Logitech International S.A.

Good afternoon and good evening. Welcome to Logitech's video call to discuss our financial results for this quarter and fiscal year-end. Joining us today are Hanukkah Faber, our CEO, and Matteo Inversa, 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 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 of the SEC. These materials, as well as the 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, references to net sales growth are in constant currency, and comparisons between periods are year over year. This call is being recorded and will be available for a replay on our website. I'll now turn the call over to Hanneke.

Thank you, Nate, and welcome, everyone. It's great to be here in Switzerland in Lausanne tonight. As I reflect on my second full year as Logitech CEO, I'm grateful for the progress we've made and also energized by the opportunities still ahead. Fiscal year 26 proved what our model is capable of in any environment. Successful innovation, best-in-class execution, and real earnings expansion. Before we look ahead, let's review our fiscal year 26 and our Q4 performance. As we do so, it's worth returning to the operating principles we declared last April. At the start of our fiscal, we faced a rapidly shifting global landscape. At the time, we set out to lean into opportunities with an offensive mindset, to apply rigorous cost discipline, and to leverage our global manufacturing footprint for real-time agility. I'm pleased to share that we delivered on all three of those objectives last year. First and foremost, we played offense. As a result, we captured significant new market share in key segments and geographies, and we delivered 6% net sales growth in U.S. dollars and 4% in constant currency through a balanced mix of volume and price. Simultaneously, we kept a very firm hand on costs and operating expenses, and we strategically diversified our global manufacturing base. And as a result of that, we delivered exceptional profitability, with non-GAAP gross margins of 43.6% and an operating margin of 18.8%, ahead of our long-term model and a record high outside of the COVID years. Operating income grew 18% to $911 million. We then translated this structural profitability into outstanding cash generation. Cash flow from operations exceeded a billion dollars for the fiscal year, well above 100% of operating income. And we were pleased to be able to return $768 million of cash back to shareholders in the form of share repurchases and dividends. Looking back at just the fourth quarter, we closed out the fiscal year strong. In Q4, we again drove significant global market share growth with 140 basis points increase in personal workspace, a highlight. We returned the Americas to solid growth led by the United States. We accelerated global gaming to high single-digit growth. And we delivered superb margins and a 25% increase in non-GAAP operating income versus last year. I am proud of our teams for balancing bold action with deep operational rigor in fiscal year 26. Now, as we transition into fiscal 27, we're amplifying our focus on future growth. We can do so because we are starting the year from a position of outstanding financial strength, and we should do so because their rapid advancements in AI will make the next 12 to 18 months a unique period for a technology company like ours to innovate and invest for a future in which both work and play will look very different. Thus, in the year ahead, we will up the tempo on the offense. With structurally strong growth margins and a pristine balance sheet, we'll invest in the business to accelerate future growth. At the same time, we will continue to apply our signature cost discipline and agility with a focus on maintaining operating margins at the high end of our long-term targets and driving healthy operating cash flow. Our investments will be focused on three strategic areas of growth. First, R&D and product innovation. We will leverage AI as a catalyst for innovation. We'll do so by enhancing superiority in existing categories, and our new Rally AI video conferencing cameras, which are shipping this summer, are a great example. We will also innovate into new spaces with products designed to help people be more productive and perform better with AI across work and play. And we'll leverage AI for speed. AI is already helping us deliver our annual suite of new products faster than ever. The ProX SuperStrike gaming mouse which shipped in February and went from prototype to a hugely successful launch in under a year, is a great example. Second, we'll invest in Logitech for Business. We're deepening our presence in B2B markets by building enterprise-grade commercial capabilities and penetrating new verticals, prioritizing education, government, and healthcare. We're in the early innings of this plan, but the investments are working. In fiscal year 26, B2B demand outpaced B2C demand, and video collaboration net sales were up 10% in U.S. dollars and 8% in constant currency. We believe Logitech for Business still holds significant untapped potential. And third, we'll invest in building an iconic brand. We will use proven, high-res marketing to generate more trial and awareness of Logitech, especially of our premium offerings. The high-end MX Master 4, which was supported by strong global marketing campaigns in fiscal 26, is a great example. At a $120 price tag, it generated nearly $100 million in net sales within its first six months, making it one of the fastest adopted products in Logitech's history. All in all, these targeted investments are designed to capture market share, expand addressable markets, and support organic top-line growth. I'm super excited about the plans for the year ahead. We believe fiscal 27 will keep us tracking towards our long-term model, mid to high single-digit organic cropline growth, while maintaining operating margins at the high end of that model. Let me close by extending my sincere gratitude to the Logitech team around the world for their dedication and their fabulous work throughout fiscal 26. And with that, over to Mateo to cover the financials in more detail.

