Thank you, everyone for joining Logitech's Q1 Fiscal '22 Earnings call. During this call, we may make forward-looking statements including with respect to future operating results and business outlook under the Safe Harbor of the Private Securities Litigation Reform Act of 1995. We are making these statements based on our views only as of today.

Our actual results could differ materially due to a number of risks and uncertainties including those mentioned in our earnings materials and SEC filings. We undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results.

You can find a reconciliation between non-GAAP and GAAP results and information about our use of non-GAAP measures in our press release and in our filing with the SEC, including our most recent annual report.

These materials as well as our prepared remarks and slides and webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, comparisons between periods are year-over-year and in constant currency and sales are net sales.

This call is being recorded and will be available for replay on our website. And with that, I'll turn it over to Bracken. But first Bracken I will have to apologize that I did not get to wrap the Safe Harbor provision statement that I have promised you so I apologize. And I hope to still be able to do that one day..

Thank you, Ben. And thanks, everybody for joining us late; I mean, late night. [Indiscernible] had a bet that one day you would wrap the Safe Harbor provisions and I guarantee you if you had people would have listened more carefully to those Safe Harbors. So if you could from an SEC standpoint.

So maybe in your next company one day you will do that I will be listening for it Ben. Okay, well, this is officially Ben's last earnings call and Nate and I couldn't be more excited about Ben's new role as a CFO, which he is going into and his new company is going to announce that soon. So we won't jump the gun.

But Ben I really want to thank you on behalf of all Logitech, all these investors and analysts on the call today. Yes, I know you've added tremendous value. I've learned a lot from you. And I'll keep watching you from afar and cheering for you..

Thank you, Bracken. Thanks so much, to you, to Nate and the team..

Absolutely. Well, thank you. Thanks again. Congratulations. And now let's move on. I spent last week in New York City. Today I'm in LA, and in New York City or just outside of the city.

I was walking my daughter down the aisle at her wedding, and as a proud father and one who really adores his daughter and all, both all three of my kids and my new son in law. I can't tell you what an amazing experience it was. It was really wonderful to enjoy this long awaited celebration and gathering with my friends and family.

And as I talked to people I know many are having experiences like that feel more like pre pandemic life. One experiences like this may feel like a return to the old normal. In many ways our work life is forever changed.

In many places around the world, we won't commute into an office every day, five days a week, we won't waste the 10 to 20 hours a week, that's 10% to 20% of our non-sleeping non-working time. Think about that. We won't waste the 10 to 20 hours a week just getting to and from the place we work.

Gone will be the last days of flying to Tokyo or Shanghai or London or Paris for one or two hour meetings. And the reason they'll be gone isn't because of the pandemic is because that way of working was fading even before we really realized it.

The virus has been terrible and yet it's pulled in a future that might otherwise have taken 20 years to get to Ebor. Autopilot has been turned off. And our employees, customers and friends are looking for a new and better way to return to work.

Every conversation I have and I bet you have to recently seems to evolve to a high discussion of hybrid in some way. The new normal will not be the same for every person in every part of the world, or in every company. Their variety will be as diverse as you could possibly imagine.

I'm sure that to start a lot more people will simply work from home all the time, like many of us are now. That was a practice previously most common in startups and for some salespeople. Even at Logitech, a predominantly in the office culture, part of the pandemic, we're going to have a lot more people working full time remotely.

This new approach to work also unlocks talent. We couldn't have accessed before, in jobs that are far more oriented to remote work than we realized. Aaron Chen [ph] who doesn't know I'm mentioning her today, runs marketing for our streamers and creators products out in New York.

We have struggled to attract her from PepsiCo where she was in marketing for Mountain Dew. If she'd had to move California with her family on the East Coast, we might have lost Vincent Borough [ph], who also doesn't know that I just mentioned him. So we might have lost Vincent Borough [ph] at some point, that's who she reports to.

That what runs that group but he moved to Florida to pursue his son's passion for waterskiing and secretly his own too. Meredith Rojas [ph], who works for Aaron. So we're covering the whole reporting structure here develops influencer and celebrity partnerships for our streamers and creators team.

And she surely would not have joined us if she'd had to move from LA, which is the epicenter of the world that she's worked in for the last decade, the entertainment world. In short remote work is growing within Logitech. But for most people, and like for me on this call, working from home two to three days a week will become the new normal.

Those people who need spaces and equipment to work in both places are some that will be a fully replicated workspace in each spot. For others, it'll be a place to plug their laptop into a monitor. In both cases, they'll need a mouse, a keyboard and other peripherals.

So you can look directly at the screen, sit back comfortably, not get a terrible video angle, and be healthy ergonomically. Most of us will want duplicates of our tools in both places that work into home. And larger companies will standardize on good equipment. So the conference call and employee productivity are optimized.

The [indiscernible] who some of you know, runs our strategy team, and she's eager to get back into the office a few days a week. She has an important and high profile job for us, as well as two adorable kids who want her all the time. She likes the idea of working sometimes in the office, both for meetings and also just to quietly focus.

Sam Harnett [ph], our General Counsel, who is no doubt listening right now, lives a commutable distance. But like Natasha, it's not easy. It's not an easy daily commute. And like Natasha and Vincent, I've got to know Sam's daughter a little better. Thanks to all our video calls.

I gave you specific names because I want to note that people, they are real people. They have real lives with passions that aren't fully served by a world where you burn up 20% of your time commuting. They often do want and need some time in the office with their co-workers who are also their friends.

But despite that, there will be some in most companies in parts of the world, who returned to work full time to an office a lot like we did before. Their jobs where these can't be avoided. Places where commutes are almost effortless and organizations that just aren't ready to make the shift.

There are places where homes just don't work as well, where living spaces are too small to work comfortably. But even their work lives will never be the same. The rise of video meetings means they will feel awkward in the office on audio only calls.

