Maybe you clicked on this blog post with a mouse from Logitech? There is a good chance you did. We talk to Ben Lu, VP Investor Relations about the last Corona year and the future.
Logitech was founded in 1981 by Swiss Daniel Borel and some colleagues from Stanford University on a farm in Apples, Switzerland. Since then, their devices can be found in many households and offices all over the world, embedded in everyday life, work and play. Although its roots are in Switzerland, most people think that Logitech is either an American or a Chinese tech company.
Mr. Lu, what is your impression of Logitech’s public perception and what is the corporate culture like in a multinational environment?
Logitech is a global company founded in Switzerland, with deep roots in the Swiss community. At the same time, we have key sites in the U.S. and in Asia, as well as our own manufacturing plant in Suzhou, China. This multi-culturalism and global footprint are strengths of ours that reach back to when we were founded and can be found today across our employee base 40 years later. Like any multinational company, there is power in our diversity, but we also have values that are dear to Logitech. Humility, neutrality, a sense for premium quality and design. Some might say these are very Swiss.
Just recently it was officially confirmed that the once praised Harmony remote controls have been discontinued. As Head of IR, looking at a fast-changing world, where do you see potential and opportunities for Logitech and what is water under the bridge, like the Harmony remote controls?
Some years ago, we positioned our business against a number of fast-growing, long-term trends: remote work, the growth in video as a form of communication, the rise of gaming as a mainstream sport and with a highly participatory audience, and the democratization of content creation where anyone can be a broadcaster or artist. These trends have helped drive the growth of some of our major categories – Creativity & Productivity, Video Collaboration and Gaming. These have become billion+ dollar businesses in the last fiscal year. It is clear these opportunities as well as new ones need the right allocation of resources, so that is what we are doing. We are directing our investment resources into faster growing markets and investing in the future.
Just in time with the pandemic and its mandatory home office, Logitech launched “Logitech Sync”, a cloud-based platform that helps monitor, manage and update Logitech video conferencing devices. The platform is a much needed and welcome help for all IT departments dealing with many trouble tickets. It is a success story. What other innovative products can we expect next from your pipeline?
Even during the Pandemic we are able to apply our creativity and design to new and relevant experiences for our customers. Logitech Sync is just one example. Another is a beta software feature we have released called Spotlight for Mice. We have brought the spotlight feature from our presenter tools to mice so people can spotlight areas of importance in their work when presenting virtually. This is tremendously useful when live, in-person presentations have been curtailed. These are just some of the software innovations we are introducing, and we are doubling down on our investments in software. In fact, all our hardware product categories today have a software leader. We have more in the pipeline of course, but I cannot share them yet!
The pandemic amplified existing trends. Working from home is now established in many companies and families, more and more people are starting their own streaming channel on various platforms and playing games together, either via multiplayer or in the family circle, became even more popular. All this has led to higher demand for web cams and other devices. As a result, Logitech has reported record sales. How do you see these developments and what are your goals for the current business year?
Our strategy and focus have not changed during the pandemic. The pandemic has accelerated the growth trends we were already positioned against. We ended our fiscal year with strong momentum in our last quarter and have become a significantly larger and more profitable company, focused on these key secular growth trends. A form of hybrid work is developing, where people are preparing to work some days from the office and some days from home. And we have seen a rise in streaming and creating, as increasing numbers of people turn to our gear to express themselves on platforms like YouTube and Twitch. Last month we raised our Fiscal Year 2022 outlook for non-GAAP operating income to between $800 million and $850 million. Previously, it was expected to be between $750 million and $800 million. The outlook for sales growth in constant currency is still expected to be approximately flat, plus or minus 5 percent. And that is after the most recent fiscal year where our sales grew 74% in constant currency.
Container shortages, lack of resources, supply problems in production, among other factors have increased costs and delayed deliveries for many tech companies in recent months. How profitable is the hardware business today and what are possible future scenarios in terms of product development, manufacturing and distribution?
Over the course of FY 2021, we experienced shortages in certain product lines and elevated logistics cost, but the year was mostly characterized by high demand that our operations worked hard to meet. Operational excellence is one of our strongest capabilities and is reflected in our FY 2021 financials. We delivered record sales, profitability and cash flow. Gross margin was also a record at 44.8%, up 640 basis points versus FY 2020 as we benefited from low promotional spending and favorable product mix. Going into FY 2022 we expect promotional and in-store marketing activities to return to more normalized levels. And as such, we expect gross margin to land in our upwardly revised long-term model of between 36 and 40%.
Logitech is active and popular in many sectors with devices that cover image, sound, touch and feel and create positive experiences for office and home users as well as gamers. In which sector do you predict the highest sales now and in the future? Does gaming and/or e-sports still play a significant role in this for your company?
We still see strong growth opportunities in our Gaming category, yes. We also expect trends in remote work as well as video and content creation to continue to drive growth in Video Collaboration and Creativity & Productivity.
Mr. Lu, if you could create any electronic device, what would it be and why?
Are you asking me to choose a favorite between the Logitech products I use? Impossible!
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