Logitech International SA (LOGI)
F2Q2012 Earnings Conference Call
October 27, 2011, 08:30 a.m. ET
Joe Greenhalgh - VP, IR and Corporate Treasurer
Guerrino De Luca - Chairman and Acting President and CEO
Erik Bardman - SVP, Finance and CFO
Jonathan Tseng - Bank of America/Merrill Lynch
John Bright - Avondale Partners
Ashish Sinha - Morgan Stanley
Alexander Peterc - Exane BNP Paribas
Andy Hargreaves - Pacific Crest Securities
Stefan Gachter - Helvea
Paul Coster - JPMorgan
Michael Foeth - Vontobel
Luc Mouzon - Amundi Asset Management
Previous Statements by LOGI
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Good day and welcome to the Logitech Second Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. We will be conducting a question-and-answer session and instructions will follow at that time. This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech.
I’d like to introduce your host for today’s call, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech. Please proceed sir.
Welcome to the Logitech conference call to discuss the company’s results for the second quarter ended September 30, 2011. The press release, our prepared remarks and slides, and a live webcast of this call are available online at logitech.com. As noted in our press release, we have published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments, and we will not repeat them on this call.
During the course of this call, we may make forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor and 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 May 27, 2011, and subsequent filings which are available online on the SEC EDGAR database, and in the final paragraph of the press release and prepared remarks reporting second quarter results available at logitech.com.
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 statement as a result of new developments or otherwise. This call is being recorded and will be available for replay on the Logitech website.
Joining us today is Guerrino De Luca, Chairman and acting President and Chief Executive Officer; and Erik Bardman, Senior Vice President of Finance and Chief Financial Officer.
I’d now like to turn the call over to Guerrino.
Guerrino De Luca
Thanks Joe. Thanks to all of you for joining us today. I’d like to add some color from additional perspective to the predicted market that we posted on the web. Our Q2 results are consistent with the finding I shared with you last month. Part of the business that are not yet performing as well as they need to and other they are doing quite well. I will address that as well as various and I will start with China.
We continue to deliver a very strong sales growth in China. I was in Shanghai just last week, spend time with our General Manager there and I came away even more enthusiastic about the potential and our capabilities in this large enduring market. We have a strong unit price, a sound strategy and I believe it will service well in the quarters to come.
In Q2 we achieved solid growth in our LifeSize business. The growth was constrained somewhat by the uncertain economic situation in several key markets and this is the category that is vulnerable to economic downturns in the rest of our business given the customer base purchasing dynamics, but our long-term outlooks remain bullish. I recently spent time with the LifeSize team as well and had our first time look at their product roadmap which includes a number of disrupted technologies and highly innovative offerings that I believe will provide the fuel for future growth.
Let me turn now to our EMEA and the Americas sales regions. Our business in EMEA is firmly in recovery mode. We continue to drive operational improvement in our sales and marketing organization. Our China partners have been pretty leveled to gradually come down over the last two quarters, they are still are not quite as low as they should be in the current economic climate. I’m pleased with the progress that we have seen and I believe it will continue as we get our largest region back to health.
In the Americas region we have seen an increase degree of caution in the face of economic uncertainty by our channel partners, while our China partners are understandably concerned about carrying too much inventory as we entered the high volume holiday selling season, we believe the level of channel stock is healthy and we are actually becoming concerned about the potential for stock outs in few categories.
Looking at both the Americas and EMEA, probably the most telling fact to note is that the metrics we track point to the underlying level of demand in Q2 being higher than our sales (inaudible). While our sales into the channels in the Americas fell by 1% compared to the prior year the sales through by a channel partner increased by 14%.
Looking at the EMEA region a local currency, we have a gap between sales-ins and sale through was essentially the same as in the Americas. What this tells us is that despite sluggish economic conditions, negative consumer sentiment and a product line that is not as strong as it should be, the dynamics around our market portfolio are healthier than most [might get soon].