They'll often discover customers and business partners who don't want to come to meetings, who request video meetings. Video will simply overwhelm the old audio calls, including in the office one on one, everyone will need a good webcam there too. But that new hybrid world is not or is it a wide range of stages now.

Some places are reopening quickly, while others are back in more protected levels, including Los Angeles, where I happen to be today. It's gone back to masks. The countries in EMEA have starts and stops and reversals.

And while much of Asia Pacific has been much better, some parts like Taiwan and Australia have moved back into defensive mode or even in the most severe lockdown since the pandemic started. In a word its choppy, it's choppy around the world. It will stay highly uneven for some time.

While the pandemic has been a huge change event, the cultural and technological trends underlying the change started well before the pandemic as you know. And one of our clear strengths in the past nine years has been our ability to select trends to follow and quickly address those trends. This approach has worked.

After selecting the right categories, developing innovative products, we've become the market leaders and well over half of our categories today. We weren't even present or barely present in over half of those categories a decade ago. And we have not let up looking for new categories.

Well, we continue to innovate in the businesses we've entered across all the categories, you know, we also continue to quietly work on new categories all the time. Not all of our new category efforts turn into something. We've shelved many products before you saw them.

We've re-distributed teams across the company from one seat team to another And we've launched categories you saw that we subsequently shut down. Logitech is dynamic. We continue to test and learn our way into new things that's been a hallmark and a key to our growth and innovation. Now let's look ahead within our existing categories.

We had strong growth across our businesses this quarter. Our video business is well positioned in a category with tremendous growth potential. Customers are digesting the need for more video, more webcams and more standardization of equipment in home workspaces. This is early days for the standardization but it's happening.

The conference room video growth is also still early days. Many feared gaming would slow down dramatically as we exited this year. But our new products are fantastic and are growing quickly. In fact, our latest gaming products, like our super light mouse are already among our biggest of the company. That's a shift.

We're just getting our innovation and marketing engines refined here and I'm super excited about the future of gaming. Our CNP business, which is mostly mice and keyboards had a super strong quarter. This is a reflection of great vision, strategy and execution.

We're running the play from our Analyst and Investor Day in fiscal year 2020 and you could see it. Our lifestyle products are fun and in line with cultural trends. Our ergonomic products are needed but still have low awareness. In fact, the crazy good experience provided many of our best products is still unknown to most who would love it.

We're just firing on all cylinders and have so much upside in CNP through our awareness and new products. Our pipeline is also really exciting. Our key categories grew double digits this quarter. That's despite chip shortages and an incredible workload and stress created by COVID on our people.

Like most companies, our employees have been challenged during COVID from the stress of uncertainty from fear, from long hours and difficulty detaching from the work day it's just never seems to stop as their home became their offices. I think everyone needs a break. In this summer we're encouraging everyone to take one.

Now let me turn the call over to Nate to go deeper into the quarter, Nate?.

Thanks Bracken and thank you Ben for your outstanding work, we're going to miss you. As Bracken said we delivered an excellent Q1 with strong revenue growth, margin expansion, strategic investments to improve our business and share gains. Net sales grew 58% in constant currency, profits doubled versus last year.

And we remain on track to deliver to the increased four year outlook we gave in April. Similar to last year, our operations and sales teams continue to execute well and results were strong across our categories and regions.

Our PC peripherals categories continue their strong momentum in the quarter with 49% growth in Q1 driven by better availability and a broad portfolio of differentiated products like Bracken mention.

Several of our flagship offerings like the MX Master three mouse and MX keys keyboard continued to set new sales records even after being in the market for two years, and sales of our ergonomic split keyboard the K860, which retails for $129 more than doubled in the quarter. With that impressive performance was not just in the high end.

In fact, each of our top 10 mice and keyboard products with prices that range from $12.99 to over $100 delivered strong double digit growth and in some areas triple digit growth.

Well, webcam growth has started to moderate after more than tripling last year, sales still grew 73% in the quarter, and we have regained some of the share we lost last year due to supply shortages.

Our priority remains driving greater awareness of the better user experience provided by an external webcam to increase our tax rates to the large and growing installed base of monitors and PCs. Q1 video collaboration sales increased 72% similar to the 81% growth rate in the prior year.

Sell through in the quarter was even stronger and nearly doubled versus last year. On a sequential basis, sales in the Americas and Asia Pacific remained strong, while sales in EMEA declined double digits compared to a record Q4 due to a lower opening backlog and softer demand as businesses evaluated reopening timelines.

Gaming had another strong quarter with Q1 sales up 76% continuing the fast pace of growth from last year. We delivered double digit growth in all our gaming categories across gaming mice, keyboards, headsets, console and simulation.

Gaming continues to become an integral part of many people's lives whether for entertainment, socializing with friends, or to showcase their skills on platforms like Twitch. Tablet sales increasingly 66% with strong growth in both our retail and education categories.

As we noted on past earnings calls however, sales of our education tablet products could decline this year, due to the onetime benefit from a large education order in Japan last year.

Our audio and wearable sales rose 57% in Q1 with double digit growth in all products, while mobile speakers fell 5% in Q1 in line with our expectations, as we reallocated resources and prioritized our investments to faster growing categories. Our Q1 non-GAAP gross margin was 43.8% up 460 basis points from last year.

Gross Margin was down as expected from a record level in Q4, but it remained at the high end of our target range. As we look out to the rest of the fiscal year, we continue to expect gross margins to be within our range, but lower than current levels for three primary reasons.

First, we expect our promotional spending will continue to trend toward more historical levels. Second, we will invest in retail point of sale marketing, which was significantly curtailed last year due to store closures. And last industry wide component costs increases.

Our non-GAAP operating expenses increased 76% in Q1 to $340 million, largely driven by increased investment in marketing, sales coverage and product development. In the quarter we expanded our defy logic brand campaign into parts of Europe as we look to drive greater Logitech brand awareness and consideration globally.

