UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~December 31, 2017~~September 30, 2020

o☐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,	Switzerland	None
~~(State~~ (State or other jurisdiction of incorporation or organization)			~~None~~ (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.

7700 Gateway Boulevard

Newark, California94560

(Address of principal executive offices and zip code)

~~(510)~~ 510795-8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading 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. Yesý No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data file required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yesý 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 Filer	ý	Smaller reporting company	☐
Accelerated filer	☐	Emerging Growth Company	☐
Non-accelerated filer	☐
~~Large accelerated filer~~ ý	~~Accelerated filer~~ o	~~Non-accelerated filer~~ o ~~(Do not check if a~~ ~~smaller reporting company)~~		~~Smaller reporting company~~ o	~~Emerging Growth Company~~ o

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 standard s 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 o☐ No ý

As of ~~January 12, 2018,~~ October 7, 2020, there were ~~164,110,890~~169,149,642 shares of the Registrant’s share capital outstanding.

TABLE OF CONTENTS



		Page

Part I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	4
	Condensed Consolidated Statements of Operations for the Three and ~~Nine~~Six Months ~~Ended December 31, 2017~~ended September 30, 2020 and ~~2016~~2019	4
	Condensed Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months ~~Ended December 31, 2017~~ended September 30, 2020 and ~~2016~~2019	5
	Condensed Consolidated Balance Sheets as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020	6
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months ~~Ended December 31, 2017~~ended September 30, 2020 and ~~2016~~2019	7
	Condensed Consolidated Statements of Changes in ~~Shareholders’~~Shareholders' Equity for the ~~Nine~~Three and Six Months ~~Ended December 31, 2017~~ended September 30, 2020 and ~~2016~~2019	8
	Notes to the Condensed Consolidated Financial Statements	910
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2725
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4339
Item 4.	Controls and Procedures	4640
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	4740
Item 1A.	Risk Factors	4841
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6459
Item 3.	Defaults Upon Senior Securities	6459
Item 4.	Mine Safety Disclosures	6459
Item 5.	Other Information	6459
Item 6.	Exhibit Index	6560
Signatures

Exhibits

In this document, unless otherwise indicated, references to the “Company” or, “Logitech”, "we," "our," and "us" are to Logitech International S.A., and its consolidated ~~subsidiaries and predecessor entities.~~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.

The Company’s fiscal year ends on March 31. Interim quarters are generally thirteen-week periods, each ending on a Friday of each quarter. The ~~third~~second quarter of fiscal year ~~2018~~2021 ended on ~~December 29, 2017.~~September 25, 2020. The same quarter in the prior fiscal year ended on ~~December 30, 2016.~~September 27, 2019. For purposes of presentation, the Company has indicated its quarterly periods ~~ending~~end on the last day of the calendar quarter.

The term “sales” means net sales, except as otherwise specified.

Our Internet website and the information contained, incorporated or referenced therein do not constitute a part of and are not intended to be incorporated into this Quarterly Report on Form 10-Q.

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 December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Net sales	$	812,021		$	666,707		$	1,974,437		$	1,710,875		$	1,257,158		$	719,691		$	2,049,052		$	1,363,916
Cost of goods sold	533,631			418,015			1,271,127			1,083,908			684,599			444,344			1,167,237			846,322
Amortization of intangible assets and purchase accounting effect on inventory	2,789			1,929			6,304			4,705			2,836			3,271			6,359			6,542
Gross profit	275,601			246,763			697,006			622,262			569,723			272,076			875,456			511,052

Operating expenses:
Marketing and selling	116,153			102,036			325,917			279,700			158,797			134,155			292,035			257,188
Research and development	34,398			32,284			106,144			96,867			53,379			41,964			103,104			84,207
General and administrative	22,291			24,598			72,850			75,543			31,664			24,048			60,735			46,207
Amortization of intangible assets and acquisition-related costs	2,496			1,494			6,377			4,535			4,331			4,218			8,940			7,814
Change in fair value of contingent consideration for business acquisition	—			(9,925		)	(4,908		)	(9,925		)	0			0			5,716			0
Restructuring charges (credits), net													(1		)	(364		)	(54		)	114
Total operating expenses	175,338			150,487			506,380			446,720			248,170			204,021			470,476			395,530

Operating income	100,263			96,276			190,626			175,542			321,553			68,055			404,980			115,522
Interest income	874			202			3,097			263			513			2,390			1,133			4,943
Other income (expense), net	(324		)	2,634			(894		)	943			1,149			(110		)	3,178			1,751
Income before income taxes	100,813			99,112			192,829			176,748			323,215			70,335			409,291			122,216
Provision for income taxes	20,040			1,647			18,691			10,297
Provision for (benefit from) income taxes													56,301			(2,598		)	70,304			3,938
Net income	$	80,773		$	97,465		$	174,138		$	166,451		$	266,914		$	72,933		$	338,987		$	118,278

Net income per share:
Basic	$	0.49		$	0.60		$	1.06		$	1.03		$	1.58		$	0.44		$	2.02		$	0.71
Diluted	$	0.48		$	0.59		$	1.03		$	1.01		$	1.56		$	0.43		$	1.99		$	0.70

Weighted average shares used to compute net income per share:
Basic	164,248			161,977			163,924			162,070			168,645			166,662			168,140			166,484
Diluted	169,079			165,901			168,832			165,211			171,382			169,027			170,766			168,914

Cash dividend per share	$	—		$	—		$	0.63		$	0.57

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

LOGITECH INTERNATIONAL S.A.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(unaudited)


	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Net income	$	80,773		$	97,465		$	174,138		$	166,451		$	266,914		$	72,933		$	338,987		$	118,278
Other comprehensive income (loss):
Currency translation gain (loss), net of taxes	1,535			(7,968		)	5,176			(7,714		)	3,205			(4,097		)	4,444			(4,375		)
Defined benefit pension plans:
Net gain and prior service costs, net of taxes	479			1,193			859			1,520
Amortization included in operating expenses	51			424			153			1,289
Reclassification of currency translation gain included in other income (expense), net													(1,738		)	0			(1,738		)	0
Defined benefit plans:
Net gain (loss) and prior service costs, net of taxes													(434		)	268			544			(43		)
Amortization included in other income (expense), net													176			54			345			107
Hedging gain (loss):
Deferred hedging gain (loss), net of taxes	(677		)	2,497			(6,026		)	4,026			(1,059		)	2,380			(3,426		)	1,437
Reclassification of hedging loss (gain) included in cost of goods sold	2,248			(463		)	5,377			432
Other comprehensive income (loss):	3,636			(4,317		)	5,539			(447		)
Reclassification of hedging loss included in cost of goods sold													1,969			(132		)	1,639			(358		)
Total other comprehensive income (loss)													2,119			(1,527		)	1,808			(3,232		)
Total comprehensive income	$	84,409		$	93,148		$	179,677		$	166,004		$	269,033		$	71,406		$	340,795		$	115,046

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

LOGITECH INTERNATIONAL S.A.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(unaudited)


	December 31, 2017			March 31, 2017			September 30, 2020			March 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	564,888		$	547,533		$	917,221		$	715,566
Accounts receivable, net	351,753			185,179			750,749			394,743
Inventories	278,979			253,401			394,708			229,249
Other current assets	57,530			41,732			94,753			74,920
Total current assets	1,253,150			1,027,845			2,157,431			1,414,478
Non-current assets:
Property, plant and equipment, net	86,901			85,408			86,386			76,119
Goodwill	275,563			249,741			400,953			400,917
Other intangible assets, net	92,371			47,564			111,702			126,941
Other assets	122,839			88,119			339,397			345,019
Total assets	$	1,830,824		$	1,498,677		$	3,095,869		$	2,363,474
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	429,119		$	274,805		$	662,873		$	259,120
Accrued and other current liabilities	278,055			232,273			541,977			455,024
Total current liabilities	707,174			507,078			1,204,850			714,144
Non-current liabilities:
Income taxes payable	34,410			51,797			54,507			40,788
Other non-current liabilities	82,004			83,691			130,549			119,274
Total liabilities	823,588			642,566			1,389,906			874,206
Commitments and contingencies (Note 11)
Commitments and contingencies (Note 10)
Shareholders’ equity:
Registered shares, CHF 0.25 par value:	30,148			30,148			30,148			30,148
Issued and authorized shares — 173,106 at December 31 and March 31, 2017
Conditionally authorized shares — 50,000 at December 31 and March 31, 2017
Issued shares — 173,106 at September 30 and March 31, 2020
Additional shares that may be issued out of conditional capitals — 50,000 at September 30 and March 31, 2020
Additional shares that may be issued out of authorized capital — 17,311 at September 30 and 34,621 at March 31, 2020
Additional paid-in capital	38,902			26,596			78,617			75,097
Shares in treasury, at cost — 8,899 at December 31, 2017 and 10,727 at March 31, 2017	(164,559		)	(174,037		)
Shares in treasury, at cost — 4,357 at September 30, 2020 and 6,210 at March 31, 2020							(166,258		)	(185,896		)
Retained earnings	1,197,912			1,074,110			1,882,308			1,690,579
Accumulated other comprehensive loss	(95,167		)	(100,706		)	(118,852		)	(120,660		)
Total shareholders’ equity	1,007,236			856,111			1,705,963			1,489,268
Total liabilities and shareholders’ equity	$	1,830,824		$	1,498,677		$	3,095,869		$	2,363,474

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

LOGITECH INTERNATIONAL S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)


	Nine Months Ended December 31,						Six Months Ended September 30,
	2017			2016			2020			2019
Cash flows from operating activities:
Net income	$	174,138		$	166,451		$	338,987		$	118,278
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	30,218			32,479			22,601			21,386
Amortization of intangible assets	10,653			6,618			15,239			13,735
Gain on investments in privately held companies	(550		)	(547		)
Loss on disposal of property, plant and equipment	7			—
Loss on investments							2,519			63
Share-based compensation expense	33,239			26,354			44,900			26,470
Deferred income taxes	6,728			(473		)	20,152			(8,978		)
Change in fair value of contingent consideration for business acquisition	(4,908		)	(9,925		)	5,716			0
Other							(1,877		)	(2		)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable, net	(164,028		)	(139,414		)	(346,838		)	(85,955		)
Inventories	(5,692		)	(15,194		)	(161,120		)	(47,773		)
Other assets	(18,953		)	(6,346		)	(31,567		)	(14,083		)
Accounts payable	151,711			109,095			399,176			129,101
Accrued and other liabilities	43,521			71,549			90,631			(9,223		)
Net cash provided by operating activities	256,084			240,647			398,519			143,019
Cash flows from investing activities:
Purchases of property, plant and equipment	(27,593		)	(23,372		)	(27,774		)	(18,092		)
Investment in privately held companies	(880		)	(640		)	(3,405		)	(170		)
Acquisitions, net of cash acquired	(88,323		)	(66,987		)	0			(366		)
Proceeds from return of investment in privately held companies	237			—
Changes in restricted cash	—			715
Purchases of short-term investments	(6,789		)	—
Sales of short-term investments	6,789			—
Purchases of trading investments	(2,842		)	(5,868		)	(8,199		)	(2,525		)
Proceeds from sales of trading investments	3,209			5,912			8,839			2,571
Net cash used in investing activities	(116,192		)	(90,240		)	(30,539		)	(18,582		)
Cash flows from financing activities:
Payment of cash dividends	(104,248		)	(93,093		)	(146,705		)	(124,180		)
Payment of contingent consideration for business acquisition	(5,000		)	—
Purchases of registered shares	(20,408		)	(63,764		)	(22,454		)	(15,127		)
Proceeds from exercises of stock options and purchase rights	30,947			20,355			26,066			9,331
Tax withholdings related to net share settlements of restricted stock units	(25,505		)	(13,054		)	(25,744		)	(20,908		)
Net cash used in financing activities	(124,214		)	(149,556		)	(168,837		)	(150,884		)
Effect of exchange rate changes on cash and cash equivalents	1,677			(6,468		)	2,512			(3,605		)
Net increase (decrease) in cash and cash equivalents	17,355			(5,617		)	201,655			(30,052		)
Cash and cash equivalents, beginning of the period	547,533			519,195			715,566			604,516
Cash and cash equivalents, end of the period	$	564,888		$	513,578		$	917,221		$	574,464
Supplementary Cash Flow Disclosures:
Non-cash investing activities:
Property, plant and equipment purchased during the period and included in period end liability accounts	$	5,779		$	4,044		$	9,594		$	4,412
Unpaid purchase price for business acquisition	$	1,000		$	—

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

LOGITECH INTERNATIONAL S.A.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(In thousands)

(unaudited)

Three Months ended September 30, 2019

				Additional Paid-in Capital											Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Registered Shares						Treasury Shares					Retained Earnings
	Shares	Amount					Shares		Amount			Retained Earnings
June 30, 2019	173,106	$	30,148	$	35,048		6,642		$	(170,140	)	$	1,410,381		$	(107,403	)	$	1,198,034
Total comprehensive income	—	—		—			—		—			72,933			(1,527		)	71,406
Sales of shares upon exercise of stock options and purchase rights	—	—		4,150			(366	)	5,357			—			—			9,507
Issuance of shares upon vesting of restricted stock units	—	—		(2,593		)	(73	)	1,055			—			—			(1,538		)
Share-based compensation	—	—		14,308			—		—			—			—			14,308
Cash dividends ($0.74 per share)	—	—		—			—		—			(124,180		)	—			(124,180		)
September 30, 2019	173,106	$	30,148	$	50,913		6,203		$	(163,728	)	$	1,359,134		$	(108,930	)	$	1,167,537

Six Months ended September 30, 2019																										Six Months ended September 30, 2019

																																	Additional Paid-in Capital															Accumulated Other Comprehensive Loss				Total Shareholders’ Equity
				Additional Paid-in Capital															Accumulated Other Comprehensive Loss				Total Shareholders’ Equity			Registered Shares										Treasury Shares							Retained Earnings
	Registered Shares						Treasury Shares							Retained Earnings								Shares					Amount					Shares					Amount					Accumulated Other Comprehensive Loss	Retained Earnings
	Shares	Amount					Shares			Amount							Accumulated Other Comprehensive Loss
March 31, 2016	173,106	$	30,148		$	6,616			10,697			$	(128,407	Retained Earnings	)			$				963,576						$	(111,985	)	$	759,948
March 31, 2019																									173,106			$	30,148			$		56,655			7,244			$	(169,802		)		$	1,365,036			$	(105,698	)		$	1,176,339
Total comprehensive income	—	—			—				—			—				166,451				(447		)			166,004			—			—				—				—				—				118,278				(3,232		)		115,046
Purchases of registered shares	—	—		—				3,321			(63,764		)		—					—				(63,764		)	—			—				—				389			(15,127		)		—				—				(15,127		)
Tax effects from share-based awards	—	—		(1,463		)		—			—				—				—				(1,463		)
Sales of shares upon exercise of stock options and purchase rights	—	—		6,435				(1,524	)		13,920				—				—				20,355			—			—				4,158				(391	)		5,742				—				—				9,900
Issuance of shares upon vesting of restricted stock units	—	—		(21,714		)		(1,196	)		10,909				(2,249		)		—				(13,054		)	—			—				(36,367		)		(1,039	)		15,459				—				—				(20,908		)
Share-based compensation	—	—		26,462				—			—				—				—				26,462			—			—				26,467				—			—				—				—				26,467
Cash dividends	—	—		—				—			—				(93,093		)		—				(93,093		)
December 31, 2016	173,106	$	30,148	$	16,336			11,298			$	(167,342	)		$	1,034,685			$	(112,432	)		$	801,395
Cash dividends ($0.74 per share)																										—			—				—				—			—				(124,180		)		—				(124,180		)
September 30, 2019																										173,106			$	30,148			$	50,913			6,203			$	(163,728	)		$	1,359,134			$	(108,930	)		$	1,167,537

Three Months ended September 30, 2020																										Three Months ended September 30, 2020

																																	Additional Paid-in Capital														Accumulated Other Comprehensive Loss				Total Shareholders’ Equity
				Additional Paid-in Capital															Accumulated Other Comprehensive Loss				Total Shareholders’ Equity			Registered Shares										Treasury Shares						Retained Earnings
	Registered Shares						Treasury Shares							Retained Earnings								Shares					Amount					Shares					Amount				Accumulated Other Comprehensive Loss	Retained Earnings
	Shares	Amount					Shares			Amount							Accumulated Other Comprehensive Loss
March 31, 2017	173,106	$	30,148		$	26,596			10,727			$	(174,037	Retained Earnings	)			$				1,074,110						$	(100,706	)	$	856,111
Cumulative effect of adoption of new accounting standard (Note 1)	—	—			3,293				—			—				53,912				—				57,205
June 30, 2020																										173,106			$	30,148				$	54,668			4,689		$		(158,463	)		$	1,762,099			$	(120,971	)		$	1,567,481
Total comprehensive income	—	—		—				—			—				174,138					5,539				179,677			—			—				—				—		—				266,914				2,119				269,033
Purchases of registered shares	—	—		—				581			(20,408		)		—				—				(20,408		)	—			—				—				312		(22,454			)		—				—				(22,454		)
Sales of shares upon exercise of stock options and purchase rights	—	—		15,958				(1,126	)		14,989				—				—				30,947			—			—				3,255				(568	)	12,819				—				—				16,074
Issuance of shares upon vesting of restricted stock units	—	—		(40,402		)		(1,283	)		14,897				—				—				(25,505		)	—			—				(4,463		)		(76	)	1,840				—				—				(2,623		)
Share-based compensation	—	—		33,457				—			—				—				—				33,457			—			—				25,157				—		—				—				—				25,157
Cash dividends	—	—		—											(104,248		)		—				(104,248		)
December 31, 2017	173,106	$	30,148	$	38,902			8,899			$	(164,559	)		$	1,197,912			$	(95,167	)		$	1,007,236
Cash dividends ($0.87 per share)																										—			—				—				—		—				(146,705		)		—				(146,705		)
September 30, 2020																										173,106			$	30,148			$	78,617			4,357		$	(166,258	)		$	1,882,308			$	(118,852	)		$	1,705,963

Six Months ended September 30, 2020

				Additional Paid-in Capital											Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
	Registered Shares						Treasury Shares					Retained Earnings
	Shares	Amount					Shares		Amount			Retained Earnings
March 31, 2020	173,106	$	30,148	$	75,097		6,210		$	(185,896	)	$	1,690,579		$	(120,660	)	$	1,489,268
Total comprehensive income	—	—		—			—		—			338,987			1,808			340,795
Cumulative effect of adoption of new accounting standard (Note 1)	—	—		—			—		—			(553		)	—			(553		)
Purchases of registered shares	—	—		—			312		(22,454		)	—			—			(22,454		)
Sales of shares upon exercise of stock options and purchase rights	—	—		1,365			(1,211	)	24,701			—			—			26,066
Issuance of shares upon vesting of restricted stock units	—	—		(43,135		)	(954	)	17,391			—			—			(25,744		)
Share-based compensation	—	—		45,290			—		—			—			—			45,290
Cash dividends ($0.87 per share)	—	—		—			—		—			(146,705		)	—			(146,705		)
September 30, 2020	173,106	$	30,148	$	78,617		4,357		$	(166,258	)	$	1,882,308		$	(118,852	)	$	1,705,963

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

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"~~(Logitech or the ~~"Company")~~Company) designs, manufactures and markets products that ~~allow people~~have an everyday place in people's lives, connecting them to ~~connect through music,~~the digital experiences they care about. More than 35 years ago, Logitech created products to improve experiences around the personal PC platform, and today it is a multi-brand, multi-category company designing products that enable better experiences consuming, sharing and creating any digital content such as computing, gaming, video ~~computing,~~ and ~~other digital platforms.~~music, whether it is on a computer, mobile device or in the cloud.

The Company sells its products to a broad network of domestic and international customers, including direct sales to retailers and e-tailers and indirect sales 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 Apples, Switzerland and headquarters in Lausanne, Switzerland, which conducts its business through subsidiaries in the Americas, Europe, Middle East and Africa ~~("EMEA")~~(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.

~~Business Acquisitions~~

~~In August 2017, the Company acquired the ASTRO Gaming business. In November 2017, the Company also made a small acquisition. See "Note 2 - Business Acquisitions" for more information.~~

Basis of Presentation

The condensed consolidated ~~interim~~ 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 of America ~~(“GAAP”)~~(GAAP) for interim financial information and therefore do not include all the information required by GAAP for complete financial statements. ~~They~~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, ~~2017,~~2020, included in its Annual Report on Form 10-K filed with the Securities and Exchange Commission ~~(“SEC”)~~(SEC) on May ~~26, 2017.~~27, 2020.

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 ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, ~~2018,~~2021, or any future periods.

~~Reclassification~~

Certain amounts from the comparative period in the accompanying unaudited condensed consolidated financial statements have been reclassified to conform to the condensed consolidated financial statement presentation as of and for the three and nine months ended December 31, 2017.

Changes in Significant Accounting Policies

Other than the recent accounting pronouncements adopted and discussed below under Recent Accounting Pronouncements Adopted and Summary of Significant Accounting Policies, there have been no ~~substantial~~material changes in the Company’s significant accounting policies during the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 compared with the significant accounting policies described in its Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020.

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. 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, valuation of right-of-use assets, valuation of investment in privately held companies classified under Level 3 of the fair value hierarchy, pensions obligations, warranty liabilities, accruals for customer incentives, cooperative marketing, and pricing programs (Customer Programs) and related breakage when appropriate, accrued sales return ~~reserves, allowance for doubtful accounts,~~liability, inventory valuation, ~~contingent consideration from business acquisitions and periodical reassessment of its fair value,~~ 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~~these estimates.

Risks and Uncertainties

We are subject to risks and uncertainties as a result of the novel coronavirus (COVID-19). The measures taken by many countries in response have contributed to a general slowdown in the global economy and adversely affected, and could in the future continue to adversely affect, the Company's business and operations. Capital markets and economies worldwide have also been negatively impacted by COVID-19 and it is still unclear how lasting and deep the economic impacts will be. During the three and six months ended September 30, 2020, as well as in the fourth quarter of fiscal year 2020, the COVID-19 pandemic had mixed effects on the Company’s results of operations, and it may continue to have mixed or adverse effects. While there was high demand and consumption of certain of our products that led to increased sales and operating income during the fourth quarter of fiscal year 2020 and the three and six months ended September 30, 2020, at the same time the Company experienced disruptions to supply chain and logistics services, inventory constraints and increased logistics costs. The ongoing and full extent of the impact of the COVID-19 pandemic on the Company's business and operational and financial performance and condition, including the sustainability of its effect on trends positive to the Company, is uncertain and will depend on many factors outside the Company's control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the development and availability of effective treatments and vaccines, the imposition of effective public safety and other protective measures, the impact of COVID-19 on the global economy and demand for the Company's products and services. Should the COVID-19 pandemic or global economic slowdown not improve or worsen, or if the Company's attempt to mitigate its impact on its operations and costs is not successful, the Company's business, results of operations, financial condition and prospects may be adversely affected.

Recent Accounting Pronouncements Adopted

In ~~July 2015,~~June 2016, the ~~Financial Accounting Standards Board ("FASB")~~FASB issued ~~Accounting Standards Update ("ASU") No. 2015-11, "Simplifying the~~ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of ~~Inventory (Topic 330)" ("ASU 2015-11"). Topic 330 previously required an entity~~Credit Losses on Financial Instruments" (ASU 2016-13), which was further updated and clarified by the FASB through issuance of additional related ASUs, replaces the incurred-loss impairment methodology and requires immediate recognition of estimated credit losses expected to measure inventory at the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. ASU 2015-11 requires an entity to measure inventory at the lower of cost or net realizable value andoccur for most financial assets, including trade receivables. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2016.~~2019. The Company adopted this standard effective April 1, ~~2017, which has~~2020, using a modified retrospective approach. Upon adoption, the Company updated its credit loss models to utilize a forward-looking current expected credit losses (CECL) model in place of the incurred loss methodology for financial instruments measured at amortized cost, including accounts receivable. The cumulative effect adjustment from adoption was not ~~had a~~ material ~~impact on its~~to the Company's condensed consolidated financial statements.

In ~~March 2016,~~August 2018, the FASB issued ASU ~~2016-09, "Compensation-Stock Compensation~~2018-13, "Fair Value Measurement (Topic ~~718)~~820): ~~Improvements~~Disclosure Framework - Changes to ~~Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 simplifies several aspects~~the Disclosure Requirements for Fair Value Measurements" (ASU 2018-13), which eliminates, adds and modifies certain disclosure requirements for fair value measurements, including eliminating the requirement to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the ~~accounting~~fair value hierarchy, and requiring the range and weighted average used to develop significant unobservable inputs for ~~share-based payments, including immediate recognition~~Level 3 fair value measurements. Some of all excess tax benefits and deficiencies in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classificationthese disclosure changes must be applied prospectively while others retrospectively depending on the statement of cash flows for the excess tax benefits and employee taxes paid when an employer withholds shares for tax withholding purposes. ASU 2016-09 is effective for fiscal years beginning after December 15, 2016.requirement. The Company adopted this standard effective April 1, ~~2017. Changes to~~2020. The adoption of ASU 2018-13 did not have a material impact on the statements of cash flows related to the classification of excess tax benefits were implemented on a retroactive basis and accordingly, to conform to the current year presentation, the Company reclassified $6.4 million of excess tax benefits previously reported under financing activities to operating activities for the nine months ended December 31, 2016 on itsCompany's condensed consolidated statements of cash flows. Under the new standard, the Company accounts for forfeitures as they occur. The change in accounting for forfeitures resulted in a cumulative-effect adjustment to decrease retained earnings as of March 31, 2017 by $3.3 million. The Company further recognized a cumulative-effect adjustment to increase retained earnings as of March 31, 2017 by $57.2 million upon adoption of the new guidance to account for gross excess tax benefits of $75.2 million that were previously not recognized because the related tax deduction had not reduced current income taxes, offset by a valuation allowance of $18.0 million to reduce the deferred tax assets to amounts that are more likely than not to be realized.financial statements.

In ~~January 2017,~~August 2018, the FASB issued ASU ~~2017-04, "Simplifying~~2018-14, "Compensation - Retirement Benefits - Defined Benefits Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the ~~Test~~Disclosure Requirements for ~~Goodwill Impairment (Topic~~

~~350)" ("ASU 2017-04")~~Defined Benefit Plans" (ASU 2018-14), which ~~removes Step 2 from~~requires that the ~~goodwill impairment test.~~Company remove various disclosures that no longer are considered cost-beneficial, namely amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. Further, ASU ~~2017-04 is effective~~2018-14 requires disclosure or clarification of the reasons for ~~annual~~significant gains or ~~any interim goodwill impairments~~losses related to changes in ~~annual periods beginning December 15, 2019, with early adoption permitted.~~the benefit obligation for the period. The Company adopted this standard effective April 1, ~~2017, which has not had~~2020 using a ~~material impact on its consolidated financial statements.~~

~~In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of~~

~~Modification Accounting" ("ASU 2017-09"), which provides guidance about which changes to the terms or conditions~~

~~of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is~~

effective for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company adopted this standard effective April 1, 2017, which has not had a material impact on its consolidated financial statements.

~~Recent Accounting Pronouncements to be Adopted~~

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)" ("ASU 2014-09") which supersedes the revenue recognition requirements under Accounting Standard Codification ("ASC") 605, Revenue Recognition. ASU 2014-09 outlines a new, single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. Under the new model, recognition of revenue occurs when a customer obtains control of promised goods or services in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard requires reporting companies to disclose the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The new standard will become effective for the Company on April 1, 2018. The Company will adopt Topic 606 utilizing the modified retrospective transition method, which recognizes the cumulative effect of initially applying Topic 606 as an adjustment to retained earnings at the adoption date. The Company continues to evaluate the impact this new standard will have on the current contracts with customersapproach and the ~~accruals of various sales and marketing programs the Company offers and has identified the following areas that are impacted:~~

Accrual for cooperative marketing arrangements and customer incentive programs: At the end of every quarter, the Company estimates accruals for cooperative marketing arrangements and customer incentive programs based on negotiated terms, consideration of historical experience, and inventory levelsupdated disclosures will be included in the channel. Under ASC 605, these programs are recognized as a reduction of revenue at the later of when the related revenue is recognized or when the program is offered to the customer. Under Topic 606, these programs qualify as variable consideration and are recorded as a reduction of the transaction price at the contract inception based on the expected value method. Certain of these programs will reflect such change which will lead to the recognition of the accruals sooner as compared to the guidance in ASC 605.

Breakage estimates: The Company applies a breakage rate to reduce its accruals of customer incentive, cooperative marketing, and pricing programs based on the estimated percentage of these customer programs that will not be claimed or earned. The breakage rate is applied when the Company is able to reasonably estimate the amounts that will be ultimately claimed by customers, which generally occurs up to one quarter after the program is accrued. Under Topic 606, variable consideration must be estimated at the outset of the arrangement, subject to the constraint guidance to ensure that a significant revenue reversal will not occur. As a result, upon adoption of Topic 606, revenue will be recognized sooner as compared to the existing revenue guidance.

~~The Company expects to complete its analysis of Topic 606 and reasonably estimate the impact to its consolidated financial statements when its Annual Report on~~Company's Form 10-K for the fiscal year ending March 31, ~~2018 is filed.~~2021. The Company will continue to monitor additional changes, modifications, clarifications or interpretations being undertaken by the FASB, which may impact its current conclusions. It is possible that during the fourth quarteradoption of ~~fiscal year 2018, the Company may identify additional areas which may result in material~~ASU 2018-14 did not have an impact on the ~~Company’s~~Company's condensed consolidated financial statements.

