Logitech International S.A. (LOGI)
F4Q10 Earnings Conference Call
April 29, 2010 8:30 AM ET
Joe Greenhalgh – VP, Finance and IR
Jerry Quindlen – President and CEO
Erik Bardman – SVP, Finance and CFO
Ashish Sinha – Morgan Stanley
Yair Reiner – Oppenheimer & Co.
Jonathan Tseng – Merrill Lynch
Alexander Peterc – Exane BNP Paribas
Simon Schafer – Goldman Sachs
Christoph Gretler – Credit Suisse
Previous Statements by LOGI
» Logitech International S.A. F3Q10 (Qtr End 12/31/09) Earnings Call Transcript
» Logitech International S.A. F2Q10 (Qtr End 09/30/09) Earnings Call Transcript
» Logitech International S.A. F1Q10 (Qtr End 06/30/09) Earnings Call Transcript
I would like to introduce your host for today’s call, Mr. Joe Greenhalgh, Vice President of Finance and Investor Relations at Logitech. Please proceed.
Welcome to the Logitech conference call to discuss the company’s results for the fourth quarter and fiscal year ended March 31, 2010.
A press release, a live webcast of this call, and accompanying presentation slides are available online at logitech.com.
This conference call will include forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements.
Factors that could cause actual results to differ materially include those set forth in Logitech’s Annual Report on Form 10-K dated June 1, 2009 and subsequent filings which are available online on the SEC EDGAR database and the final paragraph of the press release reporting fourth quarter and full year results issued by Logitech and available at logitech.com. The press release also contains accompanying financial information for this call.
The forward-looking statements made during this call represent management’s outlook only as of today and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise.
I would like to remind you that this call is being recorded, including the question-and-answer portion and will be available for replay on the Logitech website. For those of you just joining us, let me repeat that presentation slides accompanying this call are also available on our website.
Joining us today from Zurich is Jerry Quindlen, President and Chief Executive Officer and in Freemont we have Erik Bardman, Senior Vice President of Finance and Chief Financial Officer.
I would now like to turn the call over to Jerry.
Thanks, Joe and thanks to all of you for joining us. I'm quite pleased to report that we ended fiscal 2010, which was arguably the most difficult year in Logitech's history on a very positive note with very strong sales and gross margin performance. Our sales, operating profit and gross margin all exceeded the outlook we shared at the start of the quarter.
We returned to generating double digit year-over-year sales growth and we continue to demonstrate outstanding working capital management. One of the highlights of our full year performance is that we delivered a gross margin of 31.9%, essentially backing our long term model range of 32% to 34% and higher than our gross margin in fiscal 2009.
Considering our Q1 fiscal 2010 gross margin was roughly 24%. The improvement we achieved during the year is particularly significant and reflects a number of factors including strong consumer acceptance of our innovative new products, supply chain efficiencies, the completion of the reset of our channel partner's weeks of supply and favorable exchange rate movements.
Now let me comment on some of the highlights of our Q4 performance. I'm very pleased that we experienced sell through growth and double digit sales growth in all of our retail regions. The sales growth was led by our Americas region with topline improvement of 54% compared to the prior year.
Our very strong performance in the Americas was the key factor in exceeding our Q4 outlook and it reflects better than expected consumer demand for our products leading to double digit year-over-year sell through growth in the region.
Let me add that I was also pleased to see a return to growth in our OEM business after a number of challenging quarters. I was happy to see strong double digit growth across all of our retail product categories in the quarter. Once again Remotes was our fastest growing retail product category. After posting a 45% sales increase in Q3, growth accelerated to 58% in Q4 resulting in significant market share gains in the category.
It was a strong quarter for Pointing Devices as well led by strong consumer demand for our family of cordless mice.
Q4 also marked our first full quarter including Lifesize in our results. The integration has been a smooth one and is now largely behind us. I'm extremely pleased with the reception from Lifesize’s customers for our video communication offerings. A couple of indicators of the strong response we’re seeing of that LifeSize achieved records for both billings and unit shipments during Q4. Clearly gross margin was a major highlight during the quarter. At 35.8% we delivered one of our highest gross margins ever and the best Q4 gross margin in our history. This very strong gross margin performance was the primary driver of our better than expected profitability in the quarter.