LOGITECH INTERNATIONAL S.A. 10-Q

ITEM 1. FINANCIAL STATEMENTS (UNAUDITED) LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) (unaudited) Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Net sales $ 1,116,034 $ 1,057,008 $ 2,204,251 $ 2,031,507 Cost of goods sold 627,491 615,403 1,247,008 1,211,115 Amortization of intangible assets 2,452 2,983 4,894 6,128 Gross profit 486,091 438,622 952,349 814,264 Operating expenses: Marketing and selling 201,863 176,356 398,768 355,541 Research and development 76,205 68,559 151,512 139,118 General and administrative 44,173 35,538 81,631 76,835 Amortization of intangible assets and acquisition-related costs 2,725 3,318 5,428 6,003 Restructuring charges (credits), net 229 ( 1,788 ) 615 1,723 Total operating expenses 325,195 281,983 637,954 579,220 Operating income 160,896 156,639 314,395 235,044 Interest income 14,637 11,856 30,427 21,682 Other income (expense), net 533 ( 1,044 ) ( 1,365 ) ( 14,016 ) Income before income taxes 176,066 167,451 343,457 242,710 Provision for income taxes 30,583 30,334 56,141 42,866 Net income $ 145,483 $ 137,117 $ 287,316 $ 199,844 Net income per share: Basic $ 0.95 $ 0.87 $ 1.88 $ 1.26 Diluted $ 0.95 $ 0.86 $ 1.86 $ 1.25 Weighted average shares used to compute net income per share: Basic 152,460 157,911 152,875 158,385 Diluted 153,672 158,934 154,320 159,545 The accompanying notes are an integral part of these condensed consolidated financial statements. 3 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited) Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Net income $ 145,483 $ 137,117 $ 287,316 $ 199,844 Other comprehensive income (loss): Currency translation gain (loss): Currency translation gain (loss), net of taxes 20,789 ( 10,622 ) 15,570 ( 12,151 ) Defined benefit plans: Reclassification of amortization included in other income (expense), net ( 552 ) ( 244 ) ( 752 ) ( 248 ) Hedging gain (loss): Deferred hedging gain (loss), net of taxes ( 2,931 ) 2,078 ( 1,349 ) 1,374 Reclassification of hedging loss (gain) included in cost of goods sold ( 906 ) 1,370 ( 1,639 ) 4,356 Total other comprehensive income (loss) 16,400 ( 7,418 ) 11,830 ( 6,669 ) Total comprehensive income $ 161,883 $ 129,699 $ 299,146 $ 193,175 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts) (unaudited) September 30, 2024 March 31, 2024 Assets Current assets: Cash and cash equivalents $ 1,363,276 $ 1,520,842 Accounts receivable, net 629,278 541,715 Inventories 520,493 422,513 Other current assets 146,511 146,270 Total current assets 2,659,558 2,631,340 Non-current assets: Property, plant and equipment, net 112,357 116,589 Goodwill 463,712 461,978 Other intangible assets, net 34,810 44,603 Other assets 374,056 350,194 Total assets $ 3,644,493 $ 3,604,704 Liabilities and Shareholders’ Equity Current liabilities: Accounts payable $ 555,490 $ 448,627 Accrued and other current liabilities 646,831 637,262 Total current liabilities 1,202,321 1,085,889 Non-current liabilities: Income taxes payable 125,779 112,572 Other non-current liabilities 204,499 172,590 Total liabilities 1,532,599 1,371,051 Commitments and contingencies (Note 10) Shareholders’ equity: Registered shares, CHF 0.25 par value: 30,148 30,148 Issued shares — 173,106 at September 30, 2024 and March 31, 2024 Additional shares that may be issued out of conditional capital — 50,000 at September 30, 2024 and March 31, 2024 Additional shares that may be issued out of the capital band — 17,311 at September 30, 2024 and March 31, 2024 Additional paid-in capital 72,268 63,524 Shares in treasury, at cost — 21,270 at September 30, 2024 and 19,243 at March 31, 2024 ( 1,518,149 ) ( 1,351,336 ) Retained earnings 3,626,999 3,602,519 Accumulated other comprehensive loss ( 99,372 ) ( 111,202 ) Total shareholders’ equity 2,111,894 2,233,653 Total liabilities and shareholders’ equity $ 3,644,493 $ 3,604,704 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) Six months ended September 30, 2024 2023 Cash flows from operating activities: Net income $ 287,316 $ 199,844 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 29,103 34,135 Amortization of intangible assets 10,171 11,509 Loss on investments 1,599 11,609 Share-based compensation expense 49,874 43,579 Deferred income taxes 16,489 11,108 Other 57 100 Changes in assets and liabilities, net of acquisitions: Accounts receivable, net ( 81,568 ) ( 35,362 ) Inventories ( 93,907 ) 146,369 Other assets 2,241 11,999 Accounts payable 108,376 88,022 Accrued and other liabilities 12,280 ( 59,853 ) Net cash provided by operating activities 342,031 463,059 Cash flows from investing activities: Purchases of property, plant and equipment ( 29,113 ) ( 34,731 ) Acquisitions, net of cash acquired — ( 14,138 ) Purchases of deferred compensation investments ( 3,600 ) ( 2,548 ) Proceeds from sales of deferred compensation investments 2,299 2,622 Other investing activities ( 912 ) ( 356 ) Net cash used in investing activities ( 31,326 ) ( 49,151 ) Cash flows from financing activities: Payment of cash dividends ( 207,853 ) ( 182,305 ) Payment of contingent consideration for business acquisition ( 1,245 ) ( 5,002 ) Purchases of registered shares ( 263,185 ) ( 188,941 ) Proceeds from exercises of stock options and purchase rights 20,235 15,319 Tax withholdings related to net