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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
 
(Mark One)
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended September 30, 2023
 
Or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the Transition Period from                to                
 
Commission File Number: 0-29174
 
LOGITECH INTERNATIONAL S.A.
(Exact name of registrant as specified in its charter)
 
Canton of Vaud,SwitzerlandNone
  (State or other jurisdiction
  of incorporation or organization)
(I.R.S. Employer
Identification No.)
 
Logitech International S.A.
EPFL - Quartier de l'Innovation
Daniel Borel Innovation Center
1015 Lausanne, Switzerland
c/o Logitech Inc.
3930 North First Street
San Jose, California 95134
(Address of principal executive offices and zip code)
 
(510) 795-8500
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Registered Shares
LOGN
SIX Swiss Exchange
Registered Shares
LOGI
Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes  ý  No  o


Indicate by check mark whether the registrant has submitted electronically every Interactive Data file required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  ý  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filerý Smaller reporting company
Accelerated filer
 Emerging Growth Company
Non-accelerated filer

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).  Yes    No  ý
 
As of October 12, 2023, there were 156,783,020 shares of the Registrant’s share capital outstanding.




TABLE OF CONTENTS
 
  Page
   
Part IFINANCIAL INFORMATION 
 
 

In this document, unless otherwise indicated, references to the “Company,” “Logitech,” "we," "our," and "us" are to Logitech International S.A. and its consolidated subsidiaries. Unless otherwise specified, all references to U.S. Dollar, Dollar or $ are to the United States Dollar, the legal currency of the United States of America. All references to CHF are to the Swiss Franc, the legal currency of Switzerland.
 
Logitech, the Logitech logo, and the Logitech products referred to herein are either the trademarks or the registered trademarks of Logitech. All other trademarks are the property of their respective owners.

Our fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The second quarter of fiscal year 2024 ended on September 29, 2023. The same quarter in the prior fiscal year ended on September 30, 2022. For purposes of presentation, we have indicated our quarterly periods end on the last day of the calendar quarter.
The term “sales” means net sales, except as otherwise specified.
We make available, free of charge on our website, access to our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we file or furnish them electronically with the Securities and Exchange Commission ("SEC").

1

Recordings of our earnings videoconferences and certain events we participate in or host, with members of the investment community are posted on our investor relations website at https://ir.logitech.com. Additionally, we provide notifications of news or announcements regarding our operations and financial performance, including SEC filings, investor events, and press and earnings releases as part of our investor relations website. We intend to use our investor relations website as means of disclosing material nonpublic information and for complying with our disclosure obligations under Regulation FD. Our corporate governance information also is available on our investor relations website.

All references to our websites are intended to be inactive textual references only, and the contents of such websites do not constitute a part of and are not intended to be incorporated into this Quarterly Report on Form 10-Q.



2

PART I — FINANCIAL INFORMATION 

ITEM 1.   FINANCIAL STATEMENTS (UNAUDITED) 

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
 
Three months ended September 30,Six months ended September 30,
 2023202220232022
Net sales$1,057,008 $1,148,951 $2,031,507 $2,308,816 
Cost of goods sold615,403 707,026 1,211,115 1,404,246 
Amortization of intangible assets2,983 3,145 6,128 6,187 
Gross profit438,622 438,780 814,264 898,383 
Operating expenses:    
Marketing and selling176,356 202,091 355,541 431,469 
Research and development68,559 69,009 139,118 144,526 
General and administrative35,538 26,589 76,835 62,449 
Amortization of intangible assets and acquisition-related costs3,318 2,873 6,003 6,242 
Restructuring charges (credits), net(1,788)10,817 1,723 10,817 
Total operating expenses281,983 311,379 579,220 655,503 
Operating income156,639 127,401 235,044 242,880 
Interest income11,856 3,459 21,682 4,908 
Other income (expense), net(1,044)(25,397)(14,016)(19,773)
Income before income taxes167,451 105,463 242,710 228,015 
Provision for income taxes30,334 23,372 42,866 45,088 
Net income$137,117 $82,091 $199,844 $182,927 
Net income per share:  
Basic$0.87 $0.50 $1.26 $1.12 
Diluted$0.86 $0.50 $1.25 $1.11 
Weighted average shares used to compute net income per share:  
Basic157,911 163,186 158,385 163,937 
Diluted158,934 164,328 159,545 165,371 

 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
(unaudited)
 
Three months ended September 30,Six months ended September 30,
 2023202220232022
Net income$137,117 $82,091 $199,844 $182,927 
Other comprehensive income (loss):  
Currency translation loss:
Currency translation loss, net of taxes(10,622)(18,063)(12,151)(39,283)
Defined benefit plans:  
Net gain and prior service costs, net of taxes 28  112 
Reclassification of amortization included in other income (expense), net(244)(113)(248)(226)
Hedging gain (loss):  
Deferred hedging gain, net of taxes2,078 4,935 1,374 11,564 
Reclassification of hedging loss (gain) included in cost of goods sold1,370 (4,947)4,356 (7,038)
Total other comprehensive loss
(7,418)(18,160)(6,669)(34,871)
Total comprehensive income$129,699 $63,931 $193,175 $148,056 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

