The Company and Summary of Significant Accounting Policies and Estimates

3 Months Ended

Jun. 30, 2023

The Company and Summary of Significant Accounting Policies and Estimates

The Company

Logitech International S.A, together with its consolidated subsidiaries ("Logitech" or the "Company"), designs, manufactures and sells products that help businesses thrive and bring people together when working, creating, gaming and streaming.

The Company sells its products to a broad network of international customers, including direct sales to retailers, e-tailers and end consumers through the Company's e-commerce platform, and indirect sales to end customers through distributors.

Logitech was founded in Switzerland in 1981 and Logitech International S.A. has been the parent holding company of Logitech since 1988. Logitech International S.A. is a Swiss holding company with its registered office in Hautemorges, Switzerland, and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa ("EMEA") and Asia Pacific. Shares of Logitech International S.A. are listed on both the SIX Swiss Exchange under the trading symbol LOGN and the Nasdaq Global Select Market under the trading symbol LOGI.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Logitech and its subsidiaries. All intercompany balances and transactions have been eliminated. The condensed consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and therefore do not include all the information required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the fiscal year ended March 31, 2023, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC") on May 17, 2023.

In the opinion of management, these condensed consolidated financial statements include all adjustments, consisting of only normal and recurring adjustments, necessary and in all material aspects, for a fair statement of the results of operations, comprehensive income, financial position, cash flows and changes in shareholders' equity for the periods presented. Operating results for the three months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2024, or any future periods.

Change in Presentation of Sales by Product Category

During the first quarter of fiscal year 2024, the Company changed its presentation of Sales by Product Category, included in Note 12, to provide a simpler and clearer view of the Company's business. The change in presentation did not have an impact on previously reported total sales. These changes included reclassifications of sales between certain product categories resulting in the following:

•The Webcams category (previously PC Webcams) now includes PC webcams and VC webcams;

•Headsets is a new category which includes PC headsets and VC headsets;

•The Mobile Speakers category is no longer a separate category as sales have been reclassified into the Other category;

•The Audio & Wearables category is no longer a separate category as sales have been reclassified into other categories as discussed below.

As a result of these changes, certain prior-period amounts for the three months ended June 30, 2022 have been reclassified to conform to the current period presentation as follows (in thousands):




	As previously reported		Reclassifications			As adjusted
Gaming	$	282,806	$	15,115	(1)	$	297,921
Keyboards & Combos	227,720		—			227,720
Pointing Devices	183,283		—			183,283
Video Collaboration	246,242		(64,610)		(2) (3)	181,632
Webcams (3)	59,386		49,876		(3)	109,262
Tablet Accessories	66,585		—			66,585
Headsets	—		45,943		(2)	45,943
Other	2,087		45,432		(4) (5)	47,519
Mobile Speakers	22,310		(22,310)		(4)	—
Audio & Wearables	69,446		(69,446)		(1) (2) (5)	—
Total Sales	$	1,159,865	$	—		$	1,159,865

(1) Reclassification of Blue Microphones from "Audio & Wearables" to the Gaming category.

(2) Reclassification of VC headsets and PC headsets to the new Headsets category from "Video Collaboration" and "Audio & Wearables," respectively.

(3) The Webcams category includes amounts previously reported as "PC Webcams" as well as amounts from VC webcams reclassified from "Video Collaboration."

(4) Reclassification of all amounts previously reported in "Mobile Speakers" to the Other category.

(5) Reclassification of PC speakers previously reported in "Audio & Wearables" to the Other category.

Changes in Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies during the three months ended June 30, 2023 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Significant estimates and assumptions made by management involve the fair value of goodwill and intangible assets acquired from business acquisitions, contingent consideration for a business acquisition and periodic reassessment of its fair value, valuation of investment in privately held companies classified under Level 3 fair value hierarchy, pension obligations, accruals for customer incentives, cooperative marketing, and pricing programs and related breakage when appropriate, inventory valuation, share-based compensation expense, uncertain tax positions, and valuation allowances for deferred tax assets. Although these estimates are based on management’s best knowledge of current events and actions that may impact the Company in the future, actual results could differ materially from those estimates.

Risks and Uncertainties

Impacts of Macroeconomic and Geopolitical Conditions on the Company's Business

The Company's business has been impacted by adverse macroeconomic and geopolitical conditions. These conditions include inflation, interest rate and foreign currency fluctuations, slowdown of economic activity around the world, and lower consumer and enterprise spending. In addition, the war in Ukraine resulted in global supply chain, logistics, and inflationary challenges. The Company has had no revenue in Russia and Ukraine since fiscal year

2023 as it has indefinitely ceased all sales and shipments to Russia and sales in Ukraine have also been halted due to the ongoing military operations on the Ukrainian territory.

The global and regional economic and political conditions adversely affect demand for the Company's products. These conditions also had an impact on the Company's suppliers, contract manufacturers, logistics providers, and distributors, causing volatility in cost of materials and shipping and transportation rates, and as a result impacting the pricing of the Company's products.