What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-29 compared with 2021-01-21 · 150 added, 183 removed, 190 unchanged (64% of the section changed)

2 unchanged sentences

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934.

These forward-looking statements include, among other things, statements regarding our strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, our business strategy, the impact of investment prioritization decisions, product offerings, sales and marketing initiatives, strategic investments, addressing execution challenges, trends in consumer demand affecting our products and markets, trends in the composition of our customer base, our current or future revenue and revenue mix by product, among our lower- and higher-margin products and by geographic region, our new product introductions, our expectations regarding the potential growth opportunities for our products in mature and emerging markets and the enterprise market, our expectations regarding the impact of COVID-19 on our business and results of operations, our expectations regarding economic conditions in international markets, including China, Russia and Ukraine, our expectations regarding trends in global economic conditions and consumer demand for PCs and mobile devices, tablets, gaming, video collaboration, audio, pointing devices, wearables, remotes, microphones, streaming and other accessories and computer devices and related software and services, the interoperability of our products with third party platforms, our expectations regarding the convergence of markets for computing devices and consumer electronics, our expectations regarding the growth of cloud-based services, our dependence on new products, our competitive position and the effect of pricing, product, marketing and other initiatives by us and our competitors, the potential that our new products will overlap with our current products, our expectations regarding competition from well-established consumer electronics companies in existing and new markets, potential tariffs, their effects and our ability to mitigate their effects, our expectations regarding the recoverability of our goodwill, goodwill impairment charge estimates and the potential for future impairment charges, the impact of our current and proposed product divestitures, changes in our planned divestitures, restructuring of our organizational structure and the timing thereof, our expectations regarding the success of our strategic acquisitions, including integration of acquired operations, products, technology, internal controls, personnel and management teams, significant fluctuations in currency exchange rates and commodity prices, the impact of new product introductions and product innovation on future performance or anticipated costs and expenses and the timing thereof, cash flows, the sufficiency of our cash and cash equivalents, cash generated and available borrowings (including the availability of our uncommitted lines of credit) to fund future cash requirements, our expectations regarding future sales compared to actual sales, our expectations regarding share repurchases, dividend payments and share cancellations, our expectations regarding our future working capital requirements and our anticipated capital expenditures needed to support our product development and expanded operations, our expectations regarding our future tax benefits, tax settlements, the adequacy of our provisions for uncertain tax positions, our expectations regarding our potential indemnification obligations, and the outcome of pending or future legal proceedings and tax audits, our expectations regarding the impact of new accounting pronouncements on our operating results, and our ability to achieve and sustain renewed growth, profitability and future success.

These forward-looking statements include, among other things, statements regarding our strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, our business strategy, the impact of investment prioritization decisions, product offerings, sales and marketing initiatives, strategic investments, addressing execution challenges, trends in consumer demand affecting our products and markets, trends in the composition of our customer base, our current or future revenue and revenue mix by product, among our lower- and higher-margin products and by geographic region, our new product introductions, our expectations regarding the potential growth opportunities for our products in mature and emerging markets and the enterprise market, our expectations regarding the duration and overall impact of COVID-19 on our business and results of operations, our expectations regarding economic conditions in international markets, including China, Russia and Ukraine, our expectations regarding trends in global economic conditions and consumer demand for PCs and mobile devices, tablets, gaming, video collaboration, audio, pointing devices, wearables, remotes, microphones, streaming and other accessories and computer devices and related software and services, the interoperability of our products with third party platforms, our expectations regarding the convergence of markets for computing devices and consumer electronics, our expectations regarding the growth of cloud-based services, our dependence on new products, our competitive position and the effect of pricing, product, marketing and other initiatives by us and our competitors, the potential that our new products will overlap with our current products, our expectations regarding competition from well-established consumer electronics companies in existing and new markets, potential tariffs, their effects and our ability to mitigate their effects, our expectations regarding the recoverability of our goodwill, goodwill impairment charge estimates and the potential for future impairment charges, the impact of our current and proposed product divestitures, changes in our planned divestitures, restructuring of our organizational structure and the timing thereof, our expectations regarding the success of our strategic acquisitions, including integration of acquired operations, products, technology, internal controls, personnel and management teams, significant fluctuations in currency exchange rates and commodity prices, the impact of new product introductions and product innovation on future performance or anticipated costs and expenses and the timing thereof, cash flows, the sufficiency of our cash and cash equivalents, cash generated and available borrowings (including the availability of our uncommitted lines of credit) to fund future cash requirements, our expectations regarding future sales compared to actual sales, our expectations regarding share repurchases, dividend payments and share cancellations, our expectations regarding our future working capital requirements and our anticipated capital expenditures needed to support our product development and expanded operations, our expectations regarding our future tax benefits, tax settlements, the adequacy of our provisions for uncertain tax positions, our expectations regarding our potential indemnification obligations, and the outcome of pending or future legal proceedings and tax audits, our expectations regarding the impact of new accounting pronouncements on our operating results, and our ability to achieve and sustain renewed growth, profitability and future success.

Forward-looking statements also include, among others, those statements including the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,”, "seek", “should,” “will,” and similar language.

5 unchanged sentences

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 better experiences when consuming, sharing and creating digital content such as computing, gaming, video and music, whether it is on a computer, mobile device or in the cloud.

Logitech's brands include Logitech, Logitech G, ASTRO Gaming, Streamlabs, Ultimate Ears, Jaybird, and Blue Microphones.

Forty years ago, Logitech created products to improve experiences around the personal computer ("PC") platform, and today it is a multi-brand, multi-category company designing products that enable people to pursue their passions and connect to the world.

Logitech’s products align with several large secular trends including work and learn from anywhere, video everywhere, the increasing popularity of gaming as a spectator and participant sport, and the democratization of content creation.

Logitech's brands include Logitech,

Logitech G, ASTRO Gaming, Streamlabs, Blue Microphones, Ultimate Ears, and Jaybird.

Our Company's website is www.logitech.com.

3 unchanged sentences

Our worldwide channel network includes consumer electronics distributors, retailers, mass merchandisers, specialty stores, computer and telecommunications stores, value-added resellers and online merchants.

We sell our services directly to end customers in majority.

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.

3 unchanged sentences

The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus and, in certain markets in which we operate, government authorities have from time to time issued orders that require the closure of or restrictions on non-essential businesses and people to be quarantined or to shelter-at-home.

The COVID-19 pandemic has significantly curtailed global economic activity, caused significant volatility and disruption in global financial and commercial markets, and is likely to continue to lead to recessionary pressures for an indeterminate amount of time.

The COVID-19 pandemic has curtailed global economic activity, caused volatility and disruption in global financial and commercial markets, and is likely to continue to cause uncertainty for an indeterminate amount of time.

We are conducting our business with substantial modifications, such as employee remote work in non-manufacturing facilities and travel limitations, among other changes.