In addition to marketing, we continued our investments to develop more innovative and environmentally friendly products. Wrapping up the income statement, our Q1 operating profit doubled year-over-year to $235 million and operating margins were 17.9% up 310 basis points versus the prior year period. Now let me talk briefly about our cash flow.

Cash flow from operations was negative $115 million in Q1. Historically, our Q1 cash flows tend to be around breakeven. Well, this quarter we dipped below this level as we make tactical inventory investments, and we made an annual income tax payment of $120 million, which would typically be paid in quarterly installments.

We expect to resume our normal payment schedule in FY ‘22. Excluding this onetime change and payment timing, our Q1 cash flow would have been approximately flat and in line with normal seasonal patterns, I still expect the vast majority of our full year cash flows to come from the second half of this fiscal year.

Our Q1 cash conversion cycle was 45 days up from 27 days last year, but down from Q1 levels a couple of years ago. DSL improved by 20 days versus last year driven by a greater percentage of our sales occurring in months one and two of the quarter compared to last year.

And our days of inventory increased by 44 days to 94 as we rebuilt buffers, began migrating more of our shipments to slower but less expensive ocean freight and strategically invested in supply to ensure availability and favorable costs and it's a tightened global supply chain outlook.

Wrapping up significant uses of cash we spent $55 million on share repurchases in the quarter.

Finally, in terms of guidance, with a strong first quarter in the books, but with the majority of the year still ahead of us, we are confirming our fiscal year ‘22 outlook of flat sales growth in constant currency, plus or minus 5% and maintaining our fiscal year ‘22 non-GAAP operating income outlook of $800 million to $850 million.

This outlook reflects continued investments in the business and is consistent with our focus on driving long term growth. With that, let me hand things back to Bracken..

Thanks, Ben. Thanks, Nate. Sorry. We already miss you, Ben. We had a very good start to our fiscal year. Our performance this year, this quarter demonstrates the strength of our capabilities, our excellent operational execution. But our ability to capitalize on long term trends like gaming, streaming and creating, hybrid work, and video everywhere.

The same underlying trends that drove our business pre-COVID, significantly accelerated during COVID have become much more pervasive and sustainable as we look to life after the sheltered home period of COVID ends all over the world. We have an exciting long term growth potential ahead from this bigger base.

Now Nate and I are ready for your questions.

Ben, can you queue them up for the last time for you?.

Sure. Thank you, Bracken. As a reminder, you can chat me if you want to ask a question. The first question is Asiya Merchant. Your line is now open..

Hello, Asiya again..

Hey, congratulations on a great quarter. Just a couple of quick questions. Just on video collaboration. You mentioned a little bit of softness in EMEA. You know, as you kind of look at, and I know there was a great sell in the prior quarter. So you know, people re-evaluating some of that.

But as you look forward, some of the guidance that you provided at your analyst date, but different segments, specifically as it relates to video collaboration of growth being double digits up to 10% to 25% or 25% to 30%.

How should we kind of think about that video collaboration segment now for this year, given AMEA [ph] softness? And do you expect that to reaccelerate given some of the channel to draw down this quarter?.

I'll jump in -- or you go ahead, Nate. I can see what it's all [ph]..

Sure. Yes, just to clarify on the outlook we gave at the analyst date, it was 10% to 25% growth..

10% to 25%..

I still think that's the right way to think about it as a double digit grower. And listen, again, the sell through nearly doubled this quarter.

So, I think we've seen in the past, sometimes the sell in timing can be a little different from one quarter to another, especially as you talk about an enterprise business where you have large deals that fall on one side or another of a fiscal period.

But we still feel great, of course about the video collaboration business both this year and over the long term..

Yes, we're just super optimistic about that business. It's a great business for us, we have great products out there and we have great products coming, so..

And then because of the inventory that you guys have built up, the buffer, as well as supply demand balance that you mentioned, will you broadly share gainers across many of the categories? Because all I've heard from some of your peers was continued supply chain bottlenecks, logistics, nightmares, component constraints and different ICs, et cetera.

So, is it fair to assume that you guys gained share across several of your categories where you have pretty decent competition?.

Yes, it is. We gained share in the most categories. In fact, the vast majority of our categories -- and I do think part of it was just having supply availability. But we've got a great product lineup right now.

We were gaining share pre-pandemic, we're gaining share during the pandemic and we're gaining share as we kind of see the light at the end of the tunnel. So yes, we did..

Okay. All right. Thank you..

And I think on the inventory, just because you brought it up, I think it's an important point because I think it just highlights again, the way we think about our business strategically, and financially, and operationally, and keeping those things aligned and with a strong balance sheet, we think this is the right time and it's good opportunity for us to use that to secure components where we can.

It's a tough environment, but secure components where we can, build up those buffer stocks and as Brad have said, be ready to deliver on opportunities globally. So, we've got good availability now and I think that will be a competitive advantage for us. We'll see how it plays out..

Is most of the inventory in the warehouse as finished product? Or is it mostly ICs and components that you've kind of put together?.

It's really a mix, but I think a lot of it is in the distribution centers and it's out regionally, ready to be shipped. It's not out in the channel. It's in our distribution centers. Some of it is in components as well..

Okay. All right, thank you..

Thank you, Asiya..

Our next question is from Paul Chung from J.P. Morgan. Your line is now open..

How are you doing, Paul?.

Hey, Paul..

Hey. Nice to see you guys..

You, too..

First up, on gaming, very nice momentum there.

Can you kind of expand on the product mix where you saw relative strength in the portfolio? And as we start to lap [ph] these tough comps, where do you see kind of momentum extending? And given the strong start to the year, do you think the fat flattish outlook in gaming is on the conservative side? And I have a follow up..

I'm really excited. Where do we see strengths within the gaming business? We've got four or five segments you can really point to and really all of them. I can honestly say I'm excited about our gaming business, because we just had growth in every single segment and we're growing market share across, too and we have a fantastic portfolio.

One of the things I said in the opening was that the nature of the innovation we've been doing in gaming has also been changing. It shifted from a lot of small products to fewer bigger ones. It's a testament to our team. And then the other thing that's happened is our marketing engine in gaming is probably the best we've had.

They've really created Logitech G over the last five to seven years and they're just getting stronger and stronger. So yes, I would say overall, I just feel very, very good about gaming. We're not reopening the discussion around each individual category right now as an outlook. We confer the outlook for the year that we just raised back two months ago.

But I'm super excited about gaming, Paul..

Yes and I think, Paul, on the outlook, too, just one thing to keep in mind is gaming does have a big holiday period and that's still ahead of us. So, I think it's been a good start to the year, good strong first quarter, but typically we do almost 80% of our revenue over the next three quarters, and a lot of that comes in the holidays.

So, I think with gaming, we'll need to see how that plays out. But as Bracken said, we go into that period with a great lineup. Headsets, we mentioned last quarter and I think just continues to perform well with some really cool new products..

Okay, great. And then just on the ramp and reinvestments in the business. Though it's up like 70% this quarter year-on-year, the percent of sales is pretty much in-line with previous years.

This is the right way to think about it longer term and as we think about that spend, are you tracking that return on investment there? And given the step up in R&D? Should we expect, kind of more frequent cadence of new product releases moving forward? Thank you..

Paul, let me answer a couple of parts of that question and I'll let Nate take the one on the -- basically, the business model question, what percentage of our spending matures; we're spending a lot there [ph].

You know, I think in terms of the cadence of product launches, I wouldn't necessarily relate increased investment to more new products launched. I would say the increased investment will just enable us to do better, bigger and in the places that really matter.

We see lots of opportunities for innovation and we're not holding back on making sure we're investing there.

Nate, you want to talk about the business model question a little bit?.

Sure. And just to confirm, you're looking at the numbers the same way I am, Paul. Our OpEx as a percent of sales this quarter was actually lower than where it was in Q1 in FY 2020 and it was basically the same level as what it was for the full year in FY 2020.

So, I think some people look at the growth rate of OpEx and maybe have questions about it, but again, the business model or the structure of our P&L actually looks very consistent historically. Now, our strategy as you know is to move to a more marketing-led, rather than promotion-led company.

And so that's exactly what you see us executing this quarter and you'll see it in future quarters, is taking some of the incremental profits we're generating, the gross profits we're generating and reinvesting that into marketing, to build the brand, to build awareness and to drive the brand preference over the long term, which creates a virtuous cycle of higher margin products and faster growth.

So, you're seeing us execute what we've been talking about for some time and that's what you should expect to see in the future. In terms of the percent of sales, I think something around like what you saw this quarter is probably the right way to think about it. But it's not something I would put too fine a point on.

It might be a little higher than this in some quarters, might be a little bit lower, but it's going to be the same strategy that we talked about..

Okay, great. Thanks..

Thanks, Paul..

Thank you, Paul. Now, the next question comes from Joern Iffert from UBS. Joern, your line is now open..

Hello, Joern..

Hi, Bracken, hi, Nate, Hi, Ben..

Hey, Joern..

Ben, all the best to you and yes, we'll miss you..

Thank you..

Maybe starting this two to three questions if I may. The first one is on your implied outlook for the next nine months. The midpoint implies sales, maybe down 12%, 13%, 14%, but you're not [ph] getting EBITDA on around 40% to 50%.

Your cross profit margin assumptions as Nate stated is maybe in the around 40%, if I understood this correctly for the current year.

But if I consider the cross profit margin we're standing already in Fiscal Year 2020 and now you have better ethics benefits, it's falling back to the same level like Fiscal Year 2020, despite you having pricing power to offset rising component costs, despite you have invested in your premiumization strategy.

So, why are you exactly so cautious on the cross profit, if I may ask? This would be the first question..

Okay, let's stop you there. Let's take it one at a time. You just unloaded a lot..

Yes, sorry. Thanks..

You sound like my Bard or me talking to my team. Nate, I'll let you take that one. There's a lot in that..

Listen, Joern, the given [ph] range as 39% to 44%. I think we'll be in that range this year. There are several factors on why I think gross margins as I mentioned in my opening remarks, were I think they're going to come down from current levels. They're going to remain in that range, whether they're at 39%, 40%, 41%, 42%, 43%.

We'll just have to see it. It depends on a lot of things like mix and so forth, but certainly we have some headwinds as we talked about sequentially here with just -- we're going to have to increase promotion as the market stabilizes, normalizes back towards more historic levels.

I think mix is always going to be one thing that changes from quarter-to-quarter. I think over the long term, our mix trends are favorable with growth and some higher margin categories. We'll just have to see how logistics plays out.

Certainly, we spent a lot on air freight last year, I think we'll spend less on air freight this year, but rates continue to be higher than their historic levels. In fact just recently, the ocean rates have been increasing on the spot market 40% to 50%, just in a very short period of time.

So, while ocean is still a lot more attractive than air, those rates have gone up from their historic levels, too. So, there are some near term things here we'll have to fight through.

I think over the long term, we've given a range that's got some room for margin expansion off of those FY 2020 levels you mentioned and that's our focus, is adding new categories that have that more attractive margin profile, maybe some more software into the mix and things like that.

But in the near term, there's clearly some margin pressures, but I feel comfortable we'll be in the middle of that range or somewhere around there..

And Joern, I agree with you on the pricing power. We haven't raised any prices yet, though. We don't have immediate plans to -- we're going to keep an eye on the market. We feel like you have some of these shortages. Some of these cost-driven shortages are really temporary. So we'll see..

Yes, thank you, I got the message. And second question is please, on product positioning for videoconferencing and webcams. We can likely expect that all the notebook providers are significantly upgrading the camera systems over the next two to three years. Apple was starting with the iPad Pro, for example, they're improving camera system.

To what extent can this affect your videoconferencing and webcam business from your point of view?.

I think the installed base is so big. You got 1.4 billion PCs installed, so the transition, no matter what people do to the existing market, it just won't put a big dent in that market for years. So, we think the opportunity there is very significant and we're going to keep investing.

And even after they do, their advantage is do a remote webcam that are really, really exciting. We're excited about the webcam business. We've been in that business a long time and we will keep innovating in it to make sure that we've got products that are compelling. But we're 35 different categories now, so we don't live or die on any one category..

I'll add one thing to that one, Joern. On kind of the bullish side of that opportunity is anything that drives increased awareness for webcam, increased awareness for video calling.

So, if someone's going to communicate the quality of their webcam or the importance of having a web camera, I think that we'll see some benefit from that just in the overall market opportunity. We're going to have to compete for it.

We're going to have to come out and innovate with great features and products and a compelling value proposition for why an external webcam is a better experience. And I think the opportunity on notebooks and laptops is huge because I don't think we really communicated, frankly, a lot of what the benefits are.

I think as people move towards -- I've got two monitors here in front of me at home. Obviously, a lot of people may not have that, but I think as people move to kind of a monitor setup, maybe they've got peripherals -- my PC remains docked next to me the whole time. I never interacted with it at all. I'm only interacting with my peripherals.

And so I think, depending on someone's setup, I think there's clear advantages for an external webcam. And I think that's a big opportunity for us to communicate..

Thanks for this.

And the last question and just a superficial one, seasonality with back-to-school, now over the summer, can we expect that Q2 is on higher revenues versus Q1?.

It's a good question. Typically, we would see higher revenues in Q2 versus Q1. But as I said before, I think typical seasonality is kind of out the window right now, Joern. There are so many other factors that they're sort of atypical.

Back-to-school is very strong last year and as you see what the inventory, we're prepared for a good back-to-school, but I think we'll have to wait and see how that plays out. Again, compared to prior years, I'm not really counting on typical seasonality for a lot of things.

Certainly, some of the promo days and things like that, we would expect to see a pickup or the holiday period, we would expect to be stronger. But we'll have to wait and see..

Thanks a lot..

Thank you, Joern..

Thank you, Joern. Ananda Baruah from Loop Capital. Your line is now open..

Hello, Ananda..

Hey, guys, good morning. Appreciate you guys taking the question. Ben, congrats. It'll be awesome [ph] and it's been great working with you both at Lo G, but for years and years before that as well. So, look forward to absolutely staying in touch. And so I guess a couple questions.

The seasonality I'd like to just touch on as well, that was one of my more prominent ones. Seasonality notwithstanding, it does seem like there could be some conservatives and I guess I just want to get your thoughts on this and the revenue because I'm sort of playing around. And if do, just flat revenue for September.

And then soft side of seasonality for December and March, I get double-digit revenue growth for the year. So, any concept you could provide on sort of connecting for those kinds of dots with the flattish forecast. Like what are the puts and takes there? Then I have a quick follow up,.

I'll start that..

Go ahead..

Then you can jump in, Nate. I think we guided at the beginning of the year this flattish revenue for the full year upper five, down five. And then we raised the number because we finished so strong in Q4, even after our Analyst Day, which was the early March. We raised the equivalent of seven points -- six or seven points in revenue.

So, we've done one raise already and as you go in the back half the year, obviously, the comparison gets stronger. So, the seasonality as Nate said -- I'll let Nate -- you're probably going to repeat yourself again on this. It's really hard to call seasonality this year.

Nate?.

Just to put a little finer point on those comparisons. The second half of the year last year, we basically grew 100%. I'm not one to use this excuse, I would say, and I certainly wouldn't say too much internally, but that's a tough compare. Our visibility, Ananda, as you know is not 9 to 12 months out.

We have pretty good visibility in the short term and some businesses like video collaboration, we build pipelines and we see things further out, but we're staying with the same strategy.

We're going to remain nimble, we're going to have inventory available to grow faster if the opportunity is there and we're going to pull back hard if things slow down. And I think as Bracken mentioned at his prepared remarks, it's a little choppy. Europe looked like it was on path to reopen strongly and unfortunately, it had to take a pause.

And I think even in parts of the United States, we now see that as well. So, it's hard to make long term prediction, I would say, six-month predictions. Long term wise, I think we make very comfortable predictions about what the long term trends are in these businesses and we invest for those.

But frankly, some of the shorter periods within this fiscal year, we're just going to have to remain nimble and prepared. And that's what we're doing..

Very well said..

That's really useful context. And I guess just quick follow up, Bracken, we'd love to get your thoughts with regards to M&A. You guys obviously….

You're kind of breaking up, Ananda, but I think you were asking what Bracken served at the wedding. So, Bracken, do you want to....

I think he's talking maybe [indiscernible]..

Will this be a good time since size [ph]?.

I think I got that, Ananda. You might have to jump off video to keep your audio. If I understood you correctly, though.

Can I talk a little bit with the size?.

Yes, yes..

So the answer is as you know, we don't usually go into too much detail on what we're looking at, but we are always looking at things and the vast majority things we've done have been just small. So, it will probably stay that way. But we're always looking at medium sized, even larger things.

M&A has been surprisingly -- and I say surprising because most companies don't do very well -- surprising strength for us. We've really delivered strongly when we've done M&A. I don't know how many acquisitions now since I've been here and almost all of them are or been there. They're our expectation.

So, I think it means we really have an engine there we can keep driving and we're going to keep fueling it and we're on the hunt all the time..

That's great. Thank you..

Thank you..

Thanks..

Thank you, Ananda. Michael Foeth from Vontobel. Your line is now open..

Hi, Michael..

Yes, thank you. Hi, Bracken, hi, Nate, and thanks a lot, Ben. Good luck to you. A couple from my side. Maybe just starting with streaming business.

Can you may be comment on how that is developing? How much of the growth that you've seen in gaming is coming from that and how you can leverage their business to maybe to other categories or applications if there's anything you can share with us on that front? And the second one is sort of a curiosity.

Do you have any statistics or insights on the age distribution of people buying your creativity, productivity products and does it correlate in any way with your Defy Logic campaigns? Anything you can you can share with us. Thank you..

Okay. Why don't I answer that one first. The answer is we skew a little older on our creativity and productivity business. But we see a lot of opportunity younger too, we also skew more male, and we only think there's an opportunity female. So you'll see a lot of things we're doing are with those two thoughts in mind.

And the defy logic campaign does appeal more strongly. It's very strong appeal and appeal generally. But it's even stronger against that younger target audience. So yes, we think there's an opportunity there, and we're excited about it. What was the first question was the first question was, remind me again. .

It's regarding your streaming business and how it contributes to growth?.

Yes, the streaming business has just been a really strong grower underneath these numbers, you know, it's really kind of lives in different places in our different categories. But generally speaking, you know, if you look at Blue microphones over the past year, it's really just grown tremendously. And we think long term there is very, very strong.

And stream labs is also super exciting. And it's, it's been all the expectations we had for it in terms of growth. And we're very optimistic ahead, and we're learning so much from it about service businesses, you know, it's a pure service place.

So, and then we've got, we're also slowly quietly entering new categories, you know, we sort of this is starting to get out. And we're excited about the potential to really be a real player in enabling people to stream and create content for everybody else. And there's a lot of room to grow there. So the growth is in it. So far, it's been very good.

And I think the long term is much, much more exciting. .

So can we expect more subscription like, offerings from Logitech going forward?.

We already have that, obviously, in a couple places, we've got a very small starting business and services on the video collaboration piece. And of course, stream labs, and stream labs has a couple of things within it. So yes, I think you can expect more, I don't know whether you could expect to see it be significant the next year or so.

But it's we're certainly going to keep adding..

Sorry, just to be clear on. I think you were asking the stream labs sort of impact on gaming, it's really not material. I mean, the growth you see is really driven by the hardware. As Bracken said, stream labs has done very well. And it's a very innovative organization I would say that's doing a lot of testing and so forth.

But it's not driving the gaming results. So that's still driven by the hardware business..

Okay, the gaming results across every segment..

Okay, thanks. And then, maybe just the last one on component shortages. I mean, for Nate, maybe with inventory levels that you have now.

Do you think you're covered for the demand that you will see in the in the next quarter? Or are there any areas where shortage might sort of constrain you to not be able to deliver on demand?.

I think broadly, for the next quarter, I feel good about coverage. You know, we'll see. I don't think this is a one quarter challenge for us. I think our team's been working on it for a while and will continue. You know, in some days, we bought days of components, or weeks of finished goods, or maybe a month of finished goods here or there.

But I think broadly, we feel good about the coverage here for the next quarter. But there'll be things that pop up for sure. I mean, it's a daily challenge if you're in operations and supply chain..

Right. Thanks a lot. .

Great. Thank you, Michael. Eric Woodring from Morgan Stanley. Your line is now open. .

Hey, good morning, guys. Thank you. Thank you for taking the call. Ben, just want to reiterate what everyone's saying been a pleasure to work with you. Best of luck. In the future look forward to following your success. You know, I kind of want to start on porting devices, keyboards and combos are obviously very strong, I'd say most particularly strong.

And there's this fear in the market, that there is a slowdown in the PC market, broadly speaking from consumers and call it the education sector.

So the question is one, was there anything one time in nature this quarter, like Prime Day or the 618 festival that outwardly contributed to growth in these segments? And then the second part is, what are you seeing from enterprises in these segments, as people are now returning to the office? Are they coming into the market more so than they particularly were in the past? And then I have a follow up?.

Yes, I would say, there is, we did have Prime Day this quarter, this last quarter, certainly in the numbers, but it still would have been an extremely strong growth quarter. In terms of really what do we see ahead from enterprise et cetera.

And what about the overall view of the category? I think the coolest thing about this businesses, it's our oldest business, and it has probably, it's got an incredibly strong innovation engine and we've done a nice job of segmenting our teams.

Our team has done nice job segmenting the market into the different places, and then really delivering big time against that. And still, the awareness is relatively low for the products that we have. So I feel like we really control our own destiny to a large extent here not completely, you know, obviously, anything can happen.

In terms of, so we've got a great group of other products coming, and one that's already out there. In terms of what are we seeing from business, we are starting to see businesses, we believe that we have an opportunity really to move to more B2B business there. And we certainly are moving some resources there to make sure that happens.

This of course growth, you can't see it, but was stronger in the B2B segment than it was elsewhere and that's exciting. It's small, but it's growing fast. And we think there's a big opportunity there.

You want to add anything Nate?.

Well, I mean, of course, I'm always going to be a little bit cautious about it. I think all those things are very true. And I think it, the lineup is as strong as it's ever been.

But you know, Eric, you've got the data, as well, you know, this was our easiest compare for pointing devices, it only grew about 1%, last year in this quarter, because we did have some supply challenges with the factory being shut down due to COVID, and so forth, factories being shut down.

So I certainly think the growth rate will moderate from where it has been here. But all the positive factors back and mentioned definitely agree with.

And I think the key here is that this group, in particular, although I think it's true elsewhere, but this group in particular, I think that's a really excellent job with market segmentation and customer segmentation, understanding customer needs, and you see that in the product development, you see that in the execution.

And I think that's the path to long term success. And so we'll execute that..

Awesome, thank you. And then just on video collaboration, again, would love to get your take on what you're seeing from enterprises again, as people go back to the office.

And what I mean by that is, you know, do you find that businesses are almost pulling forward demand as they say, we've created our return to work strategy, and now we can make these infrastructure investments, or are they're saying we've created our plan, but we're still kind of going to spread out our purchases over multiple whatever it may be quarters or years, as we somewhat reevaluate those plans within the next three to six to nine months.

Again, you mentioned the choppy environment, just wondering how that choppy environment potentially impacts big purchases for video collaboration..

I mean, I think you can safely say it's a mixed bag. You've got companies that are really going all in now and getting ready.

I'd say most are saying, you know, hey, we have a game plan, let's start to enable it, but they're not moving as fast as you know to basically snap their fingers and have everything ready to go right away, which I think is kind of expected, we sort of expected that.

So I think it's going to unfold, I think the growth is going to really unfold over the next year, and two and three. And I think that probably plays right into our strengths, which is we've got a great portfolio out there a great one coming. And I think we've really got a Salesforce, now they can handle it.

Do you want to add anything to that Nate?.

Yes, do you think it's a mixed bag? And you know, you got to factor in deployment time on some of these things as well. So the decision may be made, but the deployment may take months and quarters, depending on what type of solution you're talking about. So I think that's a factor too Eric.

And, again, I think the long term strategy here is to innovate and to build great sales organization, and we're doing those things and to increase our marketing to increase our awareness and brand preference, but it's an attractive market, one that is competitive. And we're looking forward to many years of success in video collaboration. .

Super, thank you guys very much. .

Jürgen Wagner from Stifel. Your line is now open. .

Thank you for letting me on. Actually a follow up to the previous question regarding enterprises. What percent of revenue, what was it last quarter and what do you think realistic number would be going forward? Second question, Bracken you said the pipeline is exciting. So what is it that makes you so exciting? And last question on visibility.

You mentioned a near term, lack of visibility, but better, longer term or midterm. So do you think the next fiscal year would then be another growth year? Thank you..

It's a little too early for us to guide for next year, but I sure hope so. I expect it to be another growth year. In terms of what makes me excited about the innovation engine, you know, we just get stronger and stronger.

I would say we've all suffered from having to spend a lot more time on supply challenges than we would have liked and so that's probably delayed a few of the things that we would have loved come out sooner, but it just means that we've got a good pipeline ahead of us.

I mean, what you see today is not what we'll have two years from now, a year from now, and three years from now in any of our businesses. So, I'm excited about what's on the rise. We don't talk specific products until we get to the launch period.

Nate, you want to add anything, or take the first one [ph]?.

I think on the enterprise revenue mix, you're going to -- unfortunately, that's really not a figure that I'm going to really talk about here. We don't have that type of visibility to our end customers, unfortunately.

We sell through channels and some of those are more business-oriented than consumer-oriented, so we have ways of thinking about it internally. But it's just not really a great external figure. But you can see with the growth in video collaboration, which clearly is a business type of product. That mix is improving due to the growth in that category.

And then I agree with Bracken on next fiscal year, I think one of the things I always say is that, sometimes the market trends don't align perfectly with our changes in fiscal quarters and years. So, it's about building capabilities for the long term.

The company we are today is the company we are tomorrow and if that happens across the fiscal period, March 31 to April 1, so be it. But we just got to continue to build capabilities for the long term..

Okay. Understood. Thank you..

Thanks, Jurgen..

Thank you..

Great. Thank you. Serge Rotzer from Credit Suisse. Your line is now open..

Hi Serge..

Yes. Hi, everybody and bon voyage, Ben. Enjoy your new life then. But coming back to video collaboration, you touched it several time. I have difficulties to understand why sequentially the sales was done $150 million. This is a big number because I do not have expected that this could be seasonal. It is not.

So, please, can you explain me again where are this $150 million are going -- part one. Is the questions of the sales mix of the bigger comps [ph] just sold in the past quite often to private people? And what makes a positive? Because you have to see some pre-orders, when enterprises will buy now or invest into this video collaboration.

So, you should have much better visibility that you probably could share with us. This will be the first question..

Yes. Let me jump in. I'll start and Nate, you can finish. I think in terms of why the big sequential difference -- and I think if you look at our Q3 and Q4, they were just super strong, especially in EMEA, where I think there were just a lot of momentum and I think we mentioned last quarter that we had a big backlog that we really cleared.

We're sitting on very large backlog inQ4 that we were able to clear almost all of. So, that made this the sequential storage choppy, but it doesn't change the momentum underneath it. Momentum tends to be super-strong. And in terms of the Americas and AP, I think they look very similar to what you'd expect in terms of quarter–over-quarter.

You would add anything, Nate?.

Yes, just again, finer point on the data. We grew about 350% in VC in Europe in Q4. Again, I think as Bracken said, we had a very strong backlog coming in, we were short of supply and we were able to fulfill that and get the channel back to a healthy level. I think early in the call, we talked about just to maintain our outlook.

I think our expectation is it's going to be a good growth category this year and in the future..

Okay, fair enough.

Do you see any changes then in the gross profit margins? Sales mix within video collaboration and what about the behavior of your peers like Jabra came up with cam and we will see more cams coming up to the market? Do you expect gross profit margin declining? And how was it now in the current or in the last quarter?.

Gross margins are super-strong in that business. We love that business and yes, it's certainly going to get more and more competitive. Great markets are always competitive, but we love our competitive position. And do we think that we're going to have gross margin compression within the video collaboration business? Could be. I don't know.

We certainly have room. It's a mix driver for us from a gross margin standpoint, so more growth is better even in lower gross margin. So we'll see.

You want to add anything to that, Nate?.

Maybe just our investment in R&D, a lot of that is going to the video collaboration category and the innovation that you see there, some new products actually just came out earlier this year. They really highlight that. I think the Whiteboard Camera I've got here with me, just a really cool product.

So, I think there's going to be opportunities for us as we build up that install base. If you get into these accounts, you've sold them a great video solution to sell around that as well and I think that's an important piece of that business we'll need to see expand out into the future with the growth in the install base.

I think that's an important margin driver over the long term, but certainly it's an attractive market and there's a lot of competition. I think it's reflected in our outlook. I think our expectations around pricing, not only for VC, but for the market overall..