4

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
(unaudited)
September 30, 2023March 31, 2023
Assets
Current assets:  
Cash and cash equivalents$1,163,904 $1,149,023 
Accounts receivable, net656,895 630,382 
Inventories532,943 682,893 
Other current assets138,482 142,876 
Total current assets2,492,224 2,605,174 
Non-current assets:  
Property, plant and equipment, net122,027 121,503 
Goodwill461,401 454,610 
Other intangible assets, net58,081 63,173 
Other assets
291,297 316,293 
Total assets$3,425,030 $3,560,753 
Liabilities and Shareholders’ Equity  
Current liabilities:  
Accounts payable$492,905 $406,968 
Accrued and other current liabilities 594,042 643,139 
Total current liabilities1,086,947 1,050,107 
Non-current liabilities:  
Income taxes payable114,235 106,391 
Other non-current liabilities
146,583 146,695 
Total liabilities1,347,765 1,303,193 
Commitments and contingencies (Note 10)
Shareholders’ equity:  
Registered shares, CHF 0.25 par value:
30,148 30,148 
Issued shares — 173,106 at September 30, 2023 and March 31, 2023
Additional shares that may be issued out of conditional capital — 50,000 at September 30, 2023 and March 31, 2023
Additional shares that may be issued out of authorized capital — 17,311 at September 30, 2023 and March 31, 2023
Additional paid-in capital47,311 127,380 
Shares in treasury, at cost — 16,029 at September 30, 2023 and 13,763 at March 31, 2023
(1,083,468)(977,266)
Retained earnings3,190,220 3,177,575 
Accumulated other comprehensive loss(106,946)(100,277)
Total shareholders’ equity2,077,265 2,257,560 
Total liabilities and shareholders’ equity$3,425,030 $3,560,753 
 


The accompanying notes are an integral part of these condensed consolidated financial statements.

5




LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
Six months ended September 30,
 20232022
Cash flows from operating activities:  
Net income$199,844 $182,927 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation34,135 37,288 
Amortization of intangible assets11,509 12,244 
Loss on investments11,609 11,577 
Share-based compensation expense43,579 35,935 
Deferred income taxes11,108 3,040 
Other100 118 
Changes in assets and liabilities, net of acquisitions:  
Accounts receivable, net(35,362)(121,909)
Inventories146,369 21,790 
Other assets11,999 4,757 
Accounts payable88,022 (78,354)
Accrued and other liabilities(59,853)(72,157)
Net cash provided by operating activities463,059 37,256 
Cash flows from investing activities:  
Purchases of property, plant and equipment(34,731)(45,384)
Investment in privately held companies(356)(2,275)
Acquisitions, net of cash acquired(14,138)(5,839)
Purchases of deferred compensation investments(2,548)(2,499)
Proceeds from sales of deferred compensation investments2,622 2,436 
Net cash used in investing activities(49,151)(53,561)
Cash flows from financing activities:  
Payment of cash dividends(182,305)(158,680)
Payment of contingent consideration for business acquisition(5,002)(5,954)
Purchases of registered shares(188,941)(237,561)
Proceeds from exercises of stock options and purchase rights15,319 12,850 
Tax withholdings related to net share settlements of restricted stock units(26,224)(26,742)
Other financing activities(1,116) 
Net cash used in financing activities(388,269)(416,087)
Effect of exchange rate changes on cash and cash equivalents (10,758)(27,823)
Net increase (decrease) in cash and cash equivalents 14,881 (460,215)
Cash and cash equivalents, beginning of the period1,149,023 1,328,716 
Cash and cash equivalents, end of the period$1,163,904 $868,501 
Supplementary Cash Flow Disclosures:
Non-cash investing and financing activities:  
Property, plant and equipment purchased during the period and included in period end liability accounts$9,218 $9,436 
Right-of-use assets obtained in exchange for operating lease liabilities
$2,574 $47,408 
Supplemental cash flow information:
Income taxes paid, net$17,408 $44,864 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6

LOGITECH INTERNATIONAL S.A.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands, except per share amounts)
(unaudited)
Three Months Ended September 30, 2023

Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
June 30, 2023173,106 $30,148 $49,734 14,484 $(994,581)$3,240,302 $(99,528)$2,226,075 
Total comprehensive income— — — — — 137,117 (7,418)129,699 
Purchases of registered shares— — — 1,895 (124,096)— — (124,096)
Sales of shares upon exercise of stock options and purchase rights— — (13,888)(267)27,094 — — 13,206 
Issuance of shares upon vesting of restricted stock units— — (10,143)(83)8,115 — — (2,028)
Share-based compensation— — 21,608 — — — — 21,608 
   Cash dividends ($1.19 per share)
— — — — — (187,199)— (187,199)
September 30, 2023173,106 $30,148 $47,311 16,029 $(1,083,468)$3,190,220 $(106,946)$2,077,265 
Six Months Ended September 30, 2023
Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
Registered SharesTreasury SharesRetained Earnings
SharesAmountSharesAmount
March 31, 2023173,106 $30,148 $127,380 13,763 $(977,266)$3,177,575 $(100,277)$2,257,560 
Total comprehensive income— — — — — 199,844 (6,669)193,175 
Purchases of registered shares— — — 3,502 (219,172)— — (219,172)
Sales of shares upon exercise of stock options and purchase rights— — (15,755)(315)31,074 — — 15,319 
Issuance of shares upon vesting of restricted stock units— — (108,120)(921)81,896 — — (26,224)
Share-based compensation— — 43,806 — — — — 43,806 
Cash dividends ($1.19 per share)
— — — — — (187,199)— (187,199)
September 30, 2023173,106 $30,148 $47,311 16,029 $(1,083,468)$3,190,220 $(106,946)$2,077,265 




7

Three Months Ended September 30, 2022

   Additional Paid-in Capital   Accumulated Other Comprehensive LossTotal Shareholders’ Equity
 Registered SharesTreasury SharesRetained Earnings
 SharesAmountSharesAmount
June 30, 2022173,106 $30,148 $98,800 9,051 $(722,273)$3,076,517 $(120,834)$2,362,358 
Total comprehensive income— — — — — 82,091 (18,160)63,931 
Purchases of registered shares— — — 2,241 (116,942)— — (116,942)
Sales of shares upon exercise of stock options and purchase rights— — 1,652 (268)11,198 — — 12,850 
Issuance of shares upon vesting of restricted stock units— — (5,965)(81)3,367 — — (2,598)
Share-based compensation — — 11,643 — — — — 11,643 
Cash dividends ($1.00 per share)
— — — — — (162,681)— (162,681)
September 30, 2022173,106 $30,148 $106,130 10,943 $(824,650)$2,995,927 $(138,994)$2,168,561 
Six Months Ended September 30, 2022
Additional Paid-in CapitalAccumulated Other Comprehensive LossTotal Shareholders’ Equity
Registered SharesTreasury SharesRetained Earnings
SharesAmountSharesAmount
March 31, 2022173,106 $30,148 $129,925 7,855 $(632,893)$2,975,681 $(104,123)$2,398,738 
Total comprehensive income— — — — — 182,927 (34,871)148,056 
Purchases of registered shares— — — 4,221 (237,561)— — (237,561)
Sales of shares upon exercise of stock options and purchase rights— — 1,652 (268)11,198 — — 12,850 
Issuance of shares upon vesting of restricted stock units— — (61,348)(865)34,606 — — (26,742)
Share-based compensation— — 35,901 — — — — 35,901 
Cash dividends ($1.00 per share)
— — — — — (162,681)— (162,681)
September 30, 2022173,106 $30,148 $106,130 10,943 $(824,650)$2,995,927 $(138,994)$2,168,561 
 



The accompanying notes are an integral part of these condensed consolidated financial statements.
8

LOGITECH INTERNATIONAL S.A.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

Note 1 — 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 and six months ended September 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.


9


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

Three months ended September 30, 2022
As previously reportedReclassificationsAs adjusted
Gaming$297,676 $24,352 
(1)
$322,028 
Keyboards & Combos200,853  200,853 
Pointing Devices185,200  185,200 
Video Collaboration236,180 (56,981)
(2) (3)
179,199 
Webcams (3)                    
60,166 41,852 
(3)
102,018 
Tablet Accessories54,203  54,203 
Headsets 44,750 
(2)
44,750 
Other2,207 58,493 
(4) (5)
60,700 
Mobile Speakers39,195 (39,195)
(4)
 
Audio & Wearables73,271 (73,271)
(1) (2) (5)
 
Total Sales$1,148,951 $ $1,148,951 

Six months ended September 30, 2022
As previously reportedReclassificationsAs adjusted
Gaming$580,482 $39,467 
(1)
$619,949 
Keyboards & Combos428,573  428,573 
Pointing Devices368,483  368,483 
Video Collaboration482,422 (121,591)
(2) (3)
360,831 
Webcams (3)                    
119,552 91,728 
(3)
211,280 
Tablet Accessories120,788  120,788 
Headsets 90,693 
(2)
90,693 
Other4,294 103,925 
(4) (5)
108,219 
Mobile Speakers61,505 (61,505)
(4)
 
Audio & Wearables142,717 (142,717)
(1) (2) (5)
 
Total Sales$2,308,816 $ $2,308,816 
(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 and six months ended September 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.