We are continuing to actively monitor the situation and may take further actions that could alter our business operations as may be required by federal, state or local authorities in the countries in which we operate, or that we determine are in the best interest of our employees, customers, partners, suppliers or shareholders.

It is not clear what the potential effects of COVID-19 or any such modifications or alterations may have on our business, results of operations, financial operations, financial condition and stock price.

During February 2020, following the initial outbreak of COVID-19 in China, we experienced disruptions to our manufacturing, supply chain and logistics services, resulting in temporary inventory declines and an increase in logistics costs.

We continued to see disruptions to our supply chain and logistics services, inventory constraints and increased logistics costs during the remainder of the fourth quarter of fiscal year 2020 and the first, second, and third quarters of fiscal year 2021 as we attempted to address the effects of COVID-19, including health-related issues, changing regulations, and increased demand for and depleted inventories of some of our products.

At the same time, due to the ongoing shelter-at-home requirements or recommendations in many countries, there has been acceleration of the work-from-home, study-from-home, gaming, video collaboration and streaming trends and high demand and consumption of certain of our products that have led to increased sales and operating income .

While it is not yet clear how long the positive demand dynamics will continue, we expect the increased logistics costs and other adverse effects on our gross margins from COVID-19 to continue through the remainder of fiscal year 2021.

It is difficult to predict the progression, the duration and all of the effects of COVID-19, when business restrictions and shelter-at-home guidelines may be eased or lifted, and how consumer demand, inventory and logistical effects and costs may evolve over time, or the impact on our future sales and results of operations.

Some of this impact will undoubtedly occur over multiple financial periods and may have a lag effect between periods, such as what we are able to manufacture in one period affecting sales, channel inventory or logistics costs in subsequent periods.

We are continuing to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities in the countries in which we operate, or that we determine are in the best interest of our employees, customers, partners, suppliers or shareholders.

In fiscal year 2021, we experienced disruptions to our supply chain and logistics services, inventory constraints, and increased logistics costs, as we attempted to address the effects of COVID-19.

At the same time, due to the shelter-at-home requirements or other restrictions in many countries, there was an acceleration of work-from-anywhere, study-from-anywhere, gaming, video collaboration and streaming trends and high demand and consumption of certain of our products that have led to increased sales and operating income.

While we experienced increased sales and operating income in the first quarter of fiscal year 2022 compared to the first quarter of fiscal year 2021, we also experienced supply and demand volatility, as the COVID-19 pandemic and related safety measures and restrictions have evolved differently across the world.

In addition, if the demand volatility results in a decrease in sales in future periods it could lead to higher promotions and marketing expenses, or excess inventories, or both, which will have an adverse impact on our results of operations.

It is difficult to predict the progression, the duration and all of the effects of COVID-19, how business restrictions and shelter-at-home guidelines may evolve on a global basis, how consumer demand, inventory and logistical effects and costs may change over time, and the impact on our future sales and results of operations.

The full extent of the impact of COVID-19 on our business and our operational and financial performance is currently uncertain and will depend on many factors outside our control.

For additional information, see " Liquidity and Capital resources " below and " Item IA:

Risk Factors ", including under the caption " The full effect of the COVID-19 pandemic is uncertain and cannot be predicted, and it could adversely affect the Company's business, results of operations and financial condition."

For additional information, see " Liquidity and Capital Resources " below and Item 1A " Risk Factors, " including under the caption " The full effect of the COVID-19 pandemic is still uncertain and cannot be predicted, and could adversely affect the Company's business, results of operations and financial condition.

Summary of Financial Results

Our total sales for the three and nine months ended December 31, 2020 increased 85% and 64%, respectively, compared to the three and nine months ended December 31, 2019, due to stronger sales across all regions and several of our product categories from increased remote work and distance learning trends, accelerated adoption of video communications, and greater gaming viewership, creation, and participation from home, as a result of COVID-19.

The results of operations for Streamlabs have been included in our consolidated statement of operations from the acquisition date.

Our sales for the three months ended December 31, 2020 increased 85%, 77%, and 95% in the Americas, EMEA and Asia Pacific, respectively, compared to the same period of the prior fiscal year.

Our sales for the nine months ended December 31, 2020 increased 65%, 59%, and 68% in the Americas, EMEA and Asia Pacific, respectively, compared to the same period of the prior fiscal year.

Our gross margin for the three months ended December 31, 2020 increased by 780 basis points to 44.9% from 37.1% for the three months ended December 31, 2019.

Our gross margin for the nine months ended December 31, 2020 increased by 640 basis points to 43.7% from 37.3% for the nine months ended December 31, 2019.

Our gross margin for both periods benefited from higher sales volume, continued restrained promotional spending, favorable product mix, and favorable exchange rates, which more than offset higher logistics operations costs.

Operating expenses for the three months ended December 31, 2020 were $300.9 million, or 18.0% of sales, compared to $205.6 million, or 22.8% of sales in the same period of the prior fiscal year.

Operating expenses for the nine months ended December 31, 2020 were $771.4 million, or 20.8% of sales, compared to $601.2 million, or 26.5% of sales in the same period of the prior fiscal year.

Net income for the three and nine months ended December 31, 2020 was $382.5 million and $721.5 million, respectively, compared to $117.5 million and $235.8 million for the three and nine months ended December 31, 2019, respectively.

Our total sales for the three months ended June 30, 2021 increased 66%, compared to the three months ended June 30, 2020, due to stronger sales across all regions and several of our product categories from increased remote work and learning trends, accelerated adoption of video communications for a hybrid work environment, and greater gaming viewership, creation, and participation from home, as a result of COVID-19.

Our condensed consolidated statements of operations for the three months ended June 30, 2021 include the results of operations for our first quarter acquisition from its date of acquisition.

Sales for the three months ended June 30, 2021 increased 72%, 70%, and 52% in the Americas, EMEA and Asia Pacific, respectively, compared to the same period of the prior fiscal year.

Gross margin for the three months ended June 30, 2021 increased by 480 ba sis points to 43.4% from 38.6% for the three months ended June 30, 2020 .

Our gross margin benefited from higher sales volume, a favorable currency impact, lower logistics costs, and favorable product mix.

Operating expenses for the three months ended June 30, 2021 were $365.8 million, or 27.9% of sales, compared to $222.3 million, or 28.1% of sales in the same period of the prior fiscal year.

Net income for the three months ended June 30, 2021 was $186.8 million compared to $72.1 million for the three months ended June 30, 2020.

Trends in Our Business

Our products participate in five large multi-category market opportunities, including Creativity & Productivity, Gaming, Video Collaboration, Music and Smart Home.

We see opportunities to deliver growth with products in all these markets.

The following discussion represents key trends specific to our market opportunities.

2 unchanged sentences

New PC shipments have continued to be strong recently due to work-from-home and learn-from-home trends.

