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ANALYST AND INVESTOR DAY | 2 MARCH 2016THE NEW LOGITECHBRACKEN DARRELL
ANALYST AND INVESTOR DAY | 2 MARCH 2016THE NEW LOGITECHBRACKEN DARRELL
This presentation includes forward-looking statements within the meaning of the U.S. federal securities laws, including, without limitation, statements regarding: salesgrowth, cost savings, research and development spending, free cash flow, growth potential of product categories, addressableopportunities. These statements are subject to risks and uncertainties that may cause actual results and events to differ matofferings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitabof our customers and our consumers for our products and our ability to accurately forecast it; if we fail to innovate and devmanner for our new and existing product categories; if we do not successfully execute on our growth opportunities in our neware more limited than we expect; if sales of PC peripherals are less than we expect; the effect of pricing, product, marketin
FORWARD LOOKING STATEMENTS
are more limited than we expect; if sales of PC peripherals are less than we expect; the effect of pricing, product, marketinproducts and marketing strategies fail to separate our products from competitors’ products; if we do not fully realize our goleverage; if there is a deterioration of business and economic conditions in one or more of our sales regions or product cateThese risks and uncertainties are detailed in Logitech’s filings with the Securities and Exchange Commission, including its Qended December 31, 2015 and its Annual Report on Form 10-K for the fiscal year ended March 31, 2015, available atelsewhere. Logitech does not undertake any obligation to update any forward-looking statements to reflect new information or evof this presentation.
Market share information is based on the aggregate sales across certain countries for which we have obtained data, varying byinclude the U.S., Canada, Japan, Denmark and France markets. iPad Keyboards adds Australia and Great Britain. PC and Mobile Speakers also add the Netherlands.Gaming Mice, Pointing Devices and Keyboards also add India, Korea, Thailand, Taiwan, China, Russia, Sweden and Turkey (but noincludes the U.S. Webcams only includes the U.S. and Canada.
To facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measuresTo facilitate comparisons to Logitech’s historical results, Logitech has included non-GAAP adjusted measurescompensation expense, amortization of other intangible assets, restructuring charges (credits), other restructuringtime special charges. Historical GAAP and corresponding non-GAAP measures are provided with our earnings releases and presentatiLogitech’s website. For purposes of this presentation, Logitech provides non-GAAP financial information for its Retail (excludinapproximations for cost and profitability estimates. Logitech also presents percentage sales growth in constant currency (“CCunaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translatcurrent period’s average exchange rate for that currency and comparing that to current period sales. Logitech believes this iperiod performance, outlook and trends in its business. For historical financials provided in this presentation, reconciliatiprovided on the Investors page of Logitech’s website, together with this presentation. With respect to financial outlook, moshave not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconcilnon-GAAP outlook.
within the meaning of the U.S. federal securities laws, including, without limitation, statements regarding: salesgrowth, cost savings, research and development spending, free cash flow, growth potential of product categories, addressable markets, growth drivers, and growthopportunities. These statements are subject to risks and uncertainties that may cause actual results and events to differ materially, including without limitation: if our productofferings, marketing activities and investment prioritization decisions do not result in the sales, profitability or profitability growth we expect, or when we expect it; the demandof our customers and our consumers for our products and our ability to accurately forecast it; if we fail to innovate and develop new products in a timely and cost-effectivemanner for our new and existing product categories; if we do not successfully execute on our growth opportunities in our new product categories or our growth opportunitiesare more limited than we expect; if sales of PC peripherals are less than we expect; the effect of pricing, product, marketing and other initiatives by our competitors; if our
FORWARD LOOKING STATEMENTS
are more limited than we expect; if sales of PC peripherals are less than we expect; the effect of pricing, product, marketing and other initiatives by our competitors; if ourproducts and marketing strategies fail to separate our products from competitors’ products; if we do not fully realize our goals to lower our costs and improve our operatingleverage; if there is a deterioration of business and economic conditions in one or more of our sales regions or product categories, or significant fluctuations in exchange rates.These risks and uncertainties are detailed in Logitech’s filings with the Securities and Exchange Commission, including its Quarterly Report on Form 10-Q for the fiscal quarter
K for the fiscal year ended March 31, 2015, available at www.sec.gov, under the caption Risk Factors andlooking statements to reflect new information or events or circumstances occurring after the date
Market share information is based on the aggregate sales across certain countries for which we have obtained data, varying by product category. Most product categoriesKeyboards adds Australia and Great Britain. PC and Mobile Speakers also add the Netherlands.