Thank you, Anika. Thank you all for joining us on the call today. The team delivered a very strong close to the year, characterized by solid demand, exceptional profitability, and cash generation. The detailed financial results can be found in the press release and shareholder letter. But let me briefly share with you some of the key financial highlights. So starting with the fourth quarter, net sales were $1.86 billion, an increase of 7% in US dollars and 3% in constant currency. It is important to note that the impact of the war in the Middle East in the fourth quarter was approximately 5 million or 50 basis points. Overall, we saw excellent demand across both our B2B and B2C channels and across all regions. Looking at our net sales performance in constant currency, we grew across most of our key product categories. Gaming net sales increased by 7%, with year-over-year growth in all three regions, including double-digit growth in EMEA and in Asia-Pacific. Video collaboration net sales increased by 8%, driven by continuous strong growth in EMEA and AMR. And personal workspace net sales increased by 1%, with double-digit growth in tablet accessories and mid-single-digit growth in pointing devices. Moving to our regional performance, in the Americas, net sales increased 3%. This represents the second consecutive quarter of year-on-year growth following the price increase that we implemented last April. Growth was broad-based across all our product categories, most notably video collaboration, which grew double-digit. In Asia Pacific, net sales increased 8%, marking our ninth consecutive quarter of solid year-over-year growth, driven by double-digit growth in gaming and personal workspace. Net sales declined 1% in EMEA, primarily due to the impact of the Middle East conflict, and if we exclude this impact, net sales would have been slightly positive. And it is also important to note that EMEA still delivered solid growth for the full fiscal year, despite an uneven macroeconomic backdrop, underscoring the strong and resilient execution of our teams. Now, turning to profitability, our non-GAAP gross margin rate was exceptionally strong at 44.8%, up 130 basis points year over year. The positive impact of the U.S. price actions and favorable foreign exchange more than offset the impact of tariffs and higher promotions. Total non-GAAP operating expenses for the quarter were $320 million, corresponding to 29.5% of net sales, down 80 basis points year over year. We invested in sales and marketing and R&D while reducing G&A by more than 10% year-over-year. This gross margin resilience, combined with our disciplined cost management, drove an outstanding operating leverage. And as a result, fourth quarter non-GAAP operating income reached $167 million, up 25% year-over-year, with our non-GAAP operating margin rate expanding to 110 basis points, to 15.3%. Now, let me briefly touch on the full fiscal year 26, where we delivered 4.8 billion in net sales, an increase of 6% year-over-year, or 4% in constant currency. Non-GAAP gross margin rate closed at 43.6%, slightly higher year-over-year, as the impact of our manufacturing diversification actions combined with the price increase in the U.S., more than offset the negative impact of tariffs. Total non-GAAP operating expenses as a percentage of revenue were 24.8% down 170 basis points compared to the prior year, primarily driven by disciplined spending underscored by a 10% reduction in G&A. This resulted in an 18% year-over-year increase in our full-year non-GAAP operating income to $911 million and an increase in non-GAAP operating income rate of 180 basis points to 18.8%. This is the highest level of profitability in the history of the company outside of the COVID peak. The profitability level achieved is also well ahead of the top end of our long-term margin target range of 15 to 18%. Our structural profitability continues to translate in very strong cash generation, coming in above 100% of our operating income. Cash flow from operation exceeded a billion in fiscal year 2026, and we ended the year with a cash balance of approximately $1.7 billion, while returning over $765 million of cash back to shareholders in the form of share repurchases and dividends. Now, looking ahead to the first quarter of fiscal year 27, we have provided our financial outlook in today's shareholder letter, which calls for continued top-line growth and strong operating income. We are expecting net sales to grow 2-4% in constant currency, and this amount includes approximately 150 basis points of negative impact from the Middle East conflict. Non-GAAP operating income is expected to be between $195 and $215 million. Our recent results confirm that we are a company for all seasons. We successfully navigated a dynamic environment last year to deliver high-quality earnings and cash flow And we enter next year with the foundational strength to do it again. Once again, I would like to thank our teams for an exceptional fiscal year 2026. And with that, let's turn it to Q&A.