What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-05-18 compared with 2021-05-12 · 206 added, 204 removed, 269 unchanged (60% of the section changed)

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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.

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.

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

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

Our products participate in five large market opportunities:

Creativity & Productivity, Gaming, Video Collaboration, Music and Smart Home.

We sell our products to a broad network of domestic and international customers, including direct sales to retailers 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.

We sell our services directly to end customers in majority.

Our products participate primarily in four large market opportunities:

Creativity & Productivity, Gaming, Video Collaboration and Music.

We sell our products to a broad network of domestic and international customers, including direct sales to retailers, e-tailers and enterprise customers, and indirect sales through distributors.

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

We primarily sell our services directly to end customers.

From time to time, we may seek to partner with or acquire, when appropriate, companies that have products, personnel, and technologies that complement our strategic direction.

For example, in February 2021, we acquired Mevo Inc.

("Mevo") to complement our PC webcams portfolio and enable us to offer end-to-end solution for streaming and content creation, and in October 2019, we acquired General Workings, Inc.

("Streamlabs") to complement our Gaming portfolio (see Note 3 to the consolidated financial statements).

We continually review our product offerings and our strategic direction in light of our profitability targets, competitive conditions, changing consumer trends and the evolving nature of the interface between the consumer and the digital world.

On February 17, 2021, we acquired all equity interests of Mevo Inc.

(Mevo) for a total upfront cash consideration of $33.2 million, which included a working capital adjustment, plus additional contingent consideration of up to $17.0 million payable in cash only upon the achievement of certain net revenues for the period beginning on December 26, 2020 and ending on December 31, 2021 (the Mevo Acquisition).

The Mevo Acquisition is complementary to the Company's PC Webcams portfolio and will better enable us to offer end-to-end solutions for streaming and content creation.

On October 31, 2019, the Company acquired all equity interests in General Workings, Inc.

(Streamlabs) for a total consideration of $105.7 million, which included a working capital adjustment, plus additional contingent consideration of $29.0 million payable in stock only upon the achievement of certain net revenues for the period beginning on January 1, 2020 and ending on June 30, 2020 (the Streamlabs Acquisition).

Streamlabs is a leading provider of software and tools for professional streamers.

The Streamlabs Acquisition is complementary to the Company's Gaming portfolio.

Impacts of COVID-19 to Our Business

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic, which continues to spread throughout the world.

In March 2020, the World Health Organization declared the outbreak of COVID-19 as a pandemic, which continues to spread throughout the world.

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

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

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

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

While most of our offices have at least partially reopened or will be reopening in the near future, we are conducting our business with substantial modifications, such as employee remote work in many non-manufacturing facilities and travel limitations, among other changes.

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

Since the outbreak of COVID-19 in early 2020 we experienced disruptions to our supply chain and logistics, inventory constraints, and increased logistics costs, as we attempted to address the effects of the COVID-19 pandemic.

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

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

Further, the demand volatility has led to, and could continue to lead to in the future, higher promotions and marketing expenses, or excess inventories, or both, which could have an adverse impact on our results of operations.

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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 has been 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 it is not yet clear how long the positive demand dynamics will continue, we expect the increased logistics costs to continue through fiscal year 2022.

In addition, if the positive demand does not continue during fiscal year 2022, it may lead to higher promotions, 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, when business restrictions and shelter-at-home guidelines may be eased or lifted on a global basis, 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.

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

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

In addition, the COVID-19 pandemic has resulted in, and could continue to result in, industry-wide global supply chain challenges, including manufacturing, transportation and logistics.

We purchase certain products and key components from a limited number of sources, and depend on the supply chain, including freight, to receive components, transport finished goods and deliver our products across the world.

While we proactively manage our supply chain, we expect to continue to be impacted by higher logistics and component costs, prolonged delays, and challenges with component availability.

Most recently, Shanghai, China, began a lockdown in late March 2022 due to another outbreak of COVID-19, resulting in a lockdown of the city, closures of ports and airports, and disruption of commercial activities, further constraining our supply chain.

If the Shanghai lockdown is extended, including to our Suzhou manufacturing facility, and to other places where our suppliers and partners are located, such measures, depending on their duration, could cause additional negative impact on our business and results of operations.

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

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

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

", " If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales” and “We purchase key components and products from a limited number of sources, and our business and operating results could be adversely affected if supply were delayed or constrained or if there were shortages of required components.

Impacts of Macroeconomic and Geopolitical Conditions on our Business

Adverse macroeconomic conditions, including but not limited to inflation, slower growth or recession, new or increased tariffs, changes to fiscal and monetary policy, higher interest rates and currency fluctuations could adversely affect demand for our products.

In addition, in February 2022, Russia invaded Ukraine resulting in, among other things, broad economic sanctions being imposed on Russia, which has further increased existing global supply chain, logistics, and inflationary challenges.

Such global or regional economic and political conditions may also have a significant impact on our suppliers, contract manufacturers, logistics providers, and distributors, causing increases in cost of materials.

Furthermore, these conditions may lead to price increases in certain of our product markets.

Price increases may not successfully offset cost increases or may cause us to lose market share and in turn adversely impact our operations.

In the fourth quarter of fiscal year 2022, we indefinitely ceased all sales and shipments to Russia.

Our sales in Ukraine have also been halted due to the ongoing military operations on the Ukrainian territory.

Our business in Russia and Ukraine were not material to our results and accounted for approximately 2% of total revenue for fiscal year 2022.

