import or export restrictions or licensing requirements, trade protection measures, custom duties, tariffs, import or export duties, and other trade barriers, restrictions and regulations. While we incur increasing costs to comply with such other government regulations, we do not believe that our compliance with such requirements will have a material adverse effect on our competitive position, consolidated results of operations or cash flows. For more information about such regulations and how they may impact us, see "Risks Related to our Global Operations and Regulatory Environment" in Item 1A "Risk Factors" and Note 7—Income Taxes in our Notes to consolidated financial statements below. Seasonality Our product sales are typically seasonal. Sales are generally highest during our third fiscal quarter (October to December) primarily due to the increased consumer demand for our products during the year-end holiday buying season and year-end spending by enterprises. Cash flow is correspondingly lower 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. Due to the timing of our new product introductions, which could occur at any point during the fiscal year, we believe that year-over-year comparisons are more indicative of variability in our results of operations than the current quarter to prior quarter comparisons. Materials We purchase certain products and key components used in our products from a limited number of sources. If the supply of these products or key components, such as micro-controllers and optical sensors, were to be delayed or constrained, or more recently, impacted by global shortages of semiconductor chips, or if one or more of our single-source suppliers go out of business, we might be unable to find a new supplier on acceptable terms, or at all, and our shipments to our customers could be delayed, potentially resulting in lost revenue, market presence and market share. In addition, lead times for materials, components, and products ordered by us or by our contract manufacturers can vary significantly and depend on factors such as contract terms, demand for a component, our ability to forecast product demand, and supplier capacity. From time to time, we have experienced component shortages and extended lead times on semiconductors, such as micro-controllers and optical sensors, and base metals used in our products. Shortages or interruptions in the supply of components or subcontracted products, or our inability to procure these components or products from alternate sources at acceptable prices in a timely manner, could delay shipment of our products or increase our production costs. Logitech International S.A. | Fiscal 2021 Form 10-K | 13 Table of Contents Human Capital Resources Employees As of March 31, 2021, we employed approximately 9,000 employees, of which approximately 4,800 employees are in our Suzhou manufacturing facilities, and from the remaining 4,200 employees, approximately 980 are dedicated to research and development. None of Logitech's U.S. employees are represented by a labor union or are subject to a collective bargaining agreement. Certain other countries, such as China, provide by law for employee rights, which include requirements similar to collective bargaining agreements. We believe that our employee relations are good. We rely on different programs and initiatives to support our goals. Some of our key human capital management programs are summarized below. Diversity and Inclusion We believe that reflecting the diverse world in which we live - through our people and by fostering an inclusive culture - provides us with the foundation needed to create experiences that enable all people to pursue their passions, which is our corporate purpose. Our employees are located across North and South America, EMEA (Europe, Middle East and Africa) and Asia-Pacific and bring a range of perspectives and skills to Logitech. As of March 31, 2021,48% of our office employees were located in Asia-Pacific, 30% in the Americas, and 22% in EMEA (Europe, Middle East and Africa). As of March 31, 2021 females represented 36% of our global office employees, 28% of our manufacturing workforce, and 32% were in managerial roles. In the U.S., underrepresented minorities (defined as Black or African American, Asian, Hispanic or Latino, American Indian or Alaska Native, and Native Hawaiian or Other Pacific Islander) represented 46% of our workforce, and 40% were in managerial roles. To foster a more inclusive environment, we offer training sessions to emphasize awareness of self, bias and privilege, and inclusion. In addition, to measure our employees’ satisfaction at Logitech, we distribute a bi-annual employee engagement survey. Most recently, we conducted a survey in December 2020, in which 79% of our global office employees participated. As part of the survey, employees provided weighted feedback on their experience at Logitech, on measures such as happiness, retention and their perspective on our current state of workplace inclusivity at Logitech. Safety, Health and Well-being