We believe that innovative PC peripherals, such as our mice and keyboards, can renew the PC usage experience and help improve the productivity and engagement of remote work, distance learning, and telemedicine, thus providing growth opportunities.

We believe that innovative PC peripherals, such as our mice and keyboards, can renew the PC usage experience and help improve the productivity and engagement of remote work and learning, thus providing growth opportunities.

Hybrid work culture will also greatly expand the number of new workspaces to which we can attach our PC peripherals.

Increasing adoption of various cloud-based applications has led to multiple unique consumer use cases, which we are addressing with our innovative product portfolio and a deep understanding of our customer base.

1 unchanged sentence

Smaller mobile computing devices, such as tablets, have created new markets and usage models for peripherals and accessories.

We offer a number of products to enhance the use of mobile devices, including a combo backlit keyboard case for the iPad Pro and keyboard folios for other iPad models.

Hybrid and distance learning environments have also created demand and growth opportunities for our education tablet keyboards and accessories.

The PC gaming and console gaming platforms continue to show strong structural growth opportunities as online gaming, multi-platform experiences, and esports gain greater popularity and gaming content becomes increasingly more demanding and social, particularly as other recreational activities have been curtailed or restricted during shelter-at-home mandates.

The new console refresh cycle during the holiday season of 2020 could drive subsequent growth opportunities over the coming years for our ASTRO family of headsets and controllers.

We offer a number of products to enhance the use of mobile devices, including a combo backlit keyboard case with trackpad for the iPad.

Hybrid and remote learning environments have also created demand and growth opportunities in the education market for tablet keyboards and accessories.

The PC gaming and console gaming platforms continue to show strong structural growth opportunities as online gaming, multi-platform experiences, and esports gain greater popularity and gaming becomes more social, particularly as other recreational activities have been curtailed or restricted during shelter-at-home mandates.

We expect gaming will increasingly become one of the largest participant and spectator sports in the world.

We believe Logitech is well positioned to benefit from the overall gaming market growth.

Our acquisition of Streamlabs provides a solid platform to deliver recurring services and subscriptions to gamers.

Our acquisition of Streamlabs provides a solid platform to deliver recurring services and subscriptions to gamers and streamers.

Video Collaboration :

The near and long-term structural growth opportunities in the video collaboration market (VC) have never been more relevant than in today’s environment, as commercial and consumer adoption of video has seen explosive growth since the start of the COVID-19 pandemic.

The near and long-term structural growth opportunities in the video collaboration market ("VC") have never been more prevalent than in today’s environment, as commercial and consumer adoption of video has seen substantial growth since the start of the COVID-19 pandemic.

Video meetings continue to be on the rise, and companies increasingly want lower-cost, cloud-based solutions that can provide their employees with the ability to work from anywhere.

1 unchanged sentence

We are also experiencing significant demand for our enterprise-grade VC webcams and headsets.

We will continue to invest in select business-specific products (both hardware and software), targeted product marketing and sales channel development.

The mobile speaker market has remained soft, and has further weakened as physical retail stores have been recently closed and the retail footprint has decreased significantly due to the COVID-19 pandemic.

The integration of personal voice assistants has become increasingly competitive in the speaker categories, and the market for third-party, voice-enabled speakers has not yet gained traction.

Moreover, the market for mobile speakers appears to be maturing, which led to a decline in Ultimate Ears sales in the past two years.

In fiscal year 2020, the wireless headphone industry continued to flourish with strong revenue growth but has slowed in recent months.

The largest growth is in true wireless headphones while traditional wireless headphones have declined significantly.

We will continue to invest in the development of select business-specific products (both hardware and software), targeted product marketing and sales channel development.

Consumers are optimizing their audio experiences on their tablets and smartphones with a variety of music peripherals including wireless mobile speakers and in-ear and other headphones.

However, the mobile speaker market has matured and the integration of personal voice assistants has increased competition in the speaker category.

In addition, the retail footprint has decreased significantly due to the COVID-19 pandemic.

These factors have led to a decline in our Mobile Speakers category sales in the past three years.

In the wireless headphone industry, the largest growth in recent years has been in true wireless headphones while traditional wireless headphones have declined significantly.

Continued growth in the wireless headphone market is expected for the next several years as consumers increasingly adopt wireless headphones over wired headphones.

Blue Microphones has experienced strong demand as musicians, performers and streamers increasingly look to entertain and engage with their fans on various online platforms like YouTube, Twitch, and Facebook.

Our remote Harmony business declined substantially in fiscal year 2020, offset by growth in our Circle 2 family of security cameras.

This trend continued during the nine months of fiscal year 2021.

In general, our Harmony and Circle 2 products are under pressure as the way people consume content is changing and as retail stores have been closed or subject to restrictions.

In addition, Blue Microphones has experienced strong demand as musicians, performers and streamers increasingly look to entertain and engage with their fans on various online platforms like YouTube, Twitch, and Facebook.

Sales of our Harmony universal remote and Circle security family of products declined substantially in fiscal year 2021.

In general, our sales of Harmony and Circle products are under pressure as the way people consume content is changing and as retail stores have been closed or subject to restrictions.

The smart home market opportunity is broad, and we will continue to explore other innovative experiences to drive growth in the Smart Home category.

Business Seasonality, Product Introductions and Acquisitions

Business Seasonality and Product Introductions

We have historically experienced higher sales in our third fiscal quarter ending December 31, compared to other fiscal quarters in our fiscal year, primarily due to the increased consumer demand for our products during the year-end holiday buying season and year-end spending by enterprises.

Due to the spike in the number of cases from the COVID-19 pandemic, and the ongoing shelter-at-home requirements, the third fiscal quarter experienced an even higher demand and consumption of most of our products.

Additionally, new product introductions and business acquisitions can significantly impact sales, product costs and operating expenses.

2 unchanged sentences

However, neither historical seasonal patterns nor historical patterns of product introductions should be considered reliable indicators of our future pattern of product introductions, future sales or financial performance.

Furthermore, cash flow is correspondingly lower in the first half of the fiscal year as we typically build inventories in advance for the third quarter and we pay an annual dividend following our Annual General Meeting, which is typically in September.

Furthermore, cash flow is correspondingly lower in the first half of our fiscal year as we typically build inventories in advance for the third quarter and we pay an annual dividend following our Annual General Meeting, which is typically in September.

Swiss Federal Tax Reform

2 unchanged sentences

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities.

The preparation of financial statements and related disclosures in conformity with U.S.

GAAP requires us to make judgments, estimates, and assumptions that affect reported amounts of assets, liabilities, sales and expenses, and the disclosure of contingent assets and liabilities.

We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances.

2 unchanged sentences

We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.

