Logitech CEO on why the company is expecting 'long term growth' in 4 key categories

Bracken Darrell, Logitech CEO, joins The Final Round to discuss the company's Q2 earnings and the outlook for Q3 in light of such strong sales.

Video Transcript

JEN ROGERS: I want to talk about Logitech. Logitech stock has basically doubled this year. And you can guess why. Everybody's buying mice and keyboards and webcams. I want to bring in the company's CEO right now, Bracken Darrell. We've had him on before, but nothing like this, because now I actually have a webcam. I've had to submit to this. It took me a long time to get one.

And I want to ask you about that. PC webcams, you reported, sales increased over 250%, doubling the growth rate that you had achieved last quarter. And on the call, you said your supply chain is humming. But if I go to the website today, the webcam I have is still backordered. Why are you still not able to fill every order that comes in?

BRACKEN DARRELL: Well, if you look at the response that we've had to our various products and how fast we responded, to be able to deliver 75% growth year over year in a business that sells hardware is pretty remarkable. So we're really proud of that. But it's true that there's still a few products we still haven't completely caught up with the demand on. Webcams is one of them.

JEN ROGERS: So what about your pricing strategy around that? Because you could go to eBay and find this webcam, and somebody will charge a lot more. Do you think that you guys will adjust your pricing in here? Consumers obviously want these. So is that part of your thinking at all?

BRACKEN DARRELL: No. No, we don't have any plans to adjust our pricing. We aren't promoting as much as we would have a year ago, but we plan to start to ramp up our promotions some, too, just so our pricing looks comparable to a year ago. But no, we're not going to raise prices, if that's what you mean.

JEN ROGERS: And just asking you geographically, in terms of where you're seeing-- you guys said, globally, everything looked good. I want to ask you about China in particular. Because we've been seeing that their economy has really rebounded.

People are able to go back to work. People are going to movie theaters. But are they still spending the same amount of money that they were? And I guess, is that a leading indicator for us or other geographies that they can recover?

BRACKEN DARRELL: Well, we haven't quoted a number in China per se, but if you look at our Asia-Pacific number, you'll see we grew 60% or almost 60%. So within that, China is by far our biggest business. So we still see good growth in China.

So people are back to work, but they're living in this hybrid world where they're mostly working in the office, but they're sometimes working at home. That really favors our business where they may need a couple of different workspaces, one at work and one at home.

DAN ROBERTS: Bracken, Dan Roberts here.

BRACKEN DARRELL: Hey, Dan.

DAN ROBERTS: Something that we discussed with a lot of companies that have seen pandemic boosts, like the one you're seeing with a sales surge, is a potential pull forward in demand. And thus, the concern that, you know, you see a boost during this time. Everyone's staying at home. They're buying your products.

And then, well, uh-oh, does it create an unfair expectation? Because now the levels are raised and, you know, it was a one-time boost from the pandemic. Is that something you're concerned about? Is that something you expect?

Just yesterday, Netflix-- different kind of business, obviously. But Netflix said that's what we're seeing. We saw huge pull forward in demand in the first half of 2020. And now we're not going to see as many subscriber ads moving forward.

BRACKEN DARRELL: Well, we do have a long-term secular trend for four-- or four secular trends driving our business. One is video going everywhere, whether it's offices or webcams, as Rebecca said. The second one is the rise of gaming as a professional sport and as bigger and bigger spectator sport. It will be the biggest collection of sports in the world one day.

The third one is working from anywhere, which we're talking about now. The fourth is everybody creating their own content and streaming it, which lends itself well to our microphones, [INAUDIBLE].

So all four of those are long-term secular trends. We think-- we really think what we're getting is a higher watermark. And from that point forward, we'll see what happens. But if you look over the long term, we expect long-term growth in every one of those categories.

SEANA SMITH: Hey, Bracken, it's Seana. I mean, it's so interesting because the growth figures that you guys put out and going off of what you just said, that you expect long-term growth here in so many of those categories, you're now expecting your annual guidance is seeing between 35% and 40% sales growth. And that's up significantly from what you were forecasting before, just 11% to 13% growth.

And this is similar to what Dan just asked, but when you talk about how much of this type of growth can be sustained, and then looking out even further, to when you can expect to get back to that more normal type of growth, how are you parsing through that? How are you looking at that at this point?

BRACKEN DARRELL: You know, I lost a little bit of that. But I think I got the gist of the question. You know, one way I've thought about it is, you know, our business, let's say our mouse and keyboard business, which is a $1.2 billion business before the pandemic, what's happening now is all of-- everybody on this call now has a duplicate desktop with a duplicate mouse and keyboard somewhere.

So we've kind of doubled the installed base. A lot of people have done that so hastily that they need to go out and fix what they did. You know, so they just bought what they could. And now they've got to repair it. Others are going to want to upgrade it at some point over the next year or two.

And then others are going to want to deal with the ergonomic issues that come when you have the wrong kind of product. Or it's part of your decor now. By the way, you guys [INAUDIBLE] beautiful places. You want your desktop to look beautiful, too. So there's an upgrade cycle coming on top of that. And our old business was just completely that kind of upgrade cycle business. So we've got a whole new business to serve and the old business to serve, which is in the office.

JEN ROGERS: So you guys have your hands full, but are there any categories that you would like to get into that you're not into right now? You know, not gaming, not the work from home. Could health be an area? I mean, we're all looking at different places for expansion.

BRACKEN DARRELL: You know, Jennifer, we always are looking at new businesses. So we systematically have between 5 and 15 new categories of development at a time, small teams, kind of like startups inside of our company. A lot of those never make it out the door. But we're always looking at those, so absolutely there are businesses we want to be in that we're not in yet. And we'll see which ones we find our way into.

JEN ROGERS: And before we let you go, e-sports real quick. I feel like we've talked to you about that. We've been talking about just how people aren't interested in sports at all. Ratings are down. People got other stuff on their mind. How is e-sports going? And do you still see that as an area where, long-term, that's going to be big for you guys?

BRACKEN DARRELL: Well, ratings aren't down in e-sports. "League of Legends" finals in Shanghai last Saturday, 100-- there's an estimate [INAUDIBLE] about 110 million people would watch that live. 1.5 billion would watch something in the finals. We were-- so it's on fire. Our business was up 84 million-- 84% in gaming this quarter, which is the highest in quite a while-- I mean years.

And we're deeply in this. You know, we have seven of the top eight teams were our sponsor teams in the final. Four of the four-- all four of the top teams were our teams, so no, I think e-sports is really just going to keep growing.

JEN ROGERS: I guess we're all just not watching football or basketball. But everybody's on their computer. Bracken Darrell, Logitech CEO, great to get a chance to see you and talk with you.

BRACKEN DARRELL: Nice to see you guys. Thanks.