Q4 2021 Logitech International SA Earnings Call

Yeah.

Yeah.

Hi, good morning.

Welcome to Logitech and video call to discuss our financial results for the fourth quarter and full fiscal year of 2021.

Joining us today are bracken, Darrell, our president and CEO and Nate Olmstead, our CFO. During this call. We may make forward looking statements, including with respect to future operating results under the Safe Harbor of the private Securities Litigation Reform Act of 1995.

We're making these statements based on our views only as of today, our actual results could differ materially and we undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results you can find the reconciliation between non-GAAP and GAAP results and information about our use of non-GAAP measures and factors that can impact our financial results and our press.

Release, and our filings with the SEC, including our most recent annual and quarterly reports and subsequent filings.

These materials as well as our prepared remarks and slides and a 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 and constant currency and sales. Our net sales. This year. This call is being recorded and will be available for replay on our website and I will now turn the call over to bracket.

Thank you Ben and thanks for all of you for joining us and I want to start by saying others.

And was worried about India as I can possibly be.

A year or whatever it's been now.

For this pandemic has raged on and I think we've heard.

Fears of inspected every person on this call and more of it.

Some ways.

So worried about India for all the reasons you can imagine and.

And I'm afraid, it's happening, but I hope and pray that they really give it back under control quickly.

And that the rest of the world continues to improve step by step and escape is pretty limit, though the pandemic continues to disrupt our daily lives and as I said and some countries and its even getting tragically worse.

It's that we're starting to emerge from this strict shelter in place requirement here, where I'm sitting today in California, and actually broadly and the U S and we've been thinking and it's got us thinking even more maybe more accurately about what a return to the office might look like as the pandemic subsides.

So the behaviors that are for during the pandemic are clearly going to endure.

Video, calling is meteoric rise will not reverse.

Most calls are moving permanently to video.

A place in your house, having one for each person to work for a study or to be both.

And they're here to stay we're all going to other places in their home.

While gaming was popular long before the pandemic people are using it more and more for.

For social interaction.

Many of US noticed this first during the fourth day phenomenon and pure years ago.

And this year gaming took on and even took an even bigger step for prominence and our culture.

And the number of podcasts funny videos, thank God streamers, and creators continue to grow throughout the pandemic and.

Emboldening more and more people to think maybe they could given that streaming act and create video for other people.

Or audio and.

None of that is new for our strategy.

While our long term strategy is unchanged our opportunities have changed their bigger and they are broader.

On top of that we now have a bigger more profitable base to grow from.

Let me briefly briefly give you a few external examples that illustrate the acceleration of the secular trends that affect us.

These illustrations might help you see what we see.

Long term growth.

Let's start with the trend of video everywhere and working from home and office.

Citigroup announced that most of its employees will be designated as hybrid workers, who will spend at least three days and work in the office and up to two days and home.

And that's just one of many companies that have announced similar plans.

More and more will follow over the coming weeks and months.

In fact, even surveys from early and the pandemic showed the companies are beginning to think then about hybrid.

<unk> one of the largest commercial real estate operators and the World noted and a survey last September with 61% and remember this is last September 61% of companies were already back then and planning to offer a hybrid working arrangement.

And I suspect that numbers, even higher now.

And one of the key reasons the companies are going to hybrid work is.

And while it's obvious to all of you on the call now because we like it.

We who are working and home wanted.

J L. L. Another commercial real estate, operator set and a survey that 72% of workers do work life balance as their number one priority post COVID-19 ahead of a comfortable salary even.

I spoke of and many executives over the past year.

Since the onset of COVID-19 most until recently have really had no plan for how to return to work.

Now plans are starting to for.

Short term.

The story, that's come to everyone and a few days and the office and a few days at home.

And they need video and their offices to keep their remote with connected teams working well.

And go beyond hybrid work.

Last week Apple is just the latest major company to identify podcasts is a growth platform with podcast subscriptions, which.

Which will allow creators to sell subscriptions for their podcast listeners.

On top of that streaming is soaring.

Social audio by Clubhouses suddenly taken off.

And there are more and more creators, making it seem like a feasible and attractive thing for even more and more would be creators to do.

The network effect is so powerful we make the tools that enable existing creators to do it better and be more effective.