share settlements of restricted stock units ( 21,243 ) ( 26,224 ) Other financing activities ( 1,663 ) ( 1,116 ) Net cash used in financing activities ( 474,954 ) ( 388,269 ) Effect of exchange rate changes on cash and cash equivalents 6,683 ( 10,758 ) Net increase (decrease) in cash and cash equivalents ( 157,566 ) 14,881 Cash and cash equivalents, beginning of the period 1,520,842 1,149,023 Cash and cash equivalents, end of the period $ 1,363,276 $ 1,163,904 Supplementary Cash Flow Disclosures: Non-cash investing and financing activities: Property, plant and equipment purchased during the period and included in period end liability accounts $ 6,207 $ 9,218 Right-of-use assets obtained in exchange for operating lease liabilities $ 22,386 $ 2,574 Supplemental cash flow information: Income taxes paid, net $ 17,103 $ 17,408 The accompanying notes are an integral part of these condensed consolidated financial statements. 6 Table of Contents LOGITECH INTERNATIONAL S.A. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (In thousands, except per share amounts) (unaudited) Three Months Ended September 30, 2024 Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders’ Equity Registered Shares Treasury Shares Retained Earnings Shares Amount Shares Amount June 30, 2024 173,106 $ 30,148 $ 57,036 20,090 $ ( 1,418,051 ) $ 3,695,574 $ ( 115,772 ) $ 2,248,935 Total comprehensive income — — — — — 145,483 16,400 161,883 Purchases of registered shares — — — 1,456 ( 129,987 ) — — ( 129,987 ) Sales of shares upon exercise of stock options and purchase rights — — ( 4,526 ) ( 216 ) 23,410 ( 3,267 ) — 15,617 Issuance of shares upon vesting of restricted stock units — — ( 6,059 ) ( 60 ) 6,479 ( 2,810 ) — ( 2,390 ) Share-based compensation — — 25,817 — — — — 25,817 Cash dividends ($ 1.37 per share) — — — — — ( 207,981 ) — ( 207,981 ) September 30, 2024 173,106 $ 30,148 $ 72,268 21,270 $ ( 1,518,149 ) $ 3,626,999 $ ( 99,372 ) $ 2,111,894 Six Months Ended September 30, 2024 Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders’ Equity Registered Shares Treasury Shares Retained Earnings Shares Amount Shares Amount March 31, 2024 173,106 $ 30,148 $ 63,524 19,243 $ ( 1,351,336 ) $ 3,602,519 $ ( 111,202 ) $ 2,233,653 Total comprehensive income — — — — — 287,316 11,830 299,146 Purchases of registered shares — — — 2,900 ( 262,119 ) — — ( 262,119 ) Sales of shares upon exercise of stock options and purchase rights — — ( 6,065 ) ( 273 ) 29,567 ( 3,267 ) — 20,235 Issuance of shares upon vesting of restricted stock units — — ( 35,394 ) ( 600 ) 65,739 ( 51,588 ) — ( 21,243 ) Share-based compensation — — 50,203 — — — — 50,203 Cash dividends ($ 1.37 per share) — — — — — ( 207,981 ) — ( 207,981 ) September 30, 2024 173,106 $ 30,148 $ 72,268 21,270 $ ( 1,518,149 ) $ 3,626,999 $ ( 99,372 ) $ 2,111,894 7 Table of Contents Three Months Ended September 30, 2023 Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders’ Equity Registered Shares Treasury Shares Retained Earnings Shares Amount Shares Amount June 30, 2023 173,106 $ 30,148 $ 49,734 14,484 $ ( 994,581 ) $ 3,240,302 $ ( 99,528 ) $ 2,226,075 Total comprehensive income — — — — — 137,117 ( 7,418 ) 129,699 Purchases of registered shares — — — 1,895 ( 124,096 ) — — ( 124,096 ) Sales of shares upon exercise of stock options and purchase rights — — ( 13,888 ) ( 267 ) 27,094 — — 13,206 Issuance of shares upon vesting of restricted stock units — — ( 10,143 ) ( 83 ) 8,115 — — ( 2,028 ) Share-based compensation — — 21,608 — — — — 21,608 Cash dividends ($ 1.19 per share) — — — — — ( 187,199 ) — ( 187,199 ) September 30, 2023 173,106 $ 30,148 $ 47,311 16,029 $ ( 1,083,468 ) $ 3,190,220 $ ( 106,946 ) $ 2,077,265 Six Months Ended September 30, 2023 Additional Paid-in Capital Accumulated Other Comprehensive Loss Total Shareholders’ Equity Registered Shares Treasury Shares Retained Earnings Shares Amount Shares Amount March 31, 2023 173,106 $ 30,148 $ 127,380 13,763 $ ( 977,266 ) $ 3,177,575 $ ( 100,277 ) $ 2,257,560 Total comprehensive income — — — — — 199,844 ( 6,669 ) 193,175 Purchases of registered shares — — — 3,502 ( 219,172 ) — — ( 219,172 ) Sales of shares upon exercise of stock options and purchase rights — — ( 15,755 ) ( 315 ) 31,074 — — 15,319 Issuance of shares upon vesting of restricted stock units — — ( 108,120 ) ( 921 ) 81,896 — — ( 26,224 ) Share-based compensation — — 43,806 — — — — 43,806 Cash dividends ($ 1.19 per share) — — — — — ( 187,199 ) — ( 187,199 ) September 30, 2023 173,106 $ 30,148 $ 47,311 16,029 $ ( 1,083,468 ) $ 3,190,220 $ ( 106,946 ) $ 2,077,265 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Table of Contents LOGITECH INTERNATIONAL S.A. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Note 1 — The Company and Summary of Significant Accounting Policies and Estimates The Company Logitech International S.A, together with its consolidated subsidiaries ("Logitech" or the "Company"), designs software-enabled hardware solutions that help businesses thrive and bring people together when working, creating, gaming and streaming. As a point of connection between people and the digital world, the Company's mission is to extend human potential in work and play, in a way that is good for people and the planet. The Company sells its products to a broad network of international customers, including direct sales to retailers, e-tailers and end consumers through the Company's e-commerce platform, and indirect sales to end customers through distributors. Logitech was founded in Switzerland in 1981 and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Hautemorges, Switzerland, and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa ("EMEA") and Asia Pacific. Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange under the trading symbol LOGN and the Nasdaq Global Select Market under the trading symbol LOGI. Basis of Presentation The condensed consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2024, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 16, 2024. In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of only normal and recurring adjustments, necessary and in all material aspects, for a fair statement of the results of operations, comprehensive income, financial position, cash flows and changes in shareholders' equity for the periods presented. Operating results for the three and six months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2025, or any future periods. Changes in Significant Accounting Policies There have bee n no material changes in the Company’s significant accounting policies during the three and six months ended September 30, 2024 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2024. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve the fair value of goodwill and intangible assets acquired from business acquisitions, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, accruals for customer incentives, cooperative marketing, and pricing programs and related breakage when appropriate, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates. 9 Risks and Uncertainties Impacts of Macroeconomic and Geopolitical Conditions on the Company's Business The Company's business has continued to be impacted by macroeconomic and geopolitical conditions. These conditions include inflation, interest rate and foreign currency fluctuations, changes in fiscal policies, geopolitical conflicts, low economic growth in certain regions, and uncertainty in consumer and enterprise demand. The global and regional economic and political conditions have caused and may continue to cause volatility in demand for the Company's products as well as the cost of materials and logistics, and transportation delays, and as a result may impact the pricing of the Company's products, product availability and the Company's results of operations. Recent Accounting Pronouncements Not Yet Adopted In November 2023, the Financial Accounting Standard Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures . ASU 2023-07 improves reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the chief operating decision maker. In addition, ASU 2023-07 requires that all existing annual disclosures about segment profit or loss must be provided on an interim basis and clarifies that single reportable segment entities are subject to the disclosure requirement under Topic 280 in its entirety. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years beginning after December 15, 2024. A public entity should apply ASU 2023-07 retrospectively to all prior periods presented in the financial statements. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU 2023-09 requires additional disclosures related to rate reconciliation, income taxes paid, and other disclosures. Under ASU 2023-09, for each annual period presented, public entities are required to (1) disclose specific categories in the tabular rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires all reporting entities to disclose on an annual basis the amount of income taxes paid disaggregated by federal, state, and foreign taxes as well as the amount of income taxes paid by individual jurisdiction. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024 and can be applied on a prospective basis with an option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its consolidated financial statements and related disclosures. Note 2 — Net Income Per Share The following table summarizes the computations of basic and diluted net income per share for the three and six months ended September 30, 2024 and 2023 (in thousands, except per share amounts): Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Net income $ 145,483 $ 137,117 $ 287,316 $ 199,844 Shares used in net income per share computation: Weighted average shares outstanding - basic 152,460 157,911 152,875 158,385 Effect of potentially dilutive equivalent shares 1,212 1,023 1,445 1,160 Weighted average shares outstanding - diluted 153,672 158,934 154,320 159,545 Net income per share: Basic $ 0.95 $ 0.87 $ 1.88 $ 1.26 Diluted $ 0.95 $ 0.86 $ 1.86 $ 1.25 Share equivalents attributable to outstanding stock options, restricted stock units and employee share purchase plans totaling 0.9 million and 1.1 million for the three months ended September 30, 2024 and 2023, 10 respectively, and 1.0 million and 1.6 million for the six months ended September 30, 2024 and 2023, respectively, were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive. A small number of performance-based restricted stock units were not included in the dilutive net income per share calculation because all necessary conditions had not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the performance contingency period. Note 3 — Employee Benefit Plans Employee Share Purchase Plans and Stock Incentive Plans As of September 30, 2024, the Company offers the 2006 Employee Share Purchase Plan (Non-U.S.), as amended and restated, the 1996 Employee Share Purchase Plan (U.S.), as amended and restated, and the 2006 Stock Incentive Plan, as amended and restated. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock. The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three and six months ended September 30, 2024 and 2023 (in thousands): Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Cost of goods sold $ 3,902 $ 2,462 $ 6,500 $ 3,877 Marketing and selling 10,469 9,262 22,320 19,745 Research and development 5,067 4,694 10,806 9,147 General and administrative 7,031 5,650 10,248 10,810 Total share-based compensation expense 26,469 22,068 49,874 43,579 Income tax benefit ( 4,776 ) ( 2,548 ) ( 12,378 ) ( 7,866 ) Total share-based compensation expense, net of income tax benefit $ 21,693 $ 19,520 $ 37,496 $ 35,713 The income tax benefit in the respective periods primarily consisted of tax benefits related to the share-based compensation expense for the period and direct tax benefit realized. Share-based compensation costs capitalized as part of inventory were $ 1.8 million and $ 1.5 million for the three months ended September 30, 2024 and 2023, respectively, and $ 4.3 million and $ 3.4 million for the six months ended September 30, 2024 and 2023, respectively. Defined Benefit Plans Certain of the Company’s subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee benefit regulations. The Company’s practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. The costs of $ 1.8 million and $ 1.9 million recorded for the three months ended September 30, 2024 and 2023, respectively, and $ 3.5 million and $ 3.8 million recorded for the six months ended September 30, 2024 and 2023, respectively, were primarily related to service costs. Note 4 — Income Taxes The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company’s income before taxes and the provision for (benefit from) income taxes are generated outside of Switzerland. The income tax provision for the three and six months ended September 30, 2024 was $ 30.6 million and $ 56.1 million based on an effective income tax rate of 17.4 % and 16.3 % of pre-tax income, respectively. The income tax 11 provision for the same periods ended September 30, 2023 was $ 30.3 million and $ 42.9 million based on an effective income tax rate of 18.1 % and 17.7 % of pre-tax income, respectively. The change in the effective income tax rate for the three and six months ended September 30, 2024, compared with the same periods ended September 30, 2023, was primarily due to the change in the mix of income and losses in the various tax jurisdictions in which the Company operates, the favorable tax impacts from share-based compensation and unrecognized tax benefits due to uncertain tax positions. The Base Erosion and Profit Shifting Project (the “BEPS Project”) undertaken by the Organization for Economic Co-operation and Development (the "OECD") recommended changes to numerous long-standing tax principles, including a proposal to reallocate profits among tax jurisdictions in which companies do business (“Pillar One”) and establishing a minimum tax on global income (“Pillar Two”). Some jurisdictions, including Switzerland, where the Company operates are implementing Pillar Two laws to effectuate a 15 % minimum tax. The minimum tax effective beginning in fiscal year 2025 for the Company, is treated as a current cost and does not have a material impact on the Company's effective tax rate. The OECD and participating countries continue to issue underlying rules and administrative guidance related to Pillar Two, and the Company continues to monitor the relevant developments. Note 5 — Balance Sheet Components The following table presents the components of certain balance sheet asset amounts (in thousands): September 30, 2024 March 31, 2024 Accounts receivable, net: Accounts receivable $ 862,485 $ 744,836 Allowance for sales returns ( 13,521 ) ( 10,180 ) Allowance for cooperative marketing arrangements ( 43,782 ) ( 41,634 ) Allowance for customer incentive programs ( 74,841 ) ( 60,027 ) Allowance for pricing programs ( 101,063 ) ( 91,280 ) $ 629,278 $ 541,715 Inventories: Raw materials $ 55,634 $ 65,209 Finished goods 464,859 357,304 $ 520,493 $ 422,513 Other current assets: Value-added tax ("VAT") receivables $ 67,720 $ 41,172 Prepaid expenses and other assets 78,791 105,098 $ 146,511 $ 146,270 Property, plant and equipment, net: Property, plant and equipment $ 523,536 $ 503,882 Less: accumulated depreciation and amortization ( 411,179 ) ( 387,293 ) $ 112,357 $ 116,589 Other assets: Deferred tax assets $ 227,009 $ 224,831 Right-of-use assets 79,076 61,163 Investments for deferred compensation plan 31,929 29,174 Investments in privately held companies 27,976 28,662 Other assets 8,066 6,364 $ 374,056 $ 350,194 12 The following table presents the components of certain balance sheet liability amounts (in thousands): September 30, 2024 March 31, 2024 Accrued and other current liabilities: Accrued customer marketing, pricing and incentive programs $ 182,559 $ 170,371 Accrued personnel expenses 124,571 145,473 Income taxes payable 45,093 24,196 Warranty liabilities 32,100 30,270 VAT payable 27,638 28,253 Accrued sales return liability 27,275 30,098 Deferred revenue (1) 23,097 19,262 Accrued loss for inventory purchase commitments 21,807 29,349 Operating lease liabilities 16,011 15,107 Other current liabilities 146,680 144,883 $ 646,831 $ 637,262 Other non-current liabilities: Operating lease liabilities $ 79,100 $ 61,920 Employee benefit plan obligations 43,662 42,707 Obligation for deferred compensation plan 31,929 29,174 Deferred revenue (1) 31,512 21,097 Warranty liabilities 14,733 14,384 Deferred tax liabilities 744 705 Other non-current liabilities 2,819 2,603 $ 204,499 $ 172,590 (1) Includes deferred revenue for post-contract customer support and other services. Note 6 — Fair Value Measurements Fair Value Measurements The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value: • Level 1 — Quoted prices in active markets for identical assets or liabilities. • Level 2 — Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. • Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs. 13 The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands): September 30, 2024 March 31, 2024 Level 1 Level 2 Level 3 Level 1 Level 2 Level 3 Assets: Cash equivalents $ 926,645 $ — $ — $ 1,042,604 $ — $ — Investments for deferred compensation plan included in other assets: Cash $ 203 $ — $ — $ 312 $ — $ — Common stock 710 — — 573 — — Money market funds 8,456 — — 8,129 — — Mutual funds 22,560 — — 20,160 — — Total investments for deferred compensation plan $ 31,929 $ — $ — $ 29,174 $ — $ — Currency derivative assets included in other current assets $ — $ 168 $ — $ — $ 913 $ — Liabilities: Contingent consideration included in accrued and other current liabilities $ — $ — $ — $ — $ — $ 1,215 Currency derivative liabilities included in accrued and other current liabilities $ — $ 714 $ — $ — $ 573 $ — Investments for Deferred Compensation Plan The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $ 31.9 million and $ 29.2 million, as of September 30, 2024 and March 31, 2024, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized gains (losses) related to marketable securities for the three and six months ended September 30, 2024 and 2023 were not material and were included in other income (expense), net, and corresponding changes in the deferred compensation liability were included in operating expenses and cost of goods sold, in the Company's condensed consolidated statements of operations. Equity Method Investments The Company has certain non-marketable investments included in other assets that are accounted for as equity method investments, with a carrying value of $ 18.6 million and $ 18.0 million as of September 30, 2024 and March 31, 2024, respectively. Gains (losses) related to equity method investments for the three and six months ended September 30, 2024 and 2023 were not material and are included in other income (expense), net, in the Company's condensed consolidated statements of operations. There was no impairment of equity method investments during the three and six months ended September 30, 2024 and 2023. Assets Measured at Fair Value on a Nonrecurring Basis Financial Assets The Company has certain equity investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The carrying value is also adjusted for observable price changes with the same or similar security from the same issuer. The amount of these equity investments without readily determinable fair value included in other assets was $ 8.8 million and $ 10.1 million as of September 30, 2024 and March 31, 2024, respectively. The impairment charges related to these equity investments were not material during the three and six 14 months ended September 30, 2024. There were no impairment charges related to these equity investments during the three and six months ended September 30, 2023. During the six months ended September 30, 2023, the Company recorded an impairment loss, before tax, of $ 9.6 million as a result of the write-off of a note receivable which has been deemed no longer recoverable. This note receivable was previously obtained in conjunction with an exchange transaction related to the Company's investment in a privately held company. The impairment loss is included in other income (expense), net, in the Company's condensed consolidated statement of operations for the six months ended September 30, 2023. Non-Financial Assets Goodwill, intangible assets, and property, plant and equipment, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate these non-financial assets for impairment, whether due to certain triggering events or because of the required annual impairment test, and a resulting impairment is recorded to reduce the carrying value to the fair value, the non-financial assets are measured at fair value during such period. There was no impairment of non-financial assets during the three and six months ended September 30, 2024 and 2023. Note 7 — Derivative Financial Instruments Under certain agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same type with a single net amount payable by one party to the other. However, the Company presents its derivative assets and derivative liabilities on a gross basis in other current assets and accrued and other current liabilities, respectively, on the condensed consolidated balance sheets as of September 30, 2024 and March 31, 2024. See Note 6 for the fair values of the Company’s derivative instruments as of September 30, 2024 and March 31, 2024. Cash Flow Hedges The Company enters into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within approximately four months . Gains and losses in the fair value of the effective portion of the hedges are deferred as a component of accumulated other comprehensive loss until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold. Cash flows from such hedges are classified as operating activities in the condensed consolidated statements of cash flows. Hedging relationships are discontinued when the hedging contract is no longer eligible for hedge accounting, or is sold, terminated or exercised, or when the Company removes hedge designation for the contract. Gains and losses in the fair value of the effective portion of the discontinued hedges continue to be reported in accumulated other comprehensive loss until the hedged inventory purchases are sold, unless it is probable that the forecasted inventory purchases will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter. The notional amounts of foreign currency exchange forward contracts outstanding related to forecasted inventory purchases were $ 144.4 million and $ 90.5 million as of September 30, 2024 and March 31, 2024, respectively. The Company had $ 1.8 million of net loss related to its cash flow hedges included in accumulated other comprehensive loss as of September 30, 2024, which will be reclassified into earnings within the next twelve months. 15 The following table presents the amounts of gain (loss) on the Company’s derivative instruments designated as hedging instruments for the three and six months ended September 30, 2024 and 2023 and their locations on its condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (in thousands): Three months ended September 30, Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold 2024 2023 2024 2023 Cash flow hedges $ ( 2,931 ) $ 2,078 $ ( 906 ) $ 1,370 Six months ended September 30, Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold 2024 2023 2024 2023 Cash flow hedges $ ( 1,349 ) $ 1,374 $ ( 1,639 ) $ 4,356 The Company presents the earnings impact from forward points in the same line item that is used to present the earnings impact of the hedged item, i.e., cost of goods sold, for hedging forecasted inventory purchases and such amount is not material for all periods presented. Other Derivatives The Company also enters into foreign currency exchange forward and swap contracts to reduce the short-term effects of currency exchange rate fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of its subsidiaries. These contracts generally mature within approximately one month . The primary risk managed by using forward and swap contracts is the currency exchange rate risk. The gains or losses on these contracts are not material and included in other income (expense), net, in the condensed consolidated statements of operations based on the changes in fair value. The notional amounts of these contracts outstanding as of September 30, 2024 and March 31, 2024 were $ 121.4 million and $ 79.4 million, respectively. The fair value of all foreign currency exchange forward and swap contracts is determined based on observable market transactions of spot currency rates and forward rates. Cash flows from these contracts are classified as operating activities in the condensed consolidated statements of cash flows. Note 8 — Goodwill and Other Intangible Assets The Company conducts its impairment analysis of goodwill annually at December 31 or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of the Company’s reporting unit may be less than its carrying amount. There have been no triggering events identified affecting the valuation of goodwill and intangible assets during the three and six months ended September 30, 2024 and 2023. The following table summarizes the activities in the Company’s goodwill balance (in thousands): As of March 31, 2024 $ 461,978 Effects of foreign currency translation 1,734 As of September 30, 2024 $ 463,712 16 The Company's acquired intangible assets were as follows (in thousands): September 30, 2024 March 31, 2024 Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Trademarks and trade names $ 32,390 $ ( 27,207 ) $ 5,183 $ 32,390 $ ( 25,739 ) $ 6,651 Developed technology 107,421 ( 91,768 ) 15,653 107,421 ( 86,855 ) 20,566 Customer contracts/relationships 69,087 ( 54,854 ) 14,233 69,087 ( 51,061 ) 18,026 Effects of foreign currency translation ( 289 ) 30 ( 259 ) ( 1,019 ) 379 ( 640 ) Total $ 208,609 $ ( 173,799 ) $ 34,810 $ 207,879 $ ( 163,276 ) $ 44,603 Note 9 — Financing Arrangements The Company had several uncommitted, unsecured bank lines of credit and letters of credit aggregating $ 178.7 million and $ 172.5 million as of September 30, 2024 and March 31, 2024, respectively. There are no financial covenants under the lines of credit with which the Company must comply. There was no borrowing outstanding under the lines of credit as of September 30, 2024 or March 31, 2024. As of September 30, 2024 and March 31, 2024, the Company had outstanding bank guarantees of $ 29.5 million and $ 14.3 million, respectively. Note 10 — Commitments and Contingencies Product Warranties Changes in the Company’s warranty liabilities for the three and six months ended September 30, 2024 and 2023 were as follows (in thousands): Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Beginning of the period $ 44,502 $ 39,885 $ 44,654 $ 40,886 Provision 11,776 10,393 21,962 19,485 Settlements ( 9,975 ) ( 9,838 ) ( 20,013 ) ( 19,756 ) Effects of foreign currency translation 530 ( 175 ) 230 ( 350 ) End of the period $ 46,833 $ 40,265 $ 46,833 $ 40,265 Indemnifications The Company indemnifies 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. As of September 30, 2024, no material amounts have been accrued for indemnification provisions. The Company does 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 its indemnification arrangements. The Company also indemnifies its current and former directors and certain current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable. Legal Proceedings From time to time the Company is involved in claims and legal proceedings that arise in the ordinary course of its business. The Company is currently subject to several such claims and legal proceedings. The Company intends to vigorously defend against them. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. The Company follows ASC 17 ("Accounting Standards Codification") 450, Contingencies , in determining the accounting and disclosure for these contingencies. Based on currently available information, the Company does not believe that resolution of pending matters will have a material adverse effect on its financial condition, cash flows and results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that the Company's defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on the Company's business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against the Company can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain a necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect the Company's business. Note 11 — Shareholders’ Equity Share Repurchases In June 2023, the Company's Board of Directors approved a three-year share repurchase program, which allows the Company to use up to $ 1.0 billion to repurchase its shares. The 2023 share repurchase program enables the Company to repurchase shares for cancellation, as well as to support equity incentive plans or potential acquisitions. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program became effective on July 28, 2023. During the six months ended September 30, 2024, the Company repurchased 2.9 million shares for an aggregate cost of $ 262.1 million under the 2023 share repurchase program for cancellation, of which $ 18.4 million of the aggregate cost was not paid yet as of September 30, 2024. As of September 30, 2024 , $ 373.9 m illion was available for repurchase under the 2023 share repurchase program. During the six months ended September 30, 2023, the Company repurchased 0.9 million shares for an aggregate cost of $ 60.1 million under the 2023 share repurchase program for cancellation. In addition, the Company repurchased 2.6 million shares for an aggregate cost of $ 159.1 million under the previous share repurchase program during the six months ended September 30, 2023. This previous share repurchase program was initially approved by the Company's Board of Directors in May 2020, to purchase Logitech shares to support equity incentive plans or potential acquisitions, and expired on July 27, 2023. Swiss law limits a company’s ability to hold or repurchase its own shares. The aggregate par value of all shares held in treasury by the Company and its subsidiaries may not exceed 10 % of the share capital of the Company, which for the Company corresponds to approximately 17.3 million registered shares. This limitation does not apply to shares repurchased for cancellation, due to the Board of Directors’ authority under the Company’s capital band set forth in the Company’s Articles of Incorporation to cancel shares up to a limit of 10 % of the Company's current share capital. As of September 30, 2024, the Company had a total of 21.3 million shares held in treasury stock, which includes 7.0 million shares that have been repurchased for cancellation and 14.3 million shares that have been purchased to support equity incentive plans or potential acquisitions. To the extent that the shares are repurchased to support equity incentive plans or potential acquisitions, the shares are repurchased on the ordinary trading line of SIX Swiss Exchange (“SIX”) and/or The Nasdaq Global Select Market (“Nasdaq”). Shares repurchased for cancellation purposes are repurchased on a second trading line on SIX. Shares may be repurchased from time to time on the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors and the program does not require the purchase of any minimum number of shares. Share Cancellation In September 2024, the Company's Board of Directors approved the cancellation of 4.1 million treasury shares, which were repurchased in fiscal year 2024 for an aggregate cost of $ 332.1 million under the 2023 share repurchase program. The cancellation became effective in October 2024, and as a result both the number of registered shares issued and the number of treasury shares outstanding decreased by 4.1 million shares. Upon cancellation of these shares, the Company deducted the par value from registered shares and reflected the excess of share repurchase cost over par value as a reduction to retained earnings. 18 Dividends During the three and six months ended September 30, 2024, the Company declared cash dividends of CHF 1.16 (USD equivalent of $ 1.37 based on the exchange rate on the date of declaration) per share and paid a total of $ 207.9 million on the Company's outstanding shares. During the three and six months ended September 30, 2023, the Company declared cash dividends of CHF 1.06 (USD equivalent of $ 1.19 based on the exchange rate on the date of declaration) per share and paid a total of $ 182.3 million on the Company's outstanding shares. Any future dividends will be subject to approval of the Company's shareholders. Accumulated Other Comprehensive Loss The accumulated other comprehensive loss was as follows (in thousands): Currency Translation Adjustment Defined Benefit Plans Deferred Hedging Gains (Losses) Total March 31, 2024 $ ( 103,947 ) $ ( 8,395 ) $ 1,140 $ ( 111,202 ) Other comprehensive income (loss) 15,570 ( 752 ) ( 2,988 ) 11,830 September 30, 2024 $ ( 88,377 ) $ ( 9,147 ) $ ( 1,848 ) $ ( 99,372 ) Note 12 — Segment Information The Company operates in a single operating segment that encompasses the design, manufacturing and marketing of peripherals for gaming, personal computers ("PCs"), tablets, video conferencing, and other digital platforms. Operating performance measures are provided directly to the Company's Chief Executive Officer ("CEO"), who is considered to be the Company’s Chief Operating Decision Maker. The CEO periodically reviews information such as sales and adjusted operating income (loss) to make business decisions. These operating performance measures do not include restructuring charges (credits), net, share-based compensation expense, amortization and impairment of intangible assets, acquisition-related costs, and change in fair value of contingent consideration from business acquisitions. Sales by product category for the three and six months ended September 30, 2024 and 2023 were as follows (in thousands): Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Gaming (1) $ 300,470 $ 282,104 $ 609,945 $ 548,533 Keyboards & Combos 209,936 194,914 425,269 375,769 Pointing Devices 195,936 191,676 385,882 366,130 Video Collaboration 159,660 152,389 306,702 291,735 Webcams 80,249 88,222 153,153 163,422 Tablet Accessories 85,614 63,677 164,153 134,013 Headsets 46,916 44,411 91,152 81,261 Other (2) 37,253 39,615 67,995 70,644 Total Sales $ 1,116,034 $ 1,057,008 $ 2,204,251 $ 2,031,507 (1) Gaming includes streaming services revenue generated by Streamlabs. (2) Other primarily consists of mobile speakers and PC speakers. 19 Sales by geographic region (based on the customers’ locations) for the three and six months ended September 30, 2024 and 2023 were as follows (in thousands): Three months ended September 30, Six months ended September 30, 2024 2023 2024 2023 Americas $ 480,081 $ 462,406 $ 965,370 $ 907,574 EMEA 351,886 311,805 661,703 570,683 Asia Pacific 284,067 282,797 577,178 553,250 Total Sales $ 1,116,034 $ 1,057,008 $ 2,204,251 $ 2,031,507 Revenue from sales to customers in the United States, Germany and China each represented 10% or more of the total consolidated sales for each of the periods presented herein. No other countries represented 10% or more of the Company’s total consolidated sales for the periods presented herein. Switzerland, the Company’s country of domicile, represented 3 % of the Company's total consolidated sales for each of the three months ended September 30, 2024 and 2023, and 3 % and 2 % of the Company's total consolidated sales for the six months ended September 30, 2024 and 2023, respectively. Three customers of the Company each represented 10% or more of the total consolidated gross sales for each of the three and six months ended September 30, 2024 and 2023. Property, plant and equipment, net (excluding software) and right-of-use assets by geographic region were as follows (in thousands): September 30, 2024 March 31, 2024 Americas $ 64,591 $ 67,762 EMEA 50,101 30,819 Asia Pacific 56,668 58,901 Total $ 171,360 $ 157,482 Property, plant and equipment, net (excluding software) and right-of-use assets in the United States, China and Ireland, were $ 62.9 million, $ 40.0 million, and $ 15.9 million, respectively, as of September 30, 2024. Property, plant and equipment, net (excluding software) and right-of-use assets in the United States, China, and Ireland were $ 66.5 million, $ 41.2 million, and $ 16.2 million, respectively, as of March 31, 2024. Property, plant and equipment, net (excluding software) and right-of-use assets in Switzerland, the Company’s country of domicile, were $ 26.2 million and $ 9.0 million as of September 30, 2024 and March 31, 2024, respectively. No other countries represented more than 10% of the Company’s total property, plant and equipment, net (excluding software) and right-of-use assets as of September 30, 2024 or March 31, 2024. 20