For additional information, see item 1A " Risk Factors ," including under the caption “We purchase key components and products from a limited number of sources, and our business and operating results could be adversely affected if supply were delayed or constrained or if there were shortages of required components,” “Our principal manufacturing operations and third-party contract manufacturers are located in China and Southeast Asia, which exposes us to risks associated with doing business in that geographic area as well as potential tariffs, adverse tax consequences and pressure to move or diversify our manufacturing locations” and “If we do not accurately forecast market demand for our products, our business and operating results could be adversely affected.”

Summary of Financial Results

Our total sales for fiscal year 2021 increased 76% in comparison to fiscal year 2020, due to stronger sales across all regions and most of our product categories from increased remote work and learning trends, accelerated adoption of video communications, and greater gaming viewership, creation, and participation from home, as a result of COVID-19.

Our consolidated statements of operations for fiscal year 2021 include the results of operations for current year acquisitions from their respective dates of acquisition.

Sales for fiscal year 2021 increased 72%, 84% and 75% in the Americas, EMEA and Asia Pacific, respectively, in comparison to fiscal year 2020.

Gross margin increased by 680 basis points to 44.5% during fiscal year 2021, compared to fiscal year 2020.

Our gross margin benefited from higher sales volume, restrained promotional spending, and favorable product mix, which more than offset higher logistics costs to meet strong demand.

Our total sales for fiscal year 2022 increased 4% compared to fiscal year 2021, primarily driven by growth in sales in Gaming, Keyboards & Combos, and Pointing Devices, partially offset by a decline in sales of Tablet & Other Accessories, Audio & Wearables, and Video Collaboration.

Sales for fiscal year 2022 increased 5% and 10% in the Americas and Asia Pacific, respectively, and declined 1% in EMEA, compared to fiscal year 2021.

Gross margin for fiscal year 2022 decreased by 320 basis points to 41.3%, compared to fiscal year 2021, due to increased promotional spending, higher reserves for excess inventories, and higher material and logistic costs, partially offset by favorable impacts from product mix and changes in currency exchange rates.

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Operating expenses for fiscal year 2022 were $1,489.0 million, or 27.2% of sales, compared to $1,187.6 million, or 22.6% of sales, for fiscal year 2021.

The increase in operating expenses was primarily driven by $185.6 million higher personnel-related costs due to additional headcount across departments to support business growth and from business acquisitions, $135.1 million higher third-party costs to support our long-term growth opportunities and branding development, and a $30 million contribution into a charitable donor advised fund to support our social giving strategies.

These increases were partially offset by a $17.5 million decrease in the change in fair value of contingent consideration due to the Streamlabs earn-out recorded in fiscal year 2020 and settled in fiscal year 2021.

Included in the income tax provision of $200.9 million in fiscal year 2021 was $152.6 million of tax expense from Switzerland that reflects the post enactment of TRAF in the canton of Vaud.

The increase in operating expenses was primarily driven by $195.6 million higher third-party costs to support our long-term growth opportunities and branding development as well as $124.6 million higher personnel-related costs due to additional headcount across departments to support business growth.

These increases were partially offset by a $30 million contribution into a charitable donor advised fund in fiscal year 2021 to support our social giving strategies.

Included in the income tax provision of $131.3 million and $200.9 million in fiscal year 2022 and 2021 was $88.7 million and $152.6 million, respectively, of tax expense from Switzerland that reflects the post enactment of the Tax Reform and AHV Financing (“TRAF") by the canton of Vaud.

TRAF was enacted in the fourth quarter of fiscal year 2020 and took effect as of January 1, 2020.

The income tax benefit of $125.4 million in fiscal year 2020 was impacted by a tax benefit of $153.2 million related to the measurement of deferred tax assets and liabilities, net of assessment of uncertain tax positions in Switzerland as a result of the enactment of TRAF.

Net income for fiscal year 2022 wa s $644.5 million , compared to $947.3 million for fiscal year 2021.

Trends in Our Business

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

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

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

Trends Specific to Our Five Market Opportunities

Trends Specific to Our Market Opportunities

Creativity & Productivity:

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

In the past few years, new PC shipments were strong due to work-from-home and learn-from-home trends.

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

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

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

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understanding of our customer base.

The increasing popularity of streaming and broadcasting, as well as the rising work-from-home trend, provides additional growth opportunities for our webcam products as well as other products in our portfolio.

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

The popularity of streaming coupled with work-from-home trends, provide growth opportunities for our webcam products as well as other products in our portfolio.

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

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

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 content becomes increasingly more demanding and social, particularly as other recreational activities have been curtailed or restricted during shelter-at-home mandates.

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

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.

W e 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.

In addition, our acquisition of Streamlabs provides a solid platform to deliver recurring services and subscriptions to gamers and streamers.

Video Collaboration :

The near and long-term structural growth opportunities in the video collaboration market (VC) have never been more 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.

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.

The near and long-term structural growth opportunities in the video collaboration market continue to be strong as commercial and consumer adoption of video has seen substantial growth since the start of the COVID-19 pandemic.

Video meetings continue to be an opportunity as companies want lower-cost, cloud-based solutions that can provide their employees with the ability to work from anywhere.

We are continuing our efforts to create and sell innovative products to accommodate the increasing demand from home offices and small-size meeting rooms, such as huddle rooms, to medium and large-sized meeting rooms.

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.

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

The digitization of learning and hybrid learning environments have also created demand and growth opportunities in the education market.

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 in fiscal year 2021 decreased significantly due to the COVID-19 pandemic.

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.

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.

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

In general, our 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.

We will continue developing wireless audio products as growth in the wireless headphone market is expected for the next several years.