And for new creators to try it.

And gaming.

It's bigger than it's ever been and as I said, it's become the place to meet for more and more people socially.

What does all this mean for logitech.

More video enabled rooms.

More video enabled workspace that need to be equipped and upgraded with our great our growing portfolio of offerings more streamers and more creators looking for more equipment.

For gamers looking for better gear.

Before I go further let me say that you might never have another analyst call from logitech without and update on either our quest to be environmentally sustainable our actions and diversity equity and inclusion for.

And in some cases youre going to hear about both.

These are so central to Logitech purpose.

This quarter, we announced the availability of the previously announced carbon labeled products, we talked about.

FERC, we know of and the Tech World.

Or one of very few companies and the world and commit to this on every single product.

And in effort to reduce global carbon output by setting a new industry standard.

And as calorie labels have impacted the food industry.

And the process, we developed a lifecycle analysis methodology to measure our products carbon impact from its raw materials to its manufacturing and transportation to use by the customer consumer and.

And then finally to the end of life.

We're sharing our learnings and 33rd party certified methodology to any company any competitor anywhere in the world for NOLA price at all for free.

And I encourage you to ask companies as you're talking to them, if theyre considering carbon labeling.

Don't do it because we ask you to do because it's part of a program that will enable the earth to keep your healthy for your kids and your grandkids.

Now, let's turn to our financial results.

Logitech delivered the best year in our history with fiscal year, 2021 sales up 74% and operating income more than tripling to $1 3 billion.

What drove those impressive results was not just one category or one time pull forward.

These results were broad based across virtually all of our categories and regions, including countries that never fully locked down and those that are furthest along with our post COVID-19 recovery programs.

Said another way the secular trends, we keep talking about are really secular and theres still circular circular they will keep growing.

Our PC peripherals categories, we're already growing consistently every year, but.

For the increased over 50% and fiscal year 2021 for $1 9 billion.

To be candid, we always felt there was potential to grow more and these categories and we work, but we were held back by limited awareness of some of our premium mice and keyboards for example, and MX master and anywhere.

And using genomics master right now.

Which participate and the premium premium into the category.

Analysts coders and creators should be using these products, but the awareness has always been limited.

I've met many of you on this call don't even realize how outstanding these products are Nathan and I were talking about this again last night.

It was only when hybrid work and remote learning expanded and we began to be able to invest and awareness that demand for premium price for.

Premium mice and premium keyboards began to accelerate.

We also have and even faster growing alternative organs.

Ergonomic products for those who need comfort.

Webcams.

And needless to say have shown their highest growth.

So on the highest growth more than tripling versus year ago.

And while we've been supply constrained through most of fiscal year 2021, and it is admittedly lost some share because of it we expect to close the gap between and market demand and our ability to fulfill it and fiscal through 2022.

But let me put this opportunity and perspective on webcams.

<unk> webcams.

We shipped less and 20 million units and the entire year of fiscal year 2021. The one were talking about today against it and installed base of 500.

Million monitors and one 4 billion PC.

Yes.

You can see that we still have vast opportunities ahead of us to drive greater attach rates.

And what excites us even more and they increase the number of workspace as more companies shift to hybrid work.

As we noted on our recent analyst and Investor Day, Our internal survey suggests that two to three X increase and the number of people who will work more than two days at home and the other day in the office.

This means more mice keyboards, webcams speakers headsets mikes.

You can expect us to continue to innovate across our product portfolio like the <unk> bites and keyboards for enhanced productivity, our mainstream mice and keyboards and focused on lifestyle and design for those ergonomic products I talked about.

Combined with that combine that with our increased investments and marketing, which you know <unk>.

We're putting in.

To create greater user awareness and consideration for how something as simple as a $50 mouse or keyboard can drastically improve your PC experience.

Youre workspace experience at home or in the office for both and.

And you can start to see why we're so excited about this category for the next several years.

Now, let me talk about another big growth category for us.

Video collaboration.

Sales almost tripled and fiscal year 2021 to over $1 billion for the <unk>.

First time for.

For Q4, <unk> sales were more than what we did it all in all of last fiscal year.

Our growth actually accelerated through the quarters of fiscal 'twenty, one and supply improved and more companies started to map out their return to work, which returned to the office.