10

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.
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.
Note 2 — Net Income Per Share
 
The following table summarizes the computations of basic and diluted net income per share for the three and six months ended September 30, 2023 and 2022 (in thousands, except per share amounts):
Three months ended September 30,Six months ended September 30,
 2023202220232022
Net income$137,117 $82,091 $199,844 $182,927 
Shares used in net income per share computation:    
Weighted average shares outstanding - basic157,911 163,186 158,385 163,937 
Effect of potentially dilutive equivalent shares1,023 1,142 1,160 1,434 
Weighted average shares outstanding - diluted158,934 164,328 159,545 165,371 
Net income per share:    
Basic$0.87 $0.50 $1.26 $1.12 
Diluted$0.86 $0.50 $1.25 $1.11 
 
Share equivalents attributable to outstanding stock options, restricted stock units and employee share purchase plans totaling 1.1 million and 1.7 million for the three months ended September 30, 2023 and 2022, respectively, and 1.6 million and 2.6 million for the six months ended September 30, 2023 and 2022, respectively, were excluded from the calculation of diluted net income per share because their effect would have been anti-dilutive. A small number of performance-based restricted stock units were not included in the dilutive net income per share calculation because all necessary conditions had not been satisfied by the end of the respective period, and those shares were not issuable if the end of the reporting period were the end of the performance contingency period.
 
11

Note 3 — Employee Benefit Plans
 
Employee Share Purchase Plans and Stock Incentive Plans
 
As of September 30, 2023, the Company offers the 2006 Employee Share Purchase Plan (Non-U.S.), as amended and restated ("2006 ESPP"), the 1996 Employee Share Purchase Plan (U.S.), as amended and restated ("1996 ESPP"), and the 2006 Stock Incentive Plan ("2006 Plan") as amended and restated. Shares issued to employees as a result of purchases or exercises under these plans are generally issued from shares held in treasury stock.

The following table summarizes the share-based compensation expense and total income tax benefit recognized for share-based awards for the three and six months ended September 30, 2023 and 2022 (in thousands):
Three months ended September 30,Six months ended September 30,
 2023202220232022
Cost of goods sold$2,462 $1,443 $3,877 $2,904 
Marketing and selling9,262 7,429 19,745 17,226 
Research and development4,694 3,280 9,147 8,812 
General and administrative5,650 93 10,810 6,993 
Total share-based compensation expense22,068 12,245 43,579 35,935 
Income tax expense (benefit)(2,548)102 (7,866)(4,220)
Total share-based compensation expense, net of income tax expense (benefit)$19,520 $12,347 $35,713 $31,715 

The income tax benefit in the respective periods primarily consisted of tax benefits related to the share-based compensation expense for the period and direct tax benefit realized, including net excess tax benefits recognized from share-based awards vested or exercised during the period.

Share-based compensation costs capitalized as part of inventory were $1.5 million and $1.3 million for the three months ended September 30, 2023 and 2022, respectively, and $3.4 million and $3.1 million for the six months ended September 30, 2023 and 2022, respectively.

Defined Benefit Plans
 
Certain of the Company’s subsidiaries sponsor defined benefit pension plans or non-retirement post-employment benefits covering substantially all of their employees. Benefits are provided based on employees’ years of service and earnings, or in accordance with applicable employee benefit regulations. The Company’s practice is to fund amounts sufficient to meet the requirements set forth in the applicable employee benefit and tax regulations. The costs of $1.9 million and $2.8 million recorded for the three months ended September 30, 2023 and 2022, respectively, and $3.8 million and $5.6 million recorded for the six months ended September 30, 2023 and 2022, respectively, were primarily related to service costs.
 
Note 4 — Income Taxes
 
The Company is incorporated in Switzerland but operates in various countries with differing tax laws and rates. Further, a portion of the Company’s income before taxes and the provision for (benefit from) income taxes are generated outside of Switzerland.

The income tax provision for the three and six months ended September 30, 2023 was $30.3 million and $42.9 million based on an effective income tax rate of 18.1% and 17.7% of pre-tax income, respectively. The income tax provision for the same periods ended September 30, 2022 was $23.4 million and $45.1 million based on effective income tax rate of 22.2% and 19.8% of pre-tax income, respectively.

The change in the effective income tax rate for the three and six months ended September 30, 2023, compared with the same periods ended September 30, 2022 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates and the tax impact from share-based compensation.
12

 
Although the Company has adequately provided for uncertain tax positions, the provisions related to these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. During fiscal year 2024, the Company continues to review its tax positions and to provide for or reverse unrecognized tax benefits as they arise. During the next twelve months, while it is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly, it is not possible to provide a range of potential changes.

