Q1 2024 Logitech International SA Earnings Call
Our <unk>, our interim CEO and Chuck Boynton, our CFO . During this call we will make forward looking statements, including with respect to future operating results under the Safe Harbor of the private Securities Litigation Reform Act of 1095.
We're making these statements based on our views only as of today, our actual results could differ materially we undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results and you can find a reconciliation between non-GAAP and GAAP results and information about our use of non-GAAP measures and factors that could impact our financial results and forward looking.
Statements in our press release and in our filings with the SEC.
These materials as well as the 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 and.
Noted otherwise comparisons between periods are year over year and in constant currency and net sales. This call is being recorded and will be available for a replay on our website I will now turn the call over to got thanks Nate.
And thank you all for joining us it is a pleasure to speak with you today.
Before we jump into our first quarter achievements, let me provide some context regarding my all and the board's search process for logistics next CEO .
Im honored and excited to guide this iconic brand company in the near term doing my fully is on the board of Logitech I've got and very familiar with the company as I had the opportunity to serve as the chair of Logitech Technology and innovation Committee of the board and to serve as a member of the audit Committee.
I view my role as an interim CEO is to provide a consistent and steady hand to the many wonderful experienced teams working hard of course logitech.
Singularly focused on making progress in ensuring we did not lose any time in our ongoing execution.
Our strategy remains unchanged as the business plans that are in place. All the teams are focused on executing our proven playbook and my focus is to remove obstacles facilitate decision, making and it sure we lose no time.
Now a few words on the search as we previously announced the board is conducting a global CEO search, including internal and external candidates.
It is progressing well.
There has been a lot of interest in the opportunity and we are pleased with the strong caliber of the candidates were seeing.
Needless to say the board's views. This decision was the utmost utmost seriousness it deserves and it's working diligently reviewing and interviewing candidates.
Given the confidential nature of the search I will not be able to add more color today, but rest assured that we will update you when we have news to share.
Before I turn it over to Chuck to review the team's progress on many important fronts. Let me provide a few of the nonfinancial highlights after quarter.
Assuming logitech as a global leader in design and innovation, we were awarded the industry most prestigious Red Dot design team of the year Award previously awarded to companies such as Apple, So Raleigh and others renowned for their design.
We introduced four new products in the quarter, including Alibaba Huddle. The newest addition to Logitech family of conference come at Us that sounds small meeting rooms into collaboration spaces.
And designed for esports athletes, our newest Logitech G Pro X gaming headset feature die.
Drivers for those that require precision audio technology and in addition to the products launched last quarter. We are just about to start shipping logistics site, a table to come along with 315 degrees.
New capabilities delivers a truly unique video conferencing experience at the heart of this new system is an AI director like technology that decides which participants should be highlight on the screen and from which NGO close off all this benefits both people in the conference room, and especially remote participants.
Who otherwise may feel they are not really involved in the meeting because they are nicely to that on the table.
Our sales teams closed a number of meaningful customer deals in Q1, including Honda cargo Theta syntax and the approximate scope as well as the European Commission. These wins represent multiple industries in both the public and private sectors.
And finally last week, we announced the acquisition of loop deck, a small tuck in deal that is adding a differentiated technology initially in gaming and screaming and Flaming and later in other areas. We will continue to screen for more deals that will help us accelerate the execution of our strategy as well as bringing our unique.
Technology to new sets of users.
These are just some of the recent highlights although most importantly for today is that we started physically here with an encouraging set of results.
And an updated outlook as we move through the remainder of the fiscal year and re <unk>. Our expected return to growth you should expect to see unwavering commitment to the principles and capabilities that has become the hallmark of logitech innovation to capitalize on the growth plans that fuel our business, which is video.
<unk> hybrid work gaming and digital content creation design led engineering and product innovation.
Maniacal focus on lean manufacturing and operations.
Our capital allocation strategy that is focused on M&A paying a dividend and share buyback.
And we don't do all of that with continued commitment to our values. As an example, this week we released our annual impact report, where you can read about the progress of teams have been making in the areas of sustainability and social impact.
With that I will turn it to Chuck to provide the financial details of our first quarter and to review the outlook for the reminder of the year Chuck Thank you Guy.
I also appreciate everyone joining us on the call today first and foremost I want to thank all of our employees for the strong execution and teamwork in the quarter. It really shows in our results, especially our strong operating cash flows.
Before we get into the details on our financial performance, let me spend a minute on some reporting changes we made to our product category classifications our.
Our slide presentation, and quarterly fact sheet provide additional information as well as a five year set of comparable.