And that represents a clear trend for turning on video to connect with friends and coworkers clients and others.

Triple digit growth and this category was across both our conference for video products.

As well as our personal collaboration products such as the enterprise for Cambria Webcams are the zone wireless headset.

We're also very excited about the opportunities for most recently announced all in one devices the rally bar and the rally bar and many.

They are just starting to rollout to great customer feedback.

Our gaming category also had a very strong year with fiscal 2021 sales up 77% and sales more than doubling and Q4.

The growth was broad based across all our gaming categories, including PC gaming simulation console gaming and.

And all of our regions.

Not only has the gaming market expanded significantly over the past year. We have also reached our highest level ever and overall gaming market share.

I'm extremely proud of all the innovation and products that we our teams have been able to introduce despite the shelter and place mandates around the world.

Our colorful and playful G 733 gaming headset developed by Tiffany beers and her team.

And as quickly become one of our best selling gaming headsets, while our newest <unk> supervised gaming mice mouse.

And one of our fastest post launch sales reps since it was introduced just six months ago.

These are just two of the many new products and supported our growth and share gains and fiscal year 2021.

Tablet and other Successories also had a tremendous year with sales up almost three X, while our tablet keyboards for education.

Were up over seven X.

So net schools around the world are needed new technology tools to deliver education to students remotely and as we noted last quarter a large one time order from a Japanese school district drove a significant part of our tablet sales for the year leaves.

And even excluding this our overall tablet sales growth was up triple digits and our.

Traditional retail sales tablet sales were up over 50% was for.

Fiscal year.

Our audio <unk> wearables sales through 69% and fiscal 2021 led by retail headsets and Blue microphones.

And mobile speakers were down 22% for the full year.

But that's in line with our expectations as we reallocated and prioritized our investments and other fast growing markets.

Now, let me turn the call over to unit to walk through our key financial metrics.

Thanks, Josh.

And.

Okay. Thanks Bracken we.

And we finished and excellent year on a high note with our fourth quarter sales more than doubling and with broad based growth across all of our categories and geographies.

And as Bracken said fiscal 2021 sales reached five 3 billion up 74%, which exceeded our recently revised guidance of 63% growth.

This represents over $300 million of sales upside compared to that recent guidance.

And as Bracken will cover later, we are maintaining our growth rate outlook for FY 'twenty, two and therefore effectively flowing through this FY 'twenty one revenue upside on.

Non-GAAP operating income more than tripled to over $1 $2 7 billion higher than our previous outlook of $1 1 billion.

Our fiscal 'twenty, one non-GAAP gross margin reached 44, 8% up over six percentage points from last year on.

Almost five points of that was due to lower promotional spending and lower retail point of sale Activations.

We do expect however that these promotions and marketing activities will increase and return to more historical levels in fiscal 'twenty, two putting some downward pressure on gross margin and the months ahead.

Mix was favorable this year and we expect they will remain favorable margin again next year somewhat offsetting the pressure I just mentioned.

But all this means is that our asphalt FY 'twenty to gross margin.

<unk> land within our recently provided and increased the target range of 39% to 44%.

Our non-GAAP operating expenses increased 44% and fiscal 'twenty, one to $1 1 billion.

And our business growth solidified and accelerated we invested across many areas, including hardware and software innovation go to market expansion and marketing.

All of these investments had limited FY 'twenty, one on a revenue impact, but price the business for future potential growth.

In addition to conventional capabilities, we also invested more deeply and environmental sustainability and our own manufacturing and with all our supply chain partners.

These are all areas of strategic importance, and where we will continue to invest and the new fiscal year.

Finally, you will notice that our G&A spending increased sequentially in Q4 due to a $30 million investment into a charitable donor advised fund to support our long term social giving strategies for a quality and environmental sustainability.

And net result of these business dynamics and operating decisions was strong profit growth and operating margin expansion for both Q4 and fiscal 'twenty, one overall and improved capabilities for the longer term.

Now, let me talk briefly about our cash flow cash flow from operations reached nearly $1 5 billion for the full year.

Up from $425 million and fiscal 'twenty, driven by profit growth and efficient working capital management.

We maintain a tight linkage and alignment between our business strategies operational decisions and financial structure.