Recent Accounting Pronouncements To Be Adopted

In ~~January 2016,~~December 2019, the FASB issued ASU ~~2016-01, "Financial Instruments-Recognition~~2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes" (ASU 2019-12), which eliminates certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and ~~Measurement~~calculating income taxes in interim periods. This ASU also includes guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of ~~Financial Assets and Financial Liabilities (Subtopic 825-10)" ("~~a consolidated group. ASU ~~2016-01"). ASU 2016-01~~2019-12 is effective for annual and interim periods in fiscal years beginning after December 15, ~~2017, including interim periods within those annual periods, with early~~2020. Early adoption is permitted. The Company ~~does not believe that~~is currently assessing the ~~adoption~~impact of ASU ~~2016-01 will have a material impact~~2019-12 on its consolidated financial statements and ~~will~~plans to adopt ~~this~~the standard effective April 1, ~~2018.~~2021.

~~In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)" ("ASU 2016-02"),~~ which requires the recognition of lease assets and lease liabilities arising from operating leases in the statement of financial position. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. The Company is evaluating the full effect that ASU 2016-02 will have on its consolidated financial statements and will adopt this standard effective April 1, 2019.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory" ("ASU 2016-16"), which eliminates the deferral of income tax effects of intra-entity asset transfers until the transferred asset is sold to an unrelated party or recovered through use. However, this standard does not apply to intra-entity transfer of inventory. ASU 2016-16 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted but only in the first interim period of an annual period. The cumulative effect of change on equity upon adoption is to be quantified under the modified retrospective approach and recorded as of the beginning of the period of adoption.

~~The Company does not expect the adoption of ASU 2016-16 will have a material impact on its consolidated financial statements and will adopt this standard effective April 1, 2018.~~

In December 2016, the FASB issued ASU 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" ("ASU 2016-18"), which requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. The adoption of this standard should be applied using a retrospective transition method to each period presented. The Company does not expect that the adoption of ASU 2016-18 will have a material impact on its consolidated financial statements and will adopt this standard effective April 1, 2018.

In January 2017, the FASB issued ASU 2017-01, "Business Combination (Topic 805): Clarifying the Definition of a Business" ("ASU 2017-01"), which changes the definition of a business to assist with evaluating when a set of transferred assets and activities is a business. ASU 2017-01 is effective for annual or any interim periods in annual periods beginning after December 15, 2017, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-01 will have a material impact on its consolidated financial statements and will adopt this standard effective April 1, 2018.

In March 2017, the FASB issued ASU 2017-07, "Compensation-Retirement Benefit (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost" ("ASU 2017-07"), which requires that the Company disaggregate the service cost component from the other components of net benefit cost, and also provides guidance on how to present the service cost component and the other components of net benefit cost in the income statement and allow only the service cost component of net benefit cost to be eligible for capitalization. ASU 2017-07 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-07 will have a material impact on its consolidated financial statements and will adopt this standard effective April 1, 2018.

In August 2017, the FASB issued ASU 2017-12, "Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities" ("ASU 2017-12"), which improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements and simplifies the application of the hedge accounting guidance. ASU 2017-12 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The Company does not expect that the adoption of ASU 2017-12 will have a material impact on its consolidated financial statements and will adopt this standard effective April 1, 2019.

Note 2 ~~— Business Acquisitions~~

~~ASTRO Acquisition~~

~~On August 11, 2017 (the "Acquisition Date"), the Company acquired~~certain assets and liabilities constituting the ASTRO Gaming business ("ASTRO") from AG Acquisition Corporation for a purchase price of $85.0 million in cash (the "ASTRO Acquisition"). ASTRO is a leading console gaming accessory brand with a history of producing award-winning headsets for professional gamers and enthusiasts. ASTRO provides a strong growth platform in the console gaming accessories market.

ASTRO meets the definition of a business, and its acquisition is accounted for using the acquisition method. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the Acquisition Date (in thousands):

Estimated Fair Value
Inventories $ 10,331
Property, plant and equipment 2,760
Intangible assets 52,520
Other assets 605
Total identifiable assets acquired $ 66,216
Accrued liabilities (2,982 )
Net identifiable assets acquired $ 63,234
Goodwill 21,766
Net assets acquired $ 85,000

Goodwill related to the transaction is primarily attributable to opportunities and economies of scale from combining the operations and technologies of Logitech and ASTRO. Goodwill is expected to be deductible for tax purposes.

The fair value of the inventory acquired is estimated at its net realizable value, which uses the estimated selling prices, less the cost of disposal and a reasonable profit allowance for the selling efforts. The difference between the fair value of the inventories and the amount recorded by ASTRO immediately before the acquisition date is $0.8 million, which will be recognized in "amortization of intangibles assets and purchase accounting effect on inventory" in the condensed consolidated statements of operations upon the sale of the acquired inventory.

The Company included ASTRO's estimated fair value of assets acquired and liabilities assumed in its condensed consolidated balance sheets beginning on the Acquisition Date. The results of operations for ASTRO for this partial quarter have been included in, but are not material to, the Company's condensed consolidated statements of operations from the Acquisition Date. Pro forma results of operations for the ASTRO Acquisition have not been presented because they are not material to the condensed consolidated statements of operations.

~~The following table summarizes the estimated fair values and estimated useful lives of the components of identifiable intangible assets acquired as of the Acquisition Date (Dollars in thousands):~~

Fair Value Estimated Useful Life (years)
Developed technology $ 12,540
4.0
Customer relationships 33,100
8.0
Trade name 6,880
6.0
Total intangible assets acquired $ 52,520
6.8

Intangible assets acquired as a result of the ASTRO Acquisition are being amortized over their estimated useful lives using the straight-line method of amortization. Amortization of acquired developed technology of $0.8 million and $1.2 million, respectively, during the three and nine months ended December 31, 2017 is included in "amortization of intangible assets and purchase accounting effect of inventory" in the condensed consolidated statements of operations. Amortization of the acquired customer relationships and trade name of $1.3 million and $2.0 million, respectively, during the three and nine months ended December 31, 2017 is included in "amortization of intangible assets and acquisition-related costs" in the condensed consolidated statements of operations.

Developed technology relates to existing ASTRO gaming headset products. The economic useful life was determined based on the technology cycle related to developed technology of existing products, as well as the cash flows anticipated over the forecasted periods.

Customer relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of ASTRO. The economic useful life was determined based on historical customer turnover rates and industry benchmarks.

~~Trade name relates to the “ASTRO” trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecasted periods.~~

The fair values of developed technology and trade name were estimated using the relief-from-royalty method, an income approach (Level 3), which estimates the cost savings that accrue to the owner of the intangible assets that would otherwise be payable as royalties or license fees on revenues earned through the use of the asset. A royalty rate is applied to the projected revenues associated with the intangible assets to determine the amount of savings, which is then discounted to determine the fair value. The developed technology and trade name were valued using royalty rates of 10% and 2%, respectively, and both were discounted at a rate of 13%.

The fair value of customer relationships was estimated using the excess earnings method, an income approach (Level 3), which converts projected revenues and costs into cash flows. To reflect the fact that certain other assets contributed to the cash flows generated, the returns for these contributory assets were removed to arrive at estimated cash flows solely attributable to the customer relationships, which were discounted at a rate of 13%.

The Company believes the value of purchased intangible assets recorded above represents the fair values of, and approximates the amounts a market participant would pay for, these intangible assets as of the Acquisition Date.

The Company incurred acquisition-related costs for the ASTRO Acquisition of approximately $0.3 million and $1.3 million for the three and nine months ended December 31, 2017, respectively. The acquisition-related costs are included in "amortization of intangible assets and acquisition-related costs" in the condensed consolidated statements of operations.

~~For the three and nine months ended~~December 31, 2017, ASTRO contributed $33.5 million and $36.2 million to net sales, respectively, representing approximately 4% of the net sales of the Company for the three-month period and 2% for the nine-month period.

In November 2017, the Company also made a small acquisition for a total consideration of $5.2 million, including cash acquired of $0.9 million. $1.0 million of the total consideration was retained by the Company for the purpose of ensuring the seller's representations, warranties and covenants.

~~Note 3~~ — Net Income Per Share

The following table summarizes the computations of basic and diluted net income per share for the ~~Company were as follows~~three and six months ended September 30, 2020 and September 30, 2019 (in thousands, except per share amounts):



	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Net income	$	266,914	$	72,933	$	338,987	$	118,278

Shares used in net income per share computation:
Weighted average shares outstanding - basic	168,645		166,662		168,140		166,484
Effect of potentially dilutive equivalent shares	2,737		2,365		2,626		2,430
Weighted average shares outstanding - diluted	171,382		169,027		170,766		168,914

Net income per share:
Basic	$	1.58	$	0.44	$	2.02	$	0.71
Diluted	$	1.56	$	0.43	$	1.99	$	0.70

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Net Income $ 80,773
$ 97,465
$ 174,138
$ 166,451

Shares used in net income per share computation:

Weighted average shares outstanding - basic 164,248
161,977
163,924
162,070
Effect of potentially dilutive equivalent shares 4,831
3,924
4,908
3,141
Weighted average shares outstanding - diluted 169,079
165,901
168,832
165,211

Net income per share:

Basic $ 0.49
$ 0.60
$ 1.06
$ 1.03
Diluted $ 0.48
$ 0.59
$ 1.03
$ 1.01

Share equivalents attributable to outstanding stock options, ~~and~~ restricted stock units ~~of 0.5~~("RSUs") and employee share purchase plan ("ESPP") rights totaling 0.4 million and ~~1.7~~1.9 million for the three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively, and ~~1.1~~0.4 million and ~~2.8~~2.0 million for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively, were ~~anti-dilutive and~~ excluded from the calculation of diluted net income per ~~share.~~share because the combined exercise price and average unamortized grant date fair value upon exercise of these options and ESPP rights or vesting of RSUs were greater than the average market price of the Company's shares during the periods presented herein, and therefore their inclusion would have been anti-dilutive. The majority of performance-based awards were not included because all necessary conditions have 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.

Note 43 — Employee Benefit Plans

Employee Share Purchase Plans and Stock Incentive Plans

As of ~~December 31, 2017,~~September 30, 2020, the Company offers the 2006 ~~ESPP (2006~~ Employee Share Purchase Plan, as amended and restated (Non-U.S.)) (2006 ESPP), the 1996 ~~ESPP (1996~~ Employee Share Purchase Plan (U.S.)), as amended and restated (1996 ESPP), the 2006 ~~Plan (2006~~ Stock Incentive Plan, as amended and restated (2006 Plan), and the 2012 ~~Plan (2012~~ Stock Inducement Equity Plan (2012 Plan)~~, each as amended.~~.

The following table summarizes the share-based compensation expense and total income tax ~~provision (benefit)~~benefit recognized for share-based awards for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 (in thousands):



	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Cost of goods sold	$	1,772		$	1,184		$	3,172		$	2,342
Marketing and selling	10,377			6,951			19,169			13,800
Research and development	3,763			2,248			6,866			4,402
General and administrative	8,873			3,869			15,693			5,926
Total share-based compensation expense	24,785			14,252			44,900			26,470
Income tax benefit	(3,958		)	(2,723		)	(12,069		)	(9,523		)
Total share-based compensation expense, net of income tax benefit	$	20,827		$	11,529		$	32,831		$	16,947

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Cost of goods sold $ 960
$ 617
$ 2,762
$ 1,930
Marketing and selling 4,624
4,006
13,348
10,687
Research and development 1,621
1,176
4,797
3,007
General and administrative 4,351
3,588
12,332
10,730
Total share-based compensation expense 11,556
9,387
33,239
26,354
Income tax provision (benefit) 3,038
(2,391 ) (11,921 ) (6,092 )
Total share-based compensation expense, net of income tax $ 14,594
$ 6,996
$ 21,318
$ 20,262

The income tax benefit in the respective period primarily consists of tax benefit 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. The income tax benefit is reduced by income tax provision resulting from remeasurement of applicable federal deferred tax assets due to the enactment of H.R.1, also known as the "Tax Cuts and Jobs Act" ("the Tax Act") in the United States on December 22, 2017. See "Note 5 - Income Taxes" for more information.

As of ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, the ~~Company~~balance of capitalized ~~$0.8~~ share-based compensation included in inventory was $1.3 million and ~~$0.6~~$0.9 million, ~~of share-based compensation expense to inventory,~~ 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 ~~cost~~costs recorded of ~~$2.3~~$2.7 million and ~~$2.8~~$2.4 million for the three months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively, and ~~$6.9~~$5.4 million and ~~$8.4~~$4.8 million for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, respectively, ~~was~~were primarily related to service costs.

Note 54 — 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 canton of Vaud enacted the Federal Act on Tax Reform and AHV Financing ("TRAF"), a major reform to better align the Swiss tax system with international tax standards, on March 10, 2020 to take effect as of January 1, 2020. The longstanding tax ruling from the canton of Vaud was applicable through December 31, 2019.

The income tax provision for the three months ended ~~December 31, 2017~~September 30, 2020 was ~~$20.0~~$56.3 million based on an effective income tax rate of ~~19.9%~~17.4% of pre-tax income, compared to an income tax benefit of $2.6 million based on an effective income tax rate of (3.7)% of pre-tax income for the three months ended September 30, 2019. The income tax provision for the six months ended September 30, 2020 was $70.3 million based on an effective income tax rate of 17.2% of pre-tax income, compared to an income tax provision of ~~$1.6~~$3.9 million based on an effective income tax rate of ~~1.7%~~3.2% of pre-tax income for the ~~three~~six months ended ~~December 31, 2016. The income~~

tax provision for the nine months ended December 31, 2017 was $18.7 million based on an effective income tax rate of 9.7% of pre-tax income, compared to an income tax provision of $10.3 million based on an effective income tax rate of 5.8% for the nine months ended December 31, 2016.

On December 22, 2017, the Tax Act was signed into law in the United States. The Tax Act introduced a broad range of tax reform measures that significantly change the federal income tax regime. Among other things, the Tax Act permanently reduces the corporate income tax rate from 35% to 21% effective for tax years including or commencing on January 1, 2018, repeals corporate alternative minimum tax, limits various business deductions, modifies the maximum deduction of net operating loss with no carryback but indefinite carryforward provision and includes various international tax provisions. Many provisions in the Tax Act are generally effective in tax years beginning after December 31, 2017.

ASC 740 requires recognition of the effects of tax law changes in the period of enactment. Notwithstanding that the effective date of the Tax Act for most provisions is January 1, 2018, such effects must be recognized in December 2017 financial statements. In accordance to the new tax legislation, the Company applied a blended federal income tax rate of 31.6% to its operations in the United States effective at the beginning of the fiscal year based on a pro-rated percentage of the number of days before and after January 1, 2018. Furthermore, the Company recorded an income tax charge of $19.9 million from the estimated remeasurement of federal deferred tax assets and liabilities as of December 31, 2017 to reflect the effects of the enacted changes in tax rate and an income tax benefit of $4.1 million from assessment of valuation allowance against tax credits due to changes in tax laws. These amounts account for the change in the effective income tax rate in the three months ended December 31, 2017 compared to the same period of the prior fiscal year.

The estimated remeasurement of deferred tax assets and liabilities was based on tax rates generally at 31.6% and 21% depending on the timing of when the individual deferred tax assets and liabilities are expected to recover or settle in the future. The net provisional charge from deferred tax remeasurement and assessment of valuation allowance is based on currently available information and interpretations which are continuing to evolve. The Company continues to analyze additional information and guidance related to certain aspects of the Tax Act, such as limitations on the deductibility of executive compensation, conformity or changes by state taxing authorities in response to the Tax Act, and the final determination of the net deferred tax assets subject to the remeasurement and related impacts to the assessment of valuation allowance. The prospects of supplemental legislation or regulatory processes to address questions that arise because of the Tax Act, or evolving technical interpretations of the tax law, may cause the final impact from the Tax Act to differ from the recorded amounts. The Company continues to appropriately refine such amounts within the measurement period allowed by Staff Accounting Bulletin (“SAB”) No.118, which will be completed no later than the third quarter of fiscal yearSeptember 30, 2019.

The change in the effective income tax rate infor the ~~nine~~three months ended ~~December 31, 2017~~September 30, 2020, compared to the same period ~~of the prior fiscal year is~~ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. The Swiss income tax provision in the three months ended September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. In the same period ended September 30, 2019 when TRAF was yet to be enacted at the federal and cantonal levels, the transition income tax provision reflects the application of the longstanding tax ruling through December 31, 2019 including a retroactive adjustment made to the preceding three-month period ended June 30, 2019 when the transition income tax provision was quantified at the full statutory income tax rate of 13.63% because at the time the canton of Vaud permitted the application of the longstanding tax ruling only through March 31, 2019. The retroactive adjustment resulted in a tax benefit of $5.9 million in the three months ended September 30, 2019. In addition, there was a discrete tax benefit of $4.0 million from adjusting deferred tax assets and liabilities in Switzerland in the three months ended September 30, 2019.

The change in the effective income tax rate for the six months ended September 30, 2020, compared to the same period ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which the Company operates. The Swiss income tax provision in the six months ended September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. The income tax provision in the six months ended September 30, 2019 reflects the application of the longstanding tax ruling through December 31, 2019 as stated above. In the six months ended September 30, 2019, there was a discrete tax benefit of $1.7 million from adjusting deferred tax assets and liabilities in Switzerland. Furthermore, there were discrete tax benefits of $5.8 million and $1.5 million from the recognition of excess tax benefits ~~of $10.8 million after adoption of ASU 2016-09~~in the United States and ~~income tax benefit from the~~ reversal of uncertain tax positions from the expiration of statutes of limitations, ~~are largely offset by income tax provision from the remeasurement of deferred tax assets and liabilities~~respectively, in the ~~third quarter. In the three and nine months~~six-month period ended~~December 31, 2017, there was a discrete income tax benefit of $6.0~~ September 30, 2020, compared with $6.7 million and ~~$7.9~~$1.8 million, respectively, ~~from~~in the ~~reversal of uncertain tax positions from the expiration of statutes of limitations. In the same periods~~six-month period ended ~~December 31, 2016, the income tax benefit from the reversal of uncertain tax positions from the expiration of statutes of limitations was $9.4 million and $11.1 million, respectively.~~September 30, 2019.

As of ~~December 31~~September 30, 2020 and March 31, ~~2017,~~2020, the total amount of unrecognized tax benefits due to uncertain tax positions was ~~$67.3~~$152.5 million and ~~$63.7~~$140.8 million, respectively, all of which would affect the effective income tax rate if recognized.

~~The~~As of September 30, 2020 and March 31, 2020, the Company had ~~$34.4~~$54.5 million and $40.8 million, respectively, in non-current ~~income taxes payable and $0.1 million in current~~ income taxes payable including interest and penalties, related to ~~its~~the Company's income tax liability for uncertain tax positions as of December 31, 2017, compared to $51.8 million in non-current income taxes payable and $1.5 million in current income taxes payable as of March 31, 2017. The Company applied to a settlement program and paid $1.9 million to the tax authorities in a foreign jurisdiction in the third quarter of fiscal year 2018.positions.

The Company recognizes interest and penalties related to unrecognized tax positions in the income tax ~~expense.~~provision. As of ~~December 31~~September 30, 2020 and March 31, ~~2017,~~2020, the Company had ~~$2.1~~$4.8 million and ~~$3.0~~$4.5 million, respectively, of accrued interest and penalties related to uncertain tax ~~positions.~~

positions in non-current income taxes payable.

Although the Company has adequately provided for uncertain tax positions, the provisions onrelated to these positions may change as revised estimates are made or the underlying matters are settled or otherwise resolved. During fiscal year ~~2018,~~2021, the Company continues to review its tax positions and provide for or reverse unrecognized tax benefits as ~~issues~~they arise. During the next twelve months, it is reasonably possible that the amount of unrecognized tax benefits could increase or decrease significantly due to changes in tax law in various jurisdictions, new tax audits and changes in the U.S. dollar as compared to other currencies. Excluding these factors, uncertain tax positions may decrease by as much as ~~$21.4~~$4.7 million from the lapse of the statutes of limitations in various jurisdictions during the next twelve months.

Note 65 — Balance Sheet Components

The following table presents the components of certain balance sheet asset amounts as of ~~December 31~~September 30 and March 31, ~~2017~~2020 (in thousands):



	September 30, 2020			March 31, 2020
Accounts receivable, net:
Accounts receivable	$	973,523		$	597,939
Allowance for doubtful accounts	(1,358		)	(1,894		)
Allowance for sales returns	(10,487		)	(6,599		)
Allowance for cooperative marketing arrangements	(40,396		)	(38,794		)
Allowance for customer incentive programs	(63,051		)	(55,741		)
Allowance for pricing programs	(107,482		)	(100,168		)
	$	750,749		$	394,743
Inventories:
Raw materials	$	60,606		$	56,052
Finished goods	334,102			173,197
	$	394,708		$	229,249
Other current assets:
Value-added tax receivables	$	41,862		$	33,616
Prepaid expenses and other assets	52,891			41,304
	$	94,753		$	74,920
Property, plant and equipment, net:
Property, plant and equipment at cost	$	378,392		$	346,506
Accumulated depreciation and amortization	(292,006		)	(270,387		)
	$	86,386		$	76,119
Other assets:
Deferred tax assets	$	222,763		$	240,528
Right-of-use assets	31,386			25,557
Trading investments for deferred compensation plan	24,559			20,085
Investments in privately held companies	46,942			45,949
Other assets	13,747			12,900
	$	339,397		$	345,019

December 31,
2017 March 31,
2017
Accounts receivable, net:

Accounts receivable $ 668,811
$ 395,754
Allowance for doubtful accounts (233 ) (607 )
Allowance for sales returns (25,008 ) (18,800 )
Allowance for cooperative marketing arrangements * (44,033 ) (28,022 )
Allowance for customer incentive programs * (102,974 ) (60,857 )
Allowance for pricing programs * (144,810 ) (102,289 )
$ 351,753
$ 185,179
Inventories:

Raw materials $ 35,752
$ 30,582
Finished goods 243,227
222,819
$ 278,979
$ 253,401
Other current assets:

Value-added tax receivables $ 29,620
$ 23,132
Prepaid expenses and other assets 27,910
18,600
$ 57,530
$ 41,732
Property, plant and equipment, net:

Property, plant and equipment at cost $ 362,809
$ 348,760
Less: accumulated depreciation and amortization (275,908 ) (263,352 )
$ 86,901
$ 85,408
Other assets:

Deferred tax assets ** $ 86,518
$ 57,303
Trading investments for deferred compensation plan 17,998
15,043
Investments in privately held companies 11,969
10,776
Other assets 6,354
4,997
$ 122,839
$ 88,119

The following table presents the components of certain balance sheet liability amounts as of ~~December 31~~September 30 and March 31, ~~2017~~2020 (in thousands):



	September 30, 2020		March 31, 2020
Accrued and other current liabilities:
Accrued personnel expenses	$	105,159	$	104,423
Accrued sales return liability	28,990		30,267
Accrued customer marketing, pricing and incentive programs	143,597		130,220
Operating lease liability	12,868		10,945
Accrued freight and duty	27,954		13,284
Warranty accrual	27,303		25,905
Income taxes payable	40,884		8,823
Contingent consideration	29,000		23,284
Other current liabilities	126,222		107,873
	$	541,977	$	455,024
Other non-current liabilities:
Warranty accrual	$	14,479	$	14,134
Obligation for deferred compensation plan	24,559		20,085
Employee benefit plan obligations	63,837		61,303
Operating lease liability	23,017		19,536
Deferred tax liability	1,931		1,931
Other non-current liabilities	2,726		2,285
	$	130,549	$	119,274

December 31,
2017 March 31,
2017
Accrued and other current liabilities:

Accrued personnel expenses $ 73,124
$ 88,346
Indirect customer incentive programs * 69,921
36,409
Warranty accrual 15,640
13,424
Employee benefit plan obligation 2,164
1,266
Income taxes payable 4,387
6,232
Contingent consideration for business acquisition - current portion —
2,889
Other current liabilities 112,819
83,707
$ 278,055
$ 232,273
Other non-current liabilities:

Warranty accrual $ 10,624
$ 8,487
Obligation for deferred compensation plan 17,998
15,043
Employee benefit plan obligation 43,110
41,998
Deferred tax liability 1,789
1,789
Contingent consideration for business acquisition - non-current portion —
7,019
Other non-current liabilities 8,483
9,355
$ 82,004
$ 83,691

*The increases in the allowances for cooperative marketing arrangements, customer incentive programs, pricing programs and indirect customer incentive programs as of December 31, 2017 compared with March 31, 2017 were primarily the result of seasonality in the Company's business and increases in these marketing and promotional activities.

**The increase in deferred tax assets was primarily due to the adoption of ASU 2016-09 effective April 1, 2017, partially offset by the remeasurement of federal deferred tax assets as a result of the enactment of the Tax Act in the third quarter of fiscal year 2018. See "Note 5 - Income Taxes" for more information.

Note 76 — 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.

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, 2020						March 31, 2020
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Cash equivalents	$	301,090	$	0	$	0	$	564,952	$	0	$	0

Trading investments for deferred compensation plan included in other assets:
Cash	$	233	$	0	$	0	$	846	$	0	$	0
Common stock	1,388		0		0		0		0		0
Money market funds	8,650		0		0		7,147		0		0
Mutual funds	14,288		0		0		12,092		0		0
Total of trading investments for deferred compensation plan	$	24,559	$	0	$	0	$	20,085	$	0	$	0

Currency exchange derivative assets included in other current assets	$	0	$	1,836	$	0	$	0	$	129	$	0

Liabilities:
Contingent consideration for business acquisition included in accrued and other current liabilities	$	0	$	0	$	0	$	0	$	0	$	23,284
Currency exchange derivative liabilities included in accrued and other current liabilities	$	0	$	130	$	0	$	0	$	719	$	0

December 31, 2017 March 31, 2017
Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Assets:

Cash equivalents $ 402,983
$ —
$ —
$ 448,742
$ —
$ —

Trading investments for deferred compensation plan included in other assets:

Money market funds $ 4,229
$ —
$ —
$ 2,813
$ —
$ —
Mutual funds 13,769
—
—
12,230
—
—
Total of trading investments for deferred compensation plan $ 17,998
$ —
$ —
$ 15,043
$ —
$ —

Currency exchange derivative assets
included in other current assets $ —
$ 235
$ —
$ —
$ 48
$ —

Liabilities:
Acquisition-related contingent
consideration included in accrued and
other current liabilities and other non-current liabilities $ —
$ —
$ —
$ —
$ —
$ 9,908
Currency exchange derivative liabilities
included in accrued and other current liabilities $ —
$ 1,392
$ —
$ —
$ 443
$ —

The following table summarizes the ~~changes in fair value of the Company’s contingent consideration balance measured with Level 3 inputs during the three and nine months endedDecember 31, 2017 and 2016 (in thousands):~~

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Beginning of the period $ —
$ 18,000
$ 9,908
$ —
Fair value of contingent consideration upon acquisition —
—
—
18,000
Change in fair value of contingent consideration —
(9,925 ) (4,908 ) (9,925 )
Expected payment (see below) —
—
(5,000 ) —
End of the period $ —
$ 8,075
$ —
$ 8,075

~~Acquisition-related contingent consideration~~

On April 20, 2016 (the "Jaybird Acquisition Date"), the Company acquired all of the equity interests of Jaybird, LLC (“Jaybird”). The acquisition-related contingent consideration liability arising from the Jaybird acquisition represented the future potential earn-out payments of up to $45.0 million based on the achievement of certain net revenue targets over approximately a two-year period. If the net revenue targets were met, the Company would have paid a maximum of $25.0 million and $20.0 million in fiscal years 2018 and 2019, respectively. The fair value of the earn-out as of the Jaybird Acquisition Date was $18.0 million, which was determined by using a Monte Carlo Simulation that includes significant unobservable inputs such as a risk-adjusted discount rate of 16% and projected net sales of Jaybird over the earn-out period. The fair value was remeasured at each reporting period based on the inputs on the date of remeasurement, with the change in fair value recognized as "change in fair value of contingent consideration for business acquisition" in the operating expense section in the condensed consolidated statements of operations. Projected net sales were based on the Company's internal projections, including analysis of the target markets. In October 2017, before the issuance of the condensed financial statements for the three months ended September 30, 2017, the Company and the sellers of Jaybird entered into an agreement fully, irrevocably and unconditionally releasing the Company from the earn-out rights and payments in exchange for $5.0 million in cash, which approximated the fair value of the Company's contingent consideration ~~as of~~balance during the six months ended September 30, ~~2017.~~2020 (in thousands):



	Six Months Ended September 30, 2020
Beginning of the period	$	23,284
Change in fair value of contingent consideration	5,716
End of the period (1)	$	29,000

(1) As ~~a result,~~of June 30, 2020, the

~~contingent consideration~~ earn-out period was ~~transferred out from financial liability with Level 3 inputs as~~completed. The earn-out payment of ~~September 30, 2017 as~~$29.0 million is based on the actual net sales of Streamlabs services and no longer subject to fair value measurement and was ~~no longer required.~~ accordingly transferred out of Level 3.The ~~Company paid~~expected earn-out payment is included in the ~~$5.0 million in November 2017~~accrued and ~~included~~other current liabilities of the ~~same as financing activities on its~~unaudited condensed consolidated ~~statements of cash flows.~~balance sheet.

