Logitech International S.A. (NASDAQ:LOGI) Q4 2024 Earnings Call Transcript

They’ve done a great job of driving costs down, holding margin, holding promo and doing great. One word of caution, though, for the models, for Q1, there will be some margin pressure in Q1. It’s the June 18 holiday, big promo window in China and we’re going to win that holiday. We want to come in strong. We’ll be price competitive. It will bring margins for the company down a little bit, but we do intend to fight back and Hanneke has test challenged the team to do better and I think we can.

Joern Iffert: Okay, thanks for this and the second question, please, to Hanneke. Hanneke, how are you changing internal processes? How is decision making changing? So if you can give us some insights where you have tried to improve things or change things.

Hanneke Faber: Yeah, great question. Thanks. I think the first thing is setting out these clear strategic choices, because when you’re unclear, things tend to swirl inside the company and I want to avoid that at all costs going forward. So the choices of work and play, that’s where we will play. We’ll look at those markets in a larger way, but that’s our space. The choice of design led, software enabled hardware, again, very carefully chosen words. We are not going to do adventures in pure software that’s unrelated to our hardware. We’re also not going to play with plain hardware. Our hardware has software inside and leads with design. Those are important choices to put on a piece of paper because they’ve led to some swirl here in the past.

The choice to double down on B2B will drive some of our resource investments when it comes to capabilities. The choices on geographic opportunities, and making sure that everyone performs at the very highest level and we don’t have these share of wallet differences between similar countries and finally, the choice of one iconic brand is really important versus the multi brand strategy of the past. So I think making those clear choices will help people know what to expect and will help us move faster. I also believe structure follows strategy. So we’ll be adjusting the organization going forward to make sure we can drive those clear choices and drive really attractive, profitable growth going forward.

Joern Iffert: Thank you. And the very last question, really a quick one on the chief design officer position, can you just remind me who it is right now and if there structure has changed?

Hanneke Faber: Yeah. No, no. So we announced earlier in the quarter, sometime in February, that Marlon Lashley, who’s a fabulous Swedish designer who had been with Logitech for a little while, has been appointed our new chief design officer. She is off to a roaring start. We love what she’s doing. The design team, just in the last couple of weeks, won 10 super prestigious Red Dot design awards. So the design team just keeps performing incredibly well under her leadership.

Nate Melihercik: Thank you, Joern. Let’s go to Ananda Baruah at Loop. Hey, Ananda.

Ananda Baruah: Yeah. Thanks, Nate. Appreciate it. Good morning, guys. Yeah, and Chuck, been great working with you. Really, it’s really been value add. Your proactiveness actually has been noticeable over the years. So really appreciate that. I guess just kind of clarification and then one quick question here. Hanneke, you had mentioned kind of when you were talking about mid-single digit returning to mid-single digit growth in the intermediate terminal. My interpretation, you mentioned 5% and 7% and so do you relate to 5% to 7% as mid-single digit growth or were you just providing a for instance?

Hanneke Faber: Yeah, well, those were the growth rates pre-COVID. So those were for instances in my book, mid-single digits goes all the way from 3% to 7%. So, that’s the guide we’ll provide.

Ananda Baruah: Got it. And is high — would high single digit be an aspiration longer term for the company?

Hanneke Faber: Again, I think what we’re guiding that mid-single digits for is organic. I would hope that with our balance sheet, we would be adding M&A to that. So then we can do the math and we would do a little more.

Ananda Baruah: Is it too early to say yet if high single digit organic would be something that the company could go for long term?

Hanneke Faber: Too early to say.

Ananda Baruah: Well, got it. That’s it for me. I appreciate it.

Nate Melihercik: Next up, we’ll go to Morgan Stanley, Erik Woodring. Hey Eric.

Erik Woodring: Hey guys. Good morning. Thank you for taking my questions. I have two, please. Maybe just the first one. If we just double click on the channel inventory comments, I just want to gain a little bit of clarity there because sell through in the March quarter was flat. Selling was up 5%. So that would imply you filled the channel. So I just want to make sure I’m thinking about that right or if I’m not, what I’m missing there? And then beyond the March quarter, just to Chuck, to get to your comments, I understand maybe your approach to filling and draining the channel might be different as we look forward. From my seat, I guess it just seems as though you’re filling the channel at a different time as opposed to changing the underlying maybe fundamentals or visibility of the business and so, can you maybe just help me understand how this maybe new approach to channel inventory benefits Logitech outside of just timing related factors?

And then last question related to this. I’m sorry for the multi part question is just, if selling is up flat to up 2% in fiscal ’25, how should we think about sell through expectations for fiscal ’25? Thanks.

Chuck Boynton: Great, Eric. Thank you. I’ll try to see if I can get all your questions, remembered and articulated. So you meant to follow up if I don’t exactly hit the nail on the head. So first of all, sell in was flat. It’s in the shareholder letter or sorry, sell through was flat year-over-year. Sell in was up 5%. As I mentioned earlier, two points of that is simply comparing the channel inventory year-over-year. So a year ago, we took channel inventory down more than it came down in Q4 of this year. So really the way to think about that is two points of the five is the channel inventory reduction this year was lower than the channel inventory reduction was a year ago. The other three points of growth is really promotional effectiveness.