You saw this at work and fiscal 2021, as our strong profitability balance sheet and cash flow allowed us to invest aggressively and additional manufacturing supply and logistics.

We were able to invest at a pace and level that provided us a competitive advantage as demonstrated by recent share gains and several categories.

We will continue the strategic investment approach as we head into the new fiscal year, and we navigate a dynamic supply environment, which mainly to higher component and logistics costs and me initially projected.

Positively our efforts to find second sources and increased manufacturing output have allowed us to begin the new year with owned and channel inventory at healthier levels and in recent quarters, our inventory is fresh and weighted towards fast turning product categories.

Same time longer industry lead times, and tightening supply for some components will likely increase our cash conversion cycle and FY 'twenty, two but our strong balance sheet positions us well and the face of these challenges.

Wrapping up the uses of cash we spent $43 million and the quarter on three small acquisitions, all and the content creation category we.

We do not expect them to be material to our fiscal 'twenty two financial results, but we believe they will help us realize the growth potential of this fast growing market over the longer term.

In closing, while we do not expect this past year's record sales growth rates and margins to continue we do believe our sales volume gains are sustainable and that our long term market opportunities have become more attractive and we plan to invest accordingly.

With that it's a good time to hand things back to Bracken, who will talk about our fiscal 'twenty two outlook and guidance.

Bracken.

Thanks, you had to wake me up again, it's early here in California as.

And as they quantified for everyone and earlier, we beat our most recent fiscal year 2021 sales guidance by about 300 million, which of course, we gave back and learn and analyst Investor day and.

And then March and with not even a month into the fiscal year I don't think anyone would've felt on this at this point. If we had maintained the same sales dollar outlook for fiscal year 2022.

We guided just two months ago.

And we've done that it would have meant that our fiscal year 2022 sales forecast today, we'd be down 2% to down 11% compared to down 5% to up 5% that we guided.

But we're not holding to our dollar outlook, we are passing through the sales dollar upside and we are keeping are down 5% to up five sales growth outlook for the fiscal year 2022 unchanged essentially raised from the absolute dollar value of our original sales outlook for about 7%.

We feel confident and equally excited about what the new year will bring us and even more optimistic about the longer term growth potential beyond fiscal year 2022.

As we hold our topline growth guidance for increasing our fiscal year 2022, non-GAAP operating income guidance to $800 million to $850 million versus the prior outlook of $750 million to $800 million.

Finally, we also announced on our board approved an increase and our share buyback authorization for $250 million to $1 billion.

The board also proposed a 10% increase and our dividend, which will be voted on by shareholders in September.

The bottom line is the same underlying trends that drove our business pre COVID-19 significantly accelerated during COVID-19 and and become much more pervasive and sustainable as we look to life. After the shelter at home period of COVID-19 ends.

We have and exciting long term growth potential ahead from this big base and with that Nate and I are ready to take your questions. Ben can you humour, great. Thanks, Mike and thank you.

Paul from J P. Morgan Your line is now open.

Hey, guys. Thanks for taking my questions. Thank you.

Great quarter, and so on VP and you've seen this business for annually at a 40% CAGR for and.

The past five years and then this year accelerating.

180% and the six year.

As we look ahead and the next five years, what are some day growth levers.

You see today.

You can point and Europe was the standout this quarter was kind of driving the acceleration there and im.

Paul.

Yes, I would say a couple of things. So first of all Europe Europe part of the reason for the Delta and our and our sell in and sell out is part of Europe, and we were fulfilling and backlog and.

So we had strong sales there I would say.

Overall, I think the key drivers over the next five years, we're going to be the same drivers with guidance here with one of the big exception wishes.

I think we took a huge step up this year and the realization that video calling is just a mask.

We said it would be video and other everywhere at some point.

But we didn't quite realize that there would be this.

This strong advertising program for video, calling that would happen during the pandemic and it has happened and now it's really going for your question of how effectively and efficiently can people video enabled losses, while they continue to video enable workspaces and.

That's going to happen over the next few slides seven and 10 years.

Okay, Great and then Paul I think on that on just adding to that a little bit and I think the growth the growth levers there clearly you've got the market condition brackins articulated I think already but just building out our own portfolio you see us investing a lot on innovation and a lot of that is focused on.

And just increasing the types of solutions.

And the effectiveness and solutions that we can offer customers and video as well as our on go to market capabilities and operational capabilities. These are all things that were areas of investment for us and FY 'twenty, one and as I mentioned, we will continue to invest and FY 'twenty two and beyond.

Okay, Great and then just on marketing and how you're tracking.

And that return on net dollar spend.

Obviously the times on revenue growth she saw and the quarter.

Can you provide some feedback on that.

Define larger campaign during the Super Bowl did you see kind of and immediate lift.

And then what kind of marketing campaign and should we expect now heading into fiscal year 'twenty two.

The other different kinds of marketing there is the kind of marketing like we did and the Super Bowl, which is really for the whole top of funnel, that's kind of broad and general and not not really designed to immediately sales specific product, but to create awareness and attraction for the brand itself and the categories that we're on.

And then there is the very very kind of search engine optimization, click and buy and our marketing. So there are different kinds of metrics across those different areas. We looked at that we look at the mall and I would say overall, we feel very very good about the defined logic campaign, we're excited about the kind of impacted salary growth.

Even even just anecdotally and probably have had.

I can't I can't even tell you how many people have reached out to me and said that it really that they were surprised by the campaign, but somehow it felt very consistent with what <unk> always been which is exactly what we wanted and so you can expect more of us there and in terms of the more tactical.

<unk> oriented and we look at things like everyone else does return on AD spend and and we tried to make sure that we're investing where the returns are the highest.

And I would say in terms of areas of focus.

The board, but as Bracken mentioned I think awareness is one that I just feel so strongly about for our categories. If you read the product reviews really across the lineup.

Great reviews, and people, who try other products love the products and they recognize.

The enhanced experience that they provide and I'll just give you. An example, something like our amex Keith kind on the premium keyboard that we launched last year, which has done so well for $100 product and a few use that over two years youre paying about 15 times a day for.

And for something that is youre, using constantly and really and improves your experience. So I think theres, a big opportunity for us around awareness and Bracken mentioned some of the things we're doing there, but I would expect to see more from us to drive the awareness of the categories in general.

Okay, great. Thanks, guys.

Thanks, Paul.

Thanks, Paul.

Your line is now open.

Great Hey, good.

Graduation, and on an outstanding quarter again.

Couple of questions on my part visibility I know you guys are maintaining your growth expectations flat.

From the lineup.

But how much visibility now do you have.

And to the next couple of quarters. If you can talk a little bit sequentially any cherrington June and maybe even.

And by quarter and.

And then just high level these shortages.

That is enabling people to add on exit inventory, whether it's on the channel whether it's sitting on the shelves. When do you expect that sell and sell straight and reach a more balanced environment is that even.

And you look out into.

For the next couple of quarters, and then one on the gross margin.

Talked about the promo pricing returning for a more normalized level. When do you expect that I would and young stemming shortages and other shortages and general but suggest that price and remain.

More and more.

And our promotional price and I need more muted.

That's it for me on.

Why don't I jumped on I'll take the first two third when and if you can add to what I'm, saying in terms of.

The balance of the inventory kind of balance of general inventory et cetera.

We're just about there. So I think we kind of ran behind most of the pandemic year trying to fill the channel and this time, we got it and I think we're finally sort of a catch up this last quarter I think we're about there we'll see we could have a few additional sponsor were a little weak, but generally I think we are there.

In terms of visibility I think our I would say the visibility and this quarter's good the visibility into the next quarter. As you go further out of course, it gets less and less clear for us.

But we're optimistic we're we're I would say, it's it's a little less visibility now than it would have been in a normal year, because just particularly strong.

Real strength, we have and the last three or four quarters, but.

But we feel very very good about our own programs, we have such control over what we're doing and and the timing of our product launches and things like that.

And the tricky part of if there is a tricky part of it and maybe the trickiest part is just availability of parts, we've always been able to manage.

Ponant availability well and.

And we continue to do that really well, but it is both ctrip and things like ship sets and things are are really hand to mouth and some other categories, we're in and and the industry broadly so that could always take us a little bit by surprise, but we've been able to manage that very very well historically and I think we'll do it and the future growth.

And anything on any of that are on gross margin range for the gross margin, yes, I can cover gross margin net.

And my Zune crashed and mid mid stream, there, but backup.

I think on gross margin.

And pricing and promotion and the retail point of sale and marketing those are really important parts of our business and those are things that we have to do.

And we will see an increase and those activities I believe and FY 'twenty two.

And there's a lot of forces at play, though on margin and Bracken just alluded to some other ones around the component availability and you asked about supply chain.

Headwinds could also persist and in terms of logistics, because and materials or later, arriving and we have to rush those thanks.

And our finished goods to market, we could continue to see elevated and logistics costs.

Also I think just component pricing.

Be a challenge.

And certain areas and FY 'twenty, two as well so.

There's again competing force is favorable and unfavorable product mix I believe will continue to be favorable and faster growth and places like video collaboration but nonetheless, we think the gross margins will land within that and for that new range that we provided a idea and no increased range that we provided at AIG, but for <unk>.

Down from from levels that we saw here in FY 'twenty one.

Any color on sequential stuff and you typically provide some color on sequential and Portland Chen.

And any.

Color there.

And while they can.

Yes, I would say in general I don't think.

And FY 'twenty, one sequential historical trends sort of.

Irrelevant and I think that that could also be true here in FY 'twenty two I, just think were and still.

And unusual environment with many economies going through transitions as.

And hopefully they begin to reopen to sort of pre COVID-19 normalcy, but the timing of those changes is very hard to predict and so I think our seasonality.

Its probably harder to predict and FY 'twenty, two as well and certainly I still expect the holiday quarter and probably be the biggest.

But other than that it's going to be probably important for us just to remain.

<unk> fast flexible and nimble and just react to the market opportunities that we see.

Absolutely.

Right Okay.

Thank you Andrea.

Thanks Javier.

Michael Your line is now open and Michael.

Hi, guys. Thank you.

I have two questions actually along the same lines.

Visibility.

Can you just explain I mean between beginning of March when you gave your guidance for Q4 and the actual results and because it's a huge discrepancy.

For a nice one.

Obviously.

So the question is really.

And could you absolutely not foresee that or did you try to stay on the cautious side and.

And if I look at debt big discrepancy on <unk>.

Wondering how you can be so confident for FY 'twenty two.

With your guidance, if thats, the discrepancy and just one month.

And and the second question is also a long the shortage situation.

<unk> talked about the electronic components and semiconductor and my question is more on the plastic side.

And how do you make sure or do you see any shortages and plastics and how do you make sure debt that you have sufficient.

Availability there thank you.

I'll take a stab at both of those and then you can build it.

On the plastic side no. We don't have any at least not that I'm worried on shortages on plastics and right now, but I'd say the demand has been very strong and.

Every day is a new day when it comes to component suppliers and west year, So, but yes, I'd say so far were okay on the plastic side.

On the visibility so I think thats very fair criticism or constructive comment.

Well, how could we have been that far off it's a good question here. We're always we always try to make sure that what we tell you we can deliver we deliver and.

And.

This year was just stronger and stronger and we also had a chance to fill a backlog of orders, especially and video collaboration that we just we really couldnt completely for C getting too and we're able to do it but as you. As you noted we were really strong across the board and.

And I think I think we are.

And our.

Business is so strong and our market shares continue to gain and we never completely assume that we're going to gain market share. So we probably did a little better from a market standpoint that we expected and.

And of course, we also have a chance to refill channels, you want to add anything to revenue.

I think I still come back for the environment that we're and as is.

On.

Fast moving Brian and changes across countries and we have lots of customers and every every country. So.

And we're reacting with a very nimble supply chain and operations team.

To those changes, but I think we saw.

And also March was going to be a one of the tougher one.

The first months for really we're looking at a tougher year over year compare.

And we started to see pretty strong demand a year ago. So I think there was maybe a little bit of that thinking going into the outlook. We provided any idea as well as we werent really sure.

Yes.

And if there were some significance to that first month of the tougher year over year comparable and as Patrick said that demand and remains strong and supply also continued to improve as we went through them through the corner.

Great maybe just wondering.

One last question.

And you mentioned that you shipped around $20 million.

Units of webcams and toward a $500 million monitory installed base can you Anthony could you give us any feel about what the actual web cam installed basis, if you have any numbers.