We believe that the assumptions, judgments and estimates involved in the accounting for accruals for customer incentives, cooperative marketing, and pricing programs (Customer Programs) and related breakage when appropriate, accrued sales return liability, inventory valuation and uncertain tax positions have the greatest potential impact on our condensed consolidated financial statements.

We believe that the assumptions, judgments and estimates involved in the accounting for accruals for customer incentives and related breakage when appropriate, accrued sales return liability, inventory valuation, uncertain tax positions, and business acquisitions have the greatest potential impact on our condensed consolidated financial statements.

These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates and consequently, we consider these to be our critical accounting policies.

Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

There have been no material changes in our critical accounting policies and estimates during the nine months ended December 31, 2020 compared with the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2020.

There have been no material changes in our critical accounting policies and estimates during the three months ended June 30, 2021 compared with the critical accounting policies and estimates disclosed in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Adoption of New Accounting Pronouncements

1 unchanged sentence

Impact of Constant Currency

We refer to our sales growth rates excluding the impact of currency exchange rate fluctuations as "constant dollar" sales growth rates.

Percentage of constant dollar sales growth is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.

We refer to our net sales growth rates excluding the impact of currency exchange rate fluctuations as "constant currency" sales growth rates.

Percentage of constant currency sales growth is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.

Given our global sales presence and the reporting of our financial results in U.S.

Dollars, our financial results could be affected by shifts in currency exchange rates.

See “Results of Operations” for information on the effect of currency exchange rate results on our sales.

Dollars, our financial results could be affected by significant shifts in currency exchange rates.

See “Results of Operations” for information on the effect of currency exchange results on our sales.

Dollar appreciates or depreciates in comparison to other currencies in future periods, this will affect our results of operations in future periods as well.

References to Sales

References to “sales” mean net sales, except as otherwise specified, and the sales growth discussion and sales growth rate percentages are based on U.S.

The term “sales” means net sales, except as otherwise specified and the sales growth discussion and sales growth rate percentages are in U.S.

Dollars, except as otherwise specified.

3 unchanged sentences

Dollar, such as the Euro, Chinese Renminbi, Japanese Yen, Canadian Dollar, Taiwan New Dollar, British Pound and Australian Dollar.

During the three months ended December 31, 2020, approximately 54% of our sales were denominated in currencies other than the U.S.

During the three months ended June 30, 2021, approximately 48% of our sales were denominated in currencies other than the U.S.

Results of Operations

Our sales in the three and nine months ended December 31, 2020 increased 85% and 64%, respectively, compared to the same period of the prior fiscal year, driven by sales increases in all regions and several of our product categories from increased work-from-home and study-from-home trends, as a result of various shelter-at-home mandates.

Strong sales growth in Video Collaboration, Gaming, PC Webcams, Tablet and Other Accessories, Keyboards & Combos, Audio & Wearables, and Pointing Devices was partially offset by a decline in sales of Mobile Speakers and Smart Home.

If currency exchange rates had been constant in the three and nine months ended December 31, 2020 and 2019, our constant dollar sales growth rate would have been 80% and 63%, respectively.

Our sales in the three months ended June 30, 2021 increased 66% compared to the same period of the prior fiscal year, driven by sales increase in all regions and several of our product categories due to continuing hybrid work, work-from-home and study-from-home trends, resulting from the COVID-19 pandemic.

Strong sales growth in Gaming, Video Collaboration, Keyboards & Combos, Pointing Devices, PC Webcams, Tablet and Other Accessories, and Audio & Wearables, was partially offset by a decline in sales of Mobile Speakers and Smart Home.

If currency exchange rates had been constant in the three months ended June 30, 2021 and 2020, our constant dollar sales growth rate would have been 58%.

Sales by Region

The following table presents the change in sales by region for the three and nine months ended December 31, 2020, compared with the three and nine months ended December 31, 2019:

The following table presents the change in sales by region for the three months ended June 30, 2021, compared with the three months ended June 30, 2020:

Sales Growth Rate Constant Dollar

Sales Growth Rate

Three Months Ended

December 31, 2020 Nine Months Ended

December 31, 2020 Three Months Ended

December 31, 2020 Nine Months Ended

December 31, 2020

Americas 72 % 70 %

1 unchanged sentence

Asia Pacific 52 % 43 %

The increase in sales in our Americas region for both the three and nine month periods was primarily driven by growth in sales across a majority of our product categories, partially offset by a decline in sales of Mobile Speakers and Smart Home.

The increase in sales in our EMEA region for both the three and nine month periods was primarily driven by growth in sales across a majority of our product categories, partially offset by a decline in sales of Mobile Speakers and Smart Home.

Asia Pacific:

The increase in sales in our Asia Pacific region for both the three and nine month periods was driven by growth in sales across a majority of our product categories, partially offset by a decline in sales of Mobile Speakers and Smart Home.

The increase in sales globally in the three month periods was primarily driven by growth in sales across a majority of our product categories, partially offset by a decline in sales of Mobile Speakers and Smart Home.

Sales by Product Categories

Sales by product categories for the three and nine months ended December 31, 2020 and 2019 were as follows (Dollars in thousands):

Sales by product categories for the three months ended June 30, 2021 and 2020 were as follows (Dollars in thousands):

Three Months Ended

December 31, Nine Months Ended

2020 2019 Change 2020 2019 Change

2021 2020 Change

Pointing Devices $ 182,878 $ 120,469 52 %

7 unchanged sentences

Smart Home 6,172 6,810 (9)

606 — — 632 279 127

Total Sales $ 1,312,058 $ 791,894 66 %

3 unchanged sentences

Pointing Devices

Our Pointing Devices category comprises PC- and Mac-related mice including trackballs, touchpads and presenters.

Sales of Pointing Devices increased 38% and 23% in the three and nine months ended December 31, 2020, respectively, compared to the same period of the prior fiscal year.

The increases in both periods were primarily driven by the increase in sales of cordless and trackball mice, partially offset by a decline in sales of our presentation tools, as most conferences, events, and other large-scale presentations remained prohibited.

Our Pointing Devices category comprises PC- and Mac-related mice including trackballs, touchpads and presentation tools.

Sales of Pointing Devices increased 52% in the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was primarily driven by higher sales of our cordless, corded, and trackball mice as a result of remote working and learning trends.

Keyboards & Combos

Our Keyboards & Combos category comprises PC keyboards, living room keyboards and keyboard/mice combo products.

Sales of Keyboards & Combos increased 40% and 33% in the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The increases in both periods were driven by an increase in sales of our cordless keyboards and wireless keyboards/mice combos, partially offset by a decline in sales of our living room keyboards.

The increase in the nine-month period was further partially offset by a decline in sales of our corded keyboards/mice combos.

Our PC Webcams category comprises PC-based webcams targeted primarily at consumers.