We look to safeguard the safety, health and well-being of all members of the Logitech team. We implement training and communication programs across the business each year to ensure employee awareness of the importance of health and safety management and our key programs and provisions. To help us ensure the safety, health and well-being of employees at our production facility in Suzhou, China, we follow the Responsible Business Alliance (RBA) Code of Conduct and have an Environmental, Health and Safety (EHS) Management System that is certified to ISO 14001 and ISO 45001. We implement the RBA Code as a full supply chain initiative. Further, we operate an audit and verification program to verify compliance with the RBA code. We believe health and well-being are critical to our employee’s personal and professional success and provide, in addition to healthcare benefits, wellness tools, resources and programs designed to help employees achieve good physical, financial, emotional, intellectual and social well-being. Further, we manage the impact of COVID-19 under the guidance of our Corporate Crisis Management Team and in collaboration with our local site leaders and provide regular updates to our board of directors on our actions. In early 2020, as a result of COVID-19, we quarantined employees in accordance with local regulations and re-engineered our manufacturing operations with diminished capacity. Actions taken at our campus in Suzhou, China, that includes our production facility, our office and employee dormitories have included screening everyone at campus entrances for fever and signs of illness, requiring masks, increasing hygiene measures, and implementing protocols to address actual and suspected COVID-19 cases and potential exposure. At the same time, as a result of government orders and concern for the well-being of our employees and their families, we have required substantially all of our employees in non-manufacturing facilities to work remotely. In Asia, most of our offices reopened in 2020, as and where permitted by local regulations. We are regularly evaluating the local COVID-19 infection rate as a key metric for when we begin to gradually reopen an office. To support our employees during the pandemic, we offered and continue to offer additional benefits, including a partial internet reimbursement, work-from-home equipment contribution, and increased flexibility in our leave programs to support employees caring for children and others. We did not implement layoffs or furloughs as a result of the COVID-19 pandemic, including during mandatory shelter-in-place orders instituted in many locations in which we operate. Logitech International S.A. | Fiscal 2021 Form 10-K | 14 Table of Contents Talent Acquisition and Development Our geographic diversity gives Logitech an excellent foundation to recruit diverse talent from around the world. We believe that the entire talent process must be executed through a lens of equity and inclusion. We provide learning and development tools and resources to all our employees through our key programs. Our talent development program includes a dedicated training center at our production facility, a number of workshop-based, leadership development, mentorship, coaching career development and team building programs that remain available remotely. Information About Our Executive Officers. The following sets forth certain information regarding our executive officers as of May 12, 2021: Name Age Nationality Position Bracken Darrell 58 U.S. President and Chief Executive Officer Nate Olmstead 49 U.S. Chief Financial Officer Prakash Arunkundrum 46 U.S. Head of Global Operations & Sustainability Samantha Harnett 45 U.S. General Counsel Bracken Darrell joined Logitech as President in April 2012 and became Chief Executive Officer in January 2013. Prior to joining Logitech, Mr. Darrell served as President of Whirlpool EMEA and Executive Vice President of Whirlpool Corporation, a home appliance manufacturer and marketing company, from January 2009 to March 2012. Previously, Mr. Darrell had been Senior Vice President, Operations of Whirlpool EMEA from May 2008 to January 2009. From 2002 to May 2008, Mr. Darrell was with the Procter & Gamble Company (P&G), a consumer brand company, most recently as the President of its Braun GmbH subsidiary. Prior to rejoining P&G in 2002, Mr. Darrell served in various executive and managerial positions with General Electric Company from 1997 to 2002, with P&G from 1991 to 1997, and with PepsiCo Inc. from 1987 to 1989. Mr. Darrell holds a BA degree from Hendrix College and an MBA from Harvard University. Nate Olmstead joined Logitech in April 2019 as Vice President of Business Finance and was appointed interim Chief Financial Officer as of June 2019 and Chief Financial Officer as of July 2019. Prior to joining Logitech, Mr. Olmstead served in various financial management roles at Hewlett-Packard Company and Hewlett-Packard Enterprise, a multinational information technology company, most recently as the Vice President of Finance for