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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 fluctuation in the number of cases from the COVID-19 pandemic across the world and related local restrictions, and shelter-at-home requirements, as applicable, we experienced an even higher demand and consumption of most of our products in the third fiscal quarter of 2021.

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

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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 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.

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

Swiss Federal Tax Reform

As we described above, the canton of Vaud in Switzerland enacted TRAF on March 10, 2020 that took effect as of January 1, 2020.

Our cash tax payments have increased in Switzerland beginning with fiscal year 2020 tax filing as a result of our transition out of our longstanding tax ruling from the canton of Vaud.

Our cash tax payments have increased in Switzerland beginning in fiscal year 2020 as a result of our transition out of our longstanding tax ruling from the canton of Vaud.

Capitalization and amortization of research and development expenses in the U.S.

Pursuant to the Tax Cuts and Jobs Act of 2017, research and development expenses are required to be capitalized and amortized over five years for U.S.

tax purposes if the research and development activities are performed in the U.S, effective for tax year beginning after December 31, 2021.

Absent a change in legislation, the provision is effective for us beginning in fiscal year 2023 which will delay the deductibility of research and development expenses.

Cash tax payments in the U.S.

are expected to increase beginning in fiscal year 2023.

Critical Accounting Estimates

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and (ii) is important to an understanding of our financial condition and operating results.

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

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

Although these estimates are based on management's best knowledge of current events and actions that may impact us in the future, actual results could differ from those estimates.

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Customer incentive programs include performance-based incentives and consumer rebates.

We offer performance-based incentives to our customers and indirect partners based on pre-determined performance criteria.

We offer performance-based incentives to our customers and indirect partners based on pre-

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determined performance criteria.

Consumer rebates are offered from time to time at our discretion for the primary benefit of end-users.

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Assessing the period in which claims are expected to be submitted and the relevance of the historical claim experience require significant management judgment to estimate the breakage of Customer Programs in any accounting period.

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We regularly evaluate the adequacy of our accruals for Customer Programs and product returns.

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These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheet.

We assess the likelihood that our deferred tax assets will be recovered from future taxable income, considering all available evidence such as historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible tax strategies.

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taxable income and ongoing prudent and feasible tax strategies.

When we determine that it is not more likely than not that we will realize all or part of our deferred tax assets, an adjustment is charged to earnings in the period when such determination is made.

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Examples of critical estimates in valuing certain intangible assets and goodwill we have acquired and liabilities we have assumed include but are not limited to:

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• assumptions regarding royalty rate range and forecasted revenue growth rate;

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

Reference to Sales

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References to Sales

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

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For a discussion of the year ended March 31, 2021 compared to the year ended March 31, 2020, please refer to Part II, Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations " in our Annual Report on Form 10-K filed with the SEC on May 12, 2021.

During fiscal year 2021, sales increased 76% in comparison to fiscal year 2020.

If currency exchange rates had been constant in 2021 and 2020, our constant currency sales growth rate would have been 74%.

The increase in sales was across all regions, and benefited most of our product categories due to increased work-from-home and learning-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.

The decline in sales of Mobile Speakers was primarily due to limited outdoor activities and social gatherings.

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Our sales in fiscal year 2022 increased 4%, compared to fiscal year 2021 .

The increase in sales was primarily driven by growth in sales in Gaming, Keyboards & Combos, and Pointing Devices, partially offset by a decline in sales of Tablet & Other Accessories, Audio & Wearables, and Video Collaboration.

Our sales growth in fiscal year 2022 was driven by continued demand from hybrid work trends and popularity of esports and social gaming, partially offset by the negative impacts from higher promotions and industry-wide supply chain challenges, including supply availability and logistics delays.

I f currency exchange rates had been constant in 2022 and 2021, our constant currency sales growth rate would have remained at 4%.

Sales Denominated in Other Currencies

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Dollars, a portion of our sales was generated in currencies other than the U.S.

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

For each of the fiscal years 2021, and 2020, 52% and 50% of our sales were denominated in currencies other than the U.S.

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

For the years ended March 31, 2022 and 2021, approximately 50% and 52%, respectively, of our sales were denominated in currencies other than the U.S.

Sales by Region

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Asia Pacific 10 9

The increase in sales globally in fiscal year 2021 compared with fiscal year 2020 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 in the Americas region for fiscal year 2022, compared to fiscal year 2021, was primarily driven by growth in sales of Video Collaboration, Keyboards & Combos, Gaming, and Tablet & Other Accessories, partially offset by declines in sales of Audio & Wearables and Mobile Speakers.

The decrease in sales in the EMEA region for fiscal year 2022, compared to fiscal year 2021, was primarily driven by decline in sales of Video Collaboration, Audio & Wearables, and PC Webcams, partially offset by growth in sales of Gaming, Keyboards & Combos, Pointing Devices, and Tablets & Other Accessories.

Asia Pacific:

The increase in sales in the Asia Pacific region for fiscal year 2022, compared to fiscal year 2021, was primarily driven by growth in sales of a majority of our product categories, partially offset by decline in sales of Tablet & Other Accessories.

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Sales by Product Categories

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

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

(2) Other includes products that we phased out because they are no longer strategic to our business.

Sales by Product Categories:

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

During fiscal year 2021, Pointing Devices sales increased 25%, compared to fiscal year 2020.

The increase was primarily driven by higher sales of cordless and trackball mice, as a result of remote working and learning trends, partially offset by a decline in sales of our presentation tools, as most conferences, events, and other large-scale presentations remained prohibited.

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During fiscal year 2022, Pointing Devices sales increased 15%, compared to fiscal year 2021, primarily driven by the increase in sales for cordless and corded mice.