PC Webcams sales increased 309% and 231% in the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The increases for both periods were across all product sub-categories, primarily driven by an increase in sales of our HD Pro Webcam C920, 1080P PRO Stream Webcam, Webcam C60, and Logitech Streamcam, mostly due to more remote work adoption and learning-from-home.

Our Keyboards & Combos category comprises PC keyboards, keyboard/mice combo products, and living room keyboards.

Sales of Keyboards & Combos increased 50% in the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was primarily driven by an increase in sales of our keyboard/mice combos as well as our cordless and corded PC keyboards.

Our PC Webcams category comprises PC-based webcams targeted primarily at consumers, including streaming cameras.

Sales of PC Webcams increased 81% in the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was seen across the majority of the product sub-categories, driven primarily by sales of our HD Pro Webcam 920, 1080P PRO Stream Webcam, Logitech Streamcam, and C505 HD Webcam, partly due to organizations adopting remote or hybrid work environments.

Tablet & Other Accessories

Our Tablet & Other Accessories category primarily comprises keyboards for tablets.

Sales of Tablet & Other Accessories products increased 342% and 158% in the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The increase for both periods was primarily driven by an increase in the sales of our Rugged Folio keyboard cases for a newer generation of iPads and Slim Folio keyboard for iPad 7th generation, both introduced in the third quarter of fiscal year 2020, and our Powered Wireless Charging 3-in-1 Dock, introduced in the fourth quarter of fiscal year 2020.

Sales of Tablet & Other Accessories products increased 72% in the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was primarily driven by sales of our Rugged Folio, our Combo Touch products for iPad Pro 11-inch/12.9-inch introduced in the first quarter of fiscal year 2022, and our Folio Touch for iPad Air (4th generation).

We have seen strong demand for Tablet keyboards, partly due to schools embracing various technology devices to better educate students in learning-from-home environments.

Gaming market:

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

Gaming sales increased 78% and 69% for the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The increase for both periods was primarily driven by increases in the sales of nearly all our product sub-categories, including Streamlabs services, our business acquisition in the third quarter of fiscal year 2020.

The increases for both periods was partially offset by a decline in the sales of our console gaming controllers.

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

Sales of Gaming increased 84% for the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was primarily driven by strong performance in nearly all of our Gaming sub-categories, including our gaming mice, PC gaming headsets, gaming steering wheels, gaming keyboards, console gaming headsets and Streamlabs services, partially offset by a decline in the sales of our console gaming controllers.

Video Collaboration market:

Our Video Collaboration category primarily includes Logitech’s ConferenceCams, which combine affordable enterprise-quality audio and high definition (HD) 1080p video to bring video conferencing to businesses of any size.

Sales of Video Collaboration products increased 218% and 159% in the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The increases for both periods were primarily driven by the sales of our Rally Ultra-HD conference camera system, BRIO 4K Pro Webcam, Webcam C390e, and Webcam C925E as video communications become more critical for a more location-flexible workforce.

Video Collaboration

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

Sales of Video Collaboration products increased 81% in the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The increase was primarily driven by the sales of our Rally Bar introduced in the fourth quarter of fiscal year 2021, our GROUP video conferencing solution for mid to large-sized meeting rooms, the BRIO 4K Pro Webcam, and Webcam C925E, as video communications become more critical for remote and hybrid work environments.

Music market:

1 unchanged sentence

Our Mobile Speakers category is made up entirely of Bluetooth wireless speakers.

Sales of Mobile Speakers decreased 22% and 28% for the three and nine months ended December 31, 2020, compared to the same periods of the prior fiscal year.

The decreases for both periods were primarily driven by a decrease in the sales of our BOOM 3, BOOM 2, UE MEGABOOM, and UE WONDERBOOM mobile speakers, in part due to limited outdoor activities and social gatherings.

The decreases were partially offset by sales of our WONDERBOOM 2 speakers, and the introduction of our HYPERBOOM speaker in the fourth quarter of fiscal year 2020.

Sales of Mobile Speakers decreased 2% for the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The decrease was primarily driven by a decline in sales of our MEGABOOM 3, UE WONDERBOOM, and MEGABLAST mobile speakers.

The decrease was partially offset by sales of our BOOM 3 and WONDERBOOM 2 speakers.

Audio & Wearables

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

Audio & Wearables sales increased 87% and 62% for the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

Th e increases for both periods were primarily driven by increases in the sales of both our corded and cordless headsets and Blue Microphones products, partially offset by a decline in the sales of our Jaybird products.

Sales of Audio & Wearables increased 63% for the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

Th e increase was primarily driven by higher sales of both our corded and cordless headsets, Blue Microphones products, and our PC speakers.

Smart Home market:

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

Smart Home sales decreased 33% and 26% during the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

The decrease for both periods was primarily due to an overall decline in sales of our Harmony remotes and our home video products.

Gross profit for the three and nine months ended December 31, 2020 and 2019 was as follows (Dollars in thousands):

Sales of Smart Home decreased 9% during the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

The decrease was primarily due to a decline in sales of most of our Harmony remotes and our home video products, partially offset by increases in sales of our Harmony 665 Remote, Circle View Camera, and Circle View Doorbell, introduced in the third quarter of fiscal year 2021.

Gross profit for the three months ended June 30, 2021 and 2020 was as follows (Dollars in thousands):

Three Months Ended

December 31, Nine Months Ended

2020 2019 Change 2020 2019 Change

2021 2020 Change

Net sales $ 1,312,058 $ 791,894 66 %

1 unchanged sentence

Gross margin 43.4 % 38.6 %

distribution costs, warranty costs, customer support, shipping and handling costs, outside processing costs and write-down of inventories), amortization of intangible assets.

Gross margin increased by 780 and 640 basis points for the three and nine months ended December 31, 2020, respectively, compared to the same periods of the prior fiscal year.

Gross margin benefited from higher sales volume, continued restrained promotional spending, favorable product mix, and favorable exchange rates, which more than offset the higher logistics operations costs.

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

Gross margin increased by 480 b asis points for the three months ended June 30, 2021, compared to the same period of the prior fiscal year.

Our gross margin benefited from higher sales volume, a favorable currency impact, lower logistics costs, and favorable product mix.

Operating Expenses

Operating expenses for the three and nine months ended December 31, 2020 and 2019 were as follows (Dollars in thousands):

Operating expenses for the three months ended June 30, 2021 and 2020 were as follows (Dollars in thousands):

Three Months Ended

December 31, Nine Months Ended

2020 2019 2020 2019

Marketing and selling $ 252,314 $ 133,238

8 unchanged sentences

% of sales (0.1) % 0.7 %

Restructuring charges (credits), net — (45) (54) 69

Restructuring credits, net — (53)

% of sales — % (1)

2 unchanged sentences

(1) Absolute value for % of sales is less than 0.1%.