On August 16, 2022, the “Inflation Reduction Act” (H.R. 5376) ("IRA") was signed into law in the United States. The IRA establishes a new corporate alternative minimum tax based on financial statement income adjusted for certain items. The new minimum tax is effective for tax years beginning after December 31, 2022. The IRA is not expected to have a material impact to the Company's financial statements for the tax year ending March 31, 2024.

Note 5 — Balance Sheet Components
 
The following table presents the components of certain balance sheet asset amounts (in thousands): 
September 30, 2023March 31, 2023
Accounts receivable, net:  
Accounts receivable$882,607 $851,576 
Allowance for doubtful accounts(16)(86)
Allowance for sales returns(10,898)(10,146)
Allowance for cooperative marketing arrangements(37,781)(40,495)
Allowance for customer incentive programs(63,082)(71,645)
Allowance for pricing programs(113,935)(98,822)
 $656,895 $630,382 
Inventories:  
Raw materials$92,083 $171,790 
Finished goods440,860 511,103 
 $532,943 $682,893 
Other current assets:  
Value-added tax ("VAT") receivables$51,651 $60,343 
Prepaid expenses and other assets86,831 82,533 
 $138,482 $142,876 
Property, plant and equipment, net:  
Property, plant and equipment$510,881 $518,358 
  Less: accumulated depreciation and amortization(388,854)(396,855)
$122,027 $121,503 
Other assets:  
Deferred tax assets$163,053 $171,989 
Right-of-use assets 61,823 67,330 
Investments in privately held companies31,544 33,323 
Investments for deferred compensation plan28,546 28,213 
Other assets6,331 15,438 
 $291,297 $316,293 


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The following table presents the components of certain balance sheet liability amounts (in thousands): 
September 30, 2023March 31, 2023
Accrued and other current liabilities:  
Accrued customer marketing, pricing and incentive programs$187,559 $206,546 
Accrued personnel expenses95,279 103,592 
Accrued loss for inventory purchase commitments33,157 46,608 
Accrued sales return liability33,906 49,462 
Warranty liabilities28,085 28,861 
VAT payable22,480 33,328 
Income taxes payable26,354 18,788 
Operating lease liabilities14,099 12,655 
Contingent consideration1,700 6,629 
Other current liabilities151,423 136,670 
 $594,042 $643,139 
Other non-current liabilities:  
Operating lease liabilities$59,673 $58,361 
Employee benefit plan obligations30,241 32,421 
Obligation for deferred compensation plan28,546 28,213 
Warranty liabilities12,180 12,025 
Deferred tax liabilities2,528 2,803 
Other non-current liabilities13,415 12,872 
 $146,583 $146,695 
Note 6 — Fair Value Measurements
 
Fair Value Measurements
 
The Company considers fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The Company utilizes the following three-level fair value hierarchy to establish the priorities of the inputs used to measure fair value:
 
Level 1 — Quoted prices in active markets for identical assets or liabilities.
 
Level 2 — Observable inputs other than quoted market prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
 
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

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The following table presents the Company’s financial assets and liabilities that were accounted for at fair value on a recurring basis, excluding assets related to the Company’s defined benefit pension plans, classified by the level within the fair value hierarchy (in thousands): 
 September 30, 2023March 31, 2023
 Level 1Level 2Level 3Level 1Level 2Level 3
Assets:    
Cash equivalents$712,451 $ $ $661,884 $ $ 
Investments for deferred compensation plan included in other assets:    
Cash$82 $ $ $41 $ $ 
Common stock1,139   988   
Money market funds10,544   9,606   
Mutual funds16,781   17,578   
Total investments for deferred compensation plan$28,546 $ $ $28,213 $ $ 
Currency derivative assets
included in other current assets
$ $2,446 $ $ $107 $ 
Liabilities:
Contingent consideration included in accrued and other current liabilities$ $ $1,700 $ $ $6,629 
Currency derivative liabilities
included in accrued and other current liabilities
$ $86 $ $ $2,187 $ 
Contingent Consideration for Business Acquisitions

The following table summarizes the change in the Company's contingent consideration balance during the six months ended September 30, 2023 and 2022 (in thousands):
Six months ended September 30,
20232022
Beginning of the period$6,629 $12,259 
Fair value of contingent consideration upon acquisition
 1,142 
Payments of contingent consideration (5,002)(5,954)
Effect of foreign currency exchange rate changes73 (2,119)
End of the period $1,700 $5,328 
    
The contingent consideration arising from a technology acquisition on May 19, 2021, represented the future potential earn-out payments of up to $10.0 million payable in cash upon the achievement of three technical development milestones to be completed as of December 31, 2021, June 30, 2022, and June 30, 2023. The fair value of the contingent consideration was $10.0 million at the acquisition date, which was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During fiscal year 2022, the Company paid $0.9 million for the contingent consideration related to the first technical development milestone. During fiscal year 2023, the Company paid $4.0 million for the contingent consideration related to the second technical development milestone. During the six months ended September 30, 2023, the Company paid $3.3 million for the contingent consideration related to the third technical development milestone.
The contingent consideration arising from a technology acquisition on January 4, 2021, represented the future potential earn-out payments of up to $3.0 million payable in cash upon the achievement of two technical development milestones to be completed as of December 31, 2021 and March 31, 2022. The fair value of the contingent consideration was determined using a probability-weighted expected payment model and discounted at the estimated cost of debt. During fiscal year 2023, the Company paid $2.0 million for the contingent consideration related to the first technical development milestone. During the six months ended September 30, 2023, the Company paid $1.0 million for the contingent consideration related to the second technical development milestone.


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Investments for Deferred Compensation Plan
 
The marketable securities for the Company's deferred compensation plan were recorded at a fair value of $28.5 million and $28.2 million, as of September 30, 2023 and March 31, 2023, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized gains (losses) related to marketable securities for the three and six months ended September 30, 2023 and 2022 were not material and were included in other income (expense), net, and corresponding changes in the deferred compensation liability were included in operating expenses and cost of goods sold, in the Company's condensed consolidated statements of operations.

Equity Method Investments

The Company has certain non-marketable investments included in other assets that are accounted for as equity method investments, with a carrying value of $18.5 million and $20.5 million as of September 30, 2023 and March 31, 2023, respectively. Gains (losses) related to equity method investments for the three and six months ended September 30, 2023 and 2022 were not material and are included in other income (expense), net, in the Company's condensed consolidated statements of operations.

During the three months ended September 30, 2022, the Company recorded an impairment charge, before tax, of $21.4 million for one of its equity method investments as it was determined that the carrying value of the investment was not recoverable. The impairment charge is included in other income (expense), net, in the Company's condensed consolidated statements of operations for the three and six months ended September 30, 2022. There was no impairment of equity method investments during the three and six months ended September 30, 2023.

Assets Measured at Fair Value on a Nonrecurring Basis

Financial Assets 

The Company has certain equity investments without readily determinable fair values due to the absence of quoted market prices, the inherent lack of liquidity, and the fact that inputs used to measure fair value are unobservable and require management's judgment. When certain events or circumstances indicate that impairment may exist, the Company revalues the investments using various assumptions, including the financial metrics and ratios of comparable public companies. The carrying value is also adjusted for observable price changes with the same or similar security from the same issuer. The amount of these equity investments without readily determinable fair values included in other assets was $12.6 million as of September 30, 2023 and March 31, 2023. During the six months ended September 30, 2022, the Company recorded an unrealized gain, before tax, of $6.9 million for its investment in a private company as a result of observable price changes for similar securities issued by this company (level 2 fair value measurement). There was no impairment of these financial assets during the three and six months ended September 30, 2023 and 2022, other than an immaterial impairment charge related to one of the Company's investments without readily determinable fair value recorded during the three months ended September 30, 2022.

During the six months ended September 30, 2023, the Company recorded an impairment loss, before tax, of $9.6 million as a result of the write-off of a note receivable which has been deemed no longer recoverable. This note receivable was previously obtained in conjunction with an exchange transaction related to the Company's investment in a privately held company. The impairment loss is included in other income (expense), net, in the Company's condensed consolidated statement of operations for the six months ended September 30, 2023.

Non-Financial Assets

Goodwill, intangible assets, and property, plant and equipment, are not required to be measured at fair value on a recurring basis. However, if the Company is required to evaluate these non-financial assets for impairment, whether due to certain triggering events or because of the required annual impairment test, and a resulting impairment is recorded to reduce the carrying value to the fair value, the non-financial assets are measured at fair value during such period. There was no impairment of non-financial assets during the three and six months ended September 30, 2023 and 2022.
 
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Note 7 — Derivative Financial Instruments
 
Under certain agreements with the respective counterparties to the Company’s derivative contracts, subject to applicable requirements, the Company is allowed to net settle transactions of the same type with a single net amount payable by one party to the other. However, the Company presents its derivative assets and derivative liabilities on a gross basis in other current assets and accrued and other current liabilities, respectively, on the condensed consolidated balance sheets as of September 30, 2023 and March 31, 2023. See Note 6 for the fair values of the Company’s derivative instruments as of September 30, 2023 and March 31, 2023.

Cash Flow Hedges

The Company enters into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within approximately four months. Gains and losses in the fair value of the effective portion of the hedges are deferred as a component of accumulated other comprehensive loss until the hedged inventory purchases are sold, at which time the gains or losses are reclassified to cost of goods sold. Cash flows from such hedges are classified as operating activities in the condensed consolidated statements of cash flows. Hedging relationships are discontinued when the hedging contract is no longer eligible for hedge accounting, or is sold, terminated or exercised, or when the Company removes hedge designation for the contract. Gains and losses in the fair value of the effective portion of the discontinued hedges continue to be reported in accumulated other comprehensive loss until the hedged inventory purchases are sold, unless it is probable that the forecasted inventory purchases will not occur by the end of the originally specified time period or within an additional two-month period of time thereafter.

The notional amounts of foreign currency exchange forward contracts outstanding related to forecasted inventory purchases were $119.2 million and $72.6 million as of September 30, 2023 and March 31, 2023, respectively. The Company had $1.8 million of net gains related to its cash flow hedges included in accumulated other comprehensive loss as of September 30, 2023, which will be reclassified into earnings within the next twelve months.

 The following table presents the amounts of gain (loss) on the Company’s derivative instruments designated as hedging instruments for the three and six months ended September 30, 2023 and 2022 and their locations on its condensed consolidated statements of operations and condensed consolidated statements of comprehensive income (in thousands):
Three months ended September 30,
Amount of Gain
Deferred as a Component of Accumulated
Other Comprehensive Loss
Amount of Loss (Gain)
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
 2023202220232022
Cash flow hedges$2,078 $4,935 $1,370 $(4,947)
Six months ended September 30,
Amount of Gain
Deferred as a Component of Accumulated
Other Comprehensive Loss
Amount of Loss (Gain)
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
2023202220232022
Cash flow hedges$1,374 $11,564 $4,356 $(7,038)

The Company presents the earnings impact from forward points in the same line item that is used to present the earnings impact of the hedged item, i.e. cost of goods sold, for hedging forecasted inventory purchases and such amount is not material for all periods presented.
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Other Derivatives
 
The Company also enters into foreign currency exchange forward and swap contracts to reduce the short-term effects of currency exchange rate fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of its subsidiaries. These contracts generally mature within approximately one month. The primary risk managed by using forward and swap contracts is the currency exchange rate risk. The gains or losses on these contracts are not material and included in other income (expense), net, in the condensed consolidated statements of operations based on the changes in fair value. The notional amounts of these contracts outstanding as of September 30, 2023 and March 31, 2023 were $121.6 million and $111.2 million, respectively. Foreign currency exchange forward and swap contracts outstanding as of September 30, 2023 primarily consisted of contracts in Canadian Dollar, Brazilian Real, and Australian Dollar to be settled at future dates at predetermined exchange rates.
 
The fair value of all foreign currency exchange forward and swap contracts is determined based on observable market transactions of spot currency rates and forward rates. Cash flows from these contracts are classified as operating activities in the condensed consolidated statements of cash flows.

Note 8 — Goodwill and Other Intangible Assets

The Company conducts its impairment analysis of goodwill annually at December 31 or more frequently if changes in facts and circumstances indicate that it is more likely than not that the fair value of the Company’s reporting unit may be less than its carrying amount. There have been no triggering events identified affecting the valuation of goodwill and intangible assets during the three and six months ended September 30, 2023 and 2022.

The following table summarizes the activities in the Company’s goodwill balance (in thousands):

As of March 31, 2023$454,610 
Acquisition8,117 
Effects of foreign currency translation(1,326)
As of September 30, 2023$461,401 

The Company's acquired intangible assets were as follows (in thousands):
 September 30, 2023March 31, 2023
 Gross Carrying AmountAccumulated
Amortization
Net Carrying AmountGross Carrying AmountAccumulated
Amortization
Net Carrying Amount
Trademarks and trade names$35,290 $(27,172)$8,118 $36,790 $(26,774)$10,016 
Developed technology115,221 (89,742)25,479 121,730 (94,792)26,938 
Customer contracts/relationships71,587 (49,768)21,819 71,110 (47,688)23,422 
In-process R&D3,526 — 3,526 3,526 — 3,526 
Effects of foreign currency translation(1,273)412 (861)(1,021)292 (729)
Total$224,351 $(166,270)$58,081 $232,135 $(168,962)$63,173 
Note 9 — Financing Arrangements
 
The Company had several uncommitted, unsecured bank lines of credit and letters of credit aggregating $171.5 million and $181.3 million as of September 30, 2023 and March 31, 2023, respectively. There are no financial covenants under the lines of credit with which the Company must comply. There was no borrowing outstanding under the lines of credit as of September 30, 2023 or March 31, 2023. As of September 30, 2023 and March 31, 2023, the Company had outstanding bank guarantees of $12.2 million and $13.6 million, respectively.