So, I understood that the momentum will increase again in video collaboration and if I didn't got you wrong, Nate, before, you mentioned that in mice and keyboards, the absolute level can remain stable. So, this should all have a positive impact in the gross profit margin, isn't it? From the sales mix going into the next quarter....

What was the comment about some remaining stable on...

Yes, you mentioned to one of my colleague that year-over-year, you see declining numbers, but you see that Q1 as the absolute level as quite firm or solid number to achieve also an exporters.

Did I got it wrong?.

Yes, I think you're talking about gross margin.

Right?.

No. On the absolute level of pointing devices and keyboard and combos. Because you said that last year Q1 was weak, therefore we have seen high growth. But you see that this level can be sustainable in mice and keyboards..

The level of revenues you mean?.

Yes..

Got it. I think we should probably be careful about talking too much about detailed forecast quarter-on-quarter for the different businesses. If that category, if mice and keyboard grew faster than the overall company, they wouldn't have some favorable mix impact. But I think there's lots of products within that category that you search.

So, kind of a question I'll have to think about a little bit, but again, I would just think at the high level what I would expect, is the gross margins still going to come down a bit off of these levels we had here in Q1 due to the larger factors I talked about earlier in the call? And I think over the long term -- again, one of my focus is as we talk about M&A or we talk about new product introduction is to continue to try to build a portfolio of categories that give us a mixed benefit as we grow the company.

It's not always going to be the case and sometimes that mix benefit is going to show up on the bottom line rather than on gross margin. Meaning it's going to be a category that's got a lower OpEx profile or lower investment profile, but still accretive to the overall margin rate.

That's I think an important part of how we think about growing the business, is to look for categories where we can differentiate, where we can get a share leadership position that gives us the ability to earn margins that are at or above the levels that we're at today..

Okay, probably last one, if I may. You touched emerging markets that your capital market, there's an important topic.

Can you give us a quick update here? Do you see growth here and can this potential increasing over the next quarter or do you see incremental growth to your guidance here?.

Yes. I will jump on, Nate. I wouldn't say we see incremental growth in the current year. It's factored into our guidance for the year, but we are really excited about the emerging markets in general. I wouldn't consider China an emerging market anymore.

We still have a very strong growth in China and really, if you look across Latin America, different places to where we see strong growth and very strong growth potential. So, if anything, if I look at my tenure at Logitech, I'd say we've undershot a lot of the emerging markets compared to their potential.

I don't regret that, but I think now we have that opportunity sitting out there in front of us..

Okay, thank you so much. Bye-bye..

Thank you. Next question..

Great, thank you. Tom Forte, Your line is now open..

Hi, Tom..

Hey, Tom..

Great. So, Bracken, Nate and Ben, first off, a comment, then a question and a follow-up. The comment, Ben, it's been a pleasure working with you and best of luck for the future. The first question before the follow-up. So, I think investors sometimes place too much emphasis on working and learning remotely and how that positively affects your business.

But I would argue that two of the other secular shifts you're leveraging are accelerating -- both gaming and self-broadcasting.

So, can you talk about the notion that you're seeing acceleration in gaming and self-broadcasting?.

Yes. By the way, I love your dogs sleeping there in the background. It's really adorable. Yes, we'll start with self-broadcasting. It's hard to talk about acceleration when we've gotten so little of the potential it's already out there, but I agree, it probably is accelerating.

Anybody on this call, is if you do anything, I'm sure you're -- just as an example, I'm sure you're seeing the wave of people entering the podcasting market, or clubhouse, or all the places that people are bringing in audio or video equipment to stream or broadcast. There are just more and more of them.

My line has always been, I think we're entering a world, we're going to listen and watch a lot more of each other than we are in Netflix and all the companies could get attention from content. But it's actually dwarfed by the content that's created by each other and I think that's just going to continue -- I know it's just going to continue.

So, yes, I think that is going to grow for a very long time and become enormous. And gaming, we've been saying this from the beginning, Tom, the gaming has been underestimated or was underestimated when we started, it was probably underestimated five years in, I think it's probably still underestimated now for its long term potential.

I don't know if you've read this anywhere, but as one example as the commercial power of gaming, TSM sold its naming rights for $210 million. Those are NBA, NFL, Olympic members and that's with the E-sports team that most people here have never heard of. So, this market is absolutely going to continue to be a very strong grower..

Great. And then for my follow-up. Nate, you talked about this notion of moving promotion, spending and marketing.

Can you talk about long term, how accretive that could give your margin?.

How accretive it could be to the margin?.

Yes, pretty much..

Yes. So, long term if you trade promotion spending for marketing spending, I would think that could be something that could be accretive to margin in long term..

Yes. It could be accretive to gross margin and I think it could be operating margin neutral. Really think about it as growth strategy, I think as well. It could lead to operating margin expansion we made, reinvest that as well.

I would think about it as a way to drive growth and then how that flows through time, I think is going to be dependent on a number of factors.

Bracken, anything you'd add to that?.

Yes, I would just say, Tom, our goal here is to be a long -- we got a long term growth target of 8% to 10%. So, obviously, we've got our eyes on double digits, long term double digits. That's our credo. If we felt like reinvesting some of that gross margin opportunity back into even more marketing to drive more growth, it's a good investment, we would.

I know that you get healthier growth when you have a stronger brand equity and that's really underneath this. And healthier growth can also be stronger growth for a given dollar spent..

Great. Thanks for taking my questions..

Thanks, Tom..

Thank you, Tom..

Okay. Thank you, Tom. And Bracken, Nate, this concludes our Q&A. So, I'll turn the call back over to you..

We just finished -- I tell our teams all the time, the most important quarter of the year is really the first one because it sets the tone for the year and creates the momentum and we're off to a great start. I think we feel very, very good coming out of this first quarter and we'll look forward to seeing you a quarter from now..

Thanks, everybody..

Thanks, Ben..