Business & Financial Model

Transcription

1 Business & Financial Model March 6, 2014 Bracken Darrell Vincent Pilette

2 Forward Looking Statements 2 This presentation includes forward-looking statements within the meaning of the U.S. federal securities laws, including, without limitation, statements regarding: our turnaround; fiscal year 2014 retail sales, growth category sales, operating profit, earnings per share and operating expenses; a forecast of fiscal years 2014 and 2015 financial results; a fiscal year 2016 long-range financial target outlook; our ability to capture growth opportunities; sales mix; product introductions; the number and impact of our products; investments; acquisitions; our cash conversion cycle, growth of working capital and cash from operations; stock repurchases; dividends; addressable markets; product category growth; sales growth; LifeSize sales; our gross margin and product category gross margin; our operating expenses, expense reductions and economies of scale; our global infrastructure; and our long-term business model. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially, including without limitation: if our product offerings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; the demand of our customers and our consumers for our products and our ability to accurately forecast it; if we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories; if we do not successfully execute on our growth opportunities in our new product categories and sales in emerging market geographies; if sales of PC peripherals in mature markets are less than we expect; the effect of pricing, product, marketing and other initiatives by our competitors; if our products and marketing strategies fail to separate our products from competitors products; if our restructurings fail to produce the intended performance and cost savings results; if we are unable to divest or discontinue non-strategic product categories and products and effect strategic acquisitions and investments successfully; if there is a deterioration of business and economic conditions in one or more of our sales regions or operating segments, or significant fluctuations in exchange rates. These risks and uncertainties are detailed in Logitech s filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2013 and its Annual Report on Form 10-K/A for the fiscal year ended March 31, 2013, available at under the caption Risk Factors and elsewhere. Logitech does not undertakes any obligation to update any forwardlooking statements to reflect new information or events or circumstances occurring after the date of this presentation. To facilitate comparisons to Logitech s historical results, Logitech has included non-gaap adjusted measures in this presentation, which exclude primarily share-based compensation expense, amortization of other intangible assets, restructuring charges (credits), other restructuring-related charges, and investment impairment (recovery). Logitech believes this information will help investors to evaluate its current period performance, outlook and trends in its business. For historical financials, reconciliation between non-gaap amounts and GAAP amounts is provided on the Investors page of Logitech s website at With respect to financial outlook, most of the excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided for non-gaap outlook. Comparisons are year-over-year unless noted otherwise.

3 Delivering on the Turnaround Solid momentum exiting FY14 FY 14 (based on Q4 non-gaap outlook) FY14 retail sales up ~1%, sales from growth categories up ~50% FY14 operating profit (OP) up ~88%, EPS more than doubled Operating expenses down by ~8%, faster and more profitable company Well-positioned to capture growth opportunities Growing segments of addressable markets becoming a bigger part of the mix Successful product introductions; fewer and more impactful products Cost savings to fund incremental investments for future growth Active capital management Focus on improving working capital and growing cash from operations Active funnel of potential acquisitions, well-positioned for tuck-in Dividend and opportunistic stock buyback part of strategy 3

4 Increased 3 Year Turnaround Target Outlook M$ FY14 FY15 FY16 MAY 2013 Sales 2,000 2,100 2,250 GAAP OP* Non-GAAP OP MARCH 2014 Sales 2,100 2,160 2,275 Non-GAAP OP Improvement Sales Non-GAAP OP Flow through 37% 42% 40% *May 2013 GAAP Operating Profit assumed for 3 years FY14-16: 1) amortization of intangibles : $18M, $8M, $2M 2) stock-based compensation $20M, $22M, $23M 3) no restructuring expense assumed 4

5 Sales Projections $M 2,500 2,000 1,500 1, % 7% 6% 3% 2% 1% 14% 22% 28% 37% 76% Sales Category Mix Shifting $2,100M +0% YoY $2,160M +3% YoY $2,275M +5% YoY 5% 71% 65% 58% FY'13A FY'14E FY'15E FY'16E Profit Max Growth Non Strategic Lifesize Sales stabilize in FY14 and expected to return to growth in FY15/16 Profit Maximization category aligned to PC industry decline Growth category driven by Tablet Accessories, Mobile Speakers and PC Gaming Projecting Profit Max to be less than half of mix by FY17 5

6 Portfolio Growth Projections Sales Categories FY14 YTD actual FY15 - FY16* 2Y CAGR Pointing Devices -1% -7% PC Keyboards/Desktops 3% 1% Audio - PC & Wearables -16% -13% Video -9% -12% Remotes -10% 0% OEM -2% -8% Profit Max -4% -6% Tablet & Other Accessories 69% 37% Mobile Speakers 126% 56% PC Gaming 16% 24% Growth 50% 36% Non Strategic -64% -100% Tablet Accessories growth supported by tablet growth, attach rate expansion and diversification of platforms Mobile Speakers increase driven by innovative portfolio (building on success of BOOM), expanded distribution and improved point of sale execution Planning for stabilized LifeSize sales at ~$30M/quarter LifeSize -17% 0% Total Company 0% 4% * CAGR based on FY14E results Logitech is well-positioned to capture growth opportunities 6

7 Total Addressable Retail Market Profit Max Growth Potential * 2013 $6B $5B $5B 2016 $5B $10B $10B+ 3Y CAGR -7% 30% 30%+ Pointing Devices Keyboards Audio PC & Wearables Webcams Remotes Tablet Accessories Mobile Speakers PC Gaming Smartphone Performance Cases Connected Home Smart Wearables Mobile Gaming 7 Source: IDC, NPD, GFK, ABI Research, and Logitech estimates, 2014

8 Relative Gross Margin by Category 35%* LifeSize Pointing Devices Video Remotes PC Gaming Keyboard & Desktops = FY14E Gross Margin Mobile Speakers Tablet Accessories Audio/PC/Wearables OEM Improvement in product category gross margins driven by: Negotiated savings across over $1B in direct procurement Manufacturing flexibility (owned vs. ODM) Lower cost design Economies of scale in logistics and distribution * Non-GAAP gross margin 8

9 Operating Leverage FY14E Opex* by Category 32% Non-GAAP Opex as % of Sales 31.6% 40% Indirect Procurement Other 10% 50% People 30% 28% 26% 29.0% 28.5% 27.3% 24% FY 13A FY 14E FY 15E FY 16E FY14E Opex* by Activity 30% Regions 40% Products 30% Infrastructure Rationalization of ~$250M of indirect procurement spend Implementation of global infrastructure processes (IT, finance, etc.) Creation of investment capacity to support growth * Non-GAAP operating expenses 9

10 Non-GAAP Financial Outlook FY13 FY14 FY15 FY16 M$ ACTUALS* OUTLOOK SALES 2,100 2,100 2,160 2,275 Sales YoY Growth -9.3% 0.0% 2.8% 5.3% GROSS PROFIT % of Sales 34.8% 35.0% 35.2% 35.4% OPERATING EXPENSES % of Sales 31.6% 29.0% 28.5% 27.3% OPERATING PROFIT % of Sales 3.2% 6.0% 6.7% 8.1% Disciplined execution will drive significant operating leverage 10 *GAAP amounts and a reconciliation to GAAP are available at

11 Long-Term Capital Allocation Strategy Future Cash Flow Cash Returned to Shareholders: Annual Dividends Opportunistic Share Buybacks ~$400M+ Cash Balance Opportunistic Tuck-in Acquisitions in Growth & Potential New Categories $100M - $125M Ongoing Operations 11

12 Long-Term Business Model INCOME STATEMENT Non-GAAP (M$) LONG-TERM MODEL Sales Mix Sales High Single Digit Growth Gross Margin 35% Opex % Sales 25% Operating Margin 10% Growth > 51% Profit Max < 49% Non-GAAP Opex % Sales LONG-TERM MODEL S&M 14-15% R&D 6-7% G&A < 4% Opex % Sales 25% Annual cash conversion cycle: Less than 30 days Annual cash from ops ~ 1x operating profit Cash used for tuck-in acquisitions, dividends, and buybacks Multiple levers to increase shareholder return 12

13 Key Takeaways Market leaders in PC peripherals, tablet keyboards and PC gaming Well positioned to gain share in our growth categories (Tablet Accessories, Wireless Speakers and PC Gaming) Selectively evaluating entrance into large, high-potential growth markets Delivering operating leverage through a return to top line growth and continued disciplined cost management Strong balance sheet with proven ability to generate cash Committed to returning cash to shareholders through dividends and share repurchases Focused on delivering sustained, profitable growth 13

14 Appendix Changes to Sales Categories 14

15 Sales Category Changes vs. May 2013 Constantly reviewing the portfolio mix for maximum performance 15

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