Logitech International S.A.

Good morning and good afternoon. Welcome to Logitech's video call to discuss our financial results for the third quarter of fiscal year 2024. Joining us today are Hanukkah Faber, our CEO, and Chuck Boynton, our CFO. During this call, we will make forward-looking statements, including with respect to future operating results under the safe harbor of the Private Securities Litigation Reform Act of 1995. We're making these statements based on our views only as of today. Our actual results could differ materially. We undertake no obligation to update or revise any of these statements. We will also discuss our non-GAAP financial results, and you can find a reconciliation between GAAP and non-GAAP results and information about our use of non-GAAP measures and factors that could impact our financial results and forward-looking statements in our press release and in our filings with the SEC. These materials, as well as a shareholder letter and a webcast of this call are all available at the investor relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, comparisons between periods are year over year and in constant currency and net sales. This call is being recorded and will be available for a replay on our website. I'll now turn the call over to Hanukkah. Hanukkah.

Thank you, Nate, and welcome, everyone. I'm very excited to be here today for my first earnings call at Logitech. Now, you've probably noticed that this quarter we introduced a new document as part of our earnings material, a shareholder letter. This letter is intended to be a comprehensive review of our quarterly results and includes commentary that previously would have been covered at the beginning of the call. So today, after brief opening remarks, we will move directly into Q&A. Now, let's move on to this quarter. Our team delivered really solid results in the third quarter, and I am proud of the product innovation, the share gains, the operational discipline, and the prudent financial management throughout the quarter, resulting in really healthy gross margins and exceptional cash flow generation. Our disciplined execution, tightly managing costs and promotional spend drove a 22% increase in our operating margins. That is tremendous work by all of our teams. But we will not be satisfied, of course, until we return to top-line growth, which will be a gradual process. As we look forward, I am delighted with Logitech's positioning. Our portfolio is designed to take advantage of indisputable trends in hybrid work, video conferencing, gaming, and content creation. And disruptive technologies like AI will provide additional opportunities for us. As we work our way back to growth, we have demonstrated consistent, disciplined operational excellence that builds a highly cash generative P&L and a very strong balance sheet. This discipline, coupled with an innovation engine that introduces new products at a global scale, drives our market leadership across multiple categories. I've spent the last two months visiting with our employees, partners, customers, and shareholders. It's been a really exciting time for me, and I am as optimistic about Logitech's future as when I joined on day one. We will be hosting an analyst and investor day later this spring, and I'll provide you with a more detailed perspective on our strategy and our approach to capital allocation then. Additionally, we will then provide our outlook for fiscal year 2025. I really look forward to seeing you all at that event. Thanks again. And let me turn it to Chuck to discuss the numbers. Chuck.

Thank you, Hanukkah. Thank you all for joining us on the call today. You've seen our detailed financial results in the press release and shareholder letter, but I'd like to highlight three metrics this quarter that really stand out. First, our gross margins of 42.3% were better than expected year over year due to lower product and logistics costs, reduced promotional activities, specifically in North America. Second, we've spoken for several quarters about our focus on driving lean operations. For the seventh consecutive quarter, we reduced on-hand inventory and this quarter it was down 44% year over year with our inventory turns hitting 6.5. And finally, in Q3, we delivered $443 million of operating cash flow, one of our best ever. This was driven by an improvement in the cash conversion cycle and strong operating margins. We are updating our outlook for the full year. We are now expecting revenues of 4.2 to 4.25 billion up from four to 4.15 billion. Our operating income is expected to be between 610 and 660 million up from 525 to 575 million. One final note regarding fiscal year 2025. If you look at our last four quarters, as well as the midpoint of our fiscal 24 outlook, you will see the declines in our net sales have moderated. Looking ahead to fiscal 25, we do not anticipate an inflection point in the slope of this curve. While the rate of our net sales declines has improved, there are a number of headwinds and uncertainties that may impact our net sales throughout fiscal 25. Thank you to all of our employees for the hard work and impressive execution. With that, Nate, let's move on to Q&A.