Investment Securities

The marketable securities for the Company's deferred compensation plan ~~are~~were recorded at a fair value of ~~$18.0~~$24.6 million and ~~$15.0~~$20.1 million, ~~respectively,~~ as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017,~~2020, respectively, based on quoted market prices. Quoted market prices are observable inputs that are classified as Level 1 within the fair value hierarchy. Unrealized ~~trading~~ gains (losses) related to trading securities for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were not material and are included in other income, ~~(expense),~~ net in the Company's condensed consolidated statements of operations.

Contingent Consideration for Business Acquisition

On October 31, 2019 (the "Streamlabs Acquisition Date"), the Company acquired all of the equity interests of General Workings, Inc. ("Streamlabs"). The contingent consideration for business acquisition arising from the Streamlabs Acquisition represents the future potential earn-out payments of $29.0 million payable in stock only upon the achievement of certain net sales for the period beginning on January 1, 2020 and ending on June 30, 2020. The fair value of the earn-out as of the Streamlabs Acquisition Date was $0.04 million, and increased to $23.3

million as of March 31, 2020, which was determined by using a Black-Scholes-Merton valuation model to calculate the probability of the earn-out threshold being met and times the value of the earn-out payment, and discounted at the risk-free rate. The valuation included significant assumptions and unobservable inputs such as the projected sales of Streamlabs over the earn-out period, the risk-free rate, and the net sales volatility. The fair value was increased by $5.7 million to $29.0 million as of June 30, 2020, based on actual sales. The fair value of the contingent consideration no longer needs to be remeasured at each reporting period, as the earn-out period has been completed.

Equity Method Investments

The Company has certain non-marketable investments included in other assets that are accounted for under the equity method of accounting, with a carrying value of $42.3 million and $42.1 million as of September 30, 2020 and March 31, 2020, respectively. There was 0 impairment of these assets during the three and six months ended September 30, 2020 or 2019.

Other Assets Measured at Fair Value on a Nonrecurring Basis

Financial Assets. The ~~Company’s non-marketable cost method~~Company has certain investments ~~and non-financial assets, such as goodwill, intangible assets and property, plant and equipment, are recorded at~~without readily determinable fair ~~value only upon initial recognition or if an impairment is recognized. There were no material impairments of long-lived assets during the three and nine months ended December 31, 2017 or 2016.~~

~~Non-marketable cost method investments.~~ ~~These investments are classified as Level 3~~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 ~~primary investment included in non-marketable investments~~carrying value is also adjusted for observable price changes with a same or similar security from the ~~Company’s investment in Series A Preferred Stock of Lifesize Inc. ("Lifesize") recorded at the fair value of $5.6 million on the date of the Lifesize divestiture.~~

same issuer. The ~~aggregate recorded~~ amount of ~~cost method~~these investments included in other assets was immaterial as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020. There was ~~$7.1 million~~0 impairment of these assets during the three and ~~$7.4 million, respectively.~~six months ended September 30, 2020 or 2019.

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 certain triggering events occur (or tested at least annually for goodwill) such that a non-financial instrument is required to be evaluated for impairment and an impairment is recorded to reduce the non-financial instrument's carrying value to the fair value as a result of such triggering events, the non-financial assets and liabilities are measured at fair value for the period such triggering events occur. There was no impairment of these assets during the three and six months ended September 30, 2020 or 2019.

Note 87 — 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 on the condensed consolidated balance sheets as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017.~~2020.

The fair ~~values~~value of the Company’s derivative instruments ~~not designated as hedging instruments were~~was not material as of ~~December 31, 2017~~September 30, 2020 or March 31, 2017. The following table presents the fair values of the Company’s derivative instruments designated as hedging instruments on a gross basis in other current assets or accrued and other current liabilities on its condensed consolidated balance sheets as of December 31, 2017 and March 31, 2017 (in thousands):

Derivatives
Asset Liability
December 31,
2017 March 31,
2017 December 31,
2017 March 31,
2017
Cash flow hedges $ 235
$ 48
$ 1,327
$ 402

2020. The amount of gain (loss) recognized on derivatives not designated as hedging instruments was not material in all periods presented herein. The following table presents the amounts of gains (losses) on the Company’s derivative instruments designated as hedging instruments and their locations on its condensed consolidated statements of operations and condensed consolidated statements of comprehensive income for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 (in thousands):



	Three Months Ended September 30,
	Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss					Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold
	2020			2019		2020		2019
Cash flow hedges	$	(1,059	)	$	2,380	$	1,969	$	(132	)

Three Months Ended
December 31,
Amount of Gain (Loss)
Deferred as a Component of Accumulated
Other Comprehensive Loss Amount of Loss (Gain)
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
2017 2016 2017 2016
Cash flow hedges $ (677 ) $ 2,497
$ 2,248
$ (463 )



	Six Months Ended September 30,
	Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss					Amount of Loss (Gain) Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold
	2020			2019		2020		2019
Cash flow hedges	$	(3,426	)	$	1,437	$	1,639	$	(358	)

Nine Months Ended
December 31,
Amount of Gain (Loss)
Deferred as a Component of Accumulated
Other Comprehensive Loss Amount of Loss
Reclassified from Accumulated Other Comprehensive Loss to
Costs of Goods Sold
2017 2016 2017 2016
Cash flow hedges $ (6,026 ) $ 4,026
$ 5,377
$ 432

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 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 hedging contract is no longer eligible for hedge accounting, or is sold, terminated or exercised, or when 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. In all periods presented herein, there have been no forecasted inventory purchases that were probable to 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 ~~$135.0 million and $59.4~~$155.5 million as of ~~December 31, 2017~~September 30, 2020 and $48.0 million as of March 31, ~~2017, respectively.~~2020. The Company ~~estimates that $1.2~~had $2.0 million of net losses related to its cash flow hedges included in accumulated other comprehensive loss as of ~~December 31, 2017~~September 30, 2020, which will be reclassified into earnings within the next 12 months.

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 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 recognized 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 ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020 were ~~$89.0~~$86.5 million and ~~$56.7~~$64.7 million, respectively. Open forward and swap contracts outstanding as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017~~2020 consisted of contracts in Mexican Pesos, Japanese Yen, ~~British Pounds, Taiwanese Dollars,~~ Canadian Dollars, ~~Australian~~Taiwan New Dollars and ~~Chinese Renminbi~~Australian Dollars to be settled at future dates at pre-determined 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 98 — Goodwill and Other Intangible Assets

The Company conducts its impairment analysis of ~~the~~ goodwill annually at December 31 and as necessary, if changes in facts and circumstances indicate that it is more likely than not that the fair value of the Company’s reporting ~~units~~unit may be less than its carrying amount.

~~The Company performed its annual impairment analysis of~~ There have been no events or circumstances during the ~~goodwill as of December 31, 2017 by performing a qualitative assessment and concluded~~six months ended September 30, 2020 that ~~it was more likely than not that the fair value of its peripherals reporting unit, the only reportable segment of~~have required the Company ~~exceeded its carrying amount. In assessing the qualitative factors, the Company considered the impact~~to perform an interim assessment of ~~the following key factors: change in industry and competitive environment, growth in the Company's market capitalization and budgeted-to-actual revenue performance from the last twelve months.~~goodwill.

The following table summarizes the activities in the Company’s goodwill balance during the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 (in thousands):



As of March 31, 2020	$	400,917
Currency translation	36
As of September 30, 2020	$	400,953

As of March 31, 2017 $ 249,741
Business acquisitions 25,800
Currency translation 22
As of December 31, 2017 $ 275,563

The Company's acquired intangible assets subject to amortization were as follows (in thousands):


	December 31, 2017							March 31, 2017							September 30, 2020							March 31, 2020
	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
Trademark and trade names	$	23,790	$	(8,719	)	$	15,071	$	16,500	$	(6,933	)	$	9,567	$	45,570	$	(22,097	)	$	23,473	$	45,570	$	(19,061	)	$	26,509
Developed Technology	76,875		(48,352		)	28,523		63,285		(42,831		)	20,454
Developed technology															118,807		(83,481		)	35,326		118,807		(77,126		)	41,681
Customer contracts/relationships	59,760		(10,983		)	48,777		25,180		(7,637		)	17,543		90,610		(37,707		)	52,903		90,610		(31,859		)	58,751
Total	$	160,425	$	(68,054	)	$	92,371	$	104,965	$	(57,401	)	$	47,564	$	254,987	$	(143,285	)	$	111,702	$	254,987	$	(128,046	)	$	126,941

Note 109 — Financing Arrangements

The Company had several uncommitted, unsecured bank lines of credit aggregating ~~$62.1~~$84.2 million as of ~~December 31, 2017.~~September 30, 2020. There are no financial covenants under these lines of credit with which the Company must comply. As of ~~December 31, 2017,~~September 30, 2020, the Company had outstanding bank guarantees of ~~$44.2~~$22.9 million under these lines of credit. There was no0 borrowing outstanding under these lines of credit as of ~~December 31, 2017~~September 30, 2020 or March 31, ~~2017.~~2020.

Note 1110 — Commitments and Contingencies

Product Warranties

~~All of the Company’s peripherals products sold are covered by warranty to be free from defects in material and workmanship. The warranty period varies by product and by region.~~

Changes in the Company’s warranty liability for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (in thousands):



	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Beginning of the period	$	39,450		$	35,814		$	40,039		$	34,229
Provision	9,494			8,509			14,883			17,044
Settlements	(7,541		)	(6,727		)	(13,702		)	(13,704		)
Currency translation	379			(374		)	562			(347		)
End of the period	$	41,782		$	37,222		$	41,782		$	37,222

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Beginning of the period $ 24,349
$ 21,612
$ 21,911
$ 20,380
Assumed from business acquisition —
—
1,230
1,963
Provision 7,820
4,521
17,535
10,861
Settlements (6,050 ) (3,550 ) (15,229 ) (10,430 )
Currency translation 145
(462 ) 817
(653 )
End of the period $ 26,264
$ 22,121
$ 26,264
$ 22,121

~~Guarantees~~

Logitech Europe S.A., one of our wholly-owned subsidiaries, guaranteed payments of certain third-party contract manufacturers’ purchase obligations. As of December 31, 2017, the maximum amount of this guarantee was $3.8 million, of which $1.7 million of guaranteed purchase obligations were outstanding.

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 ~~December 31, 2017, no~~September 30, 2020, 0 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.

The stock purchase agreement entered on December 28, 2015 in connection with the investment by three venture capital firms in Lifesize contains representations, warranties and covenants of Logitech and Lifesize, Inc. to the Investors. Logitech has agreed, subject to certain limitations, to indemnify the Investors and certain persons related to the Investors for certain losses resulting from breaches of or inaccuracies in such representations, warranties and covenants as well as certain other obligations, including third-party expenses, restructuring costs and pre-closing tax obligations of Lifesize.

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 a small number of legal proceedings. The Company believes that these matters lack merit and intends to vigorously defend against them. 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 or 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 or results of operations in a particular period. Any claims or proceedings against the Company, whether meritorious or not, 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 1211 — Shareholders’ Equity

Share Repurchase Program

In March 2014, the Company’s Board of Directors approved the 2014 share buyback program, which authorizes the Company to use up to $250.0 million to purchase its own shares. This share buyback program expired in April 2017.

In March 2017, the Company's Board of Directors approved the 2017 share buyback program, which ~~authorizes~~authorized the Company to use up to $250.0 million to purchase up to 17.3 million shares of ~~its own shares following the expiration date of the 2014~~Logitech shares. This share buyback ~~program.~~program expired in April 2020. The Company did not repurchase any of its registered shares during April 2020.

In May 2020, the Company's Board of Directors approved the 2020 share buyback program, which authorized the Company to use up to $250.0 million to purchase up to 17.3 million of Logitech shares. The Company's share buyback program is expected to remain in effect for a period of three years. 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. As of September 30, 2020, $227.6 million is still available for repurchase under the 2020 buyback program.

Dividends

During the ~~nine~~three and six months ended ~~December 31, 2017 and 2016, 0.6 million and 3.3 million shares, respectively, were repurchased for $20.4 million and $63.8 million, respectively.~~

~~Cash Dividend on Shares of Common~~

~~During the nine months ended December 31, 2017,~~September 30, 2020, the Company declared and paid cash dividends of CHF ~~0.61~~0.79 (USD equivalent of ~~$0.63)~~$0.87) per ~~common~~ share, totaling ~~$104.2~~$146.7 million on the Company's outstanding ~~common stock.~~shares. During the ~~nine~~three and six months ended ~~December 31, 2016,~~September 30, 2019, the Company declared and paid cash dividends of CHF ~~0.56~~0.73 (USD equivalent of ~~$0.57)~~$0.74) per ~~common~~ share, totaling ~~$93.1~~$124.2 million on the Company's outstanding ~~common stock.~~shares.

Any future dividends will be subject to ~~the~~ approval of the Company's shareholders.

Additional Authorized and Conditional Shares

The Company has reserved conditional capital of 25,000,000 shares for potential issuance on the exercise of rights granted under the Company's employee equity incentive plans and additional conditional capital for financing purposes, representing the issuance of up to 25,000,000 shares to cover any conversion rights under a future convertible bond issuance. At the 2018 Annual General Meeting, the shareholders of the Company authorized the Board of Directors to issue up to an additional 34,621,324 shares of the Company until September 5, 2020, which authority expired on that date. At the 2020 Annual General Meeting, the shareholders of the Company authorized the Board of Directors to issue up to an additional 17,310,662 shares of the Company until September 9, 2022.

Accumulated Other Comprehensive Income (Loss)

The accumulated other comprehensive income (loss) was as follows (in thousands):



	Accumulated Other Comprehensive Income (Loss)
	Cumulative Translation Adjustment			Defined Benefit Plan			Deferred Hedging Losses			Total
March 31, 2020	$	(100,418	)	$	(20,016	)	$	(226	)	$	(120,660	)
Other comprehensive income (loss)	2,706			889			(1,787		)	1,808
September 30, 2020	$	(97,712	)	$	(19,127	)	$	(2,013	)	$	(118,852	)

Accumulated Other Comprehensive Income (Loss)
Cumulative
Translation
Adjustment (1) Defined
Benefit
Plan (1) Deferred
Hedging
Losses Total
March 31, 2017 $ (89,708 ) $ (10,480 ) $ (518 ) $ (100,706 )
Other comprehensive income (loss) 5,176
1,012
(649 ) 5,539
December 31, 2017 $ (84,532 ) $ (9,468 ) $ (1,167 ) $ (95,167 )

~~(1)Tax effect was not significant as of December 31 or March 31, 2017.~~

Note 1312 — Segment Information

The Company has determined that it operates in a single operating segment that encompasses the design, manufacturing and marketing of peripherals for PCs, tablets and other digital platforms. Operating performance measures are provided directly to the Company's ~~Chief Executive Officer (“CEO”),~~CEO, who is considered to be the Company’s Chief Operating Decision ~~Maker (“CODM”).~~Maker. The CEO periodically reviews information such as ~~net~~ sales and adjusted operating income (loss) to make business decisions. These operating performance measures do not include restructuring charges (credits), net, share-based compensation expense, amortization of intangible assets, charges from the purchase accounting effect on inventory, acquisition-related costs ~~investigation and related expenses,~~ or change in fair value of contingent consideration from business acquisition.

~~Net sales~~Sales by product categories and sales channels, excluding intercompany transactions, for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (in thousands):


	Three Months Ended December 31,				Nine Months Ended December 31,				Three Months Ended September 30,				Six Months Ended September 30,
	2017		2016		2017		2016		2020		2019		2020		2019
Pointing Devices	$	140,983	$	142,166	$	386,700	$	382,249	$	169,121	$	132,770	$	289,590	$	254,753
Keyboards & Combos	126,372		125,289		361,685		359,824		201,617		139,049		346,977		267,728
PC Webcams	27,280		30,503		80,371		80,072		102,469		28,748		163,320		56,876
Tablet & Other Accessories	26,648		24,852		80,650		59,351		83,086		33,847		129,134		72,186
Gaming									297,711		161,014		479,614		295,529
Video Collaboration	46,252		35,807		128,008		88,298		236,704		89,553		366,778		162,977
Mobile Speakers	147,377		106,578		300,843		261,046		43,581		57,232		72,590		107,648
Audio-PC & Wearables	84,435		67,225		197,082		186,058
Gaming	173,802		107,181		365,232		242,874
Audio & Wearables									114,275		68,018		185,640		126,642
Smart Home	38,692		26,942		73,481		49,916		8,573		9,434		15,383		19,298
Other (1)	180		164		385		1,187		21		26		26		279
Total net sales	$	812,021	$	666,707	$	1,974,437	$	1,710,875
Total sales									$	1,257,158	$	719,691	$	2,049,052	$	1,363,916

(1) Other category includes products that the Company currently intends to ~~transition~~phase out, ~~of,~~ or has already ~~transitioned~~phased out, ~~of,~~ because they are no longer strategic to the Company's business.

~~Net sales~~Sales by geographic region (based on the customers’ locations) for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (in thousands):



	Three Months Ended September 30,				Six Months Ended September 30,
	2020		2019		2020		2019
Americas	$	542,319	$	296,837	$	898,503	$	590,282
EMEA	389,578		231,981		600,349		411,087
Asia Pacific	325,261		190,873		550,200		362,547
Total sales	$	1,257,158	$	719,691	$	2,049,052	$	1,363,916

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Americas $ 380,130
$ 290,724
$ 887,523
$ 753,179
EMEA 253,767
233,251
622,681
576,809
Asia Pacific 178,124
142,732
464,233
380,887
Total net sales $ 812,021
$ 666,707
$ 1,974,437
$ 1,710,875

Sales are attributed to countries on the basis of the customers’ locations.

The United States and Germany each represented 10% or more ~~than 10%~~ of the total consolidated ~~net~~ sales for each of the periods presented herein. No other countries represented 10% or more ~~than 10%~~ of the Company’s total consolidated ~~net~~ sales for the periods presented herein.

Switzerland, the Company’s home domicile, represented 1%3% and 2% of the ~~Company’s~~Company's total consolidated ~~net~~ sales for the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, respectively, and 2%represented 4% and 3% of the Company's total consolidated sales for ~~each of~~ the three and ~~nine~~six months ended~~December 31, 2016.~~ September 30, 2019, respectively.

Two ~~customer groups~~customers of the Company each represented 10% or more ~~than 10%~~ of the total consolidated ~~net~~ sales for each of the periods presented herein.

Property, plant and equipment, net by geographic region were as follows (in thousands):



	September 30, 2020		March 31, 2020
Americas	$	23,080	$	26,636
EMEA	6,257		5,052
Asia Pacific	57,049		44,431
Total property, plant and equipment, net	$	86,386	$	76,119

December 31,
2017 March 31,
2017
Americas $ 36,688
$ 37,242
EMEA 4,604
4,006
Asia Pacific 45,609
44,160
Total Property, plant and equipment, net $ 86,901
$ 85,408

Property, plant and equipment, net in the United States and China were ~~$36.6~~$22.9 million and ~~$37.8~~$48.9 million, respectively, as of ~~December 31, 2017,~~September 30, 2020, and ~~$37.1~~$26.5 million and ~~$37.2~~$36.6 million, respectively, as of March 31, ~~2017.~~2020. No other countries represented 10% or more ~~than 10%~~ of the Company’s total consolidated property, plant and equipment, net as of ~~December 31, 2017~~September 30, 2020 or March 31, ~~2017.~~2020. Property, plant and equipment, net in Switzerland, the Company’s home domicile, were ~~$2.0~~$3.7 million and ~~$2.1~~$2.3 million as of ~~December 31, 2017~~September 30, 2020 and March 31, ~~2017,~~2020, respectively.

Note 13 — Subsequent Event

During October 2020, Logitech issued or reserved 397,763 shares out of treasury shares to former security holders of Streamlabs related to the achievement of certain net sales milestones during the earn-out period of contingent consideration in connection with the business acquisition. The issuances of such shares were deemed to be exempt from registration under the Securities Act, in reliance on Regulation D of the Securities Act as transactions by an issuer not involving a public offering.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion in conjunction with the interim unaudited condensed consolidated financial statements and related notes.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include, among other things, statements regarding our strategy for growth, future revenues, earnings, cash flow, uses of cash and other measures of financial performance, and market position, our business strategy, the impact of investment prioritization decisions, product offerings, sales and marketing initiatives, strategic investments, addressing execution challenges, trends in consumer demand affecting our products and markets, trends in the composition of our customer base, our current or future revenue and revenue mix by product, among our lower- and higher-margin products and by geographic region, our new product introductions, ~~and by geographic region,~~ our expectations regarding the potential growth opportunities for our products in mature and emerging markets and the enterprise market, our expectations regarding the impact of COVID-19 on our business and results of operations, our expectations regarding economic conditions in international markets, including China, Russia and Ukraine, our expectations regarding trends in global economic conditions and consumer demand for PCs and mobile devices, tablets, gaming, video collaboration, audio, pointing devices, wearables, remotes, microphones, streaming and other accessories and computer devices and related software and services, the interoperability of our products with ~~such~~ third party platforms, our expectations regarding the convergence of markets for computing devices and consumer electronics, our expectations regarding the growth of cloud-based services, our ~~expected reduction in size of our product portfolio and~~ dependence on new products, our competitive position and the effect of pricing, product, marketing and other initiatives by us and our competitors, the potential that our new products will overlap with our current products, our expectations regarding competition from well-established consumer electronics companies in existing and new markets, potential tariffs, their effects and our ability to mitigate their effects,our expectations regarding the recoverability of our goodwill, goodwill impairment charge estimates and the potential for future impairment charges, the impact of our current and proposed product divestitures, changes in our planned divestitures, restructuring of our organizational structure and the timing thereof, our expectations regarding the success of our strategic acquisitions, including integration of acquired operations, products, technology, internal controls, personnel and management teams, significant fluctuations in currency exchange rates and commodity prices, the impact of new product introductions and product innovation on future performance or anticipated costs and expenses and the timing thereof, ~~resolution of our North American distribution center issues,~~ cash flows, the sufficiency of our cash and cash equivalents, cash generated and available borrowings (including the availability of our uncommitted lines of credit) to fund future cash requirements, our expectations regarding future sales compared to actual sales, our expectations regarding share repurchases, dividend payments and share cancellations, our expectations regarding our future working capital requirements and our anticipated capital expenditures needed to support our product development and expanded operations, our expectations regarding our future tax benefits, tax settlements, the adequacy of our provisions for uncertain tax positions, ~~the impact of the Tax Cuts and Jobs Act on our overall effective income tax rate,~~ our expectations regarding our potential indemnification obligations, and the outcome of pending or future legal proceedings and tax audits, our remediation efforts to address our material weaknesses, our belief that our disclosure controls and procedures will become effective at the reasonable assurance level by the end of fiscal year 2018, our expectations regarding the impact of new accounting pronouncements on our operating results, and our ability to achieve and sustain renewed growth, profitability and future success. Forward-looking statements also include, among others, those statements including the words “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “project,” “predict,”, "seek", “should,” “will,” and similar language. These forward-looking statements involve risks and uncertainties that could cause our actual performance to differ materially from that anticipated in the forward-looking statements. Factors that might cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. We undertake no obligation to publicly release any revisions to the forward-looking statements or reflect events or circumstances after the date of this document.

Overview of Our Company

Logitech is a world leader in designing, manufacturing and marketing products that ~~have an everyday place in people's lives, connecting them~~help connect people to ~~the~~ digital ~~experiences they care about.~~and cloud experiences. More than 35 years ago, Logitech created products to improve experiences around the PCpersonal computer (PC) platform, and ~~now~~today it is a multi-brand, multi-category company designing products that enable better experiences when consuming, sharing and creating ~~any~~ digital content ~~(e.g.,~~such as computing, gaming, video and music, ~~gaming, video),~~ whether it is on a computer, mobile device or in the cloud. Logitech's brands include Logitech, ~~Jaybird, ASTRO,~~ Logitech G, ASTRO Gaming, Streamlabs, Ultimate Ears, Jaybird, and ~~Ultimate Ears.~~Blue Microphones. Our Company's website is www.logitech.com.

Our products participate in five large ~~markets that all have growth~~market opportunities: ~~Music,~~Creativity & Productivity, Gaming, Video Collaboration, Music and Smart ~~Home and Creativity & Productivity.~~Home. We sell our products to a broad network of domestic and international customers, including direct sales to retailers and e-tailers, and indirect sales through distributors. Our worldwide channel network includes consumer electronics distributors, retailers, mass merchandisers, specialty ~~electronics~~ stores, computer and telecommunications stores, value-added resellers and online merchants.

From time to time, we may seek to partner with or acquire, when appropriate, companies that have products, personnel, and technologies that complement our strategic direction. We continually review our product offerings and our strategic direction in light of our profitability targets, competitive conditions, changing consumer trends and the evolving nature of the interface between the consumer and the digital world.

~~On August 11, 2017 (the "Acquisition Date"~~Impacts of COVID-19 to Our Business

In March 2020, the World Health Organization declared the outbreak of a novel coronavirus ("COVID-19") as a pandemic, which continues to spread throughout the world. The spread of COVID-19 has caused public health officials to recommend precautions to mitigate the spread of the virus and, in certain markets in which we operate, government authorities have issued orders that require the closure of non-essential businesses and people to be quarantined or to shelter-at-home. The COVID-19 pandemic has significantly curtailed global economic activity, caused significant volatility and disruption in global financial and commercial markets, and is likely to lead to recessionary pressures for an indeterminate amount of time. We are conducting our business with substantial modifications, such as employee remote work and travel limitations among other changes. We are continuing to actively monitor the situation and may take further actions that could alter our business operations as may be required by federal, state or local authorities in the countries in which we operate, or that we determine are in the best interest of our employees, customers, partners, suppliers or shareholders. It is not clear what the potential effects of COVID-19 or any such modifications or alterations may have on our business, results of operations, financial operations, financial condition and stock price.

During February 2020, following the initial outbreak of COVID-19 in China, we experienced disruptions to our manufacturing, supply chain and logistics services, resulting in temporary inventory declines and an increase in logistics costs. We continued to see disruptions to our supply chain and logistics services, inventory constraints and increased logistics costs during the remainder of the fourth quarter of fiscal year 2020 and the first and second quarters of fiscal year 2021 as we attempted to address the effects of COVID-19, including health-related issues, changing regulations, and increased demand for and depleted inventories of some of our products. At the same time, due to the ongoing shelter-at-home requirements or recommendations in many countries, there has been acceleration of the work-from-home, study-from-home, gaming, video collaboration and streaming trends and high demand and consumption of certain of our products that have led to increased sales and operating income. While it is not yet clear how long the positive demand dynamics will continue, we expect the increased logistics costs and other adverse effects on our gross margins from COVID-19 to continue through the remainder of fiscal year 2021. It is difficult to predict the progression, the duration and all of the effects of COVID-19, when business closure and shelter-at-home guidelines may be eased or lifted, and how consumer demand, inventory and logistical effects and costs may evolve over time, or the impact on our future sales and results of operations. Some of this impact will undoubtedly occur over multiple financial periods and may have a lag effect between periods, such as what we are able to manufacture in one period affecting sales, channel inventory or logistics costs in subsequent periods. The full extent of the impact of COVID-19 on our business and our operational and financial performance is currently uncertain and will depend on many factors outside our control. For additional information, see "Liquidity and Capital resources" below and "Item IA: Risk Factors", ~~we acquiredcertain assets~~including under the caption "The full effect of the COVID-19 pandemic is uncertain and ~~liabilities constituting~~cannot be predicted, and the ~~ASTRO Gaming~~Company's business, ~~("ASTRO") from AG Acquisition Corporation for a purchase price~~results of ~~$85.0 million in cash (the "ASTRO Acquisition"). ASTRO is a leading console gaming brand with a history of producing award-winning headsets for professional gamers~~operations and ~~enthusiasts.~~

financial condition could be adversely affected by the COVID-19 pandemic."

Summary of Financial Results

Our ~~net~~total sales for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 increased ~~22%~~75% and ~~15%~~50%, respectively, compared to the three and ~~nine~~six months ended~~December 31, 2016,~~September 30, 2019, due to stronger ~~net~~ sales across all ~~regions.~~regions and several of our product categories from increased remote work and distance learning trends, related to various shelter-at-home mandates, as well as gaming from home, as a result of COVID-19. The results of operations for ~~ASTRO~~Streamlabs have been included in our ~~condensed~~ consolidated ~~statements~~statement of operations from the ~~Acquisition Date. The ASTRO business is highly seasonal and it typically generates approximately half of its fiscal year sales in the third quarter.~~acquisition date.

~~For the three and nine months ended~~December 31, 2017, ASTRO contributed $33.5 million and $36.2 million to net sales, respectively, representing approximately 4% of our net sales for the three-month period and 2% for the nine-month period. For the nine months ended~~December 31, 2017, Saitek, which was acquired on September 15, 2016, contributed $8.4 million of sales increase, compared with the nine months endedDecember 31, 2016.~~

Our ~~net~~ sales for the three months ended ~~December 31, 2017~~September 30, 2020 increased ~~31%~~83%, 9%68%, and ~~25%~~70% in the Americas, EMEA and Asia Pacific, respectively, compared to the same period of the prior fiscal year. Our ~~net~~ sales for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 increased ~~18%~~52%, 8%46%, and ~~22%~~52% in the Americas, EMEA and Asia Pacific, respectively, compared to the same period of the prior fiscal year.

Given our global sales presence and the reporting of our financial results in U.S. Dollars, our financial results could be affected by shifts in currency exchange rates. See “Results of Operations” for information on the effect of currency exchange results on our net sales. If the U.S. Dollar becomes stronger or weaker in comparison to other currencies, it will also affect our results of operations in future periods.

