Logitech Results Soar on Video Collaboration, PC Tool, Gaming Sales

Mobile speaker sales grew 40% to $29.7 million in Q4, but fell 21% for the year, as the company continues to shift focus to other categories, said CEO Bracken Darrell on a Thursday earnings call. Smart home grew 1% in Q4 to $8.4 million but was down 21% for the year.

Inventory turns in the quarter slowed to 5 in Q4 vs. 7.5 times in the prior-year quarter due to COVID-19 manufacturing slowdowns in China, and the company expects turns to remain slower in the first half of the current year. Logitech invested in its own manufacturing and with supply chain partners to improve product availability amid a “tightened near-term supply chain and logistics outlook.” The company “ran behind” for most of the year trying to fill the distribution channel, Darrell said: “We’re about there.”

Headwinds could persist due to logistics, said Chief Financial Officer Nate Olmstead: “If materials are late arriving, and we have to rush … those finished goods to market, we could continue to see elevated logistics costs.” Component pricing could also be a challenge this year, he said.

Darrell sees “bigger and broader” opportunities for Logitech as companies begin to “emerge from the shelter-in-place requirement,” and he believes many work-, school- and entertainment-related behaviors from the pandemic era will endure. He cited a recent announcement from Citi CEO Jane Fraser saying employees will be expected to work in the office at least three days a week and from home up to two days, which could require more productivity tools such as webcams and PC peripherals, he said. Darrell didn’t reference Fraser’s designation of “Zoom-Free Fridays.”

The “meteoric rise” of video calls won’t reverse, so people will continue to need separate places in the home for work and study, and gaming will be used more for social interaction, Darrell predicted. He noted Apple’s announcement for paid podcast subscriptions, seeing that as an opportunity for Logitech audio headsets.

Video collaboration product sales tripled to over $1 billion for the year, with $386 million coming in the March quarter; the category accelerated through the year “as supplies improved,” he said. Streaming is “soaring,” creators are looking for equipment to make music and videos, and gamers are looking for “better gear,” he said. He cited the popularity of the Clubhouse app, saying it's an opportunity for Logitech mics to improve users’ voice tools.

Logitech began marking gaming products with its Carbon Transparency labeling, an initiative it plans to extend to the full product line, said Darrell. The company’s Life Cycle Analysis capability allows it to quantify the carbon footprint of a product -- from raw materials sourcing to manufacturing, distribution, consumer use and product end-of-life -- and to provide a corresponding carbon footprint number on packaging. The analysis is third-party certified. Logitech is encouraging other companies to adopt carbon transparency labeling, Darrell said.

Revenue guidance for fiscal 2022 is broad, calling for sales to be up or down by 5% year on year. “We’re still in an unusual environment with many economies going through transitions as they hopefully begin to reopen to pre-COVID normalcy,” said Olmstead, “but the timing of those changes is very hard to predict.” The company expects the holiday quarter to be the biggest of the year, and it plans to spend more on marketing and promotional offers in fiscal '22.