Logitech International S.A.

Good morning and good afternoon. Welcome to Logitech's video call to discuss our financial results for the first quarter of fiscal year 2025. Joining us today are Hanukkah Faber, our CEO, and Mita Sunderwaller, our interim 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 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 will now turn the call over to Hanukkah.

Thank you, Nate, and welcome everyone to our first earnings call of our 2025 fiscal year. Pleased to say that we started the year off strong. We delivered 13% year over year growth and 430 basis points of margin expansion while generating strong levels of cash, further bolstering our balance sheet. Given the healthy momentum in our business to market share gains we've seen in most of our key product categories and the confidence in our ability to execute, we are raising our fiscal 25 outlook, which I'll touch on shortly. You can read the full details of our quarter in our shareholder letter, which will give you a full review of our operating and financial performance. But I'd like to spend a few minutes on this call to provide some color and context to our results, and then we'll transition to Q&A. Let me briefly touch on three points. First, I'm super pleased to see Q1 net sales growth in the low teens, our second consecutive quarter of growth. As a reminder, we told you last quarter that strategic working capital investments would be a part of this story this quarter, as we prepared our own and channel inventories for big selling seasons like June 18, Amazon Prime, back to school, and into the holiday season. Even after you normalize for these planned channel investments, demand was nearly one third of our top line growth. The teams delivered on our plans exceptionally well. Together with our strong top-line results and our focus on execution and operational discipline, we drove healthy gross and operating margin expansion. These results were also enabled by our ability to balance the needs of our distribution partners with continued focus on lean working capital management. At the end of Q1, our owned inventory was down nearly 20% from last year. And our Q1 inventory turns were at 5.4, a notable increase from 4.2 last year, demonstrating our strong command of the business. And our channel inventory levels in terms of weeks on hand remain well within the upper and lower ranges in which we've operated since the beginning of fiscal year 24. Second, I'm excited about our product innovation lineup for this fiscal year, advancing our strategic priority that I talked about last quarter to innovate. You saw us launch 11 products in the first quarter across almost all of our product categories. This ability to launch a diversified set of innovations with a design-led focus at global scale is a competitive advantage that we will continue to leverage. Many of these products are finding smart ways to leverage the power of AI. And for example, the recently released AI Prompt Builder has now been used in over five and a half million instances. And a recently introduced Meetup 2 conference camera with right sight and right sound technologies leverages proprietary data models, our own, and machine learning algorithms to deliver a truly equitable meeting experience for those in the meeting room or participating remotely. Third, given our solid start to the year, we are updating our fiscal year 25 outlook, modestly increasing our fiscal 25 targets for both net sales and non-GAAP operating income. Fiscal year 25 net sales gross is now expected to be between 1% and 3%, and non-GAAP operating income is expected to be between $700 million and $730 million. This updated fiscal 25 outlook contemplates two discrete trends. Our top line growth in Q1 was clearly strong. And customer demand, coupled with the working capital investments I discussed earlier, drove a healthy increase in net sales. At the same time though, this positive business momentum occurred amidst this uncertain and volatile global economic backdrop. So while we're pleased with our first quarter results, we remain pragmatic about future risks and uncertainties. Now, before we move to Q&A, I'd just like to highlight our 2024 impact report that we published yesterday. You've heard us talk about our commitment to sustainability and this annual scorecards holds us accountable. There's a lot to be proud of in this report, such as the fact that three out of four of our products now use recycled plastic, and 66% of our products are carbon labeled, helping consumers and enterprise technology buyers make informed decisions about the environmental impact of their purchases. I'm very comfortable with this approach to sustainability. We set ambitious goals and provide an annual transparent scorecard. And above all, we pursue this commitment to sustainability while delivering strong business results. So in summary, I'm pleased with our ability to execute on our strategic priorities as we focus on extending human potential in work and play. Our first quarter results demonstrate that we're on the right track. Thank you. And with that, Nate, let's go to Q&A.

Great. Layla, we are now ready for our first questions.