We added a new third-party logistics provider and distribution center in North America in the second half of the second quarter of fiscal year 2018 to support our growth. We experienced significant challenges in the transition from one distribution center to two, operating procedures at the newer distribution center, and in ramping fulfillment in the second quarter and early third quarter of fiscal year 2018. As a result, we incurred additional cost on freight and warehouse-related expense. We have started transition back to only one distribution center for North America and the process is expected to be completed during the fourth quarter of fiscal year 2018.

Our gross margin for the three months ended ~~December 31, 2017 decreased~~September 30, 2020 increased by 750 basis points to ~~33.9%~~45.3% from ~~37.0%~~37.8% for the three months ended December 31, 2016. Approximately 150 basis points of the decrease in gross margin was driven by an increase in logistics costs including additional costs from the transition of the distribution center in North America and the remaining decrease was primarily due to an increase in promotions related to product transition, and product mix, partially offset by lower variable compensation based on operational metrics.

September 30, 2019. Our gross margin for the ~~nine~~six months ended ~~December 31, 2017 decreased~~September 30, 2020 increased by 520 basis points to ~~35.3%~~42.7% from ~~36.4%~~37.5% for the ~~nine~~six months ended ~~December 31, 2016. The decrease in~~September 30, 2019. Our gross margin ~~was primarily driven by an increase in logistics costs including additional costs~~for both periods benefited from ~~the transition of the distribution center in North America, an increase in promotions related to product transition,~~higher sales volume, continued restrained promotional spending, and favorable product mix, ~~partially~~which more than offset ~~by product cost reductions~~the higher logistics operations costs and ~~lower variable compensation based on operational metrics in the recent quarter.~~unfavorable currency exchange rates.

Operating expenses for the three months ended ~~December 31, 2017~~September 30, 2020 were ~~$175.3~~$248.2 million, or ~~21.6%~~19.7% of ~~net~~ sales, compared to ~~$150.5~~$204.0 million, or ~~22.6%~~28.3% of ~~net~~ sales in the same period of the prior fiscal year.

Operating expenses for the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 were ~~$506.4~~$470.5 million, or ~~25.6%~~23.0% of ~~net~~ sales, compared to ~~$446.7~~$395.5 million, or ~~26.1%~~29.0% of ~~net~~ sales in the same period of the prior fiscal year. The increase for the three-month period was primarily driven by higher external expenses to support the advertising and marketing efforts for our new products, higher personnel related cost due to additional headcount from ASTRO Acquisition, and a credit from change in fair value of contingent consideration from the Jaybird Acquisition in the prior year, partially offset by lower variable compensation for fiscal year 2018 based on operational metrics. The increase for the nine-month period was mainly due to increases in marketing and selling expenses and research and development expenses from higher personnel-related costs due to increased headcount and higher external expenses to support the advertising and marketing efforts for our new products, in addition to a lower credit from the change in fair value of contingent consideration for business acquisition, partially offset by lower variable compensation based on operational metrics.

We recorded an income tax charge of $19.9 million from the provisional remeasurement of federal deferred tax assets and liabilities as of December 31, 2017 to reflect the effects of the enacted changes in tax rate and a provisional income tax benefit of $4.1 million from the reduction in federal valuation allowance against tax credits as a result of the tax reform.

Net income for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 was ~~$80.8~~$266.9 million and ~~$174.1~~$339.0 million, respectively, compared to ~~$97.5~~$72.9 million and ~~$166.5~~$118.3 million for the three and ~~nine~~six months ended ~~December 31, 2016,~~September 30, 2019, respectively.

Trends in Our Business

Our ~~strategy focuses on~~products participate in five large multi-category ~~markets,~~market opportunities, including ~~Music,~~Creativity & Productivity, Gaming, Video Collaboration, Music and Smart ~~Home and Creativity & Productivity.~~Home. We see opportunities to deliver growth with products in all these markets.

~~We believe our future growth will be determined by our ability to rapidly create innovative products across multiple digital platforms, including gaming, digital music devices, video and computing.~~ The following discussion represents key trends specific to our market opportunities.

Trends Specific to Our Five Market Opportunities

~~Music:~~ The music market grew during the first nine months of fiscal year 2018, driven by growing consumption of music through mobile devices such as smartphones and tablets. According to the Recording Industry Association of America (RIAA), revenues from streaming music platforms grew significantly in the first nine months of 2017. This market growth, together with our investments in the Ultimate Ears and Jaybird brands, new channel expansion, integration of personal voice assistants, such as Google Home and Amazon Alexa, and our new product introductions, has driven our growth in this market. The integration of personal voice assistants has become increasingly competitive in the speaker categories.

~~Gaming:~~ The PC gaming and console gaming platforms continue to show strong growth as online gaming, multi-platform experiences, and eSports gain greater popularity and gaming content becomes increasingly more demanding. We believe Logitech is well positioned to benefit from the PC gaming market growth. With the ASTRO Acquisition, we are also strengthening our portfolio in adjacent categories, such as the console gaming market.

~~Video Collaboration:~~ The near and long-term structural growth opportunities in the video collaboration market is still significant. We are continuing our efforts to create and sell innovative products to accommodate the increasing demand from medium-sized meeting rooms to small-sized rooms such as huddle rooms. We will continue to invest in select business-specific products, targeted product marketing and sales channel development.

~~Smart Home:~~ This market increased in fiscal year 2017 and has continued to grow in the first nine months of fiscal year 2018. In October 2016, we integrated Amazon Alexa and Google Assistant voice capabilities into our Logitech Harmony Hub that enables voice control of the living room entertainment experience when used with an Amazon Echo or Echo Dot or a Google Home device. Our Ultimate Ears MEGABLAST and BLAST come with Amazon Alexa built-in, featuring voice-controlled music and the full range of Alexa’s skills. Through Harmony, Alexa can turn on/off and control a TV and AV system. We have also seen success with the professional installer channel

~~through the recent introduction of the Harmony Pro. We will continue to explore other innovative experiences for the Smart Home.~~

Creativity & Productivity: ~~Although new~~ New PC shipments ~~continue~~have been strong recently due to ~~decline, the installed base of PC users remains large.~~work-from-home and study-from-home trends. We believe that innovative PC peripherals, such as our mice and keyboards, can renew the PC usage experience and help improve the productivity and engagement of remote work, distance learning, and telemedicine, thus providing growth opportunities. Increasing adoption of various cloud-based applications has led to multiple unique consumer use cases, which we are addressing with our innovative product portfolio and a deep understanding of our customer base. The increasing popularity of streaming and broadcasting, as well as the rising work-from-home trend, provides additional growth opportunities for our webcam products as well as other products in our portfolio. Smaller mobile computing devices, such as tablets, have created new markets and usage models for peripherals and accessories. We offer a number of products to enhance the use of mobile devices, including a combo backlit keyboard ~~folios~~case for the iPad Pro and ~~iPad Mini, and~~ keyboard ~~covers and~~ folios for other iPad models. Hybrid and distance learning environments have also created demand and growth opportunities for our education tablet keyboards and accessories.

Gaming: The PC gaming and console gaming platforms continue to show strong structural growth opportunities as online gaming, multi-platform experiences, and esports gain greater popularity and gaming content becomes increasingly more demanding and social particularly as other recreational activities have been curtailed or restricted during shelter-at-home mandates. The new console refresh cycle during the ~~iPad Air.~~holiday season of 2020 could drive subsequent growth opportunities over the coming years for our ASTRO family of headsets and controllers. We believe Logitech is well positioned to benefit from the overall gaming market growth. With ASTRO Gaming, we also strengthened our portfolio in adjacent categories, such as the console controller market. Our acquisition of Streamlabs provides a solid platform to deliver recurring services and subscriptions to gamers.

Video Collaboration: The near and long-term structural growth opportunities in the video collaboration market (VC) have never been more relevant than in today’s environment, as commercial and consumer adoption of video has seen explosive growth in recent months. Video meetings are on the rise, and companies increasingly want lower-cost, cloud-based solutions that can provide their employees with the ability to work from anywhere. We are continuing our efforts to create and sell innovative products to accommodate the increasing demand from home offices and small-size meeting rooms, such as huddle rooms, to medium and large-sized meeting rooms. We are also experiencing significant demand for our enterprise-grade VC webcams and headsets. We will continue to invest in select business-specific products (both hardware and software), targeted product marketing and sales channel development.

Music: The mobile speaker market has remained soft, and has further weakened as physical retail stores have been recently closed and the retail footprint has decreased significantly due to the COVID-19 pandemic. The integration of personal voice assistants has become increasingly competitive in the speaker categories, but the market for third-party, voice-enabled speakers has not yet gained traction. Moreover, the market for mobile speakers appears to be maturing, which led to a decline in Ultimate Ears sales in the past two years. In fiscal year 2020, the wireless headphone industry continued to flourish with strong revenue growth but has slowed in recent months due to physical retail store closures. The largest growth was in true wireless headphones while traditional wireless headphones have declined significantly. Continued growth in the wireless headphone market is expected for the next several years as consumers increasingly adopt wireless headphones over wired headphones. Blue Microphones has experienced strong demand as musicians, performers and streamers increasingly look to entertain and engage with their fans on various online platforms like YouTube, Twitch, and Facebook.

Smart Home: Our remote Harmony business declined substantially in fiscal year 2020, offset by growth in our Circle 2 family of security cameras. This trend continued during the first half of fiscal year 2021. In general, our Harmony and Circle 2 products are under pressure as the way people consume content is changing and as retail stores have been closed. The smart home market opportunity is broad and we will continue to explore other innovative experiences to drive growth in the Smart Home category.

Business Seasonality, Product Introductions and Acquisitions

We have historically experienced higher ~~net~~ sales in our third fiscal quarter ending December 31, compared to other fiscal quarters in our fiscal year, primarily due ~~in part~~ to ~~seasonal~~the increased consumer demand for our products during the year-end holiday ~~demand.~~buying season and year-end spending by enterprises. It is not clear to what extent the COVID-19 pandemic will affect this pattern. Additionally, new product introductions and business acquisitions can significantly impact ~~net~~ sales, product costs and operating expenses. Product introductions can also impact our ~~net~~ sales to ~~our~~ distribution channels as these channels are filled with new product inventory following a product introduction, and often channel inventory of an earlier model product declines as the next related major product launch approaches. ~~Net sales~~Sales can also be affected when consumers and distributors anticipate a product introduction or changes in business circumstances. However, neither historical seasonal patterns nor historical patterns of product introductions should be considered reliable indicators of our future pattern of product introductions, future ~~net~~ sales or financial performance.

~~Critical Accounting Estimates~~

The preparation of financial statements and related disclosures in conformity with GAAP requires us to make judgments, estimates and assumptions that affect reported amounts of assets, liabilities, goodwill and intangible assets from business acquisitions, contingent consideration from business acquisitions, and net sales and expenses.

~~We consider an accounting estimate critical if it: (i) requires management to make judgments and estimates about matters that are inherently uncertain; and (ii)~~ Furthermore, cash flow is ~~important to an understanding of our financial condition and operating results.~~

We base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Although these estimates are based on management's best knowledge of current events and actions that may impact uscorrespondingly lower in the ~~future, actual results could differ from those estimates. Management has discussed the development, selection and disclosure of these critical accounting estimates with the Audit Committee~~first half of the ~~Board of Directors.~~fiscal year as we typically build inventories in advance for the third quarter and we pay an annual dividend following our Annual General Meeting, which is typically in September.

Swiss Federal Tax Reform

Other than the recent accounting pronouncement adoptions discussed below, there have been no substantial changes in the Company’s significant accounting policies during the nine months ended December 31, 2017, compared with the significant accounting policiesAs we described in our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020, the canton of Vaud in Switzerland enacted TRAF on March 10, 2020, effective as of January 1, 2020. Our cash tax payments have increased in Switzerland beginning in fiscal year 2020 as a result of our transition out of our longstanding tax ruling from the canton of Vaud.

~~Adoption~~Critical Accounting Policies and Estimates

The preparation of ~~New Accounting Guidance~~financial statements and related disclosures in conformity with GAAP and pursuant to the rules and regulations of the SEC, requires us to make judgments, estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. We base our assumptions, judgments and estimates on historical experience and various other factors that we believe to be reasonable under the circumstances. Actual results could differ materially from these estimates under different assumptions or conditions. On a regular basis, we evaluate our assumptions, judgments and estimates. We also discuss our critical accounting policies and estimates with the Audit Committee of the Board of Directors.

~~In July 2015,~~We believe that the ~~FASB issued ASU No. 2015-11, "Simplifying~~assumptions, judgments and estimates involved in the ~~Measurement of Inventory (Topic 330)" ("ASU 2015-11"). Topic 330, previously required an entity to measure~~accounting for accruals for customer incentives, cooperative marketing, and pricing programs (Customer Programs) and related breakage when appropriate, accrued sales return liability, inventory atvaluation and uncertain tax positions have the lower of cost or market, with market value represented by replacement cost, net realizable value or net realizable value less a normal profit margin. ASU 2015-11 requires an entity to measure inventory at the lower of cost or net realizable value and effective for fiscal years beginning after December 15, 2016. We adopted this standard effective April 1, 2017, which has not had a materialgreatest potential impact on our condensed consolidated financial statements. These areas are key components of our results of operations and are based on complex rules requiring us to make judgments and estimates and consequently, we consider these to be our critical accounting policies. Historically, our assumptions, judgments and estimates relative to our critical accounting policies have not differed materially from actual results.

~~In March 2016,~~There have been no material changes in our critical accounting policies and estimates during the ~~FASB issued ASU 2016-09, "Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" ("ASU 2016-09"). ASU 2016-09 simplifies several aspects~~six months ended September 30, 2020 compared with the critical accounting policies and estimates disclosed in Management's Discussions and Analysis of ~~the accounting for share-based payments, including immediate recognition~~Financial Condition and Results of ~~all excess tax benefits and deficiencies~~Operations included in the income statement, changing the threshold to qualify for equity classification up to the employees' maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classificationour Annual Report on ~~the~~

~~statement of cash flows~~Form 10-K for the ~~excess tax benefits and employee taxes paid when an employer withholds shares for tax withholding purposes. ASU 2016-09 is effective for~~ fiscal years beginning after December 15, 2016. We adopted this standard effective April 1, 2017. Changes to the statements of cash flows related to the classification of excess tax benefits were implemented on a retroactive basis and accordingly, to conform to the current year ~~presentation, we reclassified $6.4 million of excess tax benefits previously reported under financing activities to operating activities for the nine months~~ ended December 31, 2016 on our condensed consolidated statements of cash flows. Under the new standard, we account for forfeitures as they occur. The change in accounting for forfeitures resulted in a cumulative-effect adjustment to decrease retained earnings as of March 31, ~~2017 by $3.3 million. We further recognized a cumulative-effect adjustment to increase retained earnings as~~2020.

Adoption of March 31, 2017 by $57.2 million upon adoption of the new guidance to account for gross excess tax benefits of $75.2 million that were previously not recognized because the related tax deduction had not reduced current income taxes, offset by a valuation allowance of $18.0 million to reduce the deferred tax assets to amounts that are more likely than not to be realized.New Accounting Pronouncements

In January 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment (Topic 350)" ("ASU 2017-04"), which removes Step 2 from the goodwill impairment test. ASU 2017-04 is effective for annual or any interim goodwill impairments in annual periods beginning December 15, 2019, with early adoption permitted. We adopted this standard effective April 1, 2017, which has not had a material impact on our condensed consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, "Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting" ("ASU 2017-09"), which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. We adopted this standard effective April 1, 2017, which has not had a material impact on our condensed consolidated financial statements.

Refer to Note 1 to the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for recent accounting pronouncements adopted and to be adopted.

Impact of Constant Currency

We refer to our ~~net~~ sales growth rates excluding the impact of currency exchange rate fluctuations as "constant dollar" sales growth rates. Percentage of constant dollar sales growth is calculated by translating prior period sales in each local currency at the current period’s average exchange rate for that currency and comparing that to current period sales.

Given our global sales presence and the reporting of our financial results in U.S. Dollars, our financial results could be affected by ~~significant~~ shifts in currency exchange rates. See “Results of Operations” for information on the effect of currency exchange rate results on our ~~net~~ sales. If the U.S. Dollar appreciates or depreciates in comparison to other currencies in future periods, this will affect our results of operations in future periods as well.

References to Sales

References to “sales” mean net sales, except as otherwise specified, and the sales growth discussion and sales growth rate percentages are based on U.S. Dollars, except as otherwise specified.

Sales Denominated in Other Currencies

Although our financial results are reported in U.S. Dollars, a portion of our sales was generated in currencies other than the U.S. Dollar, such as the Euro, Chinese Renminbi, Japanese Yen, Canadian Dollar, Taiwan New Dollar, British Pound and Australian Dollar. During the three months ended ~~December 31, 2017, 47%~~September 30, 2020, approximately 50% of our ~~net~~ sales were denominated in currencies other than the U.S. Dollar.

Results of Operations

Net Sales

~~Net sales for the three and nine months ended December 31, 2017 and 2016 were as follows (Dollars in thousands):~~

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 Change 2017 2016 Change
Net Sales $ 812,021
$ 666,707
22 % $ 1,974,437
$ 1,710,875
15 %

Our ~~net~~ sales in the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 increased ~~22%~~75% and ~~15%~~50%, respectively, compared to the same ~~periods~~period of the prior fiscal ~~year. Sales~~year, driven by sales increases in all regions and several of our product categories from increased ~~across all three regions during the three~~remote work and ~~nine months ended December 31, 2017.~~distance learning trends, as a result of various shelter-at-home mandates. Strong sales growth in Video Collaboration, Gaming, PC Webcams, Keyboards & Combos, Audio PC & Wearables, Tablet and Other Accessories, and Pointing Devices was partially offset by a decline in sales for Mobile Speakers and Smart Home. If currency exchange rates had been constant in the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016,~~2019, our constant dollar sales growth ~~rates~~rate would have been ~~18%~~73% and ~~14%~~51%, respectively. We grew across most of our product categories, with Gaming, Smart Home, Video Collaboration and Mobile Speakers growing double digits for both periods presented above compared to the same periods of the prior fiscal year.

~~Net~~ Sales by Region

The following table presents the change in ~~net~~ sales by region for the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, compared with the three and ~~nine~~six months ended ~~December 31, 2016:~~September 30, 2019:


					Sales Growth Rate				Constant Dollar Sales Growth Rate
	Three Months Ended December 31, 2017 Change in Sales		Nine Months Ended December 31, 2017 Change in Sales		Three Months Ended September 30, 2020		Six Months Ended September 30, 2020		Three Months Ended September 30, 2020		Six Months Ended September 30, 2020
Americas	31	%	18	%	83	%	52	%	85	%	54	%
EMEA	9		8		68	%	46	%	63	%	45	%
Asia Pacific	25		22		70	%	52	%	69	%	53	%

Americas:

~~Net~~The increase in sales in ~~the~~our Americas ~~increased 31% and 18% during~~region for both the three and ~~nine months ended December 31, 2017, respectively, compared to the same~~six month periods of the prior fiscal year. If currency exchange rates had been constant in the three and nine months ended December 31, 2017 and 2016, our constant dollar sales growth rate would have been 30% and 18% in the Americas, respectively. The increase for the three-month period was primarily driven by ~~increases~~growth in sales across a majority of ~~Gaming (including ASTRO),~~our product categories, partially offset by a decline in sales for Mobile Speakers ~~Audio PC & Wearables and Smart Home. The increase for the nine-month period was driven by increases in sales of all categories, led by Gaming, Mobile Speakers, Tablet & Other Accessories~~ and Smart Home.

EMEA:

~~Net~~The increase in sales in our EMEA ~~increased 9% and 8% during~~region for both the three and ~~nine months ended December 31, 2017, respectively, compared to the same~~six month periods of the prior fiscal year. If currency exchange rates had been constant in the three and nine months ended December 31, 2017 and 2016, our constant dollar sales growth rates would have been 2% and 5%, respectively. Thewas primarily driven by growth in ~~both periods was driven by~~ sales ~~increases in Gaming, Mobile Speakers, Smart Home, and Video Collaboration,~~across a majority of our product categories, partially offset by ~~declines~~a decline in ~~Pointing Devices~~sales for Mobile Speakers and ~~PC Webcams.~~Smart Home.

Asia Pacific:

~~Net~~The increase in sales in our Asia Pacific ~~increased 25% and 22% during~~region for both the three and nine months ended December 31, 2017, respectively, compared to the same periods of the prior fiscal year. If currency exchange rates had been constant in the three and nine months ended December 31, 2017 and 2016, our constant dollar sales growth rates would have been 23% and 22%, respectively. The growth in bothsix month periods was driven by ~~Gaming, Video Collaboration, Mobile Speakers, Pointing Devices and Audio PC & Wearables.~~all product categories.

~~Net~~ Sales by Product Categories

~~Net sales~~Sales by product ~~category~~categories for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (Dollars in thousands):


	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2017		2016		Change		2017		2016		Change		2020		2019		Change		2020		2019		Change
Pointing Devices	$	140,983	$	142,166	(1	)%	$	386,700	$	382,249	1	%	$	169,121	$	132,770	27	%	$	289,590	$	254,753	14	%
Keyboards & Combos	126,372		125,289		1		361,685		359,824		1		201,617		139,049		45		346,977		267,728		30
PC Webcams	27,280		30,503		(11	)	80,371		80,072		—		102,469		28,748		256		163,320		56,876		187
Tablet & Other Accessories	26,648		24,852		7		80,650		59,351		36		83,086		33,847		145		129,134		72,186		79
Gaming													297,711		161,014		85		479,614		295,529		62
Video Collaboration	46,252		35,807		29		128,008		88,298		45		236,704		89,553		164		366,778		162,977		125
Mobile Speakers	147,377		106,578		38		300,843		261,046		15		43,581		57,232		(24	)	72,590		107,648		(33	)
Audio-PC & Wearables	84,435		67,225		26		197,082		186,058		6
Gaming	173,802		107,181		62		365,232		242,874		50
Audio & Wearables													114,275		68,018		68		185,640		126,642		47
Smart Home	38,692		26,942		44		73,481		49,916		47		8,573		9,434		(9	)	15,383		19,298		(20	)
Other (1)	180		164		10		385		1,187		(68	)	21		26		(19	)	26		279		(91	)
Total net sales	$	812,021	$	666,707	22		$	1,974,437	$	1,710,875	15
Total sales													$	1,257,158	$	719,691	75	%	$	2,049,052	$	1,363,916	50	%

(1) Other category includes products that we currently intend to ~~transition~~phase out, ~~of,~~ or have already ~~transitioned~~phased out, ~~of,~~ because they are no longer strategic to our business.

~~Net Sales by Product Categories~~

Creativity & Productivity Market:

Pointing Devices

Our Pointing Devices category comprises PCPC- and Mac-related mice including trackballs, touchpads and presenters.

~~Net sales~~Sales of Pointing Devices ~~decreased 1% for~~increased 27% and 14% in the three and six months ended ~~and increased 1% for the nine months ended December 31, 2017,~~September 30, 2020, respectively, compared to the same ~~periods~~period of the prior fiscal year. The ~~decrease for the three-month period was~~increases in both periods were primarily driven by ~~a decrease~~the increase in sales offor cordless and trackball mice, partially offset by ~~an increase~~a decline in sales of ~~trackball and presentation tools. The increase for the nine-month period was driven by an increase in sales of trackball and~~our presentation tools, ~~partially offset by the decrease in the sales of mice~~as most conferences, events, and other ~~pointing devices.~~large-scale presentations remained prohibited.

Keyboards & Combos

Our Keyboards & Combos category comprises PC keyboards, living room keyboards and keyboard/mice combo products.

~~Net sales~~Sales of Keyboards & Combos increased 1%45% and 30% in the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The increases ~~for~~in both periods were ~~primarily~~ driven by an increase in sales for our cordless keyboards and wireless keyboards/mice combos. The increase for the six month period was partially offset by a ~~decrease~~decline in sales offor our living room ~~keyboards.~~keyboards and corded keyboards/mice combos.

PC Webcams

Our PC Webcams category comprises PC-based webcams targeted primarily at consumers.

PC Webcams ~~net~~ sales ~~decreased 11%~~increased 256% and ~~remained flat~~187% in the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The ~~decrease~~increases for ~~the three-month period was~~both periods were across all product sub-categories, primarily driven by ~~the decreases~~an increase in sales ~~across most webcam products within this product category.~~of our HD Pro Webcam C920, 1080 PRO Stream Webcam, Webcam C60, and Logitech Streamcam, partly due to more remote work adoption and distance learning.

Tablet & Other Accessories

Our Tablet & Other Accessories category primarily comprises keyboards ~~and covers~~ for ~~tablets and smartphones as well as other accessories for mobile devices.~~

tablets.

~~Net sales~~Sales of Tablet & Other Accessories products increased 7%145% and ~~36%~~79% in the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The increase for both periods was primarily driven by an increase in the sales of our Rugged Folio keyboard cases for a newer generation of iPads and Slim Folio keyboard for iPad 7th generation, both introduced in the third quarter of fiscal year 2020, and our Powered Wireless Charging 3-in-1 Dock, introduced in the fourth quarter of fiscal year 2020, partly due to schools embracing various technology devices to better educate students in distance learning environments.

Gaming market:

Our Gaming category comprises gaming mice, keyboards, headsets, gamepads, steering wheels, simulation controllers, console gaming headsets, console gaming controllers, and Streamlabs services.

Gaming sales increased 85% and 62% for the three and six months ended September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The increase for both periods was primarily driven by increases in the sales of nearly all our product sub-categories, including Streamlabs services as a result of our business acquisition in the third quarter of fiscal year 2020.

Video Collaboration market:

Our Video Collaboration category primarily includes Logitech’s ConferenceCams, which combine affordable enterprise-quality audio and high definition (HD) 1080p video to bring video conferencing to businesses of any size.

Sales of Video Collaboration products increased 164% and 125% in the three and six months ended September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The increases for both periods were primarily driven by ~~an increase in~~the sales of ~~tablet keyboards, including the introduction of the Slim Folio, 10.5-inch~~our MeetUp video conferencing camera, Rally Ultra-HD conference camera system, and ~~12.9-inch Slim Combo keyboard cases, partially offset by a decrease in sales for tablet covers and other accessories. Rugged Combo also contributed to the growth for the nine-month period.~~

~~Video Collaboration market:~~

~~Video Collaboration~~

~~Our Video Collaboration category primarily includes products which combine audio and video and other products that can connect small- and medium-sized user groups.~~

Net sales of Video Collaboration products increased 29% and 45% in the three and nine months ended December 31, 2017, respectively, compared to the same periods of the prior fiscal year. The increases for both periods were primarily due to the introduction of the BrioBRIO 4K Pro Webcam, ~~PTZ Pro 2 group camera, and Meetup~~from continued deployment of video ~~conference camera~~ in the ~~first half of fiscal year 2018. Logitech Group video conference system also contributed~~office as some countries started reopening work locations and employees started returning to ~~the growth for the nine-month period.~~work.

Music market:

Mobile Speakers

Our Mobile Speakers category is made up entirely of Bluetooth wireless speakers.

~~Net sales~~Sales of Mobile Speakers ~~increased 38%~~decreased 24% and ~~15%~~33% for the three and ~~nine~~six months ended ~~December 31, 2017, respectively,~~September 30, 2020, compared to the same ~~period~~periods of the prior fiscal year. The ~~increases~~decreases for both periods were primarily ~~due to~~driven by a decrease in the sales of our UE MEGABOOM, BOOM 3, MEGABOOM 3 and UE WONDERBOOM mobile speakers. The decreases were partially offset by sales from the introduction of ~~Ultimate Ears WONDERBOOM in early fiscal year 2018, and the launch of MEGABLAST and BLAST~~our HYPERBOOM speaker in the ~~third~~fourth quarter of fiscal year ~~2018.~~2020.

Audio ~~PC��~~& Wearables

Our Audio PC & Wearables category comprises PC speakers, PC headsets, in-ear headphones, ~~and~~ premium wireless audio ~~wearables.~~wearables and studio-quality microphones for professionals and consumers.

~~Audio-PC~~Audio & Wearables ~~net~~ sales increased ~~26%~~68% and 6%47% for the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The increases for both periods were primarily driven by increases in the sales of both our corded and cordless headsets and Blue Microphones products, partially offset by a decline in the sales of our Jaybird products.

Smart Home market:

Our Smart Home category mainly comprises our Harmony line of advanced home entertainment controllers and home security cameras.

Smart Home sales decreased 9% and 20% during the three and six months ended September 30, 2020, respectively, compared to the same periods of the prior fiscal year. The ~~increases were~~decrease for the three-month period was primarily ~~driven by a~~due to the decline in sales ~~increase~~ of ~~Jaybird~~our home video products, partially offset by aan increase in sales ~~decrease~~ of ~~PC speakers and other headsets. Jaybird posted strong growth this quarter, with good contribution from Jaybird Run,~~ our ~~first true wireless earphone, and from our other Jaybird product lines.~~

~~Gaming market:~~

~~Gaming~~

~~Our Gaming category comprises gaming mice, keyboards, headsets, gamepads, steering wheels, Saitek simulation controllers and ASTRO console gaming headsets.~~

~~Gaming net sales increased 62% and 50%~~Harmony remotes. The decrease for the ~~three and nine months ended December 31, 2017, respectively, compared to the same periods of the prior fiscal year. The significant increases for both periods were~~six month period was primarily driven by the strong performance of console gaming headsets from the acquisition of ASTRO, as well as the continuing success of our gaming mice, steering wheels, keyboards, headsets and Saitek simulation products.