The increase in total operating expenses during the three months ended June 30, 2021, compared to the same period of the prior fiscal year, was mainly due to increases in marketing and selling expenses, research and development expenses, and general and administrative expenses, partially offset by the change in fair value of contingent consideration for business acquisition.

Marketing and Selling

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

During the three and nine months ended December 31, 2020, marketing and selling expenses increased $69.5 million, and $104.4 million, respectively, compared to the same periods of the prior fiscal year.

The increases were primarily driven by higher advertising expenses, personnel-related costs due to increased headcount, increased performance-based variable compensation linked to stronger performance, and increased shared-based compensation.

During the three months ended June 30, 2021, marketing and selling expenses increased $119.1 million , compared to the same period of the prior fiscal yea r.

The increase was primarily driven by higher advertising and marketing expenses, including third-party costs and increased headcount, to support our investment in brand awareness and consideration as well as incremental headcount related to investments in enterprise sales coverage.

Research and Development

Research and development expenses consist of personnel and related overhead costs, contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existing products.

During the three and nine months ended December 31, 2020, research and development expenses increased $10.6 million and $29.5 million, respectively, compared to the same periods of the prior fiscal year.

The increases were primarily driven by higher personnel-related costs due to increased headcount, increased performance-based variable expense linked to stronger performance, and higher investment in new product development.

Research and development expenses consist of personnel and related overhead costs for contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existing products.

During the three months ended June 30, 2021, research and development expenses increased $19.5 million, compared to the same period of the prior fiscal year.

The increase was primarily driven by higher personnel-related costs due to incremental headcount and higher third-party costs to support innovations in both hardware and software.

General and Administrative

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

During the three and nine months ended December 31, 2020, general and administrative expenses increased $15.3 million and $29.8 million, respectively, compared to the same periods of the prior fiscal year.

The increases were primarily driven by higher personnel-related costs due to increased headcount, increased performance-based variable compensation linked to stronger performance, and increased shared-based compensation.

During the three months ended June 30, 2021, general and administrative expenses increased $11.5 million, compared to the same period of the prior fiscal year.

The increase was primarily driven by higher personnel-related costs due to investment in additional headcount in IT and other functions to support business growth.

Amortization of Intangible Assets and Acquisition-Related Costs

1 unchanged sentence

Acquisition-related costs include legal expense, due diligence costs, and other professional costs incurred for business acquisitions.

During the three months ended December 31, 2020, amortization of intangible assets and acquisition-related costs decreased $0.1 million compared to the same period of the prior fiscal year, primarily driven by intangibles assets that were fully amortized.

For the nine months ended December 31, 2020, amortization of intangible assets and acquisition-related costs increased $1.0 million, compared to the same period of the prior fiscal year, primarily driven by amortization of the intangible assets acquired through the Streamlabs acquisition in the third quarter of fiscal year 2020.

Change in Fair Value of Contingent Consideration for Business Acquisition

The change in fair value of contingent consideration was $5.7 million for the nine months ended December 31, 2020, primarily due to growth in Streamlabs' net sales and the achievement of the net sales targets during the six-month earn-out period ended June 30, 2020.

During the three months ended June 30, 2021, amortization of intangible assets and acquisition-related costs increase d comp ared to the same period of the prior fiscal year, primarily driven by the intangible assets acquired through acquisitions completed in the fourth quarter of fiscal year 2021.

Other Income, Net

Other income, net for the three and nine months ended December 31, 2020 and 2019 was as follows (Dollars in thousands):

Other income, net for the three months ended June 30, 2021 and 2020 was as follows (Dollars in thousands):

Three Months Ended

December 31, Nine Months Ended

2020 2019 2020 2019

Investment income related to a deferred compensation plan $ 1,168 $ 1,556

Currency exchange gain, net 5,717 57

Loss on investments (2,173) (709) (4,692) (772)

Gain on investments 1,071 174

Other 479 242

3 unchanged sentences

We do not speculate in currency positions, but we are alert to opportunities to maximize currency exchange gains and minimize currency exchange losses.

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

The gain for the three months ended June 30, 2021 was primarily due to the strengthening of the Brazilian Real and the Chinese Renminbi against the U.S.

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

Provision for Income Taxes

The provision for income taxes and effective tax rates for the three and nine months ended December 31, 2020 and 2019 were as follows (Dollars in thousands):

The provision for income taxes and effective income tax rates for the three months ended June 30, 2021 and 2020 were as follows (Dollars in thousands):

Three Months Ended

December 31, Nine Months Ended

2020 2019 2020 2019

Provision for income taxes $ 24,991 $ 14,003

Effective income tax rate 11.8 % 16.3 %

The change in the effective income tax rate for the three and nine months ended December 31, 2020, compared to the same periods ended December 31, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate.

The Swiss income tax provision in the three and nine months ended December 31, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%.

In the same periods ended December 31, 2019 when TRAF was yet to be enacted at the federal and cantonal levels, the transition income tax provision reflects the application of the longstanding tax ruling through December 31, 2019.

Furthermore, there was a discrete tax benefit of $1.7 million from adjusting deferred tax assets and liabilities in Switzerland in the nine months ended December 31, 2019.

There were discrete tax benefits of $7.2 million and $2.9 million from the recognition of excess tax benefits in the United States and reversal of uncertain tax positions from the expiration of statutes of limitations, respectively, in the nine-month period ended December 31, 2020, compared with $6.0 million and $2.7 million, respectively, in the nine-month period ended December 31, 2019.

As of December 31, 2020 and March 31, 2020, the total amount of unrecognized tax benefits due to uncertain tax positions was $158.8 million and $140.8 million, respectively, all of which would affect the effective income tax rate if recognized.

The change in the effective income tax rate for the three months ended June 30, 2021, compared to the same period ended June 30, 2020 was primarily due to the mix of income and losses in the various tax jurisdictions in

which we operate.

There were discrete tax benefits of $13.7 million and $1.0 million from the recognition of excess tax benefits in the United States and reversal of uncertain tax positions from the expiration of statutes of limitations, respectively, in the three-month period ended June 30, 2021, compared with $5.0 million and $1.0 million, respectively, in the three-month period ended June 30, 2020.

As of June 30, 2021 and March 31, 2021, the total amount of unrecognized tax benefits due to uncertain tax positions was $165.5 million and $160.3 million, respectively, all of which would affect the effective income tax rate if recognized.

Liquidity and Capital Resources

Cash Balances, Available Borrowings, and Capital Resources

As of December 31, 2020, we had cash and cash equivalents of $1,388.7 million, compared to $715.6 million as of March 31, 2020.

As of December 31, 2020 , 71% of the cash and cash equivalents were held in Switzerland, 13% were held in Germany, and 9% were held in Hong Kong and China.

As of June 30, 2021, we had cash and cash equivalents of $1,497.7 million, compared to $1,750.3 million as of March 31, 2021.

