Q1 2022 Logitech International SA Earnings Call
Uh huh.
Okay.
Thank you everyone for joining the largest ex Q1 fiscal 'twenty 2 earnings call. During this call. We may make forward looking statements, including with respect of future operating results and business outlook under the Safe Harbor of the private Securities Litigation Reform Act of 1995.
We're making the 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 in our SEC filings, we undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results you will find the reconciliation between non-GAAP non-GAAP results and information.
Information about the use of non-GAAP measures in our press release and in our filings with the SEC, including on most annual recent annual report these materials as well as the prepared results and slides on a webcast of this call are all available at the investors relations page of our website. We encourage you to review these materials carefully and the unless noted otherwise comparisons between.
During periods of our year over year and in constant currency and net sales and sales of net sales. This call is being recorded and will be available for replay on our website and with that I will turn it over to bracket for first Bracken I will have to apologize that I did not get too wrath of the safe Harbor provision.
The provision the statement that I have promised you so I apologize on them hope to.
You still be able to do that 1 day.
Thank you Ben and thanks, everybody for joining us.
Moving on.
That's been the business before the.
The hope at the 1 day well do you would the rep. The safe Harbor for visits that I guarantee you. If you had people would of listened worked carefully with the safe Harbor rules sort of would be good.
From an FCC standpoint, so maybe on your next company..1 day, you will do that I will be listening for good.
Okay, well this is officially bids last sort of the pool.
All of it couldn't be more excited about is the role of CFO of which she is used for you to him in his new company is going to announce the suite. So we won't jump the gun, but bill.
I really want to thank you on behalf of all of <unk> all of these investors and analysts on the call today.
No you bet.
The tremendous value I've learned a lot from you and I'll keep watching it from afar jewelry for Ya.
Thank you bracken. Thanks, so much for you.
Nate and the team.
Absolutely well, thank you and thanks again.
Congratulations.
And now let's move on I spent last week in New York City today of in L. A and the.
In New York City, or just outside of the city.
I was walking my daughter down the aisle.
Her wedding and as proud father, and 1 of really of doors his daughter and all of both all 3 of my Kids and my do sort of law I can't tell you what are the amazing experiences.
For us it was it was really wonderful to enjoy the long awaited celebration of gathering with my friends and family and as I talk to people I know I know many of you havent experienced like like that feel more like pre pandemic life, while experiences like this may feel like the return of the old normal in many ways. Our work life has forever changed.
In many places around the world, we won't commute into an office every day 5 days of week.
We won't waste the 10 to 20 hours a week or 2.
10% to 20% of our non sleeping non working time to think about that we won't waste. The 10 to 20 hours a week, just getting to and from the place we work.
Dawn will be the.
For the last days of flying the Tokyo, Shanghai, or London or Paris.
For 1 or 2 hour meetings.
For the reason there'll be gone is it because of the dependent on.
It's because of that way of working was fading even before we really realized it.
The virus has been terrible.
And yet it's pull of which pulled in the future.
But otherwise it's taken us 20 years to get to or more.
Autopilot has been turned off and on.
Our employees customers and friends or looking for new and better way to return to work.
Every conversation I have and I'll bet you have 2 recently the seems to evolve to a high of discussion of hybrid in some way.
The new.
The normal will not be the same for every person.
In every part of the world or every company.
There are a variety of Ob as diverse as you could possibly imagine.
I'm sure of the to start a lot more people will simply work from home all the time what video of SAR now.
That was the practice previously.
The most coveted startups and for salespeople.
Even at Logitech of predominantly in the office culture part of the pandemic going on.
A lot more people working full time remotely.
This new approach to work also unlocks talent, we couldnt of access before the jobs that are far more Oreo.
Oriented to remote work than we realized.
They are in share and who doesn't go on midstream here. Good day runs marketing for our streamers and creators products out of the New York.
We just struggled to attract her for Pepsico, where she was in market for mountain Dew.
If you'd had the move to California for their family on the East Coast.
Amount of lost bits of Brown, who also because the legislation here.
Loss of VIX umbrella at some point ex sushi reports too.
It runs that group.
But he moved to Florida to pursue of Sun's passion for Waterskiing.
Secretly is on too.
Meredith Rojas, who works for for Aaron's, So we're covering the whole.
We're reporting structure here.
<unk> Influencer and celebrity partnerships for our streamers of creators team and she's surely would not have joined us if you'd had the move from L. A which is the epicenter of the world, but she's worked at for the last decade the other.
The same of world in shore remote work is growing within the logitech.
But for most people.
And like for me on this call working from home 2 to 3 days of week will become the new normal.
Those people will need spaces and equipment to work in both places.
For some of that will be a fully replicated workspace in each spot for.
For others, it will be a place to plug of their laptop into of monitor.
In both cases, they'll need a mouse or keyboard and the other peripherals. So you can look directly at the screen seatback comfortably Nokia the terrible video angle.
The healthy ergonomically.
Most of us for what duplicate some of our tools in both places would work and at home.
And larger companies.
Standardize on good equipment. So the conference call of employee productivity are optimized.
Natasha of the Guy who some of you know runs of our strategy team and she is eager to get back into the office of few days of week.
She has sort of an important and high profile job for us as well as 2 of Adorable kids, who want her all the time.
She likes the idea of working sometimes on the office both for meetings and also just the quietly focus.
Our net our general counsel, who has no doubt listening right now lives of Commutable distance, but like Natasha of its not easy its none of the easy daily commute like Natasha bits of I've got the those Sam's daughter, a little better thanks to all of our video.
Calls.
I gave you of specific things because I want to note. The people have the real people the real lives with passions that arent fully served by a world where you burned up 20% of your time commuting.
He is the often do want and need some time in the office with the.
Our co workers, who were also their friends.
But despite that there'll be some in most companies had parts of the world who returned to work full time to an office a lot like we did before the.
Their jobs, whereas this can't be avoided.
Places, where commutes or almost effortless and organization.
<unk> just aren't ready to make the shift.
There are places where homes just don't work as well we're living space are too small to work comfortably.
But even their work lives will never be the same the.
The rise of the video meetings means they will feel awkward in the office on audio only calls.
The often discover customers.
The business partners, who don't want to come to meetings.
The request video meetings.
Video will simply overwhelm the old audio calls, including in the office 1 on 1.
Everyone will need a good web cam there too.
But that new hybrid world is not.
Or is.
Is it a wide range of stage of style.
Some places of reopening quickly, while others are back and more protected levels, including Los Angeles, where I happen to beat a day.
It's gone back to masks.
The countries in EMEA.
Darts and stops and reversals and while much of Asia Pacific has been <unk>.
Much better some parts like Taiwan, and Australia have moved back into the defensive mode or even of the most severe lockdown since the pandemic started.
In a word it's choppy.
It's choppy around the world.
It will stay highly I think of it for some time.
For the pandemic has been a huge change about the culture.
Interest in.
The technological trends underlying the change.
Started well before the pandemic as you know.
On 1 of our clear strengths in the past 9 years has been our ability to select trends to follow and quickly address those trends.
This approach has worked.
After selecting the right categories develop.
Of the products, we've become the market leaders and well over half of our categories today.
We werent, even present or barely present in over half of those categories of decade ago.
And we have not let up looking for new categories.
Well, we continue to innovate on the business as we've entered the Cros all the categories you know.
We also continue to quietly work on new categories, all the time.
Not all of our new category of efforts turn into something.
We've shelved many products before you saw the we've redistributed teams across the company from 1 once the team to another.
And we have large categories you saw the we subsequently shut down.
Logitech is dynamic.
We continue to test and learn our way into new things that's been a hallmark of key to our growth of 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 the category.
Interest growth potential.
Customers are digesting the need for more video more webcams and more standardization of equipment at home Workspaces.
This is early days for the standardization, but it's happening the.
Copper true video growth is also still early days.
Many of your gaming would slow down.
Traumatic weight 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.
<unk> already among our biggest of the company that's a shift.
We're just getting our innovation and marketing interest you find here and I'm Super excited about the future of gaming.
Our CMP business, which is mostly mice and keyboards had of 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 can see it.
Our lifestyle products for fun and in line with cultural trends.
Ergonomic.
On for Bucks are needed.
But still have low awareness.
The crazy could experience provide where many of our best products is still unknown to most of the we'd love it.
We're just firing on all cylinders and if so much upside in CMP for our awareness of new products. Our pipeline is also really exciting.
Our.
On the categories grew double digits. This quarter, that's despite chip shortages and an incredible workload stress created by Covid on our people.
Like most companies our employees have been challenged during COVID-19 for the stress of uncertainty from fear for the.
The long hours and.
The difficulty of attaching for the work day, it's just never seems to stop.
The <unk> as their home of it became their offices.
I think everyone needs to break and this summer we are encouraging everyone to take 1.
Now, let me turn the call over to Nate to go deeper into the quarter.
Thanks, Bracken and thank you Ben for your outstanding work, we're Gonna Michigan.
As Bracken said, we delivered an excellent Q.
With strong revenue growth margin expansion.
Strategic investments to improve our business and share gains net.
Net sales grew 58% in constant currency profit doubled versus last year, and we remain on track to deliver to the increased full year outlook. We gave in April.
Similar to last year, our operations and sales.
Teams continued to execute well on the results were strong across our categories and regions.
Our PC peripherals categories continued their strong momentum in the quarter with 49% growth in Q1, driven by better availability and a broad portfolio of differentiated products like Bracken mentioned.
Several of our flagship offerings like the Amex Masters.
Astor, 3 mouse and M. Ex keys keyboards continued to set new sales records, even after being in the market for 2 years and sales of our ergonomic split keyboards, the K, a 60, which retails for $129 more than doubled in the quarter.
But that impressive performance was not just in the high end.
In fact, each of our top 10 mice and keyboards products with prices that range from $12.99 to over $100 delivered strong double digit growth and in some areas of triple triple digit growth.
While webcam growth has started to moderate after more than tripling last year of sales still grew 73% in the quarter and we have regained.
Again, 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 attach rates for the large and growing the installed base of monitors and PC.
Q1 video collaboration sales increased 72.
Similar to the 81% growth rate in the prior year.
Sell through on 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.
2% of demand as businesses evaluated reopening time lines.
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 of our gaming categories across gaming mice keyboards, headsets console and stimulation.
Gaming continues to become an integral part of many people's lives whether for entertainment socializing, the friends or to showcase their skills on platforms like Twitch.
Tablet sales increased 66% with strong growth in both our retail and education categories.
As we noted on past, earning 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 on Wearables sales rose, 57% in Q1 with double digit growth in all products.
While mobile speakers fell 5% in Q1 in line with our expectation.
Spectation as we reallocated resources and prioritize our investments to faster growing categories.
Our Q1 non-GAAP gross margin was 43, 8% of 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 for the rest of the fiscal year, we continue to expect gross margins to be within our range, but lower than current levels for 3 primary reasons for.
First we expect our promotional spending will continue the 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 lastly industry wide component cost 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.
Store claim 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% of 310 basis points versus the prior year period.
Now, let me talk briefly about our cash flow cash.
Cash flow from operations was negative $115 million from Q1, historically, our Q1 cash flow is tend to be around breakeven while this quarter.
<unk> below this level as we made 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 and FY 'twenty 2.
Excluding this 1 time change the payment timing of our Q on cash flow I would've 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 of couple of years ago.
DSO improved by 20 days versus last year driven by.
A greater percentage of our sales occurring in months, 1 and 2 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.
And strategically invested in supplier to ensure availability and.
And favorable costs amidst of tightened global supply chain outlook.
Wrapping up the 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 'twenty, 2 outlook of flat sales growth in constant currency, plus or -5% and maintaining our fiscal year 'twenty 2 non-GAAP operating income outlook of $800.859.
This outlook reflects continued investments in the business and is consistent with our focus on driving long term growth.
With that on a hand things back to the Bracken.
Thanks, Pat Thanks, David sorry.
The I already Miss you, but we had a very good start to our fiscal year. Our performance. This quarter demonstrates the strength of our capabilities are excellent operational execution and our ability to capitalize on long term trends like.
Okay distributing of creating hybrid work.
On the video everywhere.
The same underlying trends the drove our business pre COVID-19 significantly accelerated during COVID-19.
For the much more pervasive and sustainable as we look the life. After the shelter at home period of Covid is all over the world.
We have an exciting long term.
Term growth potential ahead for <unk>.
This bigger base.
They are ready for your questions.
The income to Cuba for the last time for you.
Alright, Thank you Bracken.
As a reminder, you can chat me if you once you ask the question.
The first question is SA merchant your line is now open.
Gaming all of Us here 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.
You know people are evaluating some of that but as you look.
Forward you know some of the guidance that you provided at your analyst day for different segment, specifically as it relates to video collaboration of growth being double digits.
The 10 to 25 per cent if I'm not in the 25 to 30 per cent how should we kind of think about that video collaboration segment.
No I think the here given EMEA softness and do you expect that to Reaccelerate.
Given some of the channel whole draw down this quarter.
I'll jump in a day.
I can see all of it yes, just Justin.
Clarify on the on the outlook, we gave at the analyst day, It was 10% to 25% growth.
And then for Krishna I still think that's the right way to think about it.
On the double double digit grower and listen I mean again, the the sell through nearly doubled this quarter. So I think we've seen in the past sometimes of the.
On the selling of timing can be a little different from 1 quarter to another especially when you're talking about on enterprise business for you have on large deals that fall on 1.
Or in other of the fiscal year and.
We still feel great of course about the video collaboration business of.
This year and over the long term.
I mean, we're just super optimistic about the business, it's a great business for US we have great products out there and we have a group of approach covenants.
And then because of the inventory that you guys have built.
Kind of a buffer as well the supply demand balance that you mentioned, you know where do you like broadly share gainer of used across many of the categories for the dollar price from some of your peers.
Continued supply chain bottlenecks.
The state's nightmares component exchange and different Ice's et cetera. So is it fair interest.
To the assumed that you guys gained share of costs can fill up here you know the categories that you have pretty decent competition. Yeah. It is I mean, we gained share in most categories, but the vast majority of our categories and I do think part of it was just how the supply availability, but we also we've got a great product lineup right now.
Cost of of gaining share, but we're gaining share of prepaid debit for gain share during the pandemic and we are gaining share as we sort of see the light at the end of the total so yeah, we did the.
Okay, Alright, Thank you and then comment on the.
The inventory just because you brought it up I think it's an important point because I think it just highlights again you know the way, we think about our business strategically and.
Recently on operationally and keeping those things aligned and the strong balance sheet. We think this is the right time and its good opportunity for us to use that.
To secure components, where we can in a tough environment for secure components, where we can build up of those buffer stocks on as Bracken said be ready for it to deliver on opportunities globally. So we've got we've got.
And from an ability now and.
I think that will be of competitive advantage for us, we'll see how it plays out.
Most of the inventory in the warehouse and finished product or is that most of the Ics and components that you've kind of put together, it's really on mix, but I think of lot of its in the distribution centers.
Regionally ready to be shipped.
Good of a lot out on the channel right. It's in our distribution centers. Some of it is in components as well.
Alright. Thank you thank.
Thank you Roger.
Our next question is from Paul Chung from Jpmorgan. Your line is now open.
For example, Hey, Paul.
Nice to see you guys. So first.
The non gaming you know very nice momentum there can you kind of expand on the product mix.
<unk> reached on a relative strength in the portfolio and as we start to lap the tough comps, where do you see kind of momentum extending in and given the strong start to the year do you think you know the.
Flattish outlook.
First of all of you mean is on the conservative side I would follow up.
Well I'm really excited.
We see strength within the gaming business for.
By segments, you can really flow through and really all of them.
I can okay. The.
I can also sort of excited about our gaming business because we just had growth of every.
Looking at the segment, we're growing market share across the 2.
Have a fantastic portfolio of 1 of the things I said it or in the.
With the opening was that the.
The nature of the innovation, we've been doing of gaming has also been changing of.
It's shifted from a lot of small products to fewer bigger ones.
We signaled the test of a 13 and then the other thing that's half of those are our marketing engine of gaming is probably the best we've had.
With the really created Logitech G over the over the last 5 to 7 years of Theyre, just getting stronger and stronger. So yes, I would say the overall I just feel very very good about Gabe we're not.
The reopening of the discussion around each.
The category right now.
For the outlook, we confirm the outlook for the year.
Of that we just.
Raised back 2 months ago, but but I'm super excited about gaming Paul.
Yeah, I think Paul on the outlook just 1 thing to keep in mind of gaming does have a big holiday period, and that's still ahead of us. So I think it's kind of a good start.
Dual care of good strong first quarter, but typically we do almost 80% of our revenue over the next 3 quarters on a lot of that comes on the holiday. So I think with gaming will need to see how that plays out.
As Bracken said, we go into that period.
With a great lineup and you know of headsets. We caught me mentioned last quarter I think it continues to perform well of some really.
For the year products.
Okay, Great and then just on the ramp and Reinvestments in the business.
Sounds like 70% this quarter year on year the percentage of sales is pretty much in line with previous years. This is kind.
The right way to think about it longer term and as we think about that spend.
Colin how 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 for thank you all of.
The answer a couple of parts of that of course NOLA.
Thanks for the 1 on the basically the business flow of question what percentage of benefit of a true filling.
But I think in terms of the cadence of.
Of new protocols the.
I wouldn't necessarily related to increase the best with 2 more new products launched I would say.
The increase of investment will enable us to do better bigger.
Any of the places that really better.
We see lots of opportunities for innovation, where the.
On the back of making sure we're investing there.
You want to talk about the business ball question, a little bit share and just to confirm it and kind of looking at the numbers of semi I am Paul you know, our our opex as a percentage of sales this quarter was actually lower than where it was Q1 and FY 'twenty and it was basically at the same level of what it was for the full year in FY 'twenty. So.
I think some people look at the growth rate of Opex, and maybe I have questions about it but you know again the business model or the structure of our P&L actually looks very consistent historically now of our strategy. As you know is to move to a more marketing led rather.
Rather than promotion led company and so that's exactly what you see us executing this quarter and Youll.
You'll see it in future quarters is taking some of the incremental profit for generating the gross profit for generating and reinvesting that into marketing to build the brand to build awareness.
And to drive that.
On the product excuse me the the brand preference over the long term, which creates the virtuous cycle of of the higher margin products.
So you've seen us execute well we've been talking about for some time in the.
That's what you should expect to see in the future in terms of the percentage of sales you know I think something around like what you saw this quarter is probably the right way to think about it but it's it's not something I would put too fine a point on the might be a little higher than this in some quarters might be a little bit lower.
Okay.
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 yarn from UBS. Your line is now open.
Hi, <unk>, Hi banner than all of the best for you.
And yeah.
We will Miss you and thank you maybe of stopping this to the 3 questions. If I may the first 1 is on your implied outlook for the next 9 months and the midpoint implies sales maybe down 12, 13, 14%, but your non-GAAP EBIT down around 40% to 50%.
Are you cross profit my sense of Amazon's S need state of this maybe in the around 40% if I understood. This correctly for the current year, but if I can sit on the excess profit Matson left standing already in fiscal year 'twenty and now you have that of ethics benefit that's holding back for the same level like fiscal year 'twenty. Despite you having the pricing.
<unk> power to offset drive the component cost. Despite you have invested in your premium on station strategy. The why are you expecting sort of cautious on the cross profit of if I may ask this would be the first question.
Most of it will take the boiler trucks with just a load of luck sure. Thank you for your you sound like My Board or me talk on the royalty.
All of the late I'll, let you day.
Bill.
Okay. Yeah, I mean, that's in the arm of gave a range of 39% to 44% of I think we'll be in that range. This year.
Yes.
There are several factors on on why the gross margins and I mentioned in my in my opening remarks, but I think they're going to come down from current levels are going to remain.
And the range, whether they're at $39.40, 41.42 43.
We'll have to see as it depends on a lot of things like mix and so forth, but certainly we have some the headwinds.
As we talked about sequentially here with just we're going to have the increased promotion of the market as the market stabilizes normalizes back towards more historic levels.
Yeah.
I think mix is always going be 1 of the thing that changes from quarter to quarter I think over the long term our mixed trends are favorable with the growth in some higher margin categories.
You also have to see how logistics plays out you know certainly we spent a lot on airfreight last year I think we'll spend less on airfreight 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 the oceans still of lot more attractive than are those.
Of those rates have gone up from their historic levels. So theres. Some near term things here, we will have to fight through I think over the long term.
We've given a range that's got some room for margin expansion.
And off of those FY 'twenty levels, you mentioned and.
That's our focus is adding new categories that have that more attractive margin profile, maybe some more software in 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 you're right I agree with you on the pricing power, we haven't raised the need for US. We don't have immediate plans to we're going to keep it out of the market we feel like.
If some of these some of the shortages of some of its cost of and shortages of really temporary so we'll see.
Yeah. Thank you and I got the message and the second question is please on per acquisition.
Positioning of for video conferencing, and Webcams I mean, we.
Like do you expect that all of the notebook and <unk>.
Provide us a significantly upgrading of the camera systems over the next 2 to 3 years I mean, <unk> starting with the iPad Pro for example, much of improving camera system to what extent on this affect your view of confronting on web.
Cash 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 of just 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 in.
September for what they do there are advantages to a remote webcam the you're really there really.
The exciting and so we're going to we're excited about the wound care business stuff that gets the.
We've been in the business a long time, you know and we will keep innovating in it to make sure that we've got the products that are compelling, but we're also we're 35 different categories now so.
Even though we don't live or die on any 1 category.
On 1 thing to that 1 you are on the kind of the bullish side of the Opex.
That opportunity is anything that drives increased awareness for web cam.
Increased awareness for video, calling so if someone's going to communicate the quality of their web cameras at the importance of having a web.
So I think we'll see some benefit from the interest in the overall market opportunity.
We're gonna have to compete for it right, we're going to have to come out and innovate with with great features of products in the compelling value proposition for line of external web cameras, the better experience and I think.
I think the opportunity on on notebooks on laptops is huge.
But I don't think we've really communicated frankly, a lot of what the benefits are and you know I think as people move towards day I've got 2 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 of monitor of set up maybe they've got peripherals. My PC remains docks next to me.
The whole time I never interact.
The camera on the only interacting with micro referrals and so I think depending on someone's setup I think there's clear advantages for external west Cameron I think that's the big opportunity for us to communicate.
Thanks. So this on the last question and just the superfast so on seasonality I mean respect the school now all of the summer can be I expect that Q2.
Who is on higher revenues versus Q1.
It's a good question I mean, typically we would see higher revenues in Q2, the versus Q1, but as I said before I think the typical seasonality is kind of out the window right now yarn for so many other factors that they're sort of atypical back to school was very strong last year.
And.
As you see on the inventory we are 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 pick up for the holiday period because of its expect to be stronger.
But.
Yeah, we'll have to wait and see.
Thanks, a lot.
The orange.
Thank you Darren.
Ananda Baruah from loop capital. Your line is now open.
Hey, guys good morning.
You guys, taking the question and Dan Congrats you'll do awesome and it's been a day.
The great working with you.
Both of the Lucky, but you know for years and years before that as well so I look.
Look forward the absolutely staying in touch.
And so I guess of couple of questions the seasonality I'd like to just touch on as well that was well. It went from 1 of my kind of on probably wise. So.
Eat seasonality.
For the early notwithstanding it does seem like there could be some conservatism I guess I just wanted to get your thoughts on the and in the revenue because I'm sort of playing around in the Baidu just flat revenue for September.
And that and soft side of the seasonality you know.
For for December and March I get double digit.
The growth for the year, so any context you could provide.
On sort of I guess sort of connecting.
All of those kinds of that with with the with the flattish forecast like what are the puts and takes there and then I have a quick follow up.
I'll start with you can drill.
Okay.
We guided at the beginning of year.
The flattish revenue for the full year of a buffer of bell.
And then we raise the number because we sort of still strong in Q4, even after our.
Our analyst day, which was the early March.
We've raised the raise the equivalent of 7 points 6 or 7 points relative.
So we've done 1 raised already.
Any of those go into the back half of the year, obviously, the compares get stronger so the seasonality.
They said all of it.
The repeat yourself again on the sort of it's really hard to call seasonality of this year.
Look I mean, just to put a little finer point on those compares the second half of the year last year, we basically grew a 100.
Revenues.
That's true.
I'm not wanted to use the 6 years I would say and I, certainly wouldn't say pretty much entirely but that's the tough compare.
So.
Our visibility of non as you know is not 9 to 12 months out I mean, we have pretty good visibility in the short term and some businesses like video collaboration we built.
We see things further on.
We're staying with the same strategy, we're going to remain nimble. We're gonna have you now on <unk>.
Inventory available to grow faster if the opportunities there and we're going to pull back hard of things slow down and I think as Bracken mentioned in his prepared remarks.
It's a little choppy right Europe looked like it was on path to a true reopened strongly.
<unk> and unfortunately, you have 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 6 months predictions lumpier from wise I think we make it very comfortable the predictions about what the long term trends are in these businesses.
Pipeline, we invest for those but.
Frankly, some of the some of the shorter periods within this fiscal year, we're just going to have to remain nimble unprepared and that's what we're doing.
Very well some of that that's really useful contacts.
And I guess just.
The COVID-19 follow up.
The bracken.
To get your thoughts with regards to the enemy.
Net.
You guys all of these.
You kind of break it up Ananda, but I think you were asking for what Bracken served with the wording. So bracken you want on.
I think as total revenue.
If I put all of them.
The other parts of the Gara.
So we're just moving.
I'm subsides.
I think I got the out of there that you might have the jumbo video too just.
Keep your audio.
If I understood you correctly, though can you talk a little kind of total of related.
So yeah.
Yes, so so the answer is yes.
We don't usually go into too much detail of what we're looking out but we are always looking at things and the.
The vast majority of things we've done over the small.
So it will probably stay that way, but we're always looking at medium size, even larger things so.
M&A has been a surprisingly and I say surprising because most companies don't do it very well surprising strength for us.
We've been we've really delivered strongly when we've done every day I mean, I think we've done I don't know how many acquisitions now since I've been here.
Almost all of them are met or beat there.
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 for all the time.
Great. Thank you thank.
Thank you.
Thank you Amanda Microfossil from Vontobel. Your line is now open hi.
Michael.
Hi, Brian Hi, Matt and thanks, a lot of and good luck.
For you.
Couple of from my side maybe.
Maybe just starting.
With.
The streaming business can you maybe comment on the harder it is.
Developing how much.
Of the growth that you are seeing in gaming is coming from that.
How you can leverage that business too maybe to other categories or applications. If there was.
Anything you can share with us some of that from <unk>.
On the second 1 is sort of a curiosity do you have any statistics or insights.
On the age distribution of people buying your creativity of productivity.
Products and does it correlate in any way with your defile.
The logic kind of pains anything you can you can share with us thanks, Okay what.
What are the answers the first purely the answer as we skew a little older all of our creativity of productivity business, but we see a lot of opportunity younger too relative skew more male skewed. The we think theres the opportunity of female so you'll see a lot of the things we're doing.
With those 2 thoughts in mind and with the biologic campaign does appeal more strongly.
It's very strong appeal, an appeal generally, but it's even stronger against the younger target audience of.
So yeah, we think there's an opportunity there and we're excited about it.
What was the first.
Or was the right very good.
Regarding the streaming business and how it tablet.
Contributes to growth yeah in the Australia business has just been a really strong grower underneath these numbers yet it's really kind of.
Lives in different places in the in there of different categories, but generally speaking if you look at blue microphones over the past year, it's really just.
First question on tremendously and we think the long term there is very very strong and in the stream labs is also super exciting for me. It's it's beaten all of the expectations, we had for it in terms of growth.
And we're very optimistic ahead of we're learning so much from the about service business. It's you know it's a pure.
Per service play so you know.
And then.
We're also slowly and quietly entering new categories.
This is starting to get out and we're excited about the potential to really be of real player of this and the enabling people to stream and create relative for for everybody else.
Theres a lot of room to grow there. So the growth of visits so for US was very good and I think the long.
Long term is much much more exciting.
And can we expect more subscription like.
Offerings from Logitech going forward.
We already have that obviously in a couple of places because of very small starting business in services on live video collaboration piece of it of course Xtreme labs of the street loves of a couple of things because of it. So yes, I think you can expect.
But the more I don't know whether you could expect to see it be significant next year or so, but we're certainly going to keep at it.
And my credit and maybe the last 1 Oh, sorry of my career.
Sorry on Jeopardy coupon I think you were asking the Xtreme labs sort of impact on game and it's really not material I mean, the growth you see is really driven by the hardware as Bracken said stream lots of its done very well.
At the very.
Innovative organization I would day, that's doing a lot of testing and so forth.
It's not driving the the gaming results. So that's still driven by the hardware business.
Okay and the Great result.
As for crossover segment.
Yeah.
Okay. Thanks, and then maybe just the last 1 on.
On component shortages.
I mean for.
For the night, maybe with the inventory level of stuff you have now.
Do you think you're covered for for the demand, but you will see in the in the next quarter.
Or are there any areas, whereas 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.
We'll see.
I don't think this is the 1 quarter challenge for US I think our teams have been working on for a while and will continue on.
Some day as we bought days of.
Components are a weeks of finished goods or maybe a month of finished goods here or there, but I think.
Broadly I believe we feel good about the coverage here for the next corner, but there'll be things that pop up for sure I mean, it's the daily challenge, if you're in operations and supply chain.
Great. Thanks, a lot of thank you Buck.
Great. Thank you Michael.
Erik Woodring from Morgan Stanley. Your line is now open hi.
Breyer.
Hey, good morning, guys. Thank you. Thank you for taking the call Ben just want to reiterate what everyone's saying been of pleasure to work with you best of luck in the future look forward to look forward to following your success.
You know I kind of want to start on pointing devices keyboards, and combos for obviously very strong I'd say almost particularly.
Our strong and there's this fear in the market.
There is a slowdown in the PC market broadly speaking from consumers and call. It the education sector. So.
The question is 1 was there anything 1 time in nature of this quarter like Prime day, or the 618 festival of that outwardly contribute.
<unk> the growth in these segments and then the second part is what are you seeing from enterprises in the segments. As people are now returning to the office are they coming into the you know are they coming into the market more so than they particular, where in the past and then I have a follow up.
Yes, I would say yes.
There is we did have prime day this quarter.
This last quarter of it so it's certainly on the numbers, but it still would have been an extremely strong growth quarter in.
In terms of.
So really what do we see the head from enterprise et cetera.
The overall view of the category I think the coolest thing about this business is it's our oldest business.
And it has probably are.
It's got an incredibly strong innovation engine that we've done a nice job of segmenting. Our team has done a nice show segment of the market into the different places other than really delivering big time against the.
And still the awareness is relatively low for the products that we have so I feel like we really control of our own destiny to a large extent here not completely obviously the anything could happen.
But in terms of.
We've got a grateful grateful for the products coming in 1 of its already out there in terms of 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 of <unk> business, and we certainly are moving from resources there to make sure that.
It happens.
This quarter's growth against the if it was stronger in the <unk> segment, but it was elsewhere thats excited its small, but its but its growing as fast or we can't give you big opportunities or anything of that.
Well I mean of course, I'm always going to.
The a little bit cautious about I mean, I think all of the things are very true and I think it for the line.
The strongest it's ever been but you know you've got the data.
Well this was our easiest compare for pointing devices the only group.
The 1% last year and this quarter, because we did have some supply challenges.
With the factories being shut down due to COVID-19 and so forth factories being shut down.
I, certainly think the growth rate will moderate.
Lineup is aware of and has been here, but.
All of the positive factors Bracken mentioned definitely I agree with and I think the key here is the <unk>.
This group.
In particular, although I think it's true elsewhere, but the strip in particular on it doesn't really excellent job with the market segmentation and customer segmentation and understanding.
The customer needs and you see that in.
In the product development, you see that in the execution and I think thats the path for long term success and so we'll execute that.
Awesome. Thank you and then just just on the video collaboration.
Would love to get your take on what Youre seeing from enterprises again as people go back to the office.
And what I mean by that is do you find that businesses are on.
Just pulling forward demand as I say, we've created our return to work strategy and now we can make these infrastructure investments or are there, saying, we've created our plan, but we're still kind of going to spread out our purchases over multiple.
For whatever it may be quarters or years, as we somewhat reevaluate those plans within the next 3 to 6 to 9 months again, you mentioned the choppy environment, just 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 to really go on all of them now and getting ready.
I'd say most are saying hey, we have a game plan, let's start to enable it but theyre not moving as fast as.
Basically snap their fingers and have everything ready to go right away, which I think is kind of expected.
We sort of expect of that so I think it's going to unfold I think the growth is going to really unfold over the next year of 2 and 3.
And I think that probably plays right into our strength, which is we've got a great portfolio out there great were coming in.
I think we've really got a sales force now that can handle it you don't have anything of that nature.
Yeah, I do think it's a mixed bag and you know you got a factor on deployment time on some of these things as well.
The decision may be made because of the climate.
Ready may takes months and quarters, depending on what type of solution you're talking about.
So I think thats the factor to Eric and.
And I think the long term strategy is to innovate and.
And the Bill Greene.
The great sales of Great sales organization, and we're doing those things.
Increase of our marketing to increase our awareness and brand preference.
Climate.
It's an attractive market 1 that is competitive and we're looking forward to.
I think many years of success the video collaboration Super. Thank you guys very much. Thank you Sir.
Okay. Thank you.
Moving on Wagner from Stifel. Your line is now open.
Yeah, Hi, Thank you for letting me on the yoga.
Alright.
Hi.
I'm actually a follow up to the previous question regarding enterprises.
But in percentage of revenue, but what was it last quarter and what do you think a realistic number would be going forward.
The question.
Bracken you said the pipeline is exciting so what is it that makes you sort of exciting.
And last question on visibility you mentioned on near term lack of visibility but.
The longer term.
Midterm.
Do you think the next fiscal year would then be.
And of the growth yet thank you.
With the little too early for US the guide for next year, but I sure hope so ex look to give you another great. Okay.
In terms of what makes me excited about the innovation engine.
We just get stronger and stronger I would say, we've we've all suffered from having the spend a lot more time on supply challenges that we would've liked until.
That's probably delayed a few of the things that we would of the load come out sooner, but it just means that we've got a good pipeline ahead of us I mean, what you see today is that we will have 2 years from now on a year from now 3 years from now.
In any of our businesses. So I'm excited about what's what's the.
On the Horizon, we don't talk specific products until we get to the large period of.
And that you want to add anything, particularly on the on the enterprise revenue mixture of Unfortunately, that's really not a finger on game.
The only talk about here I mean, we don't have that type of visibility for our end customers. Unfortunately, you know we sell through channel and some of those are more business oriented than non consumer oriented. So we have ways of thinking about it internally but.
Just not really a great external figure, but you can see with the growth in video collaboration which clearly is a big.
Business type of.
The products that.
Of that mix is improving due to the.
So from that category and then I agree with Bracken on next fiscal year of you know I think 1 thing I always say is that sometimes the market trends on.
On the line perfectly with our changes in fiscal quarters in years. So it's about building capabilities for the long term. The company. We are today of the company, we are tomorrow and that happens across cross across the fiscal period March 31st sample first so be it but we just kind of continue to build capabilities for the long term.
Okay.
Thank you.
Thank you.
Great. Thank you Serge Rosner from credit Suisse. Your line is now open.
Hi, Sarah.
Yes, hi, everybody and the boy you honestly I've been the [laughter].
On your lifestyle.
But coming back to video collaboration with touch it several times.
I have difficulties to understand why sequentially the sales of stone the hundred and 50 million. This is the big number because they do not have expected that these could be seasonally in the it is not so please can you explain me again there are $250 million are going on 1 is of the questions of the sales makes up the breo camps, you sold in the past quite of the private.
The people and what makes the positive because you'll have to see some preorders when enterprises will by no or invest into DS, which of coloration. So you should have a much better visibility.
Probably could share of refunds of stupid the first question.
Yeah, Let me, let me jump it all started in the U.
You can finish.
Private I think in terms of why the big sequential difference you know and I think really we had of if you look at our Q3 Q4 of them at a super strong, especially in EMEA, where I think.
There were just law of lot of momentum, but I think we mentioned last quarter that we had a big backlog that we really clear to me if we were sitting on very large.
The initial log of Q4 that we were able to clear almost all of it I think.
So that made this that made the sequential story of choppy, but it doesn't change the momentum of underneath that the delivery mobile computer.
Super strong in the.
In terms of the Americas AP I think they look very similar to what you would expect in terms of quarter over quarter, you want to add anything.
But yeah, I mean, just thinking of a finer point on the data we grew about 350%.
N D C 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 docs in the healthy level and.
And I think early on the call we talked about what sort of maintain our outlook I think our expectation that this can be of growth category. This year on them.
Okay Fair enough do you see any change of spending in the gross profit margins instead of a sales mix within video collaboration and what's about the behavior of your peers like Chopra came on beef.
M M.
You'll see more cans coming up with the market do you expect gross profit margin declining and how was it now in the current quarter in the last quarter.
The gross gross margins are super strong in that business, we love that business.
Yeah, there is certainly going to get more and more competitive great markets are always competitive.
But we.
We love our competitive position.
And do we think that we're gonna of gross margin compression within the video collaboration business could be I don't know if we certainly of room. It's a great mix is the mix driver for us for gross margin stay in place of more growth of better even at a lower gross margin but.
So we will see you want add anything of that day.
Maybe just you know.
No.
Our investment in R&D is as you know a lot of that has gone in the video collaboration category.
<unk>.
The innovation that you see there.
The new products actually that just came out from earlier this year.
Uh huh.
And that really highlight.
I think the whiteboard camera I've got here with me.
Really cool product.
You know what I said, I think theres going to be opportunities for us as we build up that installed base as 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 will need to see expand out into the future.
Hum.
With the growth on the installed base on it that's an important margin driver for the long term, but certainly it's on it's an attractive market and there's a lot of competition and I think it's reflected in our outlook I think our expectations around pricing not only from VC, but for the market overall.
Yeah.
So I understood that the momentum will increase.
Again, the vehicle ration and if I didn't catch over on the night before you mentioned that in mice and keyboards. The absolute level can be kind of remains stable. So this should all have the positive impact from the gross profit of marching isn't it from the sales mix going into the next quarter. So.
We see some of it was the comment about the remaining stable.
On.