~~Smart Home market:~~

~~Smart Home~~

Our Smart Home category includes our Harmony line of advanced home entertainment controllers, home security cameras and new products, incorporating voice assistants, dedicated to controlling emerging categories of connected smart home devices such as lighting, thermostats and door locks.

~~Smart Home net~~an overall decline in sales increased 44% and 47% during the three and nine months ended December 31, 2017, respectively, compared to the same periods of the prior fiscal year. The increases were primarily due to the continued success of our Harmony ~~Smart~~remotes and our home ~~remote, as well as the introduction of Circle 2 Wired and Circle 2 Wireless security cameras in the second quarter of fiscal year 2018.~~video products.

Gross Profit

Gross profit for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 was as follows (Dollars in thousands):


	Three Months Ended December 31,								Nine Months Ended December 31,								Three Months Ended September 30,								Six Months Ended September 30,
	2017			2016			Change		2017			2016			Change		2020			2019			Change		2020			2019			Change
Net sales	$	812,021		$	666,707		22	%	$	1,974,437		$	1,710,875		15	%	$	1,257,158		$	719,691		75	%	$	2,049,052		$	1,363,916		50	%
Gross profit	$	275,601		$	246,763		12		$	697,006		$	622,262		12		$	569,723		$	272,076		109		$	875,456		$	511,052		71
Gross margin	33.9		%	37.0		%			35.3		%	36.4		%			45.3		%	37.8		%			42.7		%	37.5		%

Gross profit consists of ~~net~~ sales less cost of goods sold (which includes materials, direct labor and related overhead costs, costs of manufacturing facilities, royalties, costs of purchasing components from outside suppliers, distribution costs, warranty costs, customer support, shipping and handling costs, outside processing costs and write-down of inventories), amortization of intangible assets and purchase accounting effect on inventory.

~~Our gross~~

Gross margin increased by 750 and 520 basis points for the three and six months ended ~~December 31, 2017 decreased by 310 basis points~~September 30, 2020, respectively, compared to the ~~three months ended December 31, 2016. Approximately 150 basis points~~same periods of the ~~decrease in gross~~prior fiscal year. Gross margin ~~was driven by an increase in logistics costs including additional costs~~benefited from ~~the transition of the distribution center in North America~~higher sales volume, continued restrained promotional spending, and ~~the remaining decrease was primarily due to an increase in promotions related to product transition, and~~favorable product mix, ~~partially~~which more than offset ~~by lower variable compensation based on operational metrics.~~the higher logistics operations costs and unfavorable currency exchange rates.

Our gross margin for the nine months ended December 31, 2017 decreased by 110 basis points compared to the nine months ended December 31, 2016. The decrease in gross margin was primarily driven by an increase in logistics costs including additional costs from the transition of the distribution center in North America, an increase in promotions related to product transition, and product mix, partially offset by product cost reductions and lower variable compensation based on operational metrics.

Operating Expenses

Operating expenses for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (Dollars in thousands):


	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,							Six Months Ended September 30,
	2017			2016			2017			2016			2020				2019			2020				2019
Marketing and selling	$	116,153		$	102,036		$	325,917		$	279,700		$	158,797			$	134,155		$	292,035			$	257,188
% of net sales	14.3		%	15.3		%	16.5		%	16.3		%
% of sales													12.6		%		18.6		%	14.3		%		18.9		%
Research and development	34,398			32,284			106,144			96,867			53,379				41,964			103,104				84,207
% of net sales	4.2		%	4.8		%	5.4		%	5.7		%
% of sales													4.2		%		5.8		%	5.0		%		6.2		%
General and administrative	22,291			24,598			72,850			75,543			31,664				24,048			60,735				46,207
% of net sales	2.7		%	3.7		%	3.7		%	4.4		%
% of sales													2.5		%		3.3		%	3.0		%		3.4		%
Amortization of intangible assets and acquisition-related costs	2,496			1,494			6,377			4,535			4,331				4,218			8,940				7,814
% of net sales	0.3		%	0.2		%	0.3		%	0.3		%
% of sales													0.3		%		0.6		%	0.4		%		0.6		%
Change in fair value of contingent consideration for business acquisition	—			(9,925		)	(4,908		)	(9,925		)	—				—			5,716				—
% of net sales	—		%	(1.5		)%	(0.2		)%	(0.6		)%
% of sales													—		%		—		%	0.3		%		—		%
Restructuring charges (credits), net													(1		)		(364		)	(54		)		114
% of sales													—		%	⁽¹⁾	—		%	—		%	⁽¹⁾	—		%
Total operating expenses	$	175,338		$	150,487		$	506,380		$	446,720		$	248,170			$	204,021		$	470,476			$	395,530
% of net sales	21.6		%	22.6		%	25.6		%	26.1		%
% of sales													19.7		%		28.3		%	23.0		%		29.0		%

~~The increase in total operating expenses~~(1) Absolute value for ~~the three months ended December 31, 2017, compared to the same period~~% of the prior fiscal year, was mainly due to increases in marketing and selling expenses from higher external expenses to support the advertising and marketing efforts for our new products and higher personnel related costs from additional headcount and from ASTRO Acquisition, partially offset by lower variable compensation based on operational metrics. In addition, there was a $9.9 million credit from the change in fair value of contingent consideration for a business acquisition in the prior year, which did not exist in the current year.sales is less than 0.1%.

The increase in total operating expenses for the nine months ended December 31, 2017, compared to the same period of the prior fiscal year, was mainly due to higher external expenses to support the advertising and marketing efforts for our new products, increases in marketing and selling expenses and research and development expenses from higher personnel-related costs due to increased headcount, in addition to a lower credit from the change in fair value of contingent consideration for business acquisition, partially offset by lower variable compensation based on operational metrics.

Marketing and Selling

Marketing and selling expenses consist of personnel and related overhead ~~cost,~~costs, corporate and product marketing, promotions, advertising, trade shows, ~~customer and~~ technical support for customer experiences and facilities costs.

During the three and six months ended ~~December 31, 2017,~~September 30, 2020, marketing and selling expenses increased ~~$14.1~~$24.6 million and $34.8 million, respectively, compared to the same ~~period~~periods of the prior fiscal year. The ~~increase was~~increases were primarily driven by ~~$11.2 million higher external expenses to support the advertising and marketing efforts for our new products and $1.6 million~~ higher personnel-related costs due to increased headcount, partly from the Streamlabs acquisition and ~~from ASTRO Acquisition,~~increased performance-based variable compensation, partially offset by lower ~~variable compensation based on operational metrics.~~

During the nine months ended December 31, 2017, marketing and selling expenses increased $46.2 million compared to the same period of the prior fiscal year. The increase was primarily driven by $29.7 million higher external expenses to support the advertising and marketing efforts for our new products and $14.8 million higher personnel-related costs due to increased headcount, partially offset by lower variable compensation based on operational metrics.

marketing-related expenses.

Research and Development

Research and development expenses consist of personnel and related overhead costs, ~~for~~ contractors and outside consultants, supplies and materials, equipment depreciation and facilities costs, all associated with the design and development of new products and enhancements of existing products.

During the three and six months ended ~~December 31, 2017,~~September 30, 2020, research and development expenses increased ~~$2.1~~$11.4 million and $18.9 million, respectively, compared to the same ~~period in~~periods of the prior fiscal year. The ~~increase was~~increases were primarily driven by higher personnel-related costs due to increased ~~headcount to support the development and launch of new products and capabilities and from ASTRO Acquisition, partially offset by lower variable compensation based on operational metrics.~~headcount.

During the nine months ended December 31, 2017, research and development expenses increased $9.3 million compared to the same period in the prior fiscal year. The increase was primarily driven by $9.7 million higher personnel-related costs due to increased headcount to support the development and launch of new products and capabilities, partially offset by lower variable compensation based on operational metrics.

General and Administrative

General and administrative expenses consist primarily of personnel and related overhead, information technology, and facilities costs for the infrastructure functions such as finance, information systems, executives, human resources, and ~~legal functions.~~legal.

During the three and ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, general and administrative expenses ~~decreased $2.3~~increased $7.6 million and ~~$2.7~~$14.5 million, respectively, compared to the same periods inof the prior fiscal ~~year,~~year. The increases were primarily ~~due to lower variable compensation based on operational metrics.~~driven by higher personnel-related costs and increased share-based compensation.

Amortization of ~~Intangibles~~Intangible Assets and Acquisition-Related Costs

~~Amortization of intangibles and acquisition-related costs during the three and nine months ended December 31, 2017 and 2016 were as follows (in thousands):~~

Three Months Ended
December 31, Nine Months Ended
December 31,
2017 2016 2017 2016
Amortization of intangible assets $ 2,126
$ 1,279
$ 4,965
$ 3,074
Acquisition-related costs 370
215
1,412
1,461
Total $ 2,496
$ 1,494
$ 6,377
$ 4,535

Amortization of intangible assets consists of amortization of acquired intangible assets, including customer relationships and trade names. Acquisition-related costs include legal expense, due diligence costs, and other professional costs incurred for business acquisitions.

During the three and six months ended, September 30, 2020, amortization of intangible assets and acquisition-related costs increased $0.1 million and $1.1 million, respectively, compared to the same period of the prior fiscal year. The increase for the six months ended September 30, 2020 was primarily driven by amortization of the intangible assets acquired through the Streamlabs acquisition in the third quarter of fiscal year 2020.

Change in Fair Value of Contingent Consideration for Business Acquisition

~~During the nine months ended December 31, 2017, the fair value of the contingent consideration for business acquisition decreased $4.9 million.~~ The ~~decrease~~change in fair value of contingent consideration iswas $5.7 million for the six months ended September 30, 2020, primarily due to growth in Streamlabs' net sales and the ~~agreement~~achievement of the net sales targets during the six-month earn-out period.

Other Income (Expense), Net

Other income (expense), net for the three and six months ended September 30, 2020 and 2019 was as follows (Dollars in thousands):



	Three Months Ended September 30,						Six Months Ended September 30,
	2020			2019			2020			2019
Investment income related to a deferred compensation plan	$	1,779		$	202		$	3,335		$	791
Currency exchange gain (loss), net	1,669			(319		)	1,726			499
Loss on investments	(2,693		)	(274		)	(2,519		)	(63		)
Other	394			281			636			524
Total	$	1,149		$	(110	)	$	3,178		$	1,751

Investment income represents earnings, gains, and losses on trading investments related to a deferred compensation plan offered by one of our subsidiaries.

Currency exchange gain (loss), net relates to balances denominated in currencies other than the functional currency in our subsidiaries, as well as to the sale of currencies, and to gains or losses recognized on currency exchange forward contracts. We do not speculate in currency positions, but we ~~reached with~~are alert to opportunities to maximize currency exchange gains and minimize currency exchange losses.

Loss on investments represents the ~~sellers of Jaybird. In October 2017, we entered into an agreement with the sellers of Jaybird fully, irrevocably and unconditionally releases the Company~~unrealized loss from ~~the earn-out rights and payments in the Jaybird Acquisition agreement in exchange for $5.0 million in cash, which approximates~~ the fair value ofchange on the ~~contingent consideration as of September 30, 2017. See "Note 7 - Fair Value Measurements" to our condensed consolidated financial statements for further details.~~available-for-sale securities and equity-method investments during the periods presented.

Provision for (Benefit from) Income Taxes

The provision for (benefit from) income taxes and effective tax rates for the three and ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020 and ~~2016~~2019 were as follows (Dollars in thousands):


	Three Months Ended December 31,						Nine Months Ended December 31,						Three Months Ended September 30,						Six Months Ended September 30,
	2017			2016			2017			2016			2020			2019			2020			2019
Provision for income taxes	$	20,040		$	1,647		$	18,691		$	10,297
Provision for (benefit from) income taxes													$	56,301		$	(2,598	)	$	70,304		$	3,938
Effective income tax rate	19.9		%	1.7		%	9.7		%	5.8		%	17.4		%	(3.7		)%	17.2		%	3.2		%

The change in the effective income tax rate for the three months ended September 30, 2020, compared to the same period ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate. The Swiss income tax provision in the three months ended ~~December 31, 2017 compared to~~September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. In the same period ofended September 30, 2019 when TRAF was yet to be enacted at the ~~prior fiscal year is primarily due to $19.9 million of~~federal and cantonal levels, the transition income tax provision reflects the application of the longstanding tax ruling through December 31, 2019, including a retroactive adjustment made to the preceding three-month period ended June 30, 2019 when the transition income tax provision was quantified at the full statutory income tax rate of 13.63% because at the time the canton of Vaud permitted the application of the longstanding tax ruling only through March 31, 2019. The retroactive adjustment resulted in a tax benefit of $5.9 million in the three months ended September 30, 2019. In addition, there was a discrete tax benefit of $4.0 million from ~~the provisional remeasurement of~~adjusting deferred tax assets and liabilities in Switzerland in the United States based on the applicable enacted federal income tax rates when the temporary differences and tax attribute carryforwards are expected to recover or settle. The remeasurement charge is offset by $4.1 million of provisional income tax benefit from the reduction in federal valuation allowance against tax credits as a result of the tax reform.three months ended September 30, 2019.

The change in the effective income tax rate infor the ~~nine~~six months ended ~~December 31, 2017~~September 30, 2020, compared to the same period ~~of the prior fiscal year is~~ended September 30, 2019 was primarily due to the mix of income and losses in the various tax jurisdictions in which we operate. The Swiss income tax provision in the six months ended September 30, 2020 represents the income tax provision at the full statutory income tax rate of 13.63%. The income tax provision in the six months ended September 30, 2019 reflects the application of the longstanding tax ruling through December 31, 2019 as stated above. In the six months ended September 30, 2019, there was a discrete tax benefit of $1.7 million from adjusting deferred tax assets and liabilities in Switzerland. Furthermore, there were discrete tax benefits of $5.8 million and $1.5 million from the recognition of excess tax benefits ~~of $10.8 million after adoption of ASU 2016-09~~in the United States and ~~income tax benefit from the~~ reversal of uncertain tax positions from the expiration of statutes of limitations, ~~are largely offset by income tax provision from the provisional remeasurement of deferred tax assets and liabilities~~respectively, in the ~~third quarter. In the three and nine months~~six-month period ended~~December 31, 2017, there was a discrete income tax benefit of $6.0~~ September 30, 2020, compared with $6.7 million and ~~$7.9~~$1.8 million, respectively, ~~from~~in the ~~reversal of uncertain tax positions from the expiration of statutes of limitations. In the same periods~~six-month period ended ~~December 31, 2016, the income tax benefit from the reversal of uncertain tax positions from the expiration of statutes of limitations was $9.4 million and $11.1 million, respectively.~~September 30, 2019.

Liquidity and Capital Resources

Cash Balances, Available Borrowings, and Capital Resources

As of ~~December 31, 2017,~~September 30, 2020, we had cash and cash equivalents of ~~$564.9~~$917.2 million, compared to ~~$547.5~~$715.6 million as of March 31, ~~2017,~~2020. As of ~~which 38% is~~September 30, 2020, 51% of the cash and cash equivalents were held in Switzerland, ~~30% is~~21% were held in Germany, and ~~14% is~~15% were held in Hong Kong and ~~China as of December 31, 2017.~~China. We do not expect to incur any material adverse tax impact except for what has already been recognized, or be significantly inhibited by any country in which we do business from the repatriation of funds to Switzerland, our home domicile.

The increase in cash and cash equivalents for the six months ended September 30, 2020, was primarily due to ~~the~~an increase in net ~~income~~cash provided by operating activities and proceeds from exercises of stock options and purchase rights, partially offset by ~~the~~ payment of cash dividends, ~~cash paid for acquisitions,~~ purchases of property, plant and equipment, tax withholdings related to settlements of restricted stock units, and ~~the purchases of~~shares repurchased under our ~~shares.~~share buyback program.

As of ~~December 31, 2017,~~September 30, 2020, our working capital was ~~$546.0~~$952.6 million, compared to ~~$520.8~~$700.3 million as of March 31, ~~2017.~~2020. The increase was primarily due to higher accounts receivable, net, partially offset by higher accounts payable, higher accruals and other liabilities. Our working capital increased compared to $478.7 million as of December 31, 2016, which was primarily driven by higher cash and cash equivalents, higher accounts receivable, net, higher inventories and higher ~~inventories,~~other current assets, partially offset by higher accounts payable and ~~higher accruals~~accrued and other current liabilities. Our working capital increased by $330.2 million compared to $622.4 million as of September 30, 2019, which

was primarily driven by higher cash and cash equivalents, higher accounts receivable, net, higher inventories and higher other current assets, partially offset by higher accounts payable and accrued and other current liabilities.

We had several uncommitted, unsecured bank lines of credit aggregating ~~$62.1~~$84.2 million as of ~~December 31, 2017.~~September 30, 2020. There are no financial covenants under these lines of credit with which we must comply. As of ~~December 31, 2017,~~September 30, 2020, we had outstanding bank guarantees of ~~$44.2~~$22.9 million under these lines of credit.

The following table summarizes our ~~Condensed Consolidated Statements~~condensed consolidated statements of ~~Cash Flows (in~~cash flows (Dollars in thousands):


	Nine Months Ended December 31,						Six Months Ended September 30,
	2017			2016			2020			2019
Net cash provided by operating activities	$	256,084		$	240,647		$	398,519		$	143,019
Net cash used in investing activities	(116,192		)	(90,240		)	(30,539		)	(18,582		)
Net cash used in financing activities	(124,214		)	(149,556		)	(168,837		)	(150,884		)
Effect of exchange rate changes on cash and cash equivalents	1,677			(6,468		)	2,512			(3,605		)
Net increase (decrease) in cash and cash equivalents	$	17,355		$	(5,617	)	$	201,655		$	(30,052	)

The following table presents selected financial information and statistics as of ~~December 31, 2017~~ and ~~2016~~for the three months ended September 30, 2020 and 2019 (Dollars in thousands):


	Three Months Ended December 31,				As of September 30,
	2017		2016		2020		2019
Accounts receivable, net	$	351,753	$	277,677	$	750,749	$	465,969
Accounts payable	$	429,119	$	358,196	$	662,873	$	411,043
Inventories	$	278,979	$	250,286	$	394,708	$	338,314
Days sales in accounts receivable (“DSO”) (Days) (1)	39		37
Days accounts payable outstanding (“DPO”) (Days) (2)	72		77
Inventory turnover (“ITO”) (x)(3)	7.7		6.7



	Three Months Ended September 30,
	2020	2019
Days sales in accounts receivable (“DSO”) (Days) ⁽¹⁾	54	58
Days accounts payable outstanding (“DPO”) (Days) ⁽²⁾	87	83
Inventory turnover (“ITO”) (x)⁽³⁾	7.0	5.3

(1) DSO is determined using ending accounts receivable, net as of the most recent ~~quarter-end~~quarter end and ~~net~~ sales for the most recent quarter.

(2) DPO is determined using ending accounts payable as of the most recent ~~quarter-end~~quarter end and cost of goods sold for the most recent quarter.

(3) ITO is determined using ending inventories and annualized cost of goods sold (based on the most recent quarterly cost of goods sold).

DSO for the three months ended ~~December 31, 2017 increased two~~September 30, 2020 decreased by 4 days to 54 days, compared to ~~December 31, 2016,~~58 days for the same period of the prior fiscal year, primarily due to ~~the introduction~~timing of ~~breakage model for EMEA marketing~~sales, customer payments and ~~incentive programs during the fourth quarter of fiscal year 2017.~~sales linearity.

DPO for the three months ended ~~December 31, 2017 decreased five~~September 30, 2020 increased by 4 days, compared to ~~December 31, 2016, primarily due to the timing of purchases.~~

~~ITO~~83 days for ~~the three months endedDecember 31, 2017 was higher, compared to~~ the same period of the prior fiscal ~~year. The increase in inventories~~year, primarily due to the timing of purchases and related payments.

ITO for the three months endedSeptember 30, 2020 increased by 1.7, compared ~~with December 31, 2016 was~~to 5.3 for the same period of the prior fiscal year, primarily ~~driven by~~due to higher ~~net sales.~~sales growth as a result of higher demand for certain of our products

due to the COVID-19 impact.

If we are not successful in launching and phasing in our new products, or market competition increases, ~~during the current fiscal year,~~ or we are not able to sell the new products at the prices planned, it could have a material impact on our ~~net~~ sales, gross profit margin, operating results including operating cash flow, and inventory turnover in the future.

During the ~~nine~~six months ended~~December 31, 2017,~~September 30, 2020, we generated ~~$256.1~~$398.5 million of cash infrom operating activities. Our main sources of operating cash flows were from net income, after adding back non-cash expenses of depreciation, amortization and share-based compensation expense, from change in fair value of contingent considerations, and from ~~the increases~~changes in ~~accounts payable~~operating assets and ~~accrued and other liabilities, offset by the increase in accounts receivable, net.~~liabilities. The increase in accounts receivable, net was primarily ~~due to higher sales~~driven by growth and timing of ~~customer payments, and~~sales. The increase in inventories was primarily driven by an increase in inventory purchases, in anticipation of continued high demand for certain of our products, during the six months ended September 30, 2020. The increase in accounts payable ~~and accrued and other liabilities~~ was primarily driven by the timing of purchases and related payments.

Net cash used in investing activities was ~~$116.2~~$30.5 million, primarily due to ~~$85.0 million of purchase price for the acquisition of the ASTRO business (refer to "Note 2- Business Acquisition" to the condensed consolidated financial statements) and $27.6~~$27.8 million of purchases of property, plant and equipment.

Our expenditures for property, plant and equipment during the nine months ended December 31, 2017 increased by $4.2 million, compared to the same period of the prior fiscal year, mainly due to the higher amount of tooling purchases.

Net cash used in financing activities was ~~$124.2~~$168.8 million, primarily ~~for~~due to the ~~$104.2~~$146.7 million payment of a cash ~~dividends paid, $20.4~~dividend, $22.5 million used for repurchases of our registered shares, ~~$25.5~~and $25.7 million for tax withholdings related to net share settlements of restricted stock units, ~~and $5.0 million payment of contingent consideration in connection with the Jaybird acquisition,~~ partially offset by ~~$30.9~~$26.1 million in proceeds received from ~~the~~ exercises of stock ~~options.~~options and purchase rights.

During the ~~nine~~six months ended ~~December 31, 2017,~~September 30, 2020, there was a ~~$1.7~~$2.5 million gain offrom currency ~~translation~~ exchange rate effect on cash and cash equivalents, compared to a loss of ~~$6.5~~$3.6 million during the same period of the prior fiscal year. The gain from currency translation exchange effect during the ~~nine~~six months ended ~~December 31, 2017~~ September 30, 2020was primarily due to the strengthening of the ~~Euro~~Australian Dollar, Chinese Renminbi, and Japanese Yen against the U.S. Dollar by ~~12%~~15%, 4%, and 3%, respectively, during the period. The loss from effect of currency ~~translation~~ exchange ~~effect~~rate changes during the ~~nine~~six months ended ~~December 31, 2016~~September 30, 2019 was primarily due to the weakening of the Euro, Chinese Renminbi and Brazilian Real against the ~~U.S. Dollar~~U.S.Dollar by ~~8% during the period, which had an adverse impact on our cash~~3%, 5%, and ~~cash equivalents balances in subsidiaries with Euro as their functional currency.~~7%, respectively.

Cash Outlook

Our principal sources of liquidity are our cash and cash equivalents, cash flow generated from operations and, to a much lesser extent, capital markets and borrowings. Our future working capital requirements and capital expenditures may increase to support ~~investment~~investments in product innovations and growth opportunities or to acquire or invest in complementary businesses, products, services, and technologies. The future impact of COVID-19 cannot be predicted with certainty and may increase our costs of capital and otherwise adversely affect our business, results of operations, financial conditions and liquidity.

~~During the nine months ended December 31, 2017,~~In fiscal year 2021, we ~~declared and~~ paid an annual cash ~~dividends~~dividend of ~~approximately~~ CHF ~~0.61 (USD equivalent~~134.0 million (U.S. Dollar amount of ~~$0.63) per common share, totaling $104.2~~$146.7 million) out of fiscal year 2020 retained earnings. In fiscal year 2020, we paid an annual cash dividend of CHF 121.8 million ~~on our outstanding common stock. During the nine months ended December 31, 2016, we declared and paid cash dividends~~(U.S. Dollar amount of ~~approximately CHF 0.56 (USD equivalent~~$124.2 million) out of ~~$0.57) per common share, totaling $93.1 million on our outstanding common stock.~~fiscal year 2019 retained earnings. Any future dividends will be subject to the approval of our shareholders.

In ~~March 2017,~~May 2020, our Board of Directors approved ~~another~~a new share buyback program, which authorizes us to ~~purchase~~invest up to $250.0 million ofto purchase our own shares, following the expiration date of ~~our 2014~~the 2017 share buyback program. ~~The new program was approved by the Swiss Takeover Board in May 2017.~~ Although we enter into trading plans for systematic repurchases (e.g., 10b5-1 trading plans) from time to time, our share buyback program provides us with the opportunity to make opportunistic repurchases during periods of favorable market conditions and is expected to remain in effect for a period of three years. Shares may be repurchased from time to time on the open market, through block trades or otherwise. Opportunistic purchases may be started or stopped at any time without prior notice depending on market conditions and other factors. As of ~~December 31, 2017~~, ~~$230.2~~September 30, 2020, $227.6 million is still available for repurchase under the ~~2017~~2020 share buyback program.

As noted in "Note 7 - Fair Value Measurements" to our condensed consolidated financial statements, we acquired all of the equity interest of Jaybird with an additional earn-out of up to $45.0 million in cash based on the achievement of certain net revenue growth targets over two years starting July 2016. If the net revenue growth targets were met, the Company would have paid a maximum of $25.0 million and $20.0 million in fiscal years 2018 and 2019, respectively. In October 2017, we entered into an agreement with the sellers of Jaybird which fully, irrevocably and unconditionally releases us from the earn-out rights and payments in the Jaybird purchase agreement in exchange for $5.0 million in cash. In November 2017, we made the payment of $5.0 million to the sellers of Jaybird.

We have changed the payment frequency of our employee performance bonus plan from semi-annual payment to annual payment. The full year bonus is expected to be made in the first quarter of the following fiscal year, and the operating cash flow for that period will be negatively affected as a result.

If we do not generate sufficient operating cash flows to support our operations and future planned cash requirements, our operations could be harmed and our access to credit could be restricted or eliminated. However, we believe that the trend of our historical cash flow generation, our projections of future operations and our available cash balances will provide sufficient liquidity to fund our operations for at least the next 12 months.

Operating Leases Obligation

We lease facilities under operating leases, certain of which require us to pay property taxes, insurance and maintenance costs. Operating leases for facilities are generally renewable at our option and usually include escalation clauses linked to inflation. The remaining terms of our non-cancelable operating leases expire in various years through ~~2030.~~2031.

Purchase Commitments

As of ~~December 31, 2017,~~September 30, 2020, we had non-cancelable purchase commitments of $628.6 million for inventory purchases made in the normal course of business tofrom original design manufacturers, contract manufacturers and other suppliers, as well as due to strong sales growth in the six months ended September 30, 2020 and the reduced level of our customers’ inventories, the majority of which are expected to be fulfilled within the next 12 months. The increase of inventory purchase commitment from March 31, 2020 is to replenish the inventory due to business growth as well as a mitigation of supply constraint in the fourth quarter of fiscal year 2020. Non-cancelable purchase commitments for capital expenditures primarily relate to commitments for tooling for new and existing products, computer hardware, leasehold and improvements. We expect to continue making capital expenditures in the future to support product development activities and ongoing and expanded operations. Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us to reschedule or adjust our requirements based on business needs prior to delivery of goods or performance of services.

We recorded a liability for firm, non-cancelable, and unhedged inventory purchase commitments in excess of anticipated demand or net realizable value consistent with our valuation of excess and obsolete inventory. As of September 30, 2020, the liability for these purchase commitments was $8.4 million and is recorded in accrued and other current liabilities. Although open purchase commitments are considered enforceable and legally binding, the terms generally allow us the option to reschedule and adjust our requirements based on business needs prior to delivery of goods.

Other Contractual Obligations and Commitments

For further detail about our contractual obligations and commitments, refer to our Annual Report on Form 10-K for the fiscal year ended March 31, ~~2017.~~2020.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

~~Guarantees~~

Logitech Europe S.A., one of our wholly-owned subsidiaries, guaranteed payments of two third-party contract manufacturers' purchase obligations. As of December 31, 2017, the maximum amount of this guarantee was $3.8 million, of which $1.7 million of guaranteed purchase obligations were outstanding.

Indemnifications

We indemnify certain 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 ~~December 31, 2017,~~September 30, 2020, no amounts have been accrued for indemnification provisions. We do 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 our indemnification arrangements.

We also indemnify our current and former directors and certain current and former officers. Certain costs incurred for providing such indemnification may be recoverable under various insurance policies. We are unable to reasonably estimate the maximum amount that could be payable under these arrangements because these exposures are not capped, the obligations are conditional in nature, and the facts and circumstances involved in any situation that might arise are variable.

The stock purchase agreement that we entered into in connection with the investment by three venture capital firms in Lifesize contains representations, warranties and covenants of Logitech and Lifesize to the Investors. Subject to certain limitations, we have agreed to indemnify the Investors and certain persons related to the Investors for certain losses resulting from breaches of or inaccuracies in such representations, warranties and covenants as well as certain other obligations, including third-party expenses, restructuring costs and pre-closing tax obligations of Lifesize.