And I'm just from that.

And I don't think I know, we don't have available right now, but I don't I'm not sure. We do have good numbers on that what I would say is I think if you took a poll of people on this call and it would probably surprises for you have wolfcamp and true.

But yes, so it's a big opportunity and it lets just leave it at the other and I think we're going to go after it.

Okay, well thanks for that thank.

Thank you.

Thanks, Michael Yeah again your line is now open.

Yep. Thank you yeah hi.

And actually I have.

Two questions.

And looking.

Looking at your capital and location what drove the increase to let's say and to a b and so alignment.

Is there any cross read to be made on your M&A ambitions and then.

And if things continue to go very well.

What is the capacity you have in place and in terms of theoretical sales.

Number on a group level that you would be able to generate.

On the on the.

Capital allocation.

I wouldn't read that I wouldn't read that as any comment at all about our M&A interest or.

For those on capacity I mean, we're we opioid for giving up anything in terms of capacity to do M&A by announcing a larger buyback we have.

We obviously have a lot of cash and low cash generation capability going into the future and we're certainly no less ambitious on M&A. We're always looking at all sides of things and we will continue to do that.

And in terms of our theoretical capacity, yes, we do have theoretical capacity well above where we are today and most of our categories not all on them.

And.

And we try to keep ourselves net position.

On the pick up.

But Alex.

And something I have much to add to that and you saw and we did three small deals and the quarter, obviously they didn't cost us.

A significant amount, but pretty active and looking at opportunities and so really no change and capital allocation priorities of our processes.

Okay.

Okay.

Alright. Thank you. Thank you <unk>.

Sorry.

Eric Your line is now open.

Eric Eric Hey, guys. Good morning. Thank you all for the time and congrats on the good quarter. Thank you.

I just wanted to touch on the sell in and sell through dynamics, there a little bit just to dig in and make sure I understand it correctly and that should obviously, we've seen that that gap wide and over the last three quarters and it seems predominantly focused in the Americas and EMEA. So is that widening because you've had an opportunity to fill the channel and.

You're at the point now where you feel like channel inventory levels are still healthy and then secondary to that.

And that then imply that if you are expecting it to be an on call. It flat year over year next year that sell through could potentially be 15% to 20% to have the impact from this year and normalize next year and on I have a solid.

Net you want to take that on our on that yes, I mean, I think you know.

We started the year.

Going back to Q4 last year inventory has got drawn down quite low and I would say we've been on a steady path to improve inventory levels, both within our distribution centers as well as out and the channel and that was pretty broad based to begin the year for the first couple of quarters, and then again slowly over the year. Some categories have gotten healthier I think this category.

And this quarter exiting this quarter, we really had gotten to a pretty healthy position now across the board and Theres still some places where we're a little bit tight but generally speaking I think we're now I think we feel good about about the level that we have and the coverage that we have.

In terms of looking into next year.

Again hard to predict we will do things strategically where it makes sense just given the dynamic supply environment, and we think we need to be more aggressive and securing components for availability, but I feel good right now about the state of the inventory.

Okay Super and then kind of a related question and your balance sheet inventory tripled year over year days inventory at 72 days I think is the highest and like two and half years what's.

And primarily driving that is it more finished goods versus raw materials are there any pre purchases to get ahead of component constraints just curious on your color there as well thanks.

On the days of inventory listen it on.

Our linearity of purchases and sort of backend weighted and you can see that our GPO also went up as well sort of offsetting that so our cash conversion cycle overall, which is why I usually start with 18 days, which was down I believe 26 days year over year.

And actually rather flat sequentially normally we see an increase on our cash conversion cycle Q3 to Q4, we didn't see that this quarter. So I think cash conversion was again strong I do think and the first half of next year in particular, we could see and probably we'll see and increasing and cash conversion cycle certainly against the very low levels that we were at and FY 'twenty, one we'll see that.

Cash conversion cycle increase and the first half.

Wood supply chain lead times, extending a bit.

And.

And again very comfortable of that balance sheet is very strong and I think it's something we'll put to work. So that we can enable the <unk>.

And the availability that our business needs to support growth and market opportunities and.