Many of you have asked for these updates over the last several quarters. So we hope that changes provide a simpler and clearer view of our business.
These reclassifications do not impact our previously reported financial statements.
Moving onto the business results for the first quarter.
Net sales in constant currency declined by 15% to $974 million.
Sales out was quite strong, particularly for headsets tablet accessories and gaming.
As we discussed at analyst day and on the last earnings call. We believe in the benefits of lean on hand in channel inventory for.
For the fifth consecutive quarter, we reduced the on hand inventory significantly with our inventory turns improving to four point to.
We remain committed to our goal of improving to five turns or better over the next year or two.
Likewise channel inventory was also reduced in the quarter and I am proud of the team for hitting the targets that we set.
This has improved linearity and predictability, we plan to keep reducing channel inventory during the seasonally soft months of July and August and then replenish the channel in September October and November as part of a normal build for the December quarter net net we expect channel inventory.
To be roughly the same at the end of Q2 as it was at the beginning.
In Q1, gross margins expanded quarter over quarter to 39% slightly better than anticipated.
Significant reductions in our on hand inventory drove down our drove some onetime benefits in the quarter.
On a year over year basis margins were pressured by FX and mix, but partially offset by cost improvement and less reliance on expedited shipping.
Again, thank you to our operations team for such amazing execution.
Sequentially in Q2, we anticipate gross margins to be pressured and as a reminder, gross margins in our December quarter have both headwinds and <unk>, we have the seasonally higher consumer sales and holiday promotions, but those are somewhat offset by overhead absorption.
While there will be quarter to quarter fluctuations, we feel our business is structurally positioned to generate 40% gross margins in the next four to six quarters.
Operating expenses were $271 million in the quarter.
Slightly versus our internal expectations a portion of our operating expenses were attributable to some one time administrative expenses and the weakening U S dollar in the quarter.
I continue to be pleased with the team's cost focus and ability to quickly dial up or dial down opex based on business performance.
Our long term model is to maintain operating expenses at around 25% or less of revenue.
Operating income was $109 million in Q1 and better than our internal expectations due to improved demand and strong gross margins.
One big highlight for the quarter was our working capital execution.
Cash flow from operations was $240 million, a first quarter record for the company, we didn't do a cash balance of 1.25 billion.
Our capital allocation strategy remains consistent evaluate M&A opportunities pay an increasing annual dividend and return excess capital to our shareholders through share repurchases. We are making progress on all three fronts as Guy mentioned, we announced the acquisition of loop deck.
They provide a valuable technology for Logitech G and while modest in acquisition price reflects our consistent and disciplined approach to M&A and.
In May we announced a 10 cent euro Frank increase in our dividend, which will be voted on by our shareholders at our September annual General meeting.
And just last month, our board of directors approved a new $1 billion three year share repurchase program, our existing buyback program expires at the end of July and in total we will have returned more than $1 1 billion to our shareholders as part of this program our new program will replace the expiring.
Program upon its approval by the Swiss takeover Board.
Moving onto our outlook.
Our rise raising the first half outlook, we confirmed in May expecting first half 'twenty four revenue of $1 87, 5 billion to $1 97, 5 billion. Our corresponding operating income is expected to be between $180 million and $220 million.
And our last earnings call. We said, we plan to revert to full year estimates either this quarter or next quarter. Today, we are updating the first half and have provided full year estimates based on the progress we made in Q1.
There is uncertainty with many factors like FX inflation, the state of the consumer and in the December quarter, which is typically our largest quarter and so forth. However, now with one quarter behind US we are providing a full fiscal year 'twenty four outlook, we are expecting revenue of $3 8 billion.
To $4 billion or corresponding operating income is expected to be between 400 and $500 million.
I'll close with where I started thank you. Thank you to all of our employees for driving such strong execution this quarter and with strong market share and some great new products launching we are cautiously optimistic.
We're going to show a short video on one of our new products site.
Roll the video and then let's take Q&A.
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Hello, everyone and thank you for joining as a reminder, if you'd like to participate in Q&A. Please raise your vote virtual hand and we.
We'll get you in Q I will start today with artsy emergent from city Assia.
Hey, good morning, everyone hopefully you hear me.
We can hear you well.
Color. Thank.
Thank you for the color Kathy.
Video Guy.
Jack I was hoping to ask for her.
Talk a little bit about seasonality.
The implied guide.
The September quarter, or the calendar third quarter.
Sure.
And a low double digit.
Any kind of guiding.
Flattish, maybe slightly higher maybe.
Maybe you can talk about that.
Every quarter.
If you can kind of talk to us about the visibility.
Enbridge product segment.
And then on gross margins I think you mentioned they vary from one client.
Gross margin is there then.
We are expecting.
In terms of getting your 46 on target you can talk about.
Yes.
Correct.
Yes.
Yep sounds great. Thank you so much for the question.
So first on seasonality, we outlined last quarter as Youll recall.
But if you looked at the last kind of four years on average the quarters were roughly 24% Q1 2000 for Q2 30 Q3 'twenty to Q4.
And I'm not sure that that's going to be this year.
Our Q1 was better than we had expected we performed better than our internal expectations. It was a strong quarter compared to where we expected both topline and bottomline.
And we're cautiously optimistic on the back half of the year, but there are still uncertainties of foreign exchange.
The various uncertainties in the environment.
Last year the December quarter had some margin pressure because of promotions, we don't know what's going to happen with our December quarter. This year, our single biggest quarter. The read through though the June 18 holiday in China was quite strong we don't have the final results back from Prime day, but it looks like it performed reasonably well.
So I'd say, we're cautiously optimistic, but we don't want you know the first quarter here providing.
Estimates for the full year, we want to make sure that we're we're.
Appropriately.
Providing an outlook that is manageable.
The second question on margins.
It was a great quarter, 39% as the low end of our long term operating model.
We feel good about that however, there were some benefits specifically when we brought our on hand inventory levels down by over $100 million.
That had a benefit to the overall inventory reserves that provided really a strong uplift for the quarter and we see a little bit of pressure going into Q2 on margins for the back half of the year. We are again cautiously optimistic that we'll be in that kind of.
That range, that's probably a little below 39 are in that range.
But we're optimistic there are there are tailwind freight costs have come down significantly.
Cost pressures on components, our operations team has done a great job doing cost reduction and improvement. We don't know is how the mix will impact now we have a couple of new products that are coming out they're going to provide we think a nice tailwind and could help on the margin side, but there is still uncertainty in the back half of the year.
Thank you I appreciate the color. Thank you so much.
Great and next up we'll go to Adam <unk> at Bank of America, Hey, Adam.
Thanks for taking the question just so address the on the inventory decline.
It sounded like that was a bit of a surprise.
Maybe you could dig into that.
Why.
Inventory I would say it was not a surprise our operations team we have targets our operating model. Our goal is to operate with on an inventory at about five turns.
Four point too, which is great progress considering where we've been.
But it was not a surprise it was strong execution. It was deliberate and the great news is that not only was on hand inventory reduced channel inventory came down as well significantly high single digit decline in channel inventory. So if you couple that on an inventory and channel inventory or down we've leaned out the supply chain.
And that is great news for us and our channel partners with lower inventory levels, we make more money or channel makes more money and it's good for everyone.
Okay got it that makes sense. Thanks, and then just a quick one on.
Operation So.
Declined again in the quarter, maybe you could just touch on.
How youre feeling about that market into HTM or are you seeing sort of some stabilization from the enterprise.
Or is it still a lot of uncertainty.
Yes.
First of all not the numbers, we want to see on the business side, the b to B.
The video conferencing side I would say in the last 30 days I talked to customers in every region met face to face in Asia, North America going to Europe .
This afternoon <unk>.
<unk> is strong and the Windsor significance, what we're seeing is actually.
Big companies decided to standardize on logitech and they just deploy at some pace.
Pace, where budget get opened they deploy us in Congress from so that should play.
Any better for the future. The second thing is if you look at the market.
The high to mid range, we actually doing quite well.
We grew double digits at that category, where we have some question is kind of the low mid range to the bottom to the lowest add where we didn't have a product for some time and we are about to launch a quote activity rally ball huddle, that's a great product. It will play really well in this category energize ourselves supposed to go in so.
Between this and the side that I talked about this is going to be a really good way for us to come back to customers trying to push the deployment win some more big accounts I feel very positive about the future of this business after talking to channel after talking to customers I think the opportunity is significant and it's of course the back into the margin.
This is the best margin category, we have that will help a lot I would just add we gained a couple points of share in the quarter.
So we feel good about our the strength of our position.
Sequentially. The video category was down $5 million, so relatively modest quarter over quarter.
And then with these new products that I, just mentioned being launched were again cautiously optimistic about.
Our execution in the back half of the year.
Got it that's great. Thank you.
Thank you thanks Adam.
Our next question will be from George Wang at Barclays, Hey, George.
Hey, guys. Thanks again for the question.
So firstly could.
Can you talk about gaming.