Global Operations at Hewlett-Packard Enterprise from June 2017 to March 2019. He also served as Vice President of Finance, EG Global Supply Chain and Quality from February 2015 to June 2017, Vice President of Finance, HP Storage and HP Converged Systems from 2009 to February 2015, and Director, HP Investor Relations from 2006 to 2009. Mr. Olmstead holds a BA degree from Stanford University and an MBA from Harvard University. Prakash Arunkundrum is Logitech’s Head of Global Operations & Sustainability, a position he has held since May 2018. He joined Logitech in 2015 and held operations positions as Vice President New Product Introductions & Strategic Initiatives from August 2015 to July 2016 and Vice President Global Sourcing and New Product Introductions from July 2016 to May 2018. Prior to joining Logitech, Mr. Arunkundrum was a Principal at A.T. Kearney, a global management consulting firm, from July 2014 to August 2015. He also served as Director, Management Consulting at PricewaterhouseCoopers, a multinational professional services network of firms, from September 2011 to July 2014 and Principal at PRTM Management Consultants LLC, a management consulting firm acquired by PricewaterhouseCoopers, from March 2010 to September 2011. Prior to his management consulting roles, Mr. Arunkundrum held several management positions at i2 Technologies, a supply chain management company acquired by JDA Software, from March 2007 to February 2010. Early in his career, he held product management positions at supply chain startups and i2 Technologies. Mr. Arunkundrum holds a BTech degree in Chemical Engineering from Central ElectroChemical Research Institute (CECRI) in Karaikudi, India and a Master of Science in Materials Engineering from University of Maryland at College Park. Samantha Harnett joined Logitech as General Counsel in June 2020. Prior to joining Logitech, Ms. Harnett served in various legal and management roles at Eventbrite, Inc., a global self-service ticketing and experience technology platform, most recently as Chief Legal and Operations Officer from October 2019 to June 2020. While at Eventbrite, she also served as Senior Vice President, General Counsel from May 2018 to October 2019 and Vice President, General Counsel from November 2015 to May 2018. From March 2005 to November 2015, Ms. Harnett served in various positions at ZipRealty, Inc., a real estate technology and online brokerage company, including most recently as General Counsel and Senior Vice President of Business Development from October 2009 to Logitech International S.A. | Fiscal 2021 Form 10-K | 15 Table of Contents November 2015. She also served as an associate at Wilson Sonsini Goodrich and Rosati, P.C. Ms. Harnett holds a BA degree from California State University, Chico and a JD from Santa Clara University School of Law. Available Information Our Investor Relations website is located at https://ir.logitech.com. We post and maintain an archive of our earnings and other press releases, current reports, annual and quarterly reports, earnings release schedule, information regarding annual general meetings, further information on corporate governance, and other information regarding the Company on the Investor Relations website. The information we post includes filings we make with the SEC, including reports on Forms 10-K, 10-Q, 8-K, and our proxy statement related to our annual shareholders' meeting and any amendments to those reports or statements filed or furnished pursuant to U.S. securities laws or Swiss laws. All such filings and information are available free of charge on the website, and we make them available on the website as soon as reasonably possible after we file or furnish them with the SEC. The contents of these websites are not intended to be incorporated by reference into this report or in any other report or document we file and our references to these websites are intended to be inactive textual references only. In addition, Logitech publishes press releases upon the occurrence of significant events within Logitech. Shareholders and members of the public may elect to receive e-mails when Logitech issues press releases upon the occurrence of significant events within Logitech or other press releases by subscribing through http://ir.logitech.com/alerts.cfm. As a Swiss company traded on the SIX Swiss Exchange, and as a company subject to the provisions of Section 16 of the Securities Exchange Act of 1934, as amended, we file reports on transactions in Logitech securities by members of Logitech's Board of Directors and executive officers. The reports that we file with the Securities and Exchange Commission on Forms 3, 4 and 5, along with our other SEC filings, may be accessed on our website or on the Securities and Exchange Commission's website at http://www.sec.gov, and the reports we file that are published by the SIX Swiss Exchange may be accessed at http://www.six-exchange-regulation.com/obligations/management_transactions_en.html. Logitech International S.A. | Fiscal 2021 Form 10-K | 16 Table of Contents