And to answer the question very specifically about what are we investing and it's both so we're investing and components and we're also investing and finished goods.

And.

Okay awesome.

And then maybe just one final one.

It's great to see meaningfully increase your buyback authorization and clearly bought back a lot of stock in the March quarter should we interpret these dynamics as as a sign that one you see value in your stock and buying it back today, and then to debt buybacks could potentially be more of a.

Use of cash and there's been over the last whatever 1234 years.

I'll jump in and then you can add first of all in terms of last part of your question I think.

It is this is a bigger number than we've had before on the other hand, we're we're a bigger company than we were before we have more cash than we've ever had so I think on the one and this is just the scale up on the other hand, we do on and be prepared.

Because we have doubled in value over two and a half years on what you can almost draw the line and it for the last nine years since last year, we doubled and value again and.

And we wouldn't be in a position, where we make sure that if we see it.

Good investment year, and we do we'll keep investing.

In terms of.

And of anything else for that night.

And I'm, not and Thats not going on I think on the buyback versus dividend I would just say debt the buyback number of $1 billion over three years.

And you probably have to take the dividend number and multiply it by three and add some growth to it or something just trying to get something that's apples to apples. So I think we're still very committed obviously for both forms of <unk>.

Returning cash to shareholders.

<unk>.

And our stock has doubled in price as Bracken just said so it has become more expensive for us buy back shares but at the same time, our cash generation has improved a lot as well and so I think those.

And those are some of the factors that go into that the higher authorization level, but.

But yeah as Bracken said, we believe we're long term investors and the company and we think that we have really good long term potential.

Awesome and those are all my questions. Thanks, and thanks, Greg Thank you.

Thanks, Eric and Dana Your line is now open and under.

Hey, guys. Thanks for taking the question and congrats on.

Solid results and good execution.

And I guess is equivalents for me Bracken and video collaboration can you just give us a little context around.

And what Youre seeing on the enterprise portion.

And how you're seeing how you're seeing the business certainly develop with that.

And as companies right now as they go.

Well I guess like what are you seeing with regards to sort of the day.

Enabling ribs and what's your expectation there for the next couple of quarters anecdotally.

Non res and just trying to get a sense of behavior early what they're up to and then I have a follow up.

No I think it's.

In terms of.

Intuitively you would say how can we all be sitting here doing this on video and then when we go back to the office of the same kind of setup, we had before where most people had a small fraction of your improved video and April so intuitively, that's what I what I believe.

Believed from the beginning of the pandemic and.

And I continue to believe and I would say, we're starting to see some of that.

And but it's too early to say it's about <unk>.

While it or something but I think that youre going to see strong growth and video enablement of roofs. It's just inevitable.

And anecdotally I see enough Sciences, that's true.

Okay great.

And and just going back to the remarks that you you guys, but the name about regaining some webcams sure edgy and thought gotten greater is compelling and availability has come back.

Can you guess, yes, and just sort of more fully illuminate from for me for us.

Why wouldn't <unk> compelling and available.

And as they come back for you guys and I would assume it comes back for other people and so why the year that why that Youre more debt you could take back share.

As opposed to the market.

We have.

And ill really put my neck out here and so we have better products.

So we have better price, we're known for having really strong products and people wanted logitech webcams, Here's a case, where people really look for the brand.

And they're really searching for our product and they couldn't find itself and bought somebody else.

Got it makes sense and Canadian include me in there, including in the category GAAP.

Okay.

<unk> devices from my mom and ended up buying two brands.

I never heard that before.

And again Im sorry, Im sorry to hear that we certainly have <unk> available at $99 piece right and she still trying to figure out what she's looking at.

Where it can help you on leases.

Give or give her my number all retail helper and <unk>.

She may take you up on that so be careful that you're off a bracket.

Thanks, Thank you.

Bracken Nate I think that concludes our call we have no more questions.

Well. Thank you all it's been fiscal year 'twenty, one was a tremendous year, but as I used to sit and my mom growing up.

Every day, you kind of have to draw on line behind your heels and everything behind you assist to learn from and the whole world. The whole exciting road ahead of US is right from net line forward and items Super and I know latest two we are super excited about the future. Thanks, a lot for being on for this ride. So far I think it's going to continue to be exciting and fun.

Thanks, everybody.