As of June 30, 2021 , 62% of the cash and cash equivalents were held in Switzerland, 16% were held in Germany, and 12% were held in Hong Kong and China.

We do not expect to incur any material adverse tax impact except for what has already been recognized, or be significantly inhibited by any country in which we do business from the repatriation of funds to Switzerland, our home domicile.

The increase in cash and cash equivalents for the nine months ended December 31, 2020, was primarily due to an increase in net cash provided by operating activities and proceeds from exercises of stock options and purchase rights, partially offset by payment of cash dividends, purchases of property, plant and equipment, tax withholdings related to settlements of restricted stock units, and shares repurchased under our share buyback program.

As of December 31, 2020, our working capital was $1,361.9 million, compared to $700.3 million as of March 31, 2020.

The increase was primarily driven by higher cash and cash equivalents, higher accounts receivable, net, higher inventories and higher other current assets, partially offset by higher accounts payable and accrued and other current liabilities.

Our working capital increased by $681.5 million compared to $680.4 million as of December 31, 2019, which was primarily driven by higher cash and cash equivalents, higher accounts receivable, net, higher inventories and higher other current assets, partially offset by higher accounts payable and accrued and other current liabilities.

We had several uncommitted, unsecured bank lines of credit aggregating $82.6 million as of December 31, 2020.

The decrease in cash and cash equivalents for the three months ended June 30, 2021, primarily resulted from an increase in net cash used in operating activities, despite positive net income, and an increase in net cash used in financing activities.

The increase in net cash used in operating activities was mainly due to the timing of an annual income tax payment for fiscal year 2021, increased inventory purchases to support future demand, a decline in accounts payable due to timing of purchases and related payments, and the annual bonus payment for fiscal year 2021, partially offset by earlier collections on accounts receivable due to timing of sales within the quarter.

The increase in net cash used in financing activities was driven by shares repurchased under our share repurchase program in the first quarter of fiscal 2022 compared to no share repurchases in the same period of the prior fiscal year.

As of June 30, 2021, our working capital was $1,568.0 million , compared to $1,477.5 million as of March 31, 2021.

The increase was primarily driven by higher inventories and higher other current assets, lower accounts payable, and lower accrued and other current liabilities, partially offset by lower cash and cash equivalents and lower accounts receivable, net.

Our working capital increas ed by $779.2 m illion compared to $788.8 million as of June 30, 2020, which was primarily driven by higher cash and cash equivalents, higher accounts receivable, net, higher inventories and higher other current assets, partially offset by higher accounts payable and accrued and other current liabilities.

We had several uncommitted, unsecured bank lines of credit aggregating $191.6 million as of June 30, 2021.

There are no financial covenants under these lines of credit with which we must comply.

As of December 31, 2020, we had outstanding bank guarantees of $37.8 million under these lines of credit.

As of June 30, 2021, we had outstanding bank guarantees of $24.7 million under these lines of credit.

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

Nine Months Ended

Net cash provided by operating activities $ 928,419 $ 324,154

Three Months Ended

Net cash provided by / (used in) operating activities $ (114,970) $ 118,847

Net cash used in investing activities (40,347) (12,400)

1 unchanged sentence

Effect of exchange rate changes on cash and cash equivalents 5,244 511

Net increase in cash and cash equivalents $ 673,177 $ 51,530

The following table presents selected financial information and statistics as of and for the three months ended December 31, 2020 and 2019 (Dollars in thousands):

As of December 31,

Net increase / (decrease) in cash and cash equivalents $ (252,606) $ 93,829

The following table presents selected financial information and statistics as of and for the three months ended June 30, 2021 and 2020 (Dollars in thousands):

As of June 30,

Accounts receivable, net $ 545,907 $ 500,306

8 unchanged sentences

(3) ITO is determined using ending inventories and annualized cost of goods sold (based on the most recent quarterly cost of goods sold).

DSO for the three months ended December 31, 2020 decreased by 5 days to 48 days, compared to 53 days for the same period of the prior fiscal year, primarily due to timing of sales, customer payments and sales linearity.

DPO for the three months ended December 31, 2020 increased by 10 days, compared to 70 days for the same period of the prior fiscal year, primarily due to the timing of purchases and related payments and an increase in cost of goods sold due to higher sales growth.

ITO for the three months ended December 31, 2020 increased by 0.3, compared to 7.4 for the same period of the prior fiscal year, primarily due to higher sales growth as a result of higher demand for certain of our products

due to the COVID-19 impact.

DSO for the three months ended June 30, 2021 decreased by 20 days to 37 days, compared to 57 day s for the same period of the prior fiscal year, primarily due to timing of sales within the quarter and a continued focus on collections efficiency.

DPO for the three months ended June 30, 2021 increased by 6 days, compared to 80 days for the same period of the prior fiscal year, primarily due to the timing of purchases and related payments.

ITO for the three months ended June 30, 2021 decreased by 3.4, compared to 7.2 for th e same period of the prior fiscal year, primarily due to higher ending inventory resulting from the rebuilding of inventory levels to meet future demand, compared to previously constrained supply from COVID-19 impacts.

In the fourth quarter of fiscal year 2020, we experienced manufacturing slowdowns due to the COVID-19 outbreak in China which reduced our ending inventory levels and led to higher inventory turns in the first quarter of fiscal year 2021.

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

During the nine months ended December 31, 2020, we generated $928.4 million of cash from operating activities.

Our main sources of operating cash flows were from net income, after adding back non-cash expenses of depreciation, amortization and share-based compensation expense, from change in fair value of contingent considerations, and from changes in operating assets and liabilities.

The increase in accounts receivable, net was primarily driven by growth and timing of sales.

The increase in inventories was primarily driven by an increase in inventory purchases in anticipation of continued high demand for certain of our products during the nine months

ended December 31, 2020.

The increase in accounts payable was primarily driven by the timing of purchases and related payments.

The increase in accrued liabilities was primarily driven by an increase in customer marketing, pricing, and incentive programs, freight and duty due to higher logistic costs, and income taxes payable due to stronger performance.

Net cash used in investing activities was $46.5 million, primarily due to $46.2 million of purchases of property, plant and equipment.

Net cash used in financing activities was $219.2 million, primarily due to the $146.7 million payment of a cash dividend, $72.7 million used for repurchases of our registered shares, and $29.5 million for tax withholdings related to net share settlements of restricted stock units, partially offset by $29.7 million in proceeds received from exercises of stock options and purchase rights.

During the nine months ended December 31, 2020, there was a $10.4 million gain from currency exchange rate effect on cash and cash equivalents, compared to a loss of $2.3 million during the same period of the prior fiscal year.

The gain from currency translation exchange effect during the nine months ended December 31, 2020 was primarily due to the strengthening of the Australian Dollar, Euro, Chinese Renmingbi, and Swiss Franc against the U.S.

During the three months ended June 30, 2021, net cash used in operating activities was $115.0 million.