Yeah, you mentioned the 1 of my colleague that the year over year, you see declining numbers, but do you see that the Q1, the absolute level of size.
There's quite a firmer solely the number the chief holds for the next quarters do they cut the wrong.
Yeah, No I think you're talking about gross margin range no I'm I'm.
Sorry on the on the absolute level of pointing in the minds of some keyboard and combos you know.
Because you said that last year Q1 was weak there for you have seen the high growth, but do you see that this level of can be sustainable in mice and keyboards. The level of revenues you mean, yes got it.
On.
No on that.
I think we should probably be careful about talking too much about detailed forecast quarter on the order for the different businesses in a day.
If that category of them I think keyboards grew faster than the overall company. It wouldnt have some favorable mix impact.
But.
I think there's just there's lots of products within that category of at least a search so kind of the question I have to think about a little bit, but again I'm just thinking about the high level, what I would expect that the gross margins are still going to come down a bit off of the the levels. We had here in Q1 due to the larger factors I talked about earlier.
Earlier on the call.
And.
And I think over the long term again, 1 of my focus is as we talk about.
M&A are we talking about new product introduction is the continued to try to build a portfolio of categories.
Give us some 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 media, it's gonna be accounted.
The category is kind of lower opex profile of lower investment profile, but still accretive to the overall margin rate.
But that's 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 them.
The share leadership position that gives us the ability to earn.
The margins that are at or above the levels that we're at today.
Okay, probably the last 1 if I may.
You touched on emerging markets that you were kept at the market. There is an important topic can you give us a quick update here do you see gross here and the Kennedys also ER.
Even the increase.
The ease of potentially increasing over the next quarters or at least incrementally gross who's the incremental gross of euro 2 euro on guidance here.
Yes.
I wouldn't say, we're seeing for those losses.
So it was factored into our guidance for the year, but we are really excited about the emerging markets in general.
We'd consider China and emerging.
Mark of new mortgages are still a very strong growth in China.
And we of.
And really if you look across Latin America different places, where we see strong growth of very strong growth potential.
So.
If anything if I look at the 10 year of larger tickets. So we undershot a lot of the emerging markets comparative of potential.
I don't regret.
The pricing that we have the opportunity sitting out there in front of us.
Okay. Thank you so much on my mind.
Yeah.
Great. Thank you Tom Forte Your line is now open.
Hey, Tom.
Great So bracken.
Ben first off the comment.
Then a question and a follow up to the comments on instead of pleasure working with you in the best best of luck.
For the future by the.
First question for the follow up so I think investors, sometimes place too much emphasis on working and learning remotely and how.
Most of the effects of your business, but I would argue that the 2 of the other secular shifts in for Mike.
Bridging our accelerating.
Both gaming and self broadcasting. So can you talk about the notion that you are seeing acceleration in gaming and felt broadcasting.
Yes, the other way I love your dogs.
The sleeping during the background of truly durable.
Yeah, I mean, we'll start with self broadcasting.
You know, it's hard to talk about acceleration when we've gotten so little of the potential that's already out there, but I agree with it probably is accelerating even more anybody on this call is the.
If you do anything I'm sure you're just as an example I'm.
That's the big wave of people entering the podcast the market lower.
Clubhouse or all of the places that people are bringing in audio or video equipment to stream of broadcast and there's just more and more of them. So you know I think it's.
By the light has always been the I think we're going to we're entering the world, we're going to listen and watch a lot more.
Sure yourself of each other than we are Netflix in all the countries that getting the tissue.
For context that it's actually dwarfed by the cost of this created by each other and I think that's just going to continue I know, it's just going to continue so yeah, I think that is going to grow.
At for very long time of become enormous of gaming we've been saying this from the beginning.
<unk>.
On the gaming is was has been underestimated or was addressed weighted when we started it was probably underestimated 5 years in I think it's probably still underestimated now for its long term potential.
I don't know if you read this anywhere but it was just sort of I.
As 1 example of of the commercial power of gaming TSM.
Sold at the naming rights for.
You know the $10 million those are in the E and F. L. A you know Olympic numbers and that's in the esports team. The most people here I've never heard of so.
So the spark is absolutely going to continue to be very strong grower.
Great and then for my follow up thank you.
<unk> talked about this notion of moving commercial spending the marketing can you talk about long term, how accretive that could be of your margin.
[laughter].
So how how accretive it could be it on the margin your operating.
Operating margin.
Yes, the long term if you trade.
Promotion spending for marketing spending I would think.
That could be something that could be accretive to the margin for the long term.
Yeah, it could be accretive.
The gross margin I think it could be operating margin neutral you know I'd really think about it is the growth strategy I think as well at credit it couldnt be the operating margin expansion, we may reinvest that as well I would think about it is on.
Hum.
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.
So all of our goal here is to be a lot.
<unk> long term growth targets of 10%.
So obviously, we've got a rise of double digits.
Long term that's our crude.
And if we if we felt like reinvesting some of the gross margin of opportunity back into even more marketing to drive for growth is a good investment.
I know that you get healthier growth when you have a stronger brand equity.
That's really underneath of us into healthier growth can also be stronger growth for the.
For a given a dollar of spend.
Crude oil.
Great. Thanks for taking my questions.
Sure.
Alright, Thank you Tom and Bracken Nate This concludes our Q&A, So I'll turn the call back over to you.
Well, we just finished.
So all of our teams all the time you know the most important quarter of the year is really the first of all because it sets the tone for the year of interest momentum.
And we're off to a great start.
We feel very very good coming out of this first quarter and we'll look forward to seeing you of quarter for Bell.
<unk>.
Thank you Brian.
Thanks Pat.
Yeah.
Yeah.
Yeah.