Legal Proceedings

From time to time we are involved in claims and legal proceedings that arise in the ordinary course of our business. We are currently subject to several such claims and a small number of legal proceedings. We believe that these matters lack merit and we intend to vigorously defend against them. Based on currently available information, we do not believe that resolution of pending matters will have a material adverse effect on our financial condition, cash flows or results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that our defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on our business, financial condition, cash flows and results of operations in a particular period. Any claims or proceedings against us, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain necessary ~~license~~licenses or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

Market risk represents the potential for loss due to adverse changes in the fair value of financial instruments. As a company with global ~~concern,~~operations, we face exposure to adverse movements in currency exchange rates and interest rates. These exposures may change over time as business practices evolve and could have a material adverse impact on our financial results.

Currency Exchange Rates

We report our results in U.S. Dollars. Changes in currency exchange rates compared to the U.S. Dollar can have a material impact on our results when the financial statements of our non-U.S. subsidiaries are translated into U.S. Dollars. The functional currency of our operations is primarily the U.S. Dollar. Certain operations use the Swiss Franc or the local currency of the country as their functional currencies. Accordingly, unrealized currency gains or losses resulting from the translation of net assets or liabilities denominated in other currencies to the U.S. Dollar are accumulated in the cumulative translation adjustment component of other comprehensive income (loss) in shareholders' equity.

We are exposed to currency exchange rate risk as we transact business in multiple currencies, including exposure related to anticipated sales, anticipated purchases and assets and liabilities denominated in currencies other than the U.S. Dollar. We transact business in over 30 currencies worldwide, of which the most significant to operations are the Euro, Chinese Renminbi, Australian Dollar, Taiwanese Dollar, British Pound, Brazilian Real, Canadian Dollar, Japanese Yen and Mexican Peso. For the three months ended ~~December 31, 2017,~~September 30, 2020, approximately ~~47%~~50% of our sales were in non-U.S. denominated currencies, with ~~25%~~23% of our sales denominated in Euro. The mix of our costs of goods sold and operating expenses by currency isare significantly different from the mix of our sales, with a larger portion denominated in U.S. Dollar and less denominated in Euro and other currencies. A strengthening U.S. Dollar has a more unfavorable impact on our sales ~~compare~~compared to the favorable impact on our cost of goods sold and operating ~~expense,~~expenses, resulting in an adverse impact on our operating results.

We enter into currency forward and swap contracts to reduce the short-term effects of currency fluctuations on certain receivables or payables denominated in currencies other than the functional currencies of our subsidiaries. These forward contracts generally mature within one month. The gains or losses on these contracts are recognized in earnings based on the changes in fair value.

If the U.S. Dollar remains at its current strong levels in comparison to other currencies, this will affect our results of operations in future periods as well. The table below provides information about our underlying transactions that are sensitive toan adverse 10% foreign currency exchange rate ~~changes, primarily~~change was applied to total monetary assets and liabilities denominated in currencies other than the ~~base currency, where~~functional currencies at the ~~net exposure is greater than $0.5~~balance sheet dates, it would have resulted in an adverse effect on income before income taxes of approximately $23.6 million and $11.8 million as of ~~December~~September 30, 2020 and March 31, ~~2017.~~2020, respectively. The ~~table also presents the U.S. Dollar impact on earnings~~adverse effect as of ~~a 10% appreciation~~September 30, 2020 and ~~a 10% depreciation~~March 31, 2020 is after consideration of the ~~base currency~~offsetting effect of approximately $8.6 million and $5.2 million, respectively, from open foreign exchange contracts in place as ~~compared with the transaction currency (in thousands):~~

Base
Currency

Transaction
Currency

Net
Exposed
Long
(Short)
Currency
Position

FX Gain
(Loss) From
10%
Appreciation
of Base
Currency

FX Gain
(Loss) From
10%
Depreciation
of Base
Currency
U.S. Dollar Chinese Renminbi $ (44,492 ) $ 4,045
$ (4,944 )
U.S. Dollar Canadian Dollar 20,802
(1,891 ) 2,311
U.S. Dollar Australian Dollar 17,791
(1,617 ) 1,977
U.S. Dollar Brazilian Real 14,538
(1,322 ) 1,615
U.S. Dollar Singapore Dollar (11,982 ) 1,089
(1,331 )
U.S. Dollar Mexican Peso 10,813
(983 ) 1,201
U.S. Dollar Taiwanese Dollar (9,516 ) 865
(1,057 )
U.S. Dollar Japanese Yen 3,749
(341 ) 417
U.S. Dollar Swiss Franc 1,453
(132 ) 161
U.S. Dollar Korean Wan (1,129 ) 103
(125 )
U.S. Dollar Indian Rupee (933 ) 85
(104 )
U.S. Dollar Hong Kong Dollar (920 ) 84
(102 )
U.S. Dollar Russian Ruble 646
(59 ) 72
Euro British Pound (3,959 ) 360
(440 )
Euro Swedish Krona (3,163 ) 288
(351 )
Euro Turkish Lira 3,115
(283 ) 346
Euro U.S. Dollar 1,424
(129 ) 158
Euro Croatian Kuna 1,305
(119 ) 145
Euro Swiss Franc (979 ) 89
(109 )
Euro Polish Zloty (953 ) 87
(106 )
Euro Arab Emirates Dirham (563 ) 51
(63 )
$ (2,953 ) $ 270
$ (329 )

~~Long currency positions represent net assets being held in the transaction currency while short currency positions represent net liabilities being held in the transaction currency.~~

~~Our principal manufacturing operations are located in China, with much~~ of ~~our component and raw material costs transacted in Chinese Renminbi ("CNY"). As of December 31, 2017, net liabilities held in CNY totaled $44.5 million.~~

~~Derivatives~~

such dates.

We enter into cash flow hedge contracts to protect against exchange rate exposure of forecasted inventory purchases. These hedging contracts mature within 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~~

If the U.S. dollar weakened by 10% as ~~operating activities in the condensed consolidated statements~~ of ~~cash flows. As of December 31, 2017~~September 30, 2020 and March 31, ~~2017,~~2020, the notional amounts of currency exchange forward contracts outstanding related to forecasted inventory purchases were $135.0 million and $59.4 million, respectively. Deferred realized gains of $0.1 million wereamount recorded in accumulated other comprehensive ~~loss~~income (AOCI) related to our foreign exchange contracts before tax effect would have been approximately $15.5 million and $4.8 million lower respectively, as of ~~December 31, 2017, and are~~such dates. The change in the fair value recorded in AOCI would be expected to ~~be reclassified to~~offset a corresponding foreign currency change in cost of goods sold when the ~~related~~hedged inventory ispurchases are sold. Deferred unrealized losses of $1.3 million related to open cash flow hedges were recorded in accumulated other comprehensive loss as of December 31, 2017, and these forward contracts will be revalued in future periods until the related inventory is sold, at which time the resulting gains or losses will be reclassified to cost of goods sold.

We also enter into foreign currency exchange forward and swap contracts to reduce the short-term effects of currency exchange rate fluctuations on certain currency receivables or payables denominated in currencies other than the functional currencies of our subsidiaries. These contracts generally mature within one month. The primary risk managed by using forward and swap contracts is the currency exchange rate risk. The gains or losses on these currency exchange contracts are recognized in earnings based on the changes in fair value. Cash flows from these contracts are classified as operating activities in the condensed consolidated statements of cash flows. The notional amounts of currency exchange contracts outstanding as of December 31, 2017 and March 31, 2017 relating to foreign currency receivables or payables were $89.0 million and $56.7 million, respectively. Open forward and swap contracts as of December 31, 2017 and March 31, 2017 consisted of contracts in Mexican Pesos, Japanese Yen, British Pounds, Taiwanese Dollars, Canadian Dollars, Australian Dollars and Chinese Renminbi to be settled at future dates at pre-determined exchange rates.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

~~The Company conducted an evaluation~~Logitech's management, with the participation of the Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO"), has evaluated the effectiveness of ~~the design and operation of its~~our disclosure controls and procedures (as defined in ~~Rules 13a-15(e) and 15d-15(e) under the Securities~~ Exchange Act ~~of 1934, as amended (the “Exchange Act”)) (“Disclosure Controls”~~Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form ~~10-Q (this “Report”) required by Exchange Act Rules 13a-15(b) or 15d-15(b). The controls~~10-Q. Based on this evaluation, ~~was conducted under~~ the ~~supervision~~CEO and ~~with~~ the ~~participation~~CFO have concluded that, as of ~~the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Disclosure~~such date, our disclosure controls and procedures are effective at the reasonable assurance level.

Definition of Disclosure Controls

Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in ~~our~~the Company’s reports filed ~~or submitted~~ under the Exchange Act, such as this Quarterly Report on Form 10-Q, is recorded, processed, summarized and reported within the time periods specified in the ~~Securities and Exchange Commission's~~SEC’s rules and forms. Disclosure ~~controls and procedures~~Controls are also designed to reasonably assure that ~~this~~such information is accumulated and communicated to ~~our~~the Company’s management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. ~~Based on this evaluation, the CEO and CFO have concluded that, as of the end of the period covered by this Report, the~~The Company’s Disclosure Controls ~~and procedures were not effective as a result~~include components of ~~the material weakness that existed in our~~its internal control over financial reporting, ~~as described below.~~

~~Notwithstanding~~which consists of control processes designed to provide reasonable assurance regarding the ~~material weakness discussed below, management, including our CEO~~reliability of its financial reporting and ~~CFO, believes~~ the ~~condensed consolidated~~preparation of financial statements ~~included in this Quarterly Report on Form 10-Q fairly represent, in all material respects, our financial condition, results of operations and cash flows for the periods presented~~ in accordance with ~~U.S.~~ generally accepted accounting ~~principles.~~

~~Material Weakness~~principles in ~~Internal Controls over Financial Reporting~~

~~A material weakness is a deficiency, or combination~~the United States. To the extent that components of ~~deficiencies, in~~the Company’s internal control over financial reporting ~~such that there is a reasonable possibility that a material misstatement~~are included within its Disclosure Controls, they are included in the scope of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weakness as of March 31, 2017 that continued to exist as of December 31, 2017:controls evaluation.

In connection with the Company’s sales growth strategy in EMEA, the Company expanded its use of performance-based customer programs in the region in fiscal years 2016 and 2017. As a result, the allowances and accruals for customer incentive, cooperative marketing and pricing programs increased in those years. In prior periods, the Company did not have sufficient historical data on customer breakage patterns in the EMEA region to allow for a reliable estimation of future customer breakage attributable to these allowances and accruals. However, by the fourth quarter of fiscal year 2017, sufficient historical data was available to establish a model to reliably estimate the expected future customer breakage. As of March 31, 2017, the Company did not identify that sufficient historical data existed to estimate future customer breakage and, as a result, the Company did not modify the design of the control activities related to the accuracy of the allowance and accruals to respond to the change in relevant data. Our management has concluded that this deficiency constitutes a material weakness in our internal control over financial reporting.

Management concluded that the allowances and accrued liabilities relating to customer programs in the EMEA region were overstated at March 31, 2017 as future breakage was not estimated. This overstatement of allowances and accrued liabilities relating to customer programs in the EMEA region has been corrected in our consolidated financial statements included in our Annual Report on Form 10-K. While the control deficiency did not result in a misstatement of our current or previously issued consolidated financial statements, the material weakness resulted in changes to our preliminary results of operations for the quarter and year ended March 31, 2017 furnished to the United States Securities and Exchange Commission (“SEC”) in the Current Report on Form 8-K on April 26, 2017.

~~Management’s Plan to Remediate the Material Weakness~~

~~In May 2017, management began implementing a remediation plan to address the material weakness. The remediation plan includes:~~

~~The development and implementation of a new estimation model of breakage related to customer incentive, cooperative marketing and pricing programs in the EMEA region;~~

~~The design and implementation of related controls over the new estimation model; and~~

Enhancements to the process to periodically evaluate and appropriately respond to changing business circumstances that may impact control activities, specifically in the area of the accuracy of the allowances and accruals.

Our management believes the foregoing efforts will effectively remediate the material weakness; however, the material weakness cannot be considered remediated until the control has operated for a sufficient period of time and until management has concluded, through testing of several instances, that the control is operating effectively. The Company expects to remediate this material weakness by the end of fiscal year 2018.

Limitations on the Effectiveness of Controls

The ~~Company's~~Company’s management, including the CEO and the CFO, does not expect that the ~~Company's disclosure controls and procedures~~Company’s Disclosure Controls or internal control over financial reporting will prevent all errors and all fraud. ~~Internal~~A control ~~over financial reporting,~~system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in ~~internal~~all control ~~over financial reporting,~~systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

~~The~~There have been no changes in the Company’s internal control over financial reporting during the ~~three months~~fiscal quarter ended ~~December 31, 2017,~~September 30, 2020, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial ~~reporting, are discussed above in Management’s Plan to Remediate the Material Weakness.~~reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time-to-time we are involved in claims and legal proceedings that arise in the ordinary course of our business. We are currently subject to several such claims and a small number of legal proceedings. We believe that these matters lack merit and we intend to vigorously defend against them. Based on currently available information, we do not believe that resolution of pending matters will have a material adverse effect on our financial condition, cash flows or results of operations. However, litigation is subject to inherent uncertainties, and there can be no assurances that our defenses will be successful or that any such lawsuit or claim would not have a material adverse impact on our business, financial condition, cash flows and results of operations in a particular period. Any claims or

proceedings against us, whether meritorious or not, can have an adverse impact because of defense costs, diversion of management and operational resources, negative publicity and other factors. Any failure to obtain necessary licenses or other rights, or litigation arising out of intellectual property claims, could adversely affect our business.

ITEM 1A. RISK FACTORS

Our operating results are difficult to predict and fluctuations in results may cause volatility in the price of our shares.

Our revenues and profitability are difficult to predict due to the nature of the markets in which we compete, fluctuating user demand, the uncertainty of current and future global economic conditions, and for many other reasons, including the following:

•Our operating results are highly dependent on the volume and timing of orders received during the quarter, which are difficult to forecast. Customers generally order on an as-needed basis and we typically do not obtain firm, long-term purchase commitments from our customers. As a result, our revenues in any quarter depend primarily on orders booked and shipped in that quarter.

•A significant portion of our quarterly retail sales typically occurs in the last weeks of each quarter, further increasing the difficulty in predicting quarterly revenues and profitability.

•Our sales are impacted by consumer demand and current and future global economic and political conditions, including trade restrictions and tariffs, and can, therefore, fluctuate abruptly and significantly during periods of uncertain economic conditions or geographic distress, as well as from shifts in distributor inventory practices and consumer buying patterns.

•We must incur a large portion of our costs in advance of sales orders because we must plan research and production, order components, buy tooling equipment, and enter into development, sales and marketing, and other operating commitments prior to obtaining firm commitments from our customers. This makes it difficult for us to rapidly adjust our costs during the quarter in response to a revenue shortfall, which could adversely affect our operating results.

•The COVID-19 pandemic has led to evolving changes in our supply, operations, logistics and related expenses and use patterns and demand for certain of our products that may not recur or be sustainable in future periods, as well as uncertainty in global macroeconomic conditions.

We engage in acquisitions and divestitures, and such activity varies from period to period. Such variance may affect our growth, our previous outlook and expectations, and comparisons of our operating results and financial statements between periods.

•We ~~have attempted~~are continuously attempting to simplify our organization, to reduce operating costs through expense reduction and at times through global workforce reductions, to reduce the complexity of our product portfolio, and to better align costs with our current business as we expand from PC accessories to growth opportunities in accessories and other products and services for ~~music,~~creativity and productivity, gaming, video collaboration, mobile devices, music, digital home ~~mobile devices~~ and other product categories. We may not achieve the cost savings or other anticipated benefits from these efforts, and the success or failure of such efforts may cause our operating results to fluctuate and to be difficult to predict.

•Fluctuations in currency exchange rates can impact our revenues, expenses and profitability because we report our financial statements in U.S. Dollars, whereas a significant portion of our revenues and expenses are in other currencies. We attempt to adjust product prices over time to offset the impact of currency movements. However, over short periods of time, during periods of weakness in consumer spending or given high levels of competition in many product categories, our ability to change local currency prices to offset the impact of currency fluctuations is limited.

Because our operating results are difficult to predict, our results may be below the expectations of financial analysts and investors, which could cause the price of our shares to decline.

If we fail to innovate and develop new products in a timely and cost-effective manner for our new and existing product categories, our business and operating results could be adversely affected.

Our product categories are characterized by short product life cycles, intense competition, frequent new product introductions, rapidly changing technology, dynamic consumer demand and evolving industry standards. As a result, we must continually innovate in our new and existing product categories, introduce new products and technologies, and enhance existing products in order to remain competitive.

The success of our product portfolio depends on several factors, including our ability to:

•Identify new features, functionality and opportunities;

•Anticipate technology, market trends and consumer preferences;

Develop innovative, high-quality, and reliable new products and enhancements in a cost-effective and timely manner;

•Distinguish our products from those of our competitors; and

•Offer our products at prices and on terms that are attractive to our customers and consumers.

If we do not execute on these factors successfully, products that we introduce or technologies or standards that we adopt may not gain widespread commercial acceptance, and our business and operating results could suffer. In addition, if we do not continue to differentiate our products through distinctive, technologically advanced features, designs, and services that are appealing to our customers and consumers, as well as continue to build and strengthen our brand recognition and our access to distribution channels, our business could be adversely affected.

The development of new products and services iscan be very difficult and requires high levels of innovation. The development process is also can be lengthy and costly. There are significant initial expenditures for research and development, tooling, manufacturing processes, inventory and marketing, and we may not be able to recover those investments. If we fail to accurately anticipate technological trends or our users’ needs or preferences, are unable to complete the development of products and services in a cost-effective and timely fashion or are unable to appropriately increase production to fulfill customer demand, we will be unable to successfully introduce new products and services into the market or compete with other providers. Even if we complete the development of our new products and services in a cost-effective and timely manner, they may not be competitive with products developed by others, they may not achieve acceptance in the market at anticipated levels or at all, they may not be profitable or, even if they are profitable, they may not achieve margins as high as our expectations or as high as the margins we have achieved historically.

As we introduce new or enhanced products, integrate new technology into new or existing products, or reduce the overall number of products offered, we face risks including, among other things, disruption in customers’ ordering patterns, excessive levels of new and existing product inventories, revenue deterioration in our existing product lines, insufficient supplies of new products to meet customers’ demand, possible product and technology defects, and a potentially different sales and support environment. Premature announcements or leaks of new products, features or technologies may exacerbate some of these risks by reducing the effectiveness of our product launches, reducing sales volumes of current products due to anticipated future products, making it more difficult to compete, shortening the period of differentiation based on our product innovation, straining relationships with our partners or increasing market expectations for the results of our new products before we have had an opportunity to demonstrate the market viability of the products. Our failure to manage the transition to new products and services or the integration of new technology into new or existing products and services could adversely affect our business, results of operations, operating cash flows and financial condition.

~~We believe sales of PCs will continue to decline, and that our~~

Our future growth will depend on our diversified product growth opportunities, ~~beyond the PC,~~ and if we do not successfully execute on our growth opportunities, or if our growth opportunities are more limited ~~than we expect or if our sales of PC peripherals are less~~ than we expect, our operating results could be adversely affected.

We have historically targeted peripherals for the PC platform. Consumer demand for PCs, especially in our traditional, mature markets such as North America, Western and Nordic Europe, Japan and Australia, has been declining or flat for several years and, ~~we expect it~~despite work-from-home and distance learning trends that have caused PC shipments to increase recently, such downward trends may continue ~~to decline~~ in the future. ~~As a result,~~This has put pressure on consumer demand for PC peripherals in many of our markets ~~is slowing~~and may cause sales growth of our PC peripherals to slow and, in some cases, ~~declining and we~~decline. We expect this trend may continue.

Our sales of PC peripherals might be less than we expect due to a decline in business or economic conditions in one or more of the countries or regions, a greater decline than we expect in demand for our products, our inability to successfully execute our sales and marketing plans, or for other reasons. Global economic concerns, such as the COVID-19 pandemic, the varying pace of global economic recovery, political uncertainties created by policy changes such as Brexit, tariffs and policies that inhibit trade, the impact of sovereign debt issues in Europe, the impact of ~~low~~ oil prices on Russia and other countries, conflicts with either local or

global financial implications ~~in places such as Russia and Ukraine,~~ and economic slowdown in China, create unpredictability and add risk to our future outlook.

As a result, we are attempting to diversify our product category portfolio and focusing more of our attention, which may include ~~the~~ personnel, financial resources and management attention, on product innovations and growth opportunities, including products and services for gaming, for video collaboration, for the consumption of digital music, ~~products for gaming, products for video collaboration, products~~ for the digital home, and on other potential growth ~~opportunities.~~opportunities in addition to our PC peripherals product categories. Our investments may not result in the growth we expect, or when we expect it, for a variety of reasons including those described below.

~~Music.~~ ~~We are focused on products for the consumption of digital music~~Creativity & Productivity. Our pointing devices, keyboards, webcams and other PC peripherals have continued to see some growth as a ~~sales~~result of work-from-home and distance learning trends, consumers refreshing their existing PCs, product innovation and new consumer trends, such as social content creation. If these trends and other growth ~~area. Competition~~drivers do not continue, or result in ~~the mobile speaker and headphone categories is intense, and we expect it to increase. If we are not able to grow~~erratic periods of growth, our existing and acquired product lines, introduce differentiated product and marketing strategies to separate ourselves from competitors, our mobile speaker and audio headphone efforts will not be successful, and our business and results of operations could be more susceptible to the trends in PCs and our business and our results could be adversely affected.

Gaming. We are building a diverse business that features a variety of gaming ~~peripherals.~~peripherals and services. The rapidly evolving and changing market and increasing competition increase the risk that we do not allocate our resources in line with the market and our business and our results of operations could be adversely affected.

Video Collaboration. While we view the small and ~~medium sized~~medium-sized user ~~groups'~~groups opportunity to be large and relatively unaddressed, this is a new and evolving market segment that we and our competitors are developing. If the market opportunity proves to ~~exist,~~be sustainable, we expect ~~increasing~~increased competition from ~~the large~~established competitors in the video conferencing market as well as ~~potential~~from new ~~entrants.~~entrants who are gaining traction as the industry comes to accept new technology and new solutions. In order to continue to grow in this opportunity, we may need to further build and scale our own enterprise sales force, a capability that several of our competitors in this category already have.

Music. We make and sell products for the consumption of digital music in targeted segments of that market. Competition in the mobile speaker and headphone categories is intense, and we expect it to increase. Moreover, the market for mobile speakers appears to be maturing with slower growth or even declining. If we are not able to grow our existing and acquired product lines and introduce differentiated products and marketing strategies to separate our products and brands from competitors' products and brands, our mobile speaker and audio headphone efforts will not be successful, and our business and results of operations could be adversely affected.

Smart Home. While we are a leader in programmable, performance remote controls for home entertainment, the smart home market is still in its early stages and it is not yet clear when the category will produce dynamic growth or which products will succeed and be able to take advantage of market growth or to help define and grow the market. Despite its early stages, the smart home market already is experiencing increasing competition from strong competitors.

In addition to our current growth opportunities, our future growth may be reliant on our ability to identify and develop potential new growth opportunities. This process is inherently risky and will result in investments in time and resources for which we do not achieve any return or value.

Each of these growth categories and many of the growth opportunities that we may pursue are subject to constant and rapidly changing and evolving technologies and evolving industry standards and may be replaced by new technology concepts or platforms. Some of these growth categories and opportunities are also characterized by short product cycles, frequent new product introductions and enhancements and rapidly changing and evolving consumer preferences with respect to design and features that require calculated risk-taking and fast responsiveness and result in short opportunities to establish a market presence. In addition, some of these growth categories and opportunities are characterized by price competition, erosion of premium-priced segments and average selling prices, commoditization, and sensitivity to general economic conditions and cyclical downturns. The growth opportunities and strength and number of competitors that we face in all of our product categories mean that we are at risk of new competitors coming to market with more innovative products that are more attractive to customers than ours or priced more competitively. If we do not develop innovative and reliable peripherals and enhancements in a cost-effective and timely manner that are attractive to consumers in these markets, if we are otherwise unsuccessful entering and competing in these growth categories or responding to our many competitors and to the rapidly changing conditions in these growth categories,, if the growth categories in which we invest our limited resources do not emerge as the opportunities or do not produce the growth or profitability we expect, or when we expect it, or if we do not correctly anticipate changes and evolutions in technology and platforms, our business and results of operations could be adversely affected.

If we are not able to maintain and enhance our brands, or if our brands or reputation are damaged, our reputation, business and operating results could be adversely affected.

We have developed long-term value in our brands and have invested significantly in design and in our existing and new brands over the past several years. We believe that our design and brands have significantly contributed to the success of our business and that maintaining and enhancing our brands is very important to our future growth and success. Maintaining and enhancing our brands will require significant investments and will depend largely on our future design, products and marketing, which may not be successful and may damage our brands. Our brands and reputation are also dependent on third parties, such as suppliers, manufacturers, distributors, retailers, product

reviewers and the media as well as online consumer product reviews, consumer recommendations and referrals. It can take significant time, resources and expense to overcome negative publicity, reviews or perception. Any negative effect on our brands, regardless of whether it is in our control, could adversely affect our reputation, business and results of operations.

If we do not compete effectively, demand for our products could decline and our business and operating results could be adversely affected.

The peripherals industry is intensely competitive. Most of our product categories are characterized by large, well-financed competitors with strong brand names and highly effective research and development, marketing and sales capabilities, short product life cycles, continual performance enhancements, and rapid adoption of technological and product advancements by competitors in our ~~retail~~product markets. Many of our competitors have broad product portfolios across several of our product categories and are able to use the strength of their brands to move into adjacent categories. Our competitors have the ability to bring new products to market quickly and at competitive prices. We experience aggressive price competition and other promotional activities from our primary competitors and from less-established brands, including brands owned by retail customers known as house brands. As we shift the focus of our marketing efforts in certain categories from promotional activities to a pull strategy, the pressures from this competition and from our distribution channels, combined with the implementation risks of such a strategy shift, could adversely affect our competitive position, market share and business. In addition, our competitors may offer customers terms and conditions that may be more favorable than our terms and conditions and may require us to take actions to maintain or increase our customer incentive programs, which could impact our revenues and operating margins.

In recent years, we have expanded the categories of products we sell and entered new markets. We remain alert to opportunities in new categories and markets. As we do so, we are confronting new competitors, many of which have more experience in the categories or markets and have greater marketing resources and brand name recognition than we have. In addition, because of the continuing convergence of the markets for computing devices and consumer electronics, we expect greater competition in the future from well-established consumer electronics companies in our developing categories as well as in future categories we might enter. Many of these companies, such as Microsoft, Apple, Google, Cisco, Sony, ~~Corporation, Polycom,~~ Samsung and others, have greater financial, technical, sales, marketing and other resources than we have.

Microsoft, Apple, Google and ~~Google~~Amazon are leading producers of operating systems, hardware, platforms and applications with which our mice, keyboards, wireless speakers and other products are designed to operate. In addition, Microsoft, Apple, Google and ~~Google~~Amazon each has significantly greater financial, technical, sales, marketing and other resources than Logitech, as well as greater name recognition and a larger customer base. As a result, Microsoft, Apple, Google and ~~Google~~Amazon each may be able to improve the functionality of its products, if any, or may choose to show preference to our competitors' products, to correspond with ongoing enhancements to its operating systems, hardware and software applications before we are able to make such improvements. This ability could provide Microsoft, Apple, Google, Amazon or other competitors with significant lead-time advantages. In addition, Microsoft, Apple, Google, Amazon or other competitors may be able to control distribution channels or offer pricing advantages on bundled hardware and software products that we may not be able to offer, and ~~may be~~maybe financially positioned to exert significant downward pressure on product prices and upward pressure on promotional incentives in order to gain market share.

~~Music~~

~~Mobile Speakers.~~ Our competitors for Bluetooth wireless speakers include Bose, JBL, Harmon Kardon, and Beats Electronics. Bose is our largest competitor. Apple's ownership of Beats Electronics may impact our access to shelf space in Apple retail stores and adversely impact our ability to succeed in this important growth market. Personal assistance and other devices that offer music, such as Amazon's Echo, may also compete with our products. Amazon is also a significant distributor for our products.

~~Audio-PC & Wearables~~. In the PC speakers category, our competitors include Bose, Cyber Acoustics, Phillips and Creative Labs, Inc. In the PC headset business, our main competitors include Plantronics and Altec Lansing. In-ear headphones competitors include Skull Candy, Sennheiser, Sony, Beats, and others.

~~Gaming~~

~~Competitors for our Gaming products include Razer USA Ltd., Corsair, SteelSeries, and Turtle Beach.~~

~~Video Collaboration~~

~~Our competitors for Video Collaboration products include Cisco Systems, Inc., Polycom, Inc., and AVer Information Inc.~~

~~Smart Home~~

Direct competitors in the remote control market include pro-installer-focused Universal Remote Control Inc., and new “DIY” entrants from Savant Systems and Ray Enterprises. Indirect competition exists in the form of low-end “replacement remotes” such as Sony, RCA, GE, pure app-based solutions for smartphones and other mobile devices such as Peel, as well as device and/or subscriber-specific solutions from TV makers such as Samsung and Vizio and multisystem operators, or MSOs, such as Comcast and DirecTV.

Competition in the home control market also exists in form of home automation platforms such as Smart Things (owned by Samsung), Amazon with their Echo product, Google Home and Nest (owned by Alphabet), Wink and many other startups. Many of these products and brands are partners with Logitech as well via integrations with Harmony remotes.