The decrease in accounts receivable, net was primarily driven by timing of sales.

The increase in inventories was primarily driven by an increase in inventory purchases during the first quarter of fiscal year 2022 in anticipation of future demand.

The decrease in accounts payable was primarily driven by the timing of purchases and related payments.

The decrease in accrued liabilities was primarily driven by payment of the fiscal year 2021 annual bonus and an annual payment for fiscal year 2021 income taxes.

Net cash used in investing activities was $40.3 million , primarily due to $24.5 million of purchases of property, plant and equipment, and $15.6 million of the purchase price (net of cash acquired) for business acquisition.

Net cash used in financing activities was $102.5 million , primarily due to $54.9 million used for repurchases of our registered shares, and $50.4 million for tax withholdings related to net share settlements of restricted stock units, partially offset by $2.8 million in proceeds received from exercises of stock options and purchase rights.

During the three months ended June 30, 2021, there was a $5.2 million gain from currency exchange rate effect on cash and cash equivalents, compared to a gain of $0.5 million during the same period of the prior fiscal year.

The gain from currency translation exchange effect during the three months ended June 30, 2021 was primarily due to the strengthening of the Brazilian Real and the Chinese Renminbi against the U.S.

Dollar by 14% and 2%, respectively, during the period.

The loss from effect of currency exchange rate changes during the nine months ended December 31, 2019 was primarily due to the weakening of the Euro, Chinese Renminbi and Brazilian Real against the U.S.

The gain from effect of currency exchange rate changes during the three months ended June 30, 2020 was primarily due to the strengthening of the Australian Dollar, Japanese Yen, and Taiwanese Dollar against the U.S.

Dollar by 13%, 1%, and 2%, respectively.

2 unchanged sentences

The future impact of COVID-19 cannot be predicted with certainty and may increase our costs of capital and otherwise adversely affect our business, results of operations, financial conditions and liquidity.

In fiscal year 2021, we paid an annual cash dividend of CHF 134.0 million (U.S.

In April 2021, the Board of Directors recommended that we pay cash dividends for fiscal year 2021 of CHF 147.0 million ($155.8 million based on the exchange rate on March 31, 2021).

In fiscal year 2021, we paid a cash dividend of CHF 134.0 million (U.S.

Dollar amount of $146.7 million) out of fiscal year 2020 retained earnings.

In fiscal year 2020, we paid an annual cash dividend of CHF 121.8 million (U.S.

In fiscal year 2020, we paid a cash dividend of CHF 121.8 million (U.S.

Dollar amount of $124.2 million) out of fiscal year 2019 retained earnings.

Any future dividends will be subject to the approval of our shareholders.

In May 2020, our Board of Directors approved a new share buyback program, which authorizes us to invest up to $250.0 million to purchase our own shares, following the expiration date of the 2017 share buyback program.

Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our share buyback program provides us with the opportunity to make opportunistic repurchases during periods of favorable market conditions and is expected to remain in effect for a period of three years.

In May 2020, our Board of Directors approved a new share repurchase program, which authorizes us to invest up to $250.0 million to purchase our own shares, following the expiration date of the 2017 share repurchase program.

Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our share repurchase program provides us with the opportunity to make opportunistic repurchases during periods of favorable market conditions and is expected to remain in effect for a period of three years.

Shares may be repurchased from time to time on the open market, through block trades or otherwise.

Opportunistic purchases may be started or stopped at any time without prior notice depending on market conditions and other factors.

As of December 31, 2020, $177.6 million is still available for repurchase under the 2020 share buyback program.

In April 2021, our Board of Directors approved an increase of $750.0 million of the 2020 share repurchase program, to an aggregate amount of $1.0 billion.

The Swiss Takeover Board approved this increase and it became effective on May 21, 2021.

As of June 30, 2021, $780.4 million is still available for repurchase under the 2020 repurchase program.

If we do not generate sufficient operating cash flows to support our operations and future planned cash requirements, our operations could be harmed and our access to credit could be restricted or eliminated.

However, we believe that the trend of our historical cash flow generation, our projections of future operations and our available cash balances will provide sufficient liquidity to fund our operations for at least the next 12 months.

Operating Leases Obligation

Operating Leases Obligations

We lease facilities under operating leases, certain of which require us to pay property taxes, insurance and maintenance costs.

2 unchanged sentences

Purchase Commitments

As of December 31, 2020, we had non-cancelable purchase commitments of $853.1 million for inventory purchases made in the normal course of business from original design manufacturers, contract manufacturers and

other suppliers, as well as due to strong sales growth in the nine months ended December 31, 2020, the majority of which are expected to be fulfilled within the next 12 months.

The increase of inventory purchase commitment from March 31, 2020 is to replenish the inventory due to business growth.

As of June 30, 2021, we had non-cancelable purchase commitments of $775.3 million for inventory purchases made in the normal course of business from original design manufacturers, contract manufacturers and other suppliers, the majority of which are expected to be fulfilled within the next 12 months.

We recorded a liability for firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand or net realizable value consistent with our valuation of excess and obsolete inventory.

As of December 31, 2020, the liability for these purchase commitments was $5.6 million and is recorded in accrued and other current liabilities.

We have firm purchase commitments of $32.8 million for capital expenditures, primarily related to commitments for equipment and tooling for new and existing products.

As of June 30, 2021, the liability for these purchase commitments was $13.9 million and is recorded in accrued and other current liabilities.

We have firm purchase commitments of $25.8 million for capital expenditures primarily related to commitments for tooling and equipment for new and existing products.

We expect to continue making capital expenditures in the future to support product development activities and ongoing and expanded operations.

2 unchanged sentences

For further detail about our contractual obligations and commitments, refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2021.

Off-Balance Sheet Arrangemen ts

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Indemnifications

1 unchanged sentence

The scope of these indemnities varies, but in some instances includes indemnification for damages and expenses, including reasonable attorneys’ fees.

As of December 31, 2020, no amounts have been accrued for indemnification provisions.

As of June 30, 2021, no amounts have been accrued for indemnification provisions.

We do not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under our indemnification arrangements.

4 unchanged sentences

From time to time we are involved in claims and legal proceedings that arise in the ordinary course of our business.

We are currently subject to several such claims and a small number of legal proceedings.

We believe that these matters lack merit and we intend to vigorously defend against them.

Based on currently available information, we do not believe that resolution of pending matters will have a material adverse effect on our financial condition, cash flows or results of operations.

However, litigation is subject to inherent uncertainties, and there can be no assurances that our defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on our business, financial condition, cash flows and results of operations in a particular period.

Any claims or proceedings against us, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors.

Any failure to obtain necessary licenses or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

For more information about Legal Proceedings, see Part II Item 1 Legal Proceedings of this quarterly report on Form 10-Q for the period ended June 30, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis