Logitech 2015 Annual Report Download - page 3

To Our Shareholders
We are pleased to report that Fiscal Year 2015 was a
strong year for Logitech, further advancing the Company’s
transformation that started two years ago.
This past year demonstrated the effectiveness of our
strategy and its resilience even in the face of challenges.
The PC market declined, the iPad market declined and we
underwent a lengthy internal investigation. By November
2014 the internal investigation was behind us and our
financial statements had been corrected. Against this
backdrop, we delivered solid Fiscal Year 2015 results:
• Sales of $2.11 billion, down 1 percent compared to FY
2014, and up 2 percent in constant currency.
• GAAP operating income was $15 million with earnings
per share at $0.06.
• Cash flow from operations was $179 million. We
ended the year with more than $0.5 billion in cash,
up $68 million over last year. That is after distributing
$44 million in dividends to our shareholders.
While these numbers are solid, once you analyze them in
more detail they are even more impressive.
Excellent results
Logitech’s primary focus is on our Retail Strategic
business – the company’s Profit Maximization and Growth
categories. It does not include OEM and Lifesize, which
together broke even. Retail Strategic is nearly 90 percent
of our business – the future of our company. If you look at
our performance in this business – in constant currency
to take out the unusually significant impact of exchange
rates – you will see we grew FY 2015 sales by 6 percent
compared to last year. In the last half of the year, they
grew 7 percent. This means the business that represents
the future of Logitech is already growing within our high-
single-digit, long-term growth target. It also shows that
we ended FY 2015 with momentum.
In FY 2015, we took a non-cash, non-tax-deductible
goodwill impairment charge related to the acquisition
of Lifesize of $123 million. We began to reorganize this
business and accelerate the transition to Lifesize’s new
cloud-based offering, which is gaining significant market
traction. If you put aside this one-time charge, Logitech
delivered our best earnings in seven years in FY 2015 and
we tripled profitability in just two years.
A few years ago, we promised to
deliver fewer, bigger products. And we
are delivering.
(iii)
It’s clear that those parts of Logitech’s business that
we focus on most – the Company’s future – show great
promise. Here’s more detail:
Growth Category
Logitech’s Growth category comprised Tablet and Other
Accessories, Gaming, and Mobile Speakers at the start
of Fiscal Year 2015. By Q4 we added a fourth business:
Video Collaboration.
Our growth businesses are key engines of our growth
transformation. And these engines showed horsepower:
our Growth category contributed nearly $600 million in
sales for FY 2015 and grew 25 percent year over year.
Both our Mobile Speakers and Video Collaboration
businesses more than doubled over the course of the
fiscal year.
In constant currency, the Growth category increased by
28 percent year over year in FY 2015, and by 45 percent
in Q4, demonstrating the momentum we carried into the
new fiscal year.
Profit Maximization
In FY 2015, sales in our PC Peripherals business
decreased by 5 percent year over year – 2 percent in
constant currency.
We achieved this in a PC market environment that’s
declining between 5 and 7 percent. That means we grew
share in most of our PC Peripheral categories. We have
market leadership in all of them. We also delivered record
gross margins and, through the strength of our product
innovations, even drove 5 percent growth in constant
currency in our Keyboards and Combos category.
We expect the Profit Maximization category to continue
to decline. We will manage that decline, maximizing profit
as category leaders along the way. And we will continue
to optimize our performance in this business over the
coming years, regardless of declines in the PC market.
Our Products Are Big Experiences
We have also been working to reinvent Logitech as a
Design-centric company – one in which Design is part of
our culture and used as a strategic differentiator.
To achieve this, we have changed our innovation
machine. We have opened up our office spaces to make
them more collaborative. We have encouraged a small
company culture where hierarchy and bureaucracy are
being replaced by team-work, hunger and speed. We
are seeing the fruits of our Design-focused work. Thanks
to our design and innovation teams, our products have
evolved into big experiences.
Letter to Shareholders