Gaming Mice, Pointing Devices and Keyboards also add India, Korea, Thailand, Taiwan, China, Russia, Sweden and Turkey (but not the Netherlands). Home Control only
GAAP adjusted measures in this presentation, which exclude primarily share-basedGAAP adjusted measures in this presentation, which exclude primarily share-basedcompensation expense, amortization of other intangible assets, restructuring charges (credits), other restructuring-related charges, investment impairment (recovery), and one-
GAAP measures are provided with our earnings releases and presentations in the Investors section ofGAAP financial information for its Retail (excluding OEM and Lifesize) categories that includes
approximations for cost and profitability estimates. Logitech also presents percentage sales growth in constant currency (“CC”), a non-GAAP measure, to show performanceunaffected by fluctuations in currency exchange rates. Percentage sales growth in constant currency is calculated by translating prior period sales in each local currency at thecurrent period’s average exchange rate for that currency and comparing that to current period sales. Logitech believes this information will help investors to evaluate its currentperiod performance, outlook and trends in its business. For historical financials provided in this presentation, reconciliation between non-GAAP amounts and GAAP amounts isprovided on the Investors page of Logitech’s website, together with this presentation. With respect to financial outlook, most of the excluded amounts pertain to events thathave not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided for
WHAT WE’VE DONEWHAT WE’VE DONE
RETURNED LOGITECH TO GROWTH
We revitalized Logitech’s growth capability
2%
1,840
1,860
1,880
1,900
1,920
1,940
1,960
1,760
1,780
1,800
1,820
1,840
FY13 FY14 FY15
Retail Sales Retail Sales YoY% CC
(6%)
RETURNED LOGITECH TO GROWTH
We revitalized Logitech’s growth capability
4%
3%
5%
7%
9%~7% - 9%
(3%)
(1%)
1%
FY15 FY16
Retail Sales YoY% CCOutlook
CREATED A DIVERSIFIED AND GROWING PORTFOLIO
3 new categories since 2013
~$450M of sales in FY16*
Mobile Speakers Video Collaboration
Tablet Accessories
2/3 of categories =
*Expected
CREATED A DIVERSIFIED AND GROWING PORTFOLIO
Mice & KeyboardsMice & Keyboards
growing +4% in FY16*
of categories = 80% of salesgrowing in FY16*
DEMONSTRATED ABILITY TO GROW MARKET SHARE
Gaming Mice #1 +1pt
Achieved Leadership in Almost Every Category
Pointing Devices #1
Home Control #1
Keyboards #1
Gaming Headsets #1
PC Speakers #1
+2pts
+4pts
PC Speakers #1
Mobile Speakers #2
iPad Keyboards #1
Webcams #1Increase in market share YoY
DEMONSTRATED ABILITY TO GROW MARKET SHARE
Achieved Leadership in Almost Every Category
+4pts
+6pts
+7pts
+7pts+7pts
+7pts
+10pts
+16pts
Increase in market share YoY
An early 2013 investment in LOGI would have generated142% return in three years
DELIVERED EXCEPTIONAL VALUE FOR SHAREHOLDERS
142% return in three years
Nasdaq 100
40%S&P 500
21%21%SMI
~FlatTotal
ShareholderReturn
An early 2013 investment in LOGI would have generated142% return in three years
DELIVERED EXCEPTIONAL VALUE FOR SHAREHOLDERS
142% return in three years
Nasdaq 100
40%LOGI
142%142%
HOW WE WINHOW WE WIN
THE FOUNDATION FOR FUTURE GROWTH
• Powerful• Powerful
• Revitalized product creationexisting and new categories
• A winning team
• Outstanding execution• Outstanding execution
THE FOUNDATION FOR FUTURE GROWTH
Powerful designPowerful design
Revitalized product creation …existing and new categories
A winning team … around the world
Outstanding executionOutstanding execution
EXCEPTIONAL DESIGN CAPABILITY
Design Focus Works as a Strategic Choice
Design Value Index vs. S&P 500
DESIGN CONSCIOUSCOMPANIES:APPLENIKEPROCTER & GAMBLE3MSTARBUCKSINTUITHERMAN-MILLERHERMAN-MILLERDISNEY
EXCEPTIONAL DESIGN CAPABILITY
70+Design Awards in last 3 Years
NEW CAPABILITIES AND EXPANDED EXPERIENCES
HardwareHardware
Embedded SW
Application
Cloud
Data/Analytics
Insights/Real Time Intelligence
New Benefits & Services
AND EXPANDED EXPERIENCES
RICHER EXPERIENCES FOR CONNECTED LIVES
UE Boom Logi Circle
RICHER EXPERIENCES FOR CONNECTED LIVES
Logi Circle Harmony
A TALENTED AND PASSIONATE TEAM
+54%Overall Rating Improvement
+263%+263%Number of Job Applications YoY
A TALENTED AND PASSIONATE TEAM
+54%Overall Rating Improvement
Reduced Layers andIncreased Span of Control
• Offsetting ~50% currency impact through price increases and cost savings inFY16
OPERATIONAL EXCELLENCE
• Reduced operating expenses by ~5ptsin FY16 while reallocating resources
• Profit growth and improved working capital
generated strong free cash flow of ~$0.5Bover 3 years
• Dramatic cash conversion cycle improvement
currency impact through price increases and cost savings in
5pts over the last 3 years to ~26% of sales
reallocating resources to R&D (+7% YoY) to drive growth
working capital
$0.5B 30
26
23
Improved Cash Conversion Cycle
~20-22
ash conversion cycle improvement
FY13 FY14 FY15 FY16
~20-22
WHERE WE PLAYWHERE WE PLAY
5 BIG MARKETS ALL WITH STRONG GROWTH POTENTIAL
Gaming
Music
Productivity &Creativity
5 BIG MARKETS ALL WITH STRONG GROWTH POTENTIAL
VideoCollaboration
Home
Productivity &Creativity
GAMING GROWING BEHIND RISE OF PC GAMING
GROWTH DRIVERS
eSports
$3.6B
~15% Total PC Gaming Gear CAGR
TOTAL ADDRESSABLE MARKET
~25% Total CAGR
GAMING GROWING BEHIND RISE OF PC GAMINGVIRTUAL/AUGMENTED REALITY COMING SOON
$1.3B
$2B
Cross
15%
VR/AR Gear
CrossPlatform
Gear
$2.0B
$3.6B
25%CAGR
PC GamingGear
2015 2018P
Virtual andAugmented Reality
15%CAGR
PC GamingGear
2015 2018P
Source: NPD, GFK, Tractica, Riot, management estimates
GAMING GROWING BEHIND RISE OF PC GAMING
36M viewers in 2015
up 33% vs. 2014
GROWTH DRIVERS
eSports
GAMING GROWING BEHIND RISE OF PC GAMINGVIRTUAL/AUGMENTED REALITY COMING SOON
Cross Platform
up 33% vs. 2014
Virtual andAugmented Reality
VIDEO COLLABORATION SPREADING TO EVERY ROOM
More Rooms~40% Total estimated CAGR
GROWTH DRIVERS
TOTAL ADDRESSABLE MARKET($500-1000 Equipment per Room)
# ofRooms4.2M
9.7M
More Users
Better, Simpler,
Source: Wainhouse Research and management estimates
2015 2018P
Better, Simpler,and AffordableSolutions
VIDEO COLLABORATION SPREADING TO EVERY ROOM
More Rooms
GROWTH DRIVERS
More Users
Better, Simpler,Better, Simpler,and AffordableSolutions
MUSIC PROPELLED BY STREAMING REVOLUTION
Streaming
$9B
GROWTH DRIVERS
TOTAL ADDRESSABLE MARKET
~15% Total CAGR
Multi -
AudioWearables
AudioWearables
New FeaturesExperiences
Paid Streaming MusicSubscribers
$6B
$9B
Sources: NPD, GFK, Nielsen, P. Schoenfeld Asset Management and management estimates
WiFiConnected
MobileMulti -
PurposeSpeakers
2015 2018P
MUSIC PROPELLED BY STREAMING REVOLUTION
Streaming
GROWTH DRIVERS
Features andExperiences
Paid Streaming MusicSubscribers
2015 2018P CAGR
68M 177M 38%
HOME, THE EARLY STAGES OF TRANSFORMATION
Standards
GROWTH DRIVERS~40% Total CAGR
TOTAL ADDRESSABLE MARKET
Monitoring
Control
$1B
$2.2B
Compelling Use Cases
Which area(s) of the house would you be mostexcited to connect in a smart home system?
2015 2018P
Source: NPD, GFK, IHS Research, Technavio, Icontrol Networks survey, management estimates
Entertainment Room
HOME, THE EARLY STAGES OF TRANSFORMATION
Standards
GROWTH DRIVERS
Compelling Use Cases
Which area(s) of the house would you be mostexcited to connect in a smart home system?
43%
41%
39%
Entertainment Room
Kitchen
Bedroom
PRODUCTIVITY AND CREATIVITYSTABLE WITH POTENTIAL TO GROW
Evolving Use Cases
GROWTH DRIVERS~Flat Total CAGR
TOTAL ADDRESSABLE MARKET
Input InputContent- Device & OS Agnostic
+37%~$4B ~$4B
Navigation Navigation
2015 2018P
Continued Innovation
Source: NPD, comScore, management estimates
PRODUCTIVITY AND CREATIVITYSTABLE WITH POTENTIAL TO GROW
Evolving Use Cases
Growth in time spent on
GROWTH DRIVERS
ContentDevice & OS Agnostic
Growth in time spent onPC since 2010(U.S. comScore data)
+37%
Continued Innovation
PC INSTALLED BASE STABLE AND FUELING GROWTHPOTENTIAL FOR MICE AND KEYBOARDS
PC shipments aredeclining…
PC INSTALLED BASE
declining…
But PC installed base isstable at 1.6B
Source: IDC, comScore
2012
PC INSTALLED BASE STABLE AND FUELING GROWTHPOTENTIAL FOR MICE AND KEYBOARDS
ACTUAL DIGITAL MEDIA TIME SPENT (U.S.)PC INSTALLED BASE
PC
Tablet+1,721%
Smartphone
+394%
+37%
DEC 2010 DEC 20142015
THE ROAD AHEAD…
Music
Gaming
Music
~$20B TAMby 2018
VideoCollaboration
HomeMusic HomeMusic
~$20B TAMby 2018
Productivity &Creativity