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Note 10 — Commitments and Contingencies
 
Product Warranties
 
Changes in the Company’s warranty liabilities for the three and six months ended September 30, 2023 and 2022 were as follows (in thousands): 
Three months ended September 30,Six months ended September 30,
 2023202220232022
Beginning of the period$39,885 $43,841 $40,886 $46,219 
Provision10,393 7,897 19,485 14,520 
Settlements(9,838)(9,098)(19,756)(17,379)
Effects of foreign currency translation(175)(680)(350)(1,400)
End of the period$40,265 $41,960 $40,265 $41,960 

Indemnifications
 
The Company indemnifies certain of its suppliers and customers for losses arising from matters such as intellectual property disputes and product safety defects, subject to certain restrictions. The scope of these indemnities varies, but in some instances, includes indemnification for damages and expenses, including reasonable attorneys’ fees. As of September 30, 2023, no material amounts have been accrued for these indemnification provisions. The Company does not believe, based on historical experience and information currently available, that it is probable that any material amounts will be required to be paid under its indemnification arrangements.
 
The Company also indemnifies its current and former directors and certain of its current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. The Company is unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not limited, the obligations are conditional in nature and the facts and circumstances involved in any situation that might arise are variable.

Legal Proceedings
From time to time the Company is involved in claims and legal proceedings that arise in the ordinary course of its business. The Company is currently subject to several such claims and legal proceedings. The Company intends to vigorously defend against them. Management periodically assesses the Company’s liabilities and contingencies in connection with these matters based upon the latest information available. The Company follows ASC ("Accounting Standards Codification") 450 in determining the accounting and disclosure for these contingencies. Based on currently available information, the Company does not believe that resolution of pending matters will have a material adverse effect on its financial condition, cash flows and results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that the Company's defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on the Company's business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against the Company can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain a necessary license or other rights, or litigation arising out of intellectual property claims, could adversely affect the Company's business.

Note 11 — Shareholders’ Equity

Share Repurchases

2020 Share Repurchase Program

In May 2020, the Company's Board of Directors approved the 2020 share repurchase program, which authorized the Company to use up to $250.0 million to purchase Logitech shares to support equity incentive plans or potential acquisitions. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. In April 2021, the Company's Board of Directors approved an increase of $750.0 million to the
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2020 share repurchase program, to an aggregate amount of $1.0 billion. The Swiss Takeover Board approved this increase and it became effective on May 21, 2021. In July 2022, the Company’s Board of Directors approved an increase of $500 million to the 2020 share repurchase program, to an aggregate amount of up to $1.5 billion. The Swiss Takeover Board approved this increase and it became effective on August 19, 2022. The 2020 share repurchase program expired on July 27, 2023. The Company repurchased 16.7 million shares for an aggregate cost of $1.2 billion under the 2020 share repurchase program, of which 2.6 million shares for an aggregate cost of $159.1 million were repurchased during the six months ended September 30, 2023.

2023 Share Repurchase Program

In June 2023, the Company's Board of Directors approved a new, three-year share repurchase program, which allows the Company to use up to $1.0 billion to repurchase its shares. The 2023 share repurchase program enables the Company to repurchase shares for cancellation, as well as to support equity incentive plans or potential acquisitions. The Swiss Takeover Board approved the 2023 share repurchase program in July 2023 and the program became effective on July 28, 2023. During the six months ended September 30, 2023, the Company repurchased 0.9 million shares for an aggregate cost of $60.1 million under the 2023 share repurchase program for cancellation, of which $30.2 million of the aggregate cost was not paid yet as of September 30, 2023. As of September 30, 2023, $940.0 million was available for repurchase under the 2023 share repurchase program.

Swiss law limits a company’s ability to hold or repurchase its own shares. The aggregate par value of all shares held in treasury by the Company and its subsidiaries may not exceed 10% of the share capital of the Company, which for the Company corresponds to approximately 17.3 million registered shares. This limitation does not apply to shares repurchased for cancellation, due to the Board of Directors’ authority under the Company’s capital band set forth in the Company’s Articles of Incorporation to cancel shares up to a limit of 10% of the Company's current share capital. As of September 30, 2023, the Company had a total of 16.0 million shares held in treasury stock, which includes 0.9 million shares that have been repurchased for cancellation.

To the extent that the shares are repurchased to support equity incentive plans or potential acquisitions, the shares are repurchased on the ordinary trading line of SIX Swiss Exchange (“SIX”) and/or The Nasdaq Global Select Market (“Nasdaq”). Shares repurchased for cancellation purposes are repurchased on a second trading line on SIX. Shares may be repurchased from time to time on the open market or in privately negotiated transactions, including under plans complying with the provisions of Rule 10b5-1 and Rule 10b-18 of the Securities Exchange Act of 1934, as amended. Purchases may be started or stopped at any time without prior notice depending on market conditions and other factors and the program does not require the purchase of any minimum number of shares.

Dividends