In terms of our checks we picked up some incremental improvement, especially on kind of on the downstream just not sure whether I necessarily flowing to the gaming peripherals, just based on your guide up or below seasonal to H <unk>.
Imply the gaming to be down again year over year basis for the <unk>. Just curious whether you think that thats conservative or how much visibility you have on the gaming side.
Well, we haven't provided.
Specific estimates for gaming for the back half of the year, but clearly the December quarter is the biggest quarter for gaming.
Our gaming team has been operating incredibly well, we've got some new products coming out that we think will help.
Overall, it was a really good quarter for gaming the China team executed flawlessly for the June 18, promo, which is a really important event for us in that market and overall, we've got strength in Japan and elsewhere, but I'd say the real test will be the December quarter for us that's the biggest quarter for gaming.
Great Great. Thank you and just if I can squeeze a follow up.
I guess you guys always looking to expand in new categories right just adjacencies.
So that's why that kind of growth pillars. So.
High level thoughts on your philosophy to want to enter into any sort of a brand new category, which area or which verticals do you think it will be most likely in the next few years.
George Great question.
I found great plans in the company to expand the Tam expanding to new.
Use cases, where we are.
Going after the higher value applications and use cases, it just too early for us to say to talk about it but you will see in the coming quarters more discussion about this expansion.
Okay, great. Thank you I would go back to the queue.
Joseph.
Thanks, George our next question will be from Alexander Duval of Goldman Sachs.
Yes, hi, everyone. Many thanks for question just a couple firstly on Opex. It looks like you've made some good strides on cost control in the quarter I Wonder if you could talk a bit about how much further headroom there is for cost control going forward in the remaining quarters.
And then I have a quick follow up on FX can you just remind us how much support we should expect to be seeing from FX in coming quarters. Many thanks.
Certainly.
First on the FX side.
This quarter, we still have headwinds in the year over year comps that starts to change next quarter, it's more balanced with where rates. Currently are so I think we should be back into kind of a year over year balance.
Starting in Q2 and beyond.
First question was.
The.
Can you remind us it's early here sorry.
Cost control cost control.
Favorite topic. So we have done a phenomenal job lowering costs Opex for Q1 was a little higher than our internal targets. There was a couple of one time administrative charges. So I think you'll see sequential improvement on Opex. Our long term operating model is to have opex below 25%.
Revenue, we may or may not get to that level. This year.
We'll have to wait and see but we're on that trajectory and we believe that.
But by the end of the year, roughly we should be kind of a $1 billion run rate approximately but the real long term target is to be below 25% of revenue.
Thank you very much.
Thank you. Thanks, Alex our next question is from Ananda at loop capital Good morning Amanda.
Hey, guys, thanks for taking side.
Got it cool.
Thanks for taking the question, yes, so just two quick ones if I could.
Guy and Chuck as well the decision to give the second half guide today as opposed to 90 days from now can you tell US just let me just give some context around sort of visibility that gives you guys gives you guys confidence in the ability to do that and the thought process around doing that and then I just have a quick follow.
All up as well.
On the guide.
Deliberated at and what we had outlined last quarter that we would either provided this quarter or next quarter.
And given the strong first quarter, we had relative to expectations with one quarter behind US. We felt now is the right time.
And as visibility better in some areas, yes inflation in the U S has come down a little bit higher in the UK and other markets, but the U S inflation has come down a little bit.
<unk> is starting to stabilize a bit.
But we just felt that with one quarter behind us that it was the right time to update our estimates for the full year and we're pleased to have done that.
One quarter kind of ahead of expectations.
That's helpful context, and I guess, just bigger picture question any thoughts.
Maybe you guys had a separate reaches conclusion, yet, but would love any context thoughts on sort.
When you kind of re normalize the revenue day.
I've just been some quick analysis it seems like exiting fiscal 'twenty four you could be there, but just would love your thoughts on on that that'd be helpful. Thanks.
I'll start John you can add color, but.
As we look at the year over year and sequential change.
Things are starting to stabilize like the year over year comps are getting.
They are still not where we want them to be we're not happy they are still declining.
The rate of change is is getting more favorable now I can't tell you when we're going to hit bottom.
For an asymptote.
It feels like things are starting to stabilize and that's reflective in our cautiously optimistic estimates for the year.
I'd say the last 42 days either as an interim CEO just reaffirmed my conviction that this is a growth company in the Gulf markets, we for Gulf trajectory.
This will come but let me tell you that if it were not just wait for the market to improve the team is working really hard to push whatever we can new products, obviously going to help us.
When some share and get to this point