Logitech International SA F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript

Logitech International SA F1Q11 (Qtr End 06/30/2010) Earnings Call Transcript
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Logitech International SA (LOGI)

F1Q11 (Qtr End 06/30/2010) Earnings Call

July 29, 2010 8:30 am ET


Joe Greenhalgh - VP or IR and Corporate Treasurer

Jerry Quindlen - President and CEO

Erik Bardman - SVP, Finance, and CFO


Jonathan Tseng - Merrill Lynch

Simon Schafer - Goldman Sachs

Yair Reiner - Oppenheimer and Company

Ashish Sinha - Morgan Stanley

Andy Hargreaves - Pacific Crest

Nicolas von Stackelberg - Macquarie

Tom Kucera - Avondale Partners

Beat Keiser - Cheuvreux

Tim Shaw - Citi



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Good day and welcome to the Logitech's first quarter financial results conference call. (Operator Instructions) This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech.

I would now like to introduce your host for today's call, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech.

Joe Greenhalgh

Welcome to the Logitech conference call to discuss the company's results for the first quarter ended June 30, 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 May 27, 2010 and subsequent filings which are available online on the SEC EDGAR database and in the final paragraph of the press release reporting first quarter 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 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 are Jerry Quindlen, 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 Jerry.

Jerry Quindlen

Thanks, Joe, and thanks all of you for joining us today. I'll cover the highlights for the quarter now, and I will be followed by a more detailed review of the financial results by Erik. Then I'll return to talk about our outlook for the year before we both take your questions.

I am extremely pleased with our strong start to our fiscal 2011. Building on the momentum we established in the March quarter, we delivered sales, gross margin and operating profit in Q1 that were higher than the outlook we shared at the beginning of the quarter.

Our sales grew by 47% year-over-year, with strong double-digit growth in all retail regions, led by the Americas as well as in OEM. We also experienced continued improvement in sell-through across EMEA, the Americas and Asia-Pacific, with the strongest growth in EMEA and sell-through of our product exceeding our expectations in both the Americas and Asia-Pacific.

Remotes was our fastest growing retail product category, delivering an eightfold improvement in sales year-over-year. And pointing devices was our second fastest growing retail category, with growth of 46%, led by strong demand for our cordless mice.

I continue to be pleased with the sales momentum we're building with our LifeSize business. Sales were up sequentially and LifeSize products continue to receive an enthusiastic reception from companies who are looking for high-quality, affordable, scalable solutions for HD video communication.

We delivered our best ever Q1 gross margin at 35.3%, a significant improvement from the 23.9% we posted in Q1 of fiscal 2010. I was particularly pleased to see that the negative impact of the weaker euro on our business in EMEA was more than offset by our performance across our other regions as well as by our supply chain efficiency improvements.

Another highlight for the quarter was the May announcement of our central role in developing Google TV. I am very excited about the opportunity for Logitech provided by this innovative, open platform that integrates television and internet content seamlessly. I'll have much more to say on that subject later on the call.

Let me turn the call over now to Erik.

Erik Bardman

Thanks, Jerry. I'll start with an overview of our Q1 sales performance. I'm pleased to note that the growth percentages that follow are in comparison to Q1 fiscal 2010.

Our retail sales and units grew by 39%. Looking at our regional sales in local currency, EMEA was up by 31% and Asia by 22% compared to U.S. dollar growth of 21% in EMEA and 24% in Asia. Units were up by 33% in the Americas, by 42% in EMEA and by 45% in Asia-Pacific. Our overall retail average selling price in Q1 was essentially unchanged from the prior year.

Sales of our products priced above $100 represented 15% of our retail sales in Q1, up from 12% in the prior year and essentially unchanged compared to the prior quarter.

As Jerry mentioned, the remotes category was our best performing product family in the quarter, with sales over eight times higher than the prior year and units up by well over three times. We delivered very strong growth in all regions, led by the Americas. The growth was driven by multiple products, with the Harmony One leading the way, followed by our recently launched Harmony 300, our lowest-priced remote at just $49.

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