Creativity & Productivity

Pointing Devices. Apple, Microsoft ~~Corporation~~ and HP ~~Inc.~~ are our main ~~competitors.~~competitors worldwide. We also experience competition and pricing pressure from less-established brands, including house brands ~~which we believe have impacted our market share~~and local competitors in ~~some sales geographies.~~Asian markets such as Elecom, Buffalo, Shenzhen Rapoo and Xiaomi.

Keyboards & Combo. Microsoft ~~Corporation~~ and Apple ~~Inc.~~ are our main competitors in our PC keyboard and combo product lines. We also experience competition and pricing pressure for keyboard and combos from less-established brands, including house ~~brands.~~brands and local competitors in Asian markets such as Shenzhen Rapoo and Xiaomi.

Tablet & Other Accessories. Competitors in the tablet keyboard market are Apple, Zagg, Kensington, Belkin, Targus and other less-established brands. Although we are one of the leaders in the tablet keyboard market and continue to bring innovative offerings to the market, we expect the competition ~~will~~may increase. Competitors in the tablet case market include Apple, Otter, Speck and a large number of small brands.

PC Webcams. Our primary competitors for PC webcams are Microsoft ~~Corporation~~ and ~~HP Inc. with various~~ other manufacturers taking smaller market ~~share.~~ share such as Razer, AVer, and Elecom.

Gaming

Competitors for our Gaming products include Razer, Corsair Components, SteelSeries, Turtle Beach and Kingston, among others.

Video Collaboration

Our competitors for Video Collaboration products are numerous across various categories with many new entrants. Competitors include Cisco Systems, Poly, GN Netcom/Jabra (which recently acquired Altia systems), and AVer Information, among others.

Music

Mobile Speakers. Our competitors for Bluetooth wireless speakers include Bose, JBL/Harman (owned by Samsung) and Beats (owned by Apple) among others. JBL/Harman is our largest competitor. Apple's ownership of Beats may impact our access to shelf space in Apple retail stores. Personal voice assistants and other devices that offer music, such as Sonos, Amazon's Echo, Google Home and Apple HomePod also compete with our products. Amazon is also a significant customer of our products.

Audio & Wearables. For PC speakers, our competitors include Bose, Cyber Acoustics, Phillips, Creative Labs, Apple and Samsung, among others. For PC headset, we face numerous competitors, including Plantronics and GN Netcom/Jabra, among others. In-ear headphones competitors include Beats, Bose, Apple, Sony, JBL and Sennheiser, among others. Our competitors for Blue Microphones products include Rode, Audio-Technica, Samson, Shure, Razer and Apogee, among others.

Smart Home

Direct competitors in the remote control market include pro-installer-focused Universal Remote Control and new “DIY” entrants. Indirect competition exists in the form of low-end “replacement remotes” such as Sony, RCA, GE, pure app-based solutions such as Peel, as well as device and/or subscriber-specific solutions from TV makers such as Samsung and Vizio and multisystem operators, or MSOs, such as Comcast and DirecTV.

Competition in the home control market also exists in the form of home automation platforms such as Smart Things (owned by Samsung), Amazon with their Echo product, Google Home and Nest (owned by Alphabet), Wink and many other startups. Many of these companies also integrate their products with Logitech's smart home and Harmony remote products.

The ~~worldwide market for consumer PC webcams~~full effect of the COVID-19 pandemic is uncertain and cannot be predicted, and it could adversely affect the Company’s business, results of operations and financial condition.

COVID-19 has ~~been declining,~~spread rapidly throughout the world, causing significant volatility and disruption in financial markets, curtailing global economic activity, raising the prospect of an extended global recession, and prompting governments and businesses to take unprecedented measures in response. Such measures have included restrictions on travel and business operations, indefinite business closures, and quarantines and shelter-at-home orders. The full effects of the COVID-19 pandemic cannot be predicted as a result ~~fewer competitors~~of uncertainties, including the extent and rate of the spread, the possibility and timing of any vaccine, treatment or cure or stop to the spread, and the potential for additional peaks in infection rates.

The COVID-19 pandemic and the measures taken by many countries in response have ~~entered~~contributed to a general slowdown in the ~~market.~~global economy and adversely affected, and could in the future adversely affect, our business and operations, our customers and our partners. Starting with the initial outbreak of the virus in China and as it has spread globally, we have experienced disruptions and higher costs in our manufacturing, supply chain and logistics operations and outsourced services, and in some cases increased sell-through, resulting in shortages of our products in our distribution channels and loss of market share and opportunities. In order to renew manufacturing at our own facility, we have quarantined employees and re-engineered our manufacturing operations with diminished capacity. Sales of our products have also been impeded by closures of retail stores and disruptions in other channel partner points of sale.

At the same time, as a result of government orders and concern for the well-being of our employees and their families, we have required substantially all of our employees in non-manufacturing facilities to work remotely. This has led to inefficiencies and operational, cybersecurity and other risks and costs which could have an adverse impact to our results of operations. We cannot reasonably predict when our employees will be able to return to our offices or the further precautionary measures and costs we may need to incur to ensure the health of our employees and to mitigate the spread and impact of the virus. Additionally, our management team and employees had to focus on planning for and mitigating operational changes and risks of the COVID-19 pandemic, shifting some of their attention from focusing on and adversely affecting our normal business, strategic plans and other initiatives. We have also incurred additional costs related to business continuity.

Since the onset of the COVID-19 pandemic, it has had mixed effects on our results of operations, and it may continue to have mixed or adverse effects. Its effects on the use patterns and demand for certain of our products may not be sustainable or may lead to increased competition in certain of our product markets. COVID-19 also may have the effect of heightening many of the other risks described under this heading “Risk Factors”. We continue to monitor the situation and attempt to take appropriate actions in accordance with the recommendations and requirements of relevant authorities. The full extent of the impact of the COVID-19 pandemic on our business and on our operational and financial performance and condition is currently uncertain and will depend on many factors outside our control, including but not limited to the timing, extent, duration and effects of the virus and any of its mutations, the development and availability of effective treatments an vaccines, the imposition of effective public safety and other protective measures, the impact of COVID-19 on the global economy and demand for our products and services, and the impact of the virus on the business, operations and financial condition of our partners. Should the COVID-19 situation or global economic slowdown not improve or worsen, or if our attempts to mitigate its impact on our operations and costs are not successful, our business, results of operations, financial condition and prospects may be adversely affected.

Our business depends in part on access to third-party platforms or technologies, and if the access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies change without notice to us, our business and operating results could be adversely affected.

Our peripherals business has historically been built largely around the PC platform, which over time became relatively open, and its inputs and operating system standardized. With the growth of mobile, tablet, gaming and other computer devices, digital music and personal voice assistants, the number of platforms has grown, and with it the complexity and increased need for us to have business and contractual relationships with the platform owners in order to produce products compatible with these platforms. Our product portfolio includes current and future products designed for use with third-party platforms or software, such as the Apple iPad, iPod, iPhone and Siri, ~~the~~ Android phones and tablets, Google ~~Home~~Assistant and Amazon ~~Alexa.~~Alexa. Our business in these categories relies on our access to the platforms of third parties, some of whom are our competitors. Platform owners that are competitors have a competitive advantage in designing products for their platforms and may produce peripherals or other products that work better, or are perceived to work better, than our products in connection with those platforms. As we expand the number of platforms and software applications with which our products are compatible, we may not be successful in launching products for those platforms or software applications, we may not be successful in establishing strong relationships with the new platform or software owners, or we may negatively impact our ability to develop and produce high-quality products on a timely basis for those platforms and software applications or we may otherwise adversely affect our relationships with existing platform or software owners.

Our access to third-party platforms may require paying a royalty, which lowers our product margins or may otherwise be on terms that are not acceptable to us. In addition, the third-party platforms or technologies used to interact with our product portfolio can be delayed in production or can change without prior notice to us, which can result in our having excess inventory, lower margins, lost investment in time and expense, or ~~lower margins.~~lost opportunity cost.

If we are unable to access third-party platforms or technologies, or if our access is withdrawn, denied, or is not available on terms acceptable to us, or if the platforms or technologies are delayed or change without notice to us, our business and operating results could be adversely affected.

If we do not accurately forecast market demand for our products, our business and operating results could be adversely affected.

We use our forecasts of product demand to make decisions regarding investments of our resources and production levels of our products. Although we receive forecasts from our customers, many are not obligated to purchase the forecasted demand. Also, actual sales volumes for individual products in our retail distribution channel can be volatile due to changes in consumer preferences and other reasons. In addition, our products have short product life cycles, so a failure to accurately predict high demand for a product can result in lost sales that we may not recover in subsequent periods, or higher product costs if we meet demand by paying higher costs for materials, production and delivery. We could also frustrate our customers and lose shelf ~~space.~~space and market share. Our failure to predict low demand for a product can result in excess inventory, lower cash flows and lower margins if we are required to reduce product prices in order to reduce inventories.

If our sales channel partners have excess inventory of our products or decide to decrease their inventories for any reason, they may decrease the amount of products they acquire in subsequent periods, causing disruption in our business and adversely affecting our forecasts and sales.

Over the past few years, we have expanded the types of products we sell and the geographic markets in which we sell them. The changes in our product portfolio and the expansion of our sales markets have increased the difficulty of accurately forecasting product demand.

In addition, ~~during~~starting in fiscal year 2016, we increased the ~~percentage~~number of our products that we manufacture in our own facilities. This increases the inventory that we purchase and maintain to support such manufacturing. We are also utilizing sea shipments more extensively than air delivery, which will cause us to build and ship products to our distribution centers earlier and will also result in increases in inventory. These operational shifts increase the risk that we have excess or obsolete inventory if we do not accurately forecast product demand.

Other events or circumstances, including those not in our control, such as the current COVID-19 pandemic, may result in rapid and significant increases or decreases of demand for our products that may result in excess inventory or product unavailability, increases in operational logistics and other costs, damaged relationships with suppliers or customers, opportunities for our competitors, and lost market share.

We have experienced large differences between our forecasts and actual demand for our products. We expect other differences between forecasts and actual demand to arise in the future. If we do not accurately predict product demand, our business and operating results could be adversely affected.

Our success largely depends on our ability to hire, retain, integrate and motivate sufficient numbers of qualified personnel, including senior management. Our strategy and our ability to innovate, design and produce new products, sell products, maintain operating margins and control expenses depend on key personnel that may be difficult to replace.

Our success depends on our ability to attract and retain highly skilled personnel, including senior management and international personnel. From time to time, we experience turnover in some of our senior management positions.

We compensate our employees through a combination of salary, bonuses, benefits and equity compensation. Recruiting and retaining skilled personnel, including software and hardware engineers, is highly competitive. If we fail to provide competitive compensation to our employees, it will be difficult to retain, hire and integrate qualified employees and contractors, and we may not be able to maintain and expand our business. If we do not retain or maintain the continuity of our senior managers or other key employees for any reason, including voluntary or involuntary departure, death or permanent or temporary disability (the risk of which has been underscored during the COVID-19 pandemic), we risk losing institutional knowledge, experience, expertise and other benefits of continuity as well as the ability to attract and retain other key employees. In addition, we must carefully balance the size of our employee base with our current infrastructure, management resources and anticipated operating cash flows. If we are unable to manage the size of our employee base, particularly engineers, we may fail to develop and introduce new products successfully and in a cost-effective and timely manner. If our revenue growth or employee levels vary significantly, our operating cash flows and financial condition could be adversely affected. Volatility or lack of positive performance in our stock price ~~including declines in our stock prices in the past year,~~ may also affect our ability to retain key employees, many of whom have been granted equity incentives. Logitech’s practice has been to provide equity incentives to its employees, but the number of shares available for equity grants is limited. We may find it difficult to provide competitive equity incentives, and our ability to hire, retain and motivate key personnel may suffer.

Recently and in past years, we have initiated reductions in our workforce to align our employee base with our business strategy, our anticipated revenue base or with our areas of focus. We have also experienced turnover in our workforce. These reductions and turnover have resulted in reallocations of duties, which could result in employee uncertainty and discontent. Reductions in our workforce could make it difficult to attract, motivate and retain employees, which could adversely affect our business.

Our gross margins can vary significantly depending on multiple factors, which can result in unanticipated fluctuations in our operating results.

Our gross margins can vary due to consumer demand, competition, product pricing, product ~~life cycle,~~lifecycle, product mix, new product introductions, unit volumes, acquisitions and divestitures, commodity, supply chain and logistics costs, capacity utilization, geographic sales mix, currency exchange rates, trade policy and tariffs, and the complexity and functionality of new product ~~innovations.~~innovations and other factors. In particular, if we are not able to introduce new products in a timely manner at the product cost we expect, or if consumer demand for our products is less than we anticipate, or if there are product pricing, marketing and other initiatives by our competitors to which we need to react or that are initiated by us to drive sales that lower our margins, then our overall gross margin will be less than we project.

In addition, our gross margins may vary significantly by product line, sales geography and customer type, as well as within product lines. When the mix of products sold shifts from higher margin product lines to lower margin product lines, to lower margin sales geographies, or to lower margin products within product lines, our overall gross margins and our profitability may be adversely affected.

As we expand within and into new product categories, our products in those categories may have lower gross margins than in our traditional product categories. Consumer demand in these product categories, based on style, color and other factors, tends to be less predictable and tends to vary more across geographic markets. As a result,

we may face higher up-front investments, inventory costs associated with attempting to anticipate consumer preferences, and increased inventory write-offs. If we are unable to offset these potentially lower margins by enhancing the margins in our more traditional product categories, our profitability may be adversely affected.

Changes in trade policy, including tariffs and the tariffs focused on China in particular, and currency exchange rates also have adverse impacts on our gross margins. The COVID-19 pandemic is putting pressure on our gross margins as well as causing us to face uncertain product demand and incur increased air freight and other costs to fulfill sell through demand, replenish channel inventory, and maintain shelf presence and market share.

The impact of these factors on gross margins can create unanticipated fluctuations in our operating results, which may cause volatility in the price of our shares.

As we continue our efforts to lower our costs and improve our operating leverage, we may or may not fully realize our goals.

Our strategy over the past several years has been based in part on simplifying the organization, reducing operating costs through global workforce reductions and a reduction in the complexity of our product portfolio, with the goal of better aligning costs with our current business. We restructured our business in fiscal years 2014 through 2016, and we may continue to divest or discontinue non-strategic product categories. During the third quarter of fiscal year 2016, we divested our Lifesize video conferencing business and completed our exit from the OEM business. ~~In addition,~~During the first quarter of fiscal year 2019, we ~~are continuing~~implemented a restructuring plan to streamline and realign our overall organization structure and reallocate resources to support long-term growth opportunities. We substantially completed this restructuring during the ~~rationalization of our general and administrative expense, infrastructure and indirect procurement to reduce operating expenses.~~three months ended June 30, 2019.

Our ability to achieve the desired and anticipated cost savings and other benefits from these simplification, cost-cutting and restructuring activities, and within our desired and expected timeframes, are subject to many estimates and assumptions, and the actual savings and timing for those savings may vary materially based on factors such as local labor regulations, negotiations with third parties, and operational requirements. These estimates and assumptions are also subject to significant economic, competitive and other uncertainties, some of which are beyond our control. There can be no assurance that we will fully realize the desired and anticipated benefits from these activities. To the extent that we are unable to improve our financial performance, further restructuring measures may be required in the future. Furthermore, we are expecting to be able to use the anticipated cost savings from these activities to fund and support our current growth opportunities and incremental investments for future growth. If the cost-savings do not materialize as anticipated, or within our expected timeframes, our ability to invest in growth may be limited and our business and operating results may be adversely affected. As we grow, explore new opportunities and markets, hire new management and other personnel, and fund research and development, marketing, brand development, sales, operations, investments in intellectual property and acquisitions to support this growth and our new opportunities, some or all of which may not succeed, we expect to experience continued pressure on our cost structure and expenses.

As part of the restructuring plans, we reduced the size of our product portfolio and the assortment of similar products at similar price points within each product category over the past several fiscal years. While we are constantly replacing products and are dependent on the success of our new products, this product portfolio simplification has made us even more dependent on the success of the new products that we are introducing.

As we focus on growth opportunities, we are divesting or discontinuing non-strategic product categories and pursuing strategic acquisitions and investments, which could have an adverse impact on our business.

We continue to review our product portfolio and update our non-strategic product categories and products. During the third quarter of fiscal year 2016, we divested our Lifesize video conferencing business and completed our exit from the OEM business. If we are unable to effect sales on favorable terms or if realignment is more costly or distracting than we expect or has a negative effect on our organization, employees and retention, then our business and operating results may be adversely affected. Discontinuing products with service components may also cause us to continue to incur expenses to maintain services within the product life cycle or to adversely affect our customer and consumer relationships and brand. Divestitures may also involve warranties, indemnification or covenants that could restrict our business or result in litigation, additional expenses or liabilities. In addition, discontinuing product categories, even categories that we consider non-strategic, reduces the size and diversification of our business and causes us to be more dependent on a smaller number of product categories.

As we attempt to grow our business in strategic product categories and emerging market geographies, we will consider growth through acquisition or investment. We will evaluate acquisition opportunities that could provide us with additional product or service offerings or with additional industry expertise, assets and capabilities. For example, we acquired ASTRO Gaming to expand into the console gaming market, we acquired Jaybird to expand into the wireless audio wearables market, ~~and~~ we acquired Saitek to expand into the gaming ~~flight~~ simulation and ~~farm simulation~~controller markets, we acquired Blue Microphones to expand into the microphones market, and we acquired Streamlabs to expand our software and service capabilities and tools for the streaming market. Acquisitions could result in difficulties integrating acquired operations, products, technology, internal controls, personnel and management teams and result in the diversion of capital and management’s attention away from other business issues and opportunities. If we fail to successfully integrate acquisitions, our business could be harmed. Acquisitions could also result in the assumption of known and unknown liabilities, product, regulatory and other compliance issues, dilutive issuances of our equity securities, the incurrence of debt, disputes over earn-outs or other litigation, and adverse effects on relationships with our and our target’s employees, customers and suppliers. Moreover, our acquisitions may not be successful in achieving our desired strategy, product, financial or other objectives or expectations, which would also cause our business to suffer. Acquisitions can also lead to large non-cash charges that can have an adverse effect on our results of operations as a result of write-offs for items such as future impairments of intangible assets and goodwill or the recording of share-based compensation. Several of our past acquisitions have not been successful and have led to impairment charges, including a $122.7 ~~million and $214.5~~ million non-cash goodwill impairment ~~charges~~charge in fiscal ~~years~~year 2015 ~~and 2013, respectively,~~ related to our Lifesize video conferencing ~~business which is reported in discontinued operations.~~business. Acquisitions and divestitures may also cause our operating results to fluctuate and make it difficult for investors to compare operating results and financial statements between periods. In addition, from time to time we make strategic venture investments in other companies that provide products and services that are complementary to ours. If these investments are unsuccessful, this could have an adverse impact on our results of operations, operating cash flows and financial condition.

We rely on third parties to sell and distribute our products, and we rely on their information to manage our business. Disruption of our relationship with these channel partners, changes in or issues with their business practices, their failure to provide timely and accurate information, changes in distribution partners, practices or models, or conflicts among our channels of distribution, or failure to build and scale our own sales force for certain product categories and enterprise channel partners could adversely affect our business, results of operations, operating cash flows and financial condition.

~~While most~~We primarily sell our products to a network of distributors, retailers and e-tailers (together with our ~~sales are made to~~direct sales channel ~~partners, we~~partners). We are dependent on those ~~distributors and retailers~~direct sales channel partners to distribute and sell our products to ~~other~~indirect sales channel partners and ultimately to consumers. The sales and business practices of all such sales channel partners, their compliance with laws and regulations, and their reputations - of which we may or may not be aware - may affect our business and our reputation.

While our overall distribution relationships are diffuse, over a quarter of our gross sales are concentrated with two customers - Amazon Inc. and Ingram Micro - and their affiliated entities. If online sales grow as a percentage of overall sales, we expect that we will become even more reliant on Amazon. While we believe that we have good relationships with Amazon and Ingram Micro, any adverse change in either of those relationships could have an adverse impact on our results of operations and financial condition.

The impact of economic conditions, labor issues, natural disasters, regional or global pandemics, evolving consumer preferences, and purchasing patterns on our distribution partners, or competition between our sales channels, could result in sales channel disruption. For example, if sales at large retail stores are displaced as a result of bankruptcy, competition from Internet sales

channels or otherwise, our product sales could be adversely ~~affected.~~affected and our product mix could change, which could adversely affect our operating costs and gross margins. The closure of brick-and-mortar stores around the world during the COVID-19 pandemic has exacerbated an already declining Bluetooth speaker market. COVID-19 has also underscored the risk of disruption in our sales channel at distribution partners such as Amazon. Any loss of a major partner or distribution channel or other channel disruption could make us more dependent on alternate channels, increase pricing and promotional pressures from other partners and distribution channels, increase our marketing costs, or adversely impact buying and inventory patterns, payment terms or other contractual ~~terms.~~terms, sell-through or delivery of our products to consumers, our reputation and brand equity, or our market share.

Our sales channel partners ~~the distributors and retailers who distribute and sell our products,~~ also sell products offered by our competitors and, in the case of retailer house brands, may also be our competitors. If product competitors offer our sales channel partners more favorable terms, have more products available to meet their needs, or utilize the leverage of broader product lines sold through the channel, or if

our ~~retailer~~sales channel partners show preference for their own house brands, our sales channel partners may de-emphasize or decline to carry our products. In addition, certain of our sales channel partners could decide to de-emphasize the product categories that we offer in exchange for other product categories that they believe provide them with higher returns. If we are unable to maintain successful relationships with these sales channel partners or to maintain our distribution channels, our business will suffer.

As we expand into new product categories and markets in pursuit of growth, we will have to build relationships with new channel partners and adapt to new distribution and marketing models. These new partners, practices and models may require significant management attention and operational resources and may affect our accounting, including revenue recognition, gross margins, and the ability to make comparisons from period to period. Entrenched and more experienced competitors will make these transitions difficult. Certain product categories, such as Video Collaboration, may also require that we further build and scale our own enterprise sales force. Several of our competitors already have large enterprise sale forces and experience and success with that sales model. If we are unable to build successful distribution channels, build and scale our own enterprise sales force, or successfully market our products in these new product categories, we may not be able to take advantage of the growth opportunities, and our business and our ability to grow our business could be adversely affected.

We reserve for cooperative marketing arrangements, ~~direct and indirect customer~~ incentive programs and pricing programs with our sales channel partners. These reserves are based on judgments and estimates, using historical experience rates, inventory levels in distribution, current trends and other factors. There could be significant differences between the actual costs of such arrangements and programs and our estimates.

We use ~~retail~~ sell-through data, which represents sales of our products by our direct retailer and e-tailer customers to consumers, and by our distributor customers to their customers, along with other metrics, to assess consumer demand for our products. Sell-through data is subject to limitations due to collection methods and the third-party nature of the data and thus may not be an accurate indicator of actual consumer demand for our products. ~~In addition, the~~The customers supplying sell-through data vary by geographic region and from period to period, but typically represent a majority of our retail sales. In addition, we rely on channel inventory data from our ~~retailer and distributor customers.~~sales channel partners. If we do not receive this information on a timely and accurate basis, if this information is not accurate, or if we do not properly interpret this information, our results of operations and financial condition may be adversely affected.

Our principal manufacturing operations and third-party contract manufacturers are located in China and Southeast Asia, which exposes us to risks associated with doing business in that geographic ~~area.~~area as well as potential tariffs, adverse tax consequences and pressure to move or diversify our manufacturing locations.

We produce approximately half of our products at the facilities we own in China. The majority of our other production is performed by third-party contract manufacturers, including ~~other~~original design manufacturers, in China, Taiwan, Hong Kong, Malaysia, Vietnam, and ~~Malaysia.~~Thailand.

Our manufacturing operations in China could be adversely affected by changes in the interpretation and enforcement of legal standards, strains on China’s available labor pool, changes in labor costs and other employment dynamics, high turnover among Chinese employees, infrastructure issues, import-export issues, cross-border intellectual property and technology restrictions, currency transfer restrictions, natural disasters, regional or global pandemics, conflicts or disagreements between China and Taiwan or China and the United States, labor unrest, and other trade customs and practices that are dissimilar to those in the United States and Europe. Interpretation and enforcement of China’s laws and regulations continue to evolve and we expect differences in interpretation and enforcement to continue in the foreseeable future.

Our manufacturing operations at third-party contractors could be adversely affected by contractual disagreements, by labor unrest, by natural disasters, by regional or global pandemics, by strains on local communications, trade, and other infrastructures, by competition for the available labor pool or manufacturing capacity, by increasing labor and other costs, and by other trade customs and practices that are dissimilar to those in the United States and Europe.

Further, we may be exposed to fluctuations in the value of the local currency in the countries in which manufacturing occurs. Future appreciation of these local currencies could increase our component and other raw material costs. In addition, our labor costs could continue to rise as wage rates increase and the available labor pool declines. These conditions could adversely affect our financial results.

If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales.

Our business requires us to coordinate the manufacture and distribution of our products over much of the world. We rely on third parties to manufacture many of our products, manage centralized distribution centers, and transport our products. If we do not successfully coordinate the timely manufacturing and distribution of our products, if our manufacturers, distribution logistics providers or transport providers are not able to successfully and timely process our business or if we do not receive timely and accurate information from such providers, and especially if we expand into new product categories or our business grows in volume, we may have an insufficient supply of products to meet customer demand, we could lose sales, we may experience a build-up in inventory, we may incur additional costs, and our financial performance and reporting may be adversely affected.

By locating our manufacturing in China and Southeast Asia, we are reliant on third parties to get our products to distributors around the world. Transportation costs, fuel costs, labor unrest, natural disasters, regional or global pandemics, and other adverse effects on our ability, timing and cost of delivering products can increase our inventory, decrease our margins, adversely affect our relationships with distributors and other customers and otherwise adversely affect our results of operations and financial condition.

A significant portion of our quarterly retail orders and product deliveries generally occur in the last weeks of the fiscal quarter. This places pressure on our supply chain and could adversely affect our revenues and profitability if we are unable to successfully fulfill customer orders in the quarter.

We purchase key components and products from a limited number of sources, and our business and operating results could be adversely affected if supply were delayed or constrained or if there were shortages of required components.

We purchase certain products and key components from a limited number of sources. If the supply of these products or key components, such as micro-controllers and optical sensors, were to be delayed or constrained, or if one or more of our single-source suppliers ~~goes~~experience disruptions or go out of business as a result of adverse global economic conditions, or natural disasters or regional or global pandemics, we might be unable to find a new supplier on acceptable terms, or at all, and our product shipments to our customers could be delayed, which could adversely affect our business, financial condition and operating results.

Lead times for materials, components and products ordered by us or by our contract manufacturers can vary significantly and depend on factors such as contract terms, demand for a component, and supplier capacity. From time to time, we have experienced component shortages and extended lead times on semiconductors, such as micro-controllers and optical sensors, and base metals used in our products. Shortages or interruptions in the supply of components or subcontracted products, or our inability to procure these components or products from alternate sources at acceptable prices in a timely manner, could delay shipment of our products or increase our production costs, which could adversely affect our business and operating results.

The moral and regulatory imperatives to avoid purchasing conflict minerals are causing us to incur additional expenses, could limit the supply and increase the cost of certain metals used in manufacturing our products and could adversely affect the distribution and sales of our products.

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC adopted disclosure requirements regarding the use of certain minerals, known as conflict minerals, which are mined from the Democratic Republic of Congo and adjoining countries, as well as procedures regarding a manufacturer’s efforts to identify and prevent the sourcing of such minerals and metals produced from those minerals. Additional reporting obligations are being considered by the European Union. The implementation of the existing U.S. requirements and any additional requirements in Europe could affect sourcing at competitive prices and availability in sufficient quantities of certain minerals used in the manufacture of our products. The number of suppliers who provide conflict-free minerals may be limited, and the implementation of these requirements may decrease the number of suppliers capable of supplying our needs for certain metals. In addition, there may be material costs associated with complying with the disclosure requirements, such as costs related to the due diligence process of determining the source of certain minerals used in our products, as well as costs of possible changes to products, processes, or sources of supply as a consequence of such verification activities. As our supply chain is complex and we use contract manufacturers for some of our products, we may not be able to sufficiently verify the origins of the relevant minerals used in our products through the due diligence procedures that we implement, which may adversely affect our reputation. We may also encounter

challenges to satisfy those customers who require that all of the components of our products be certified as conflict-free, which could, if we are unable to satisfy their requirements or pass through any increased costs associated with meeting their requirements place us at a competitive disadvantage, adversely affect our business and operating results, or both. We filed our report for the calendar year ~~2016~~2019 with the SEC on May ~~30, 2017.~~29, 2020.

~~If we do not successfully coordinate the worldwide manufacturing and distribution of our products, we could lose sales.~~

By locating our manufacturing in China and Southeast Asia, we are reliant on third parties to get our products to distributors around the world. Transportation costs, fuel costs, labor unrest, natural disasters and other adverse effects on our ability, timing and cost of delivering products can increase our inventory, decrease our margins, adversely affect our relationships with distributors and other customers and otherwise adversely affect our results of operations and financial condition.

We conduct operations in a number of countries and have invested significantly in growing our sales and marketing activities in China, and the effect of business, legal and political risks associated with international operations could adversely affect us.

We conduct operations in a number of countries and have invested significantly in growing our personnel and sales and marketing activities in China and, to a lesser extent, other emerging markets. We may also increase our investments to grow sales in other emerging markets, such as Latin America, Eastern Europe, the Middle East and Africa. There are risks inherent in doing business in international markets, including:

•Difficulties in staffing and managing international operations;

•Compliance with laws and regulations, including environmental, tax, import/export and anti-corruption laws, which vary from country to country and over time, increasing the costs of compliance and potential risks of non-compliance;

•Varying laws, regulations and other legal protections, uncertain and varying enforcement of those laws and regulations, dependence on local authorities, and the importance of local networks and relationships;

•Varying accounting, auditing and financial reporting standards, accountability and protections, including risks related to the lack of access by the Public Company Accounting Oversight Board (United States) (PCAOB) to inspect PCAOB-registered accounting firms in emerging market countries such as China;

Exposure to political and financial instability, especially with the uncertainty associated with the ongoing sovereign debt crisis in certain Euro zone countries and the stability of the European Union, which may lead to reduced sales, currency exchange losses and collection difficulties or other losses;

•Political and economic uncertainty around the world, including uncertainty resulting from the recent United States presidential and congressional elections, change of administration in the United States and the United Kingdom's referendum in June 2016, and other national elections and policy shifts;world;

•Import or export restrictions or licensing requirements that could affect some of our products, including those with encryption technology;

•Trade protection measures, custom duties, tariffs, import or export duties, and other trade barriers, restrictions and ~~regulations;~~regulations, including recent and ongoing United States - China tariffs and trade restrictions;

•Lack of infrastructure or services necessary or appropriate to support our products and services;

•Effects of the COVID-19 pandemic that may be more concentrated where we operate internationally;

•Exposure to fluctuations in the value of local currencies;

•Difficulties and increased costs in establishing sales and distribution channels in unfamiliar markets, with their own market characteristics and competition, including entrenched local competition;

•Weak protection of our intellectual property rights;

•Higher credit risks;

•~~Changes~~Variations in VAT (value-added tax) or VAT reimbursement;

•Imposition of currency exchange controls;

•Delays from customs brokers or government agencies; and

•A broad range of customs, consumer trends, and more.

Any of these risks could adversely affect our business, financial condition and operating results.

Sales growth in key markets, including China, is an important part of our expectations for our business. As a result, if economic, political or business conditions deteriorate in these markets, or if one or more of the risks described above ~~materializes~~materialize in these markets, our overall business and results of operations will be adversely affected.

WeChanges in trade policy in the United States and other countries, including changes in trade agreements and the imposition of tariffs and the resulting consequences, may have ~~also~~adverse impacts on our business, results of operations and financial condition.

The U.S. government has indicated and demonstrated its intent to alter its approach to international trade policy through the renegotiation, and potential termination, of certain existing bilateral or multilateral trade agreements and treaties with, and the imposition of tariffs on a wide range of products and other goods from, China, countries in EMEA and other countries. As noted previously, we have invested significantly in ~~our~~ manufacturing facilities in ~~China. Policy~~China and Southeast Asia. Given our manufacturing in those countries, and our lack of manufacturing elsewhere, policy changes in the United States or other countries, ~~given~~such as the tariffs already proposed, implemented and threatened in 2018 and 2019, present particular risks for us. Tariffs already announced and implemented are having an adverse effect on certain of our ~~lack~~products, tariffs announced but not yet implemented may have an adverse effect on many of ~~manufacturing~~our products, and threatened tariffs could adversely affect more or all of our products. There are also risks associated with retaliatory tariffs and resulting trade wars. We cannot predict future trade policy, the terms of any renegotiated trade agreements or treaties, or tariffs and their impact on our business. A trade war could have a significant adverse effect on world trade and the world economy. To the extent that trade tariffs and other restrictions imposed by the United States or other countries increase the price of, or limit the amount of, our products or components or materials used in ~~those~~our products imported into the United States or other countries, or ~~for other protectionist reasons, could result in tariffs or other~~create adverse tax consequences, the sales, cost or gross margin of our products may ~~cause us~~be adversely affected and the demand from our customers for products and services may be diminished. Uncertainty surrounding international trade policy and disputes and protectionist measures could also have an adverse effect on consumer confidence and spending. If we deem it necessary to ~~change the structure~~alter all or a portion of ~~how~~our activities or operations in response to such policies, agreements or tariffs, our capital and operating costs may increase. Our ongoing efforts to address these risks may not be effective and may have long-term adverse effects on our operations and operating results that we ~~currently operate, any of which~~may not be able to reverse. Such efforts may also take time to implement or to have an effect, and may result in adverse quarterly financial results or fluctuations in our quarterly financial results. As a result, changes in international trade policy, changes in trade agreements and tariffs could adversely affect our business, ~~and~~ results of ~~operations.~~operations and financial condition.

Our financial performance is subject to risks associated with fluctuations in currency exchange rates.

A significant portion of our business is conducted in currencies other than the U.S. Dollar. Therefore, we face exposure to movements in currency exchange rates.

Our primary exposure to movements in currency exchange rates relates to non-U.S. ~~Dollar denominated~~Dollar-denominated sales and operating expenses worldwide. For the three months ended ~~December 31, 2017,~~September 30, 2020, approximately ~~47%~~50% of our revenue was in non-U.S. denominated currencies. The weakening of currencies relative to the U.S. Dollar adversely affects the U.S. Dollar value of our non-U.S. Dollar-denominated sales and earnings. If we raise international pricing to compensate, it could potentially reduce demand for our products, adversely affecting our sales and potentially having an adverse impact on our market share. Margins on sales of our products in non-U.S. ~~Dollar denominated~~Dollar-denominated countries and on sales of products that include components obtained from suppliers in non-U.S. ~~Dollar denominated~~Dollar-denominated countries could be adversely affected by currency exchange rate fluctuations. In some circumstances, for competitive or other reasons, we may decide not to raise local prices to fully offset the U.S. Dollar’s strengthening, which would adversely affect the U.S. Dollar value of our non-U.S. Dollar-denominated sales and earnings. Competitive conditions in the markets in which we operate may also limit our ability to increase prices in the event of fluctuations in currency exchange rates. Conversely, strengthening of currency rates may also increase our product component costs and other expenses denominated in those currencies, adversely affecting operating results. We further note that a larger portion of our sales than of our expenses are denominated in non-U.S. denominated currencies.

We use derivative instruments to hedge certain exposures to fluctuations in currency exchange rates. The use of such hedging activities may not offset any, or more than a portion, of the adverse financial effects of unfavorable

movements in currency exchange rates over the limited time the hedges are in place and do not protect us from long term shifts in currency exchange rates.

As a result, fluctuations in currency exchange rates could adversely affect our business, operating results and financial condition. Moreover, these exposures may change over time.

As a company operating in many markets and jurisdictions, ~~and~~ expanding into new growth categories, and engaging in acquisitions, and as a Swiss, ~~dual - listed~~dual-listed company, we are subject to risks associated with new, existing and potential future laws and regulations.

Based on our current business model and as we expand into new markets and product categories and acquire companies, businesses and assets, we must comply with a wide variety of laws, standards and other requirements governing, among other things, health and safety, hazardous materials usage, product-related energy consumption, packaging, recycling and environmental matters. Our products may be required to obtain regulatory approvals and satisfy other regulatory concerns in the various jurisdictions where they are manufactured, sold or both. Companies, businesses and assets that we acquire may not be in compliance with regulations in all jurisdictions. These requirements create procurement and design challenges, which, among other things, require us to incur additional costs identifying suppliers and contract manufacturers who can provide or obtain compliant materials, parts and end products. Failure to comply with such requirements can subject us to liability, additional costs, and reputational harm and, in severe cases, force us to recall products or prevent us from selling our products in certain jurisdictions.

As a Swiss company with shares listed on both the SIX Swiss Exchange and the Nasdaq Global Select Market, we are also subject to both Swiss and United States corporate governance and securities laws and regulations. In addition to the extra costs and regulatory burdens of our dual regulatory obligations, the two regulatory regimes may not always be compatible and may impose disclosure obligations, operating restrictions or tax effects on our business to which our competitors and other companies are not subject. For example, on January 1, 2014, subject to certain transitional provisions, the Swiss Federal Council Ordinance Against Excessive Compensation at Public Companies (the ~~“Ordinance”)~~Ordinance) became effective in connection with the Minder initiative approved by Swiss voters during 2013. The Ordinance, among other things, (a) requires a binding shareholder “say on pay” vote with respect to the compensation of members of our executive management and Board of Directors, (b) generally prohibits the making of severance, advance, transaction premiums and similar payments to members of our executive management and Board of Directors, (c) imposes other restrictive compensation practices, and (d) requires that our articles of incorporation specify various compensation-related matters. In addition, during 2013, Swiss voters considered an initiative to limit pay for a chief executive officer to a multiple of no more than twelve times the salary of the lowest-paid employee. Although voters rejected that initiative, it did receive substantial voter support. The Ordinance, potential future initiatives relating to corporate governance or executive compensation, and Swiss voter sentiment in favor of such regulations may increase our non-operating costs and adversely affect our ability to attract and retain executive management and members of our Board of Directors.

We prepare our consolidated financial statements in accordance with ~~GAAP~~accounting principles generally accepted in the U.S. (U.S. GAAP) which are subject to interpretation or changes by the FASB, the SEC and other various bodies formed to promulgate and interpret appropriate accounting principles. New accounting pronouncements and changes in accounting principles have occurred in the past and are expected to occur in the future which may have a significant effect on our financial results or our compliance with regulations.

As a result of changes in tax laws, treaties, rulings, regulations or agreements, or their interpretation, of Switzerland or any other country in which we operate, the loss of a major tax dispute or a successful challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, or other factors, our effective income tax rates may increase, ~~in the future,~~ which could adversely affect our net income and cash flows.

We are incorporated in the canton of Vaud in Switzerland, and our effective income tax rate benefited from a longstanding ruling from the canton of Vaud through December 31, 2019. On May 19, 2019, the voters in Switzerland approved the Federal Act on Tax Reform and AHV Financing ("TRAF"), a major reform in response to certain guidance and demands from both the European Union and the Organization for Economic Co-operation and Development. TRAF mandates reforms in the cantonal tax law that were enacted by the canton of Vaud on March 10, 2020 and took effect as of January 1, 2020. As a result of the reform, Logitech will incur cash income taxes that will increase over time as the deferred income tax benefit established in connection with the reform diminishes. See "Note 7 - Income Taxes" in our fiscal year 2020 Form 10-K for more information. The canton’s tax authority is primarily delegated by the

Swiss federal government and its implementation of TRAF in general or with respect to Logitech is subject to Swiss federal review and challenge. Implementation of any material change in tax laws or policies or the adoption of new interpretations of existing tax laws and rulings, or termination or replacement of our tax arrangements with the canton of Vaud, by Switzerland or the canton of Vaud could result in a higher effective income tax rate, or a decreased tax asset, a charge to earnings and an accelerated pace of increase in our effective income tax rate, or a combination of such impacts, on our worldwide earnings and any such change will adversely affect our net income. Changes in our effective income tax rate may also make it more difficult to compare our net income and earnings per share between periods.

We operate in multiple jurisdictions and our profits are taxed pursuant to the tax laws of these jurisdictions. Our effective income tax rate may be affected by changes in or interpretations of tax laws, treaties, rulings, regulations or agreements in any given jurisdiction, utilization of net operating loss and tax credit carryforwards, changes in geographical allocation of income and expense, and changes in management’s assessment of matters such as the realizability of deferred tax assets. In the past, we have experienced fluctuations in our effective income tax rate. Our effective income tax rate in a given fiscal year reflects a variety of factors that may not be present in the succeeding fiscal year or years. There is no assurance that our effective income tax rate will not change in future periods.

We are incorporated in the Canton of Vaud in Switzerland and our effective income tax rate benefits from a longstanding ruling from the Canton of Vaud. The tax rules in Switzerland are expected to change in response to certain guidance and demands from both the European Union and the Organization for Economic Co-operation and Development and that could have an adverse effect on our tax ruling and effective income tax rate. Switzerland’s implementation of any material change in tax laws or policies or its adoption of new interpretations of existing tax laws and rulings, or changes in our tax ruling from the Canton of Vaud, could result in a higher effective income tax rate on our worldwide earnings and such change could adversely affect our net income.

We file Swiss and foreign tax returns. We are frequently subject to tax audits, examinations and assessments in various jurisdictions. If any tax authority successfully challenges our operational structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries, if the terms of certain income tax treaties are interpreted in a manner that is adverse to our structure, or if we lose a material tax dispute in any country, our effective income tax rate could increase. For example, policy changes in the United States or China predicated on our presence in those countries could adversely affect where we recognize profit and our effective income tax rate. A material assessment by a governing tax authority could adversely affect our profitability. If our effective income tax rate increases in future periods, our net income and cash flows could be adversely affected.

Claims by others that we infringe their proprietary technology could adversely affect our business.

We have been expanding the categories of products we sell, such as entering new markets and introducing products for tablets, other mobile devices, digital music, and video collaboration. We expect to continue to enter new categories and markets. As we do so, we face an increased risk that claims alleging we infringe the patent or other intellectual property rights of others, regardless of the merit of the claims, may increase in number and significance. Infringement claims against us may also increase as the functionality of video, voice, data and conferencing products begin to overlap. This risk is heightened by the increase in lawsuits brought by holders of patents that do not have an operating business or are attempting to license broad patent portfolios and by the increasing attempts by companies in the technology industries to enjoin their competitors from selling products that they claim infringe their intellectual property rights. Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. A successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain products or performing certain services. We might also be required to seek a license for the use of such intellectual property, which may not be available on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation or the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could materially and adversely affect our business and results of operations.

We may be unable to protect our proprietary rights. Unauthorized use of our technology may result in the development of products that compete with our products.

Our future success depends in part on our proprietary technology, technical know-how and other intellectual property. We rely on a combination of patent, trade secret, copyright, trademark and other intellectual property laws, and confidentiality procedures and contractual provisions such as nondisclosure terms and licenses, to protect our intellectual property.

We hold various United States patents and pending applications, together with corresponding patents and pending applications from other countries. It is possible that any patent owned by us will be invalidated, deemed unenforceable, circumvented or challenged, that the patent rights granted will not provide competitive advantages to us, or that any of our pending or future patent applications will not be ~~granted.~~granted, maintained or enforced. In addition, other intellectual property laws or our confidentiality procedures and contractual provisions may not adequately protect our intellectual

property. Also, others may independently develop similar technology, duplicate our products, or design around our patents or other intellectual property rights. Unauthorized parties have copied and may in the future attempt to copy aspects of our products or to obtain and use information that we regard as proprietary. Any of these events could adversely affect our business, financial condition and operating results.

Product quality issues could adversely affect our reputation, business and ~~our~~ operating results.

The market for our products is characterized by rapidly changing technology and evolving industry standards. To remain competitive, we must continually introduce new products and technologies. The products that we sell could contain defects in design or manufacture. Defects could also occur in the products or components that are supplied to us. There can be no assurance we will be able to detect and remedy all defects in the hardware and software we sell. Failure to do so could result in product recalls, product liability claims and litigation, product redesign efforts, lost revenue, loss of reputation, and significant warranty and other expenses to remedy.

While we maintain reserves for reasonably estimable liabilities and purchase liability insurance, our reserves may not be adequate to cover such claims and liabilities and our insurance is subject to deductibles and may not be adequate to cover such claims and liabilities. Furthermore, our contracts with distributors and retailers may contain warranty, indemnification and other provisions related to product quality issues, and claims under those provisions may adversely affect our business and operating results.

Significant disruptions in, or breaches in security of, our websites or information technology systems could adversely affect our business.

As a consumer electronics company, our websites are an important presentation of our company, identity and brands and an important means of interaction with and source of information for consumers of our products. We also rely on our centralized information technology systems for product-related information and to store intellectual property, forecast our business, maintain financial records, manage operations and inventory, and operate other

critical functions. We allocate significant resources to maintain our information technology systems and deploy network security, data encryption, training and other measures to protect against unauthorized access or misuse. Nevertheless, our websites and information technology systems have been subject to or threatened with, and are susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, structural or operational failures, computer viruses, attacks by computer hackers, other data security issues, telecommunication failures, user error, malfeasance, catastrophes, system or software upgrades, integration or migration, or other foreseeable and unforeseen events. From time to time, we and our suppliers have identified vulnerabilities or other issues that we believe have been addressed, and we expect such issues to continue to arise. Moreover, due to the COVID-19 pandemic, there is an increased risk that we may experience security breach related incidents as a result of our employees, service providers, and third parties working remotely on less secure systems. Breaches or disruptions of our websites or information technology systems, breaches of confidential information, data corruption or other data security issues could adversely affect our brands, reputation, relationships with customers or business partners, or consumer or investor perception of our company, business or products or result in disruptions of our operations, loss of intellectual property or our customers’ or our business partners’ data, reduced value of our investments in our brands, design, research and development or engineering, or costs to address regulatory inquiries or actions or private litigation, to respond to customers or partners or to rebuild or restore our websites or information technology systems.

We have identified a material weakness in our internal control over financial reporting which, if not remediated, could adversely affect investor confidence in our financial reports, our business and our stock price.

As disclosed in Part 1, Item 4 of this report, we identified a material weakness in our internal control over financial reporting. The material weakness was identified during the preparation of our audited financial statements for the year ended March 31, 2017. A material weakness is defined as a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. As a result of the material weakness identified, our management concluded that our internal control over financial reporting was not effective as of March 31, 2017, based on criteria established in the framework in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We are actively engaged in implementing a remediation plan designed to address this material weakness. In the past, we have identified material weaknesses in our internal control over financial reporting, as described in our previous Annual Reports on Form 10-K. If our remediation measures are insufficient to address this material weakness, or if additional material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements, and we could be required to restate our financial results. In addition to potentially adversely affecting investors' confidence, any restatement of our consolidated financial statements could lead to potential litigation against us, which, whether meritorious or not, could be time-consuming, costly or divert significant operational resources, any of which could adversely affect our business and results of our operations.

The collection, storage, transmission, use and distribution of user data could give rise to liabilities and additional costs of operation as a result of laws, governmental regulation and risks of security breaches.

In connection with certain of our products and services, we collect data related to our consumers. This information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, and especially in Europe. For example, the European Union adopted the General Data Protection Regulation (GDPR), which is applicable to us and to all companies processing data of European Union residents, became effective in May 2018 and imposes significant fines and sanctions for violation of the Regulation. Compliance with the GDPR has been made more difficult by the recent invalidity of the U.S.-European Union Privacy Shield. Government actions are typically intended to protect the privacy and security of personal information and its collection, storage, transmission, use and distribution in or from the governing jurisdiction. In addition, because various jurisdictions have different laws and regulations concerning the use, storage and transmission of such information, we may face requirements that pose compliance challenges in existing markets as well as new international markets that we seek to enter. The collection of user data heightens the risk of security breaches and other data security issues related to our IT systems and the systems of third-party data storage and other service and IT providers. Such laws and regulations, and the variation between jurisdictions,

as well as additional security measures and risk, could subject us to costs, allocation of additional resources, liabilities or negative publicity that could adversely affect our business.

~~We recently upgraded~~In previous periods, we identified material weaknesses in our ~~worldwide business application suite,~~internal control over financial reporting and, ~~difficulties, distraction~~if we are unable to satisfy regulatory requirements relating to internal controls or ~~disruptions may interrupt~~if our ~~normal operations and adversely affect~~internal control over financial reporting is not effective, our business and ~~operating results.~~stock price could be adversely affected.

~~During~~In connection with Section 404 of the Sarbanes-Oxley Act and as recently as our audited financial statements for the fiscal ~~years 2014~~year ended March 31, 2017, we have identified in the past and ~~2015, we devoted significant resources~~may, from time-to-time in the future, identify issues with our internal controls and deficiencies in our internal control over financial reporting. Certain of those material weaknesses resulted in late filings of and an amendment to ~~the upgrade~~our periodic reports and in restatements of our ~~worldwide business application suite to Oracle’s version R12. We implemented~~financial results. A material weakness indicates a reasonable possibility that ~~upgrade in fiscal year 2016 and will continue to review the success of that implementation during fiscal year 2018. As~~ a ~~result~~material misstatement of our ~~transition~~annual or interim financial statements will not be prevented or detected on a timely basis. If additional material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results, we could be subject to litigation, whether meritorious or not, remediation efforts could be time consuming, costly and/or divert significant operational resources, we could lose investor confidence in the ~~new~~accuracy and completeness of our financial reports, and our reputation, business, ~~application suite, we may experience difficulties with our systems, management distraction, lack~~results of ~~visibility into our business~~ operations and results, and significant business disruptions. Difficulties with our systems may interrupt our normal operations, including our enterprise resource planning, forecasting, demand planning, supply planning,stock price could be adversely affected.

intercompany processes, promotion management, internal financial controls, pricing, and our ability to provide quotes, process orders, ship products, provide services and support to our customers and consumers, bill and track our customers, fulfill contractual obligations, and otherwise run and track our business. For example, the transition has resulted in delays in processing customer claims for claims accruals. In addition, we may need to expend significant attention, time and resources to correct problems or find alternative sources for performing these functions. Any such difficulty or disruption may adversely affect our business and operating results.

We cannot ensure that our ~~recently announced~~current share repurchase program will be fully utilized or that it will enhance long-term shareholder value. Share repurchases may also increase the volatility of the trading price of our ~~shares~~shares. We similarly cannot ensure that we will continue to increase our dividend payments or to pay dividends at all. Share repurchases and dividends diminish our cash ~~reserves~~.reserves.

In ~~March 2017,~~May 2020, our Board of Directors authorized a three-year ~~$250~~$250.0 million repurchase program of our registered shares. ~~This~~We have also paid cash dividends and increased the size of our dividend, each year since fiscal year 2013. Our share repurchase program and dividend policy may be affected by many factors, including general business and economic conditions, our financial condition and operating results, our views on potential future capital requirements, restrictions imposed in any future debt agreements, the emergence of alternative investment or acquisition opportunities, changes in our business strategy, legal requirements, changes in tax laws, and other factors. Our share repurchase program does not obligate us to repurchase all or any of the ~~dollar-value~~dollar value of shares authorized for repurchase. The program could also increase the volatility of the trading price of our ~~shares,~~shares. Similarly, we are not obligated to pay dividends on our registered shares. Under Swiss law, we may only pay dividends upon the approval of a majority of our shareholders, which is under the discretion of and generally follows a recommendation by our Board of Directors that such a dividend is in the best interests of our shareholders. There can be no assurance that our Board of Directors will continue to recommend, or that our shareholders will approve, dividend increases or any dividend at all. If we do not pay a regular dividend, we may lose the interest of investors that focus their investments on dividend-paying companies, which could create downward pressure on our share price. Any announcement of a termination or suspension of ~~the~~our share repurchase program or dividend may result in a decrease in our share price. The share repurchase program and payment of cash dividends could also diminish our cash reserves that may be needed for investments in our business, acquisitions or other purposes. Without dividends, the trading price of our shares must appreciate for investors to realize a gain on their investment.

Goodwill impairment charges could have an adverse effect on the results of our operations.

Goodwill associated with a number of previous acquisitions could result in impairment charges. The slowdown in the overall video conferencing industry together with the competitive environment in fiscal year 2013 resulted in a $214.5 million non-cash goodwill impairment charge in fiscal year 2013, which substantially impacted results of discontinued operations. We recorded an additional impairment charge of goodwill of $122.7 million related to our Lifesize video conferencing discontinued operations in fiscal year 2015, reducing its goodwill to zero, which substantially impacted results of discontinued operations again. If we divest or discontinue product categories or products that we previously acquired, or if the value of those parts of our business become impaired, we may need to evaluate the carrying value of our goodwill. Additional impairment charges could adversely affect our results of operations.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Share Repurchases

In fiscal year ~~2018,~~2021, the following approved share buyback ~~programs were~~program was in place (in thousands):

Share Buyback Program Shares Approved Amounts
March 2014 17,311
$ 250,000
March 2017 17,311
$ 250,000

The following table presents certain information related to purchases made by Logitech of its equity securities under the ~~March 2017~~May 2020 share buyback program above (in thousands, except per share amounts):

Total Number of Shares
Repurchased
Weighted Average Price Paid Per Share
Remaining Amount that May Yet Be
Repurchased under the Program *
During the three months ended CHF (LOGN) USD (LOGI)
Month 1
September 30, 2017 to October 27, 2017 187
35.4
—
$ 233,104
Month 2
October 28, 2017 to November 24, 2017 —
—
—
233,104
Month 3
November 25, 2017 to December 29, 2017 87
33.39
—
230,159
Total 274
34.76
—
$ 230,159

* The March 2014 program expired in April 2017.



	Total Number of Shares Repurchased	Weighted Average Price Paid Per Share				Remaining Amount that May Yet Be Repurchased under the Program
During the three months ended September 30, 2020	Total Number of Shares Repurchased	CHF (LOGN)		USD (LOGI)
Month 1
June 27, 2020 to July 24, 2020	—	$	—	$	—	$	250,000
Month 2
July 25, 2020 to August 21, 2020						227,635
Nasdaq	166			72.83
SIX	146	64.43
Month 3
August 22, 2020 to September 25, 2020	—	—		—		227,635
	312	$	—	$	—	$	227,635

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Index



Exhibit No.		Description

3.1		Articles of Incorporation of Logitech International S.A., as amended

10.2	**	Employment Agreement between Logitech Inc. and Samantha Harnett, dated as of July 1, 2020, incorporated by reference from Exhibit 10.2 to the Quarterly Report on Form 10-Q filed on July 23, 2020.

31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer.

31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer.

32.1	*	Section 1350 Certifications of Chief Executive Officer and Chief Financial Officer.*

101.INS		XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

101.DEF		XBRL Taxonomy Definition Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*This exhibit is furnished herewith, but not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that we explicitly incorporate it by reference.

** Indicates management compensatory plan, contract or arrangement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



			LOGITECH INTERNATIONAL S.A.


~~January 25, 2018~~October 22, 2020			/s/ Bracken Darrell
Date			Bracken Darrell
			President and
			Chief Executive Officer


~~January 25, 2018~~October 22, 2020			/s/ ~~Vincent Pilette~~Nate Olmstead
Date			~~Vincent Pilette~~Nate Olmstead
			Chief Financial Officer

6661



	Estimated Fair Value
Inventories	$	10,331
Property, plant and equipment	2,760
Intangible assets	52,520
Other assets	605
Total identifiable assets acquired	$	66,216
Accrued liabilities	(2,982		)
Net identifiable assets acquired	$	63,234
Goodwill	21,766
Net assets acquired	$	85,000



	Fair Value		Estimated Useful Life (years)
Developed technology	$	12,540	4.0
Customer relationships	33,100		8.0
Trade name	6,880		6.0
Total intangible assets acquired	$	52,520	6.8



	Derivatives
	Asset				Liability
	December 31, 2017		March 31, 2017		December 31, 2017		March 31, 2017
Cash flow hedges	$	235	$	48	$	1,327	$	402



	Nine Months Ended December 31,
	Amount of Gain (Loss) Deferred as a Component of Accumulated Other Comprehensive Loss					Amount of Loss Reclassified from Accumulated Other Comprehensive Loss to Costs of Goods Sold
	2017			2016		2017		2016
Cash flow hedges	$	(6,026	)	$	4,026	$	5,377	$	432



As of March 31, 2017	$	249,741
Business acquisitions	25,800
Currency translation	22
As of December 31, 2017	$	275,563



	Accumulated Other Comprehensive Income (Loss)
	Cumulative Translation Adjustment (1)			Defined Benefit Plan (1)			Deferred Hedging Losses			Total
March 31, 2017	$	(89,708	)	$	(10,480	)	$	(518	)	$	(100,706	)
Other comprehensive income (loss)	5,176			1,012			(649		)	5,539
December 31, 2017	$	(84,532	)	$	(9,468	)	$	(1,167	)	$	(95,167	)



Base Currency	Transaction Currency	Net Exposed Long (Short) Currency Position			FX Gain (Loss) From 10% Appreciation of Base Currency			FX Gain (Loss) From 10% Depreciation of Base Currency
U.S. Dollar	Chinese Renminbi	$	(44,492	)	$	4,045		$	(4,944	)
U.S. Dollar	Canadian Dollar	20,802			(1,891		)	2,311
U.S. Dollar	Australian Dollar	17,791			(1,617		)	1,977
U.S. Dollar	Brazilian Real	14,538			(1,322		)	1,615
U.S. Dollar	Singapore Dollar	(11,982		)	1,089			(1,331		)
U.S. Dollar	Mexican Peso	10,813			(983		)	1,201
U.S. Dollar	Taiwanese Dollar	(9,516		)	865			(1,057		)
U.S. Dollar	Japanese Yen	3,749			(341		)	417
U.S. Dollar	Swiss Franc	1,453			(132		)	161
U.S. Dollar	Korean Wan	(1,129		)	103			(125		)
U.S. Dollar	Indian Rupee	(933		)	85			(104		)
U.S. Dollar	Hong Kong Dollar	(920		)	84			(102		)
U.S. Dollar	Russian Ruble	646			(59		)	72
Euro	British Pound	(3,959		)	360			(440		)
Euro	Swedish Krona	(3,163		)	288			(351		)
Euro	Turkish Lira	3,115			(283		)	346
Euro	U.S. Dollar	1,424			(129		)	158
Euro	Croatian Kuna	1,305			(119		)	145
Euro	Swiss Franc	(979		)	89			(109		)
Euro	Polish Zloty	(953		)	87			(106		)
Euro	Arab Emirates Dirham	(563		)	51			(63		)
		$	(2,953	)	$	270		$	(329	)

Share Buyback Program

Shares Approved

Approved Amounts