Keyboards & Combos

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

During fiscal year 2021, Keyboards & Combos sales increased 37%, compared to fiscal year 2020.

The increase was primarily driven by an increase in sales of our cordless and corded PC keyboards and wireless keyboard/mice combos, partially offset by a decline in sales of our living room keyboard products.

During fiscal year 2022, Keyboards & Combos sales increased 23%, compared to fiscal year 2021, driven by increases in sales of cordless and corded keyboards and keyboard/mice combos.

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

During fiscal year 2021, PC Webcams sales increased 240%, compared to fiscal year 2020.

The increase was seen across all product sub-categories, primarily driven by an increase in sales of our HD Pro Webcam C920, 1080P PRO Stream Webcam, Webcam C260, and Logitech Streamcam, mostly due to more remote working from home and learning-from-home.

During fiscal year 2022, PC Webcams sales decreased 8%, compared to fiscal year 2021, primarily driven by decline in sales of 1080P PRO Webcam, HD Pro Webcam 920, Streamcam, partially offset by an increase in sales of Mevo Video Cameras.

Tablet & Other Accessories

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

During fiscal year 2021, Tablet & Other Accessories sales increased 184%, compared to fiscal year 2020.

The increase was primarily driven by the sales of our Rugged Folio and Slim Folio Keyboards for the 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.

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.

During fiscal year 2022, Tablet & Other Accessories sales decreased 19%, compared to fiscal year 2021, primarily driven by decline in sales of Rugged Folio and Slim Folio Products, partially offset by sales of Combo Touch for iPad Pro 12.9-inch, introduced in the second quarter of fiscal year 2022, Combo Touch for iPad Pro 11-inch and Combo Touch for iPad Air, introduced in the first quarter of fiscal year 2022.

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Gaming market:

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

During fiscal year 2021, Gaming sales increased 80%, compared to fiscal year 2020.

The increase was primarily driven by strong performance in PC gaming, Simulation, and Console Gaming headsets.

The sales in Streamlabs services, our business acquisition in the third quarter of fiscal year 2020, doubled as the streaming industry saw an increase in the amount of hours viewed and streamed.

The increase was partially offset by a decline in the sales of our console gaming controllers.

During fiscal year 2022, Gaming sales increased 17%, compared to fiscal year 2021, primarily driven by strong performance in nearly all of our Gaming sub-categories, including our gaming mice, gaming steering wheels, and gaming headsets, partially offset by a decline in the sales of our console gaming headsets and console gaming controllers.

Video Collaboration market:

Video Collaboration

Our Video Collaboration category 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.

During fiscal year 2021, Video Collaboration sales increased 186%, compared to fiscal year 2020.

The increase was primarily due to increases in sales of our Rally Ultra-HD Conference Camera, our MeetUp video conference camera, BRIO 4K Pro Webcam, Webcam C930E, and Webcam C925E as video communications become more critical for a more location-flexible workforce.

Our Video Collaboration category includes Logitech’s ConferenceCams, which combine affordable enterprise-quality audio and high definition 4K video to bring video conferencing to businesses of any size, as well as webcams and headsets that turn any desktop into an instant collaboration space.

During fiscal year 2022, Video Collaboration sales decreased 5% , compared to fiscal year 2021, primarily driven by the decline in sales of webcams and headsets, partially offset by the increase in sales of conference peripherals.

Music market:

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

During fiscal year 2021, Mobile Speakers sales decreased 21%, compared to fiscal year 2020.

The decrease was primarily due to a decline in sales of our MEGABOOM, BOOM 3, BOOM 2, and WONDERBOOM, and MEGABLAST mobile speakers in part due to limited outdoor activities and social gatherings.

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

Logitech International S.A.

| Fiscal 2021 Form 10-K | 48

During fiscal year 2022, Mobile Speakers sale s decreased 14% , compared to fiscal year 2021, primarily due to a decline in sales of most of our Mobile Speaker sub-categories, partially offset by an increase in sales of our Boom 3 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.

During fiscal year 2021, Audio & Wearables sales increased 71%, compared to fiscal year 2020.

The increase was primarily driven by increases in sales of our corded and cordless headsets and Blue Microphones products, partially offset by decline in sales of our Jaybird and UE Custom products.

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

During fiscal year 2022, Audio & Wearables sales decreased 14%, compared to fiscal year 2021, primarily due to the decrease in sales of Blue Microphone products, cordless headsets and Jaybird products, partially offset by an increase in sales of our Ultimate Ears custom and wireless headsets.

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

Smart Home market:

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

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

During fiscal year 2022, Smart Home sales decreased 46%, compared to fiscal year 2021.

The decrease was primarily driven by an overall decline in sales in our Harmony remote products, partially offset by an increase in sales of our Circle View camera.

In the fourth quarter of fiscal year 2021, we made the decision to discontinue manufacturing and selling our Harmony line of advanced home entertainment controllers as the way people consume content has shifted to streaming services across multiple screens.

Fiscal year 2022 included sales of remaining Harmony products in inventory.

We continue to sell our Circle home security cameras within the Smart Home product category.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 47

Gross profit for fiscal years 2022 and 2021 was as follows (Dollars in thousands):

Years Ended March 31,

2022 2021 Change

Net sales $ 5,481,101 $ 5,252,279 4.4 %

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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 680 basis points to 44.5% during fiscal year 2021, compared to fiscal year 2020.

The increase in gross margin was primarily driven by higher sales volume, restrained promotional spending, favorable product mix, which more than offset the higher logistics operations costs to meet strong demand.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 49

Gross margin decreased by 320 basis points to 41.3% during fiscal year 2022, compared to fiscal year 2021.

The decrease in gross margin was primarily due to increased promotional spending, higher reserves for excess inventories, higher material costs and logistic costs, partially offset by favorable impacts from a shift in product mix and currency exchange rates.

The higher material costs were due to industry-wide supply chain challenges and supply availability.

Operating Expenses

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% of sales 0.3 % 0.4 %

Impairment of intangible assets 7,000 —

% of sales 0.1 % — %

Change in fair value of contingent consideration for business acquisition (3,509) 5,716

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% of sales 27.2 % 22.6 %

The increase in total operating expenses during fiscal year 2021, compared to fiscal year 2020, was mainly due to increases in marketing and selling expenses, research and development expenses, and general and administrative expenses, partially offset by decreases in change in fair value of contingent consideration for business acquisition.

The increase in total operating expenses during fiscal year 2022, compared to fiscal year 2021, was mainly due to increases in marketing and selling expenses, research and development expenses, impairment of intangible assets and restructuring charges related to the Jaybird exit, partially offset by decrease in general and administrative expenses and 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 fiscal year 2021, marketing and selling expenses increase d $237.0 million , compared to fiscal year 2020.

The higher expenses were primarily related to increases of $120.8 million in third-party costs and $114.2 million in personnel-related costs.

The increase in third-party costs is primarily due to increased marketing and advertising spend to support our investment in brand awareness and consideration.

The higher personnel spend was driven by increased headcount to support business growth and go-to-market expansion, as well as increased performance-based variable compensation linked to stronger performance, and increased share-based compensation.

During fiscal year 2022, marketing and selling expenses increased $255.6 million, compared to fiscal year 2021.

The higher expenses were primarily related to increases of $172.8 million in third-party costs and

Logitech International S.A.

| Fiscal 2022 Form 10-K | 48

$73.5 million in personnel-related costs.

The increase in third-party costs was primarily due to increased marketing and advertising spend to support our investment in brand awareness and consideration.

The higher personnel spend was driven by increased headcount to support business growth and go-to-market expansion.

Research and Development

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During fiscal year 2022, research and development expenses increased $65.8 million, compared to fiscal year 2021.

The increases were primarily driven by $30.3 million of additional personnel-related costs due to increased headcount to support our investment in innovation and increased performance-based variable compensation linked to stronger performance.

The increases were primarily driven by $39.9 million of additional personnel-related costs due to increased headcount to support our investment in innovation.

Higher third-party costs of $18.2 million also contributed to the growth in research and development expense and were mainly comprised of costs for contractors to support the increased research and development initiatives.

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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.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 50

During fiscal year 2021, general and administrative expenses increased $72.6 million, compared to fiscal year 2020.

The higher spend was primarily driven by an increase of $41.3 million in personnel-related costs due to increased headcount to support business growth, increased performance-based variable compensation linked to stronger performance, and increased share-based compensation.

An additional $30.0 million of the increase in general and administrative expenses was related to our contribution into a charitable donor advised fund to support our social giving strategies.

Amortization of Intangibles and Acquisition-Related Costs

Amortization of intangibles included in operating expense and acquisition-related costs during fiscal years 2021 and 2020 were as follows (in thousands):

During fiscal year 2022, general and administrative expenses decreased $17.9 million, compared to fiscal year 2021.

The decrease was primarily driven by a $30.0 million contribution into a charitable donor advised fund in fiscal year 2021, partially offset an increase of $10.2 million in personnel-related costs due to increased headcount to support business growth.

Amortization of Intangible Assets and Acquisition-Related Costs

Amortization of intangible assets included in operating expense and acquisition-related costs during fiscal years 2022 and 2021 were as follows (in thousands):

Years Ended March 31,

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

The increase in amortization of intangible assets and acquisition-related costs from fiscal year 2020 to 2021 was primarily driven by the intangible assets acquired through the Mevo acquisition in the fourth quarter of fiscal year 2021 and a full year of intangibles amortization expense for the Streamlabs Acquisition which occurred in the third quarter of fiscal year 2020.

The decrease in amortization of intangible assets and acquisition-related costs from fiscal year 2021 to 2022 was primarily driven by write-off Jaybird intangible assets in fiscal year 2022, partially offset by full year of amortization in fiscal year 2022 for intangible assets acquired through acquisitions completed in the fourth quarter of fiscal year 2021.

Impairment of Intangible Assets

During fiscal year 2022, we recognized a pre-tax impairment charge of $7.0 million, related to the intangibles acquired as part of the Jaybird acquisition due to our decision to discontinue Jaybird-branded products.

Change in Fair Value of Contingent Consideration for Business Acquisition

The change in fair value of contingent consideration was $5.7 million for the fiscal year 2021, 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.

T he change in fair value of contingent consideration was a decrease of $3.5 million for fiscal year 2022, primarily due to the release of the contingent consideration from the acquisition of Mevo as a result of not achieving the net sales milestone upon completion of the earn-out period.

The change in fair value of contingent consideration was an increase of $5.7 million for fiscal year 2021, 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.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 49

Restructuring Charges (Credits), Net

During fiscal year 2022, we recorded restructuring charges of $2.1 million related to our decision to exit Jaybird-branded products.

The total charges consisted of $1.3 million, primarily related to costs of production cancellation, and $0.8 million related to cash severance and termination benefits.

We expect to complete the restructuring within the next nine months.

Interest Income

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We invest in highly liquid instruments with an original maturity of three months or less at the date of purchase, which are classified as cash equivalents.

The decrease in interest income for fiscal year 2021 was primarily driven by the decline in interest rates and reduction of cash held in interest bearing accounts.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 51

The decrease in interest income for fiscal year 2022, compared to fiscal year 2021, was primarily driven by the decline in interest rates.

Other Income (Expense), Net

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Years Ended March 31,

Investment income (loss) related to the deferred compensation plan $ 5,916 $ (831)

Investment income related to the deferred compensation plan $ 1,231 $ 5,916

Currency exchange loss, net (4,604) (2,688)

Gain (Loss) on investments, net (5,910) 39,011

Loss on investments, net (1,683) (5,910)

Other 5,616 893

Total $ 560 $ (1,789)

Investment income (loss) related to the deferred compensation plan for fiscal years 2021 and 2020 represents earnings, gains, and losses on trading investments related to a deferred compensation plan offered by one of our subsidiaries.

Currency exchange loss, net relates to balances denominated in currencies other than the functional currency in our subsidiaries, as well as to the sale of currencies, and to gains or losses recognized on currency exchange forward contracts.

Investment income related to the deferred compensation plan for fiscal years 2022 and 2021 represents earnings, gains, and losses on marketable securities related to a deferred compensation plan offered by one of our subsidiaries.

The decrease in investment income for fiscal year 2022 compared to fiscal year 2021 primarily relates to the change in market performance of the underlying securities.

Currency exchange loss, net, relates to balances denominated in currencies other than the functional currency in our subsidiaries, as well as the sale of currencies, and gains or losses recognized on currency exchange forward contracts.

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

Gain (Loss) on investments, net, represents the realized gain (loss) on sales of investment, investment impairment, and unrealized gain (loss) from the fair value change on the available-for-sale securities and equity-method investments during the periods presented.

The loss in fiscal year 2021 is mostly due to our portion of loss from our investments which are accounted for as an equity method investment.

The increase in fiscal year 2020 was due to the sale of our $5.5 million investment in a privately held company for a gain of $39.8 million.

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes and the effective income tax rate for fiscal years 2021 and 2020 were as follows (Dollars in thousands):

The loss for fiscal year 2022 was primarily related to the strengthening of the Chinese Renminbi against the U.S.

Loss on investments, net, represents the realized gain (loss) on sales of investment, unrealized gain (loss) from the fair value change of investment and gain (loss) on equity-method investments during the periods presented.

Other, includes the components of net periodic benefit cost other than the service costs component.

The increase in the net gains for fiscal year 2022, compared to fiscal year 2021, was related to the actuarial gains primarily resulting from change in termination rate assumption used for one of our defined benefit plans.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 50

Provision for Income Taxes

The provision for income taxes and the effective income tax rate for fiscal years 2022 and 2021 were as follows (Dollars in thousands):

Years Ended March 31,

Provision for (benefit from) income taxes $ 200,863 $ (125,397)

Provision for income taxes $ 131,305 $ 200,863

Effective income tax rate 16.9 % 17.5 %

The change in the effective income tax rate between fiscal years 2021 and 2020 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate and the income tax accounting impact from the enactment of TRAF in the canton of Vaud in Switzerland on March 10, 2020 that took effect as of January 1, 2020.

We have benefited from a longstanding tax ruling from the canton of Vaud through December 31, 2019.

We reached an agreement with the Vaud Tax Administration in fiscal year 2020 that would allow for a tax step-up of goodwill to be amortized over ten years beginning on January 1, 2020 as a transition measure.

The Swiss income tax provision in fiscal year 2021 represents the income tax provision at the full statutory income tax rate of 13.60%.

In fiscal year 2020, we recorded an income tax benefit of $151.7 million, net of unrecognized tax benefits to account for the book and tax basis difference of the step-up upon enactment.

The deferred income tax benefit from other temporary differences resulting from the Swiss tax reform, net of three-month amortization of the tax step-up amounted to $1.5 million.

The aggregate deferred income tax impact in fiscal year 2020 as a result of the enactment of TRAF was $153.2 million.

In addition, we recognized excess tax benefits from share-based payments, net of shortfalls of $8.7 million and $6.4 million in the United States in fiscal years 2021 and 2020, respectively, and recognized income tax benefit from the reversal of uncertain tax positions from the expiration of statutes of limitations in the amount of $4.7 million and $4.0 million in fiscal years 2021 and 2020, respectively.

The change in the effective income tax rate between fiscal years 2022 and 2021 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate.

We recognized excess tax benefits from share-based payments, net of shortfalls of $16.3 million and $8.7 million in the United States in fiscal years 2022 and 2021, respectively, and recognized income tax benefit from the reversal of uncertain tax positions from the expiration of statutes of limitations in the amount of $4.9 million and $4.7 million in fiscal years 2022 and 2021, respectively.

In addition, we recognized income tax benefit of $3.7 million from the reversal of uncertain tax positions from an effective settlement of a foreign income tax audit in fiscal year 2022.

As of March 31, 2022 and 2021, the total amount of unrecognized tax benefits due to uncertain tax positions was $176.0 million and $160.3 million, respectively, all of which would affect the effective income tax rate if recognized.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 52

As of March 31, 2021 and 2020, we had $59.2 million and $40.8 million, respectively, in non-current income taxes payable, including interest and penalties, related to the Company's income tax liability for uncertain tax positions.

As of March 31, 2022 and 2021, we had $83.4 million and $59.2 million, respectively, in non-current income taxes payable, including interest and penalties, related to our income tax liability for uncertain tax positions.

We recognized $1.5 million and $1.1 million, in interest and penalties related to unrecognized tax positions in income tax expense during fiscal years 2022 and 2021, respectively.

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We received final tax assessments in Switzerland through fiscal year 2019.

For other foreign jurisdictions such as the United States, we are generally not subject to tax examinations for years prior to fiscal year 2018.

We are under examination and have received assessment notices in foreign tax jurisdictions.

For other material foreign jurisdictions such as the United States and China, we are generally not subject to tax examinations for years prior to fiscal year 2019 and calendar year 2019, respectively.

In the United States, the federal and state tax agencies have the authority to examine periods prior to fiscal year 2019, to the extent allowed by law, where tax attributes were generated, carried forward, and being utilized in subsequent years.

We are under examination in foreign tax jurisdictions.

If the examinations are resolved unfavorably, there is a possibility that they may have a material negative impact on our results of operations.

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As of March 31, 2022, we had cash and cash equivalents of $1,328.7 million, compared with $1,750.3 million as of March 31, 2021.

Our cash and cash equivalents consist of bank demand deposits and short-term time deposits, of which 69% is held in Switzerland, 10% is held in Germany, and 8% is held in China (including Hong Kong).

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

Our cash and cash equivalents consist of bank demand deposits and short-term time deposits, of which 70% is held in Switzerland, 12% is held in China (including Hong Kong), and 10% is held in Germany.

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

As of March 31, 2022, our working capital was $1,651.8 million, compared with working capital of $1,477.5 million as of March 31, 2021.

The increase in working capital over fiscal year 2020 was primarily due to higher balances of cash and cash equivalents, higher accounts receivable (net), higher inventories, and higher other current assets, partially offset by higher accounts payable and higher accrued and other liabilities.

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

We had several uncommitted, unsecured bank lines of credit aggregating to $195.0 million as of March 31, 2022.

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As of March 31, 2022, we had outstanding bank guarantees of $25.5 million under these lines of credit.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 51

The following table presents selected financial information and statistics as of March 31, 2022 and 2021 (Dollars in thousands):

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Inventory turnover (ITO)(x) (3)

______________________________

(1) DSO is determined using ending accounts receivable, net as of the most recent quarter-end and sales for the most recent quarter.

(2) DPO is determined using ending accounts payable as of the most recent quarter-end and cost of goods sold for the most recent quarter.

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

DSO as of March 31, 2021 decreased by 14 days to 36 day s, as compared to 50 days as of March 31, 2020, primarily due to timing of customer payments and sales linearity .

DPO as of March 31, 2021 increased 36 days, compared to March 31, 2020, primarily due to timing of purchases and related payments and an increase in cost of goods sold due to higher sales growth during fiscal year 2021.

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

DSO as of March 31, 2022 increased by 13 days to 49 days, as compared to 36 days as of March 31, 2021, primarily due to the timing of sales and customer payments within the quarter.

DPO as of March 31, 2022 decreased 12 days, compared to March 31, 2021, primarily due to lower inventory purchases than prior year as well as timing of purchases and related payments.

ITO as of March 31, 2022 was lower compared to March 31, 2021, primarily due to lower demand than prior year and industry wide logistic delays.

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

During fiscal year 2022, we generated $298.3 million in cash from operating activities, resulting from net income of 644.5 million, a favorable impact from adding back non-cash expenses totaling $245.7 million, and an unfavorable net change in operating assets and liabilities of $591.9 million.

Non-cash expenses were primarily related to share-based compensation expenses, depreciation, amortization, and deferred income taxes.

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

The increase in inventories was primarily driven by higher inventory levels compared to the previously constrained supply from COVID-19 impacts and industry wide logistic delays.

The decrease in accounts payable was primarily driven by lower inventory purchases than prior years as well as the timing of purchases and related payments.

The decrease in accrued and other liabilities was primarily driven by a higher annual bonus accrual and a higher annual income tax payment, both due to strong business performance in fiscal year 2021.

For fiscal year 2022, net cash used in investing activities was $107.9 million, primarily due to purchases of property, plant, and equipment of $89.2 million and payments for an acquisition, net of cash acquired, of $16.2 million.

Our expenditures for property, plant and equipment during fiscal year 2022 were primarily for tooling and equipment as well as computer hardware and software.

For fiscal year 2022, net cash used in financing activities was $606.8 million, resulting from repurchases of our registered shares of $412.0 million, payments of cash dividends of $159.4 million, and tax withholdings related to net share settlements of restricted stock units of $64.2 million, partially offset by proceeds from exercise of stock options and purchase rights of $29.6 million.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 52

ITO as of March 31, 2021 was lower compared to March 31, 2020, primarily due to higher inventory levels to build inventory in anticipation of future sales growth.

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

During fiscal year 2021, we generated $ 1,458.6 million in cash from operating activities.

Our main sources of operating cash flows were from net income, after adding back non-cash expenses of depreciation, amortization, share-based compensation expense, 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.

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

The increase in accrued and other liabilities was primarily due to higher income tax payable due to stronger performance, an increase in customer, marketing, pricing, and incentive programs, freight and duty due to higher logistic costs, and higher accrued personnel expenses.

Net cash used in investing activities was $120.0 million, primarily due to $43.5 million of the purchase price (net of cash acquired) for business acquisitions and $76.2 million of purchases of property, plant, and equipment.

Net cash used in financing activities was $299.9 million, primarily due to $146.7 million of cash dividends paid during the year, $165.0 million of repurchases of our registered shares and $32.1 million of tax withholdings related to net share settlements of restricted stock units, partially offset by $43.8 million in proceeds received from the sale of shares upon exercise of stock options and purchase rights.

Our expenditures for property, plant and equipment during fiscal year 2021 and 2020 were primarily for tooling and equipment and computer hardware and software.

Our expenditures for property, plant and equipment increased during fiscal year 2021, compared to fiscal year 2020, primarily due to higher tooling and equipment.

Our pa yments for acquisitions, net of cash acquired, during fiscal year 2021 were primarily for the Mevo Acquisition.

Our payments for acquisitions, net of cash acquired, during fiscal year 2020 were primarily for the Streamlabs Acquisition (refer to "Note 3—Business Acquisitions" to the consolidated financial statements).

The purchases and sales of trading investments during fiscal years 2021 and 2020 represent mutual fund activity directed by participants in a deferred compensation plan offered by one of our subsidiaries.

The mutual funds are held by a Rabbi Trust.

During fiscal year 2021, there was a $4.0 million loss from currency exchange rate effect on cash and cash equivalents, compared to a loss of $7.1 million from currency exchange rate effect during fiscal year 2020.

The loss from the effect of currency rate changes during fiscal year 2021 were primarily due to the weakening of the Japanese yen, Brazilian real, partially offset by the strengthening of the Chinese yuan and Australian dollar versus the U.S.

Dollar by 2%, 10%, 8% and 25%, respectively.

The loss from the effect of currency exchange rate changes during fiscal year 2020 were primarily due to the weakening of Euro, Brazilian real and Australian dollar versus the U.S.

During fiscal year 2022, there was a $5.2 million loss from currency exchange rate effect on cash and cash equivalents, primarily due to the weakening of the Euro and Australian dollar versus the U.S.

Dollar by 3%, and 5%, respectively.

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Our future working capital requirements and capital expenditures may increase to support investments in product innovations and growth opportunities or to acquire or invest in complementary businesses, products, services, and technologies.

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

In 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 a cash dividend of CHF 121.8 million (U.S.

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

In fiscal year 2019, we paid a cash dividend of CHF 110.7 million (U.S.

Dollar amount of $114.0 million) out of fiscal year 2018 retained earnings.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 54

In May 2022, the Board of Directors recommended that we pay cash dividends for fiscal year 2022 of CHF 0.96 per share (approximately $1.04 per share b ased on the exchange rate on March 31, 2022).

Based on our shares outstanding, net of treasury shares, as of March 31, 2022 (165,252,020 shares), this would result in an aggregate gross dividend of approximately CHF 159.0 million (or approximately $172.1 million based on the exchange rate on March 31, 2022).

In fiscal year 2022, we paid a cash dividend of CHF 0.87 per share, or CHF 147.0 million (U.S.

Dollar amount of $159.4 million) on an aggregate gross basis, out of fiscal year 2021 retained earnings.

In fiscal year 2021, we paid a cash dividend of CHF 0.79 per share, or CHF 134.0 million (U.S.

Dollar amount of $146.7 million) on an aggregate gross basis, out of fiscal year 2020 retained earnings.

In fiscal year 2020, we paid a cash dividend of CHF 0.73 per share, or CHF 121.8 million (U.S.

Dollar amount of $124.2 million) on an aggregate gross basis, out of fiscal year 2019 retained earnings.

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 until July 2023.

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 March 31, 2022 , $423.7 million was available for repurchase under the 2020 repurchase program.

Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our share repurchase program provides us with the opportunity to make opportunistic repurchases during periods of favorable market conditions and is expected to remain in effect for a period of three years through July 27, 2023.

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.

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.

This increase is subject to approval by the Swiss Takeover Board.

For over ten years, we have generated positive cash flows from our operating activities, including cash from operations of $298.3 million, and $1,458.6 million during fiscal years 2022 and 2021, respectively.

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Our other contractual obligations and commitments that require cash are described in the following sections.

Logitech International S.A.

| Fiscal 2021 Form 10-K | 55

Contractual Obligations and Commitments

Purchase Commitments

As of March 31, 2021, we have non-cancelable purchase commitments of $865.6 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 during the first two quarters of fiscal year 2022.

As of March 31, 2022, we had non-cancelable purchase commitments of $736.9 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 during the first two quarters of fiscal year 2023.

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 March 31, 2021, the liability for these purchase commitments was $11.8 million and is recorded in accrued and other current liabilities.

We have firm purchase commitments of $24.9 million for capital expenditures, primarily related to commitments for tooling, equipment, and computer hardware.

As of March 31, 2022, the liability for these purchase commitments was $46.4 million and is recorded in accrued and other current liabilities in the consolidated balance sheet.

We have firm purchase commitments of $29.5 million for capital expenditures, primarily related to commitments for tooling and equipment for new and existing products.

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

Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us the option to reschedule and adjust our requirements based on business needs prior to delivery of goods.

Logitech International S.A.

| Fiscal 2022 Form 10-K | 53

Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us to reschedule or adjust our requirements based on business needs prior to delivery of goods or performance of services.

Operating Leases Obligation

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The remaining terms of our non-cancelable operating leases expire in various years through 2031.

See "Note 17—Leases" to the consolidated financial statements included in this report for more information on leases.

S ee Note 17 - Leases in our Notes to the consolidated financial statements included in this report for more information on leases.

Income Taxes Payable

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At this time, we are unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities.

therefore, such amounts are not included in the contractual obligation table above.

Indemnifications

We indemnify certain of our suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions.

We indemnify certain suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions.

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

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

We also indemnify our current and former directors and certain of our current and former officers.

We also indemnify our current and former directors and certain current and former officers.

Certain costs incurred for providing such indemnification may be recoverable under various insurance policies.

3 unchanged sentences

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-K

Item 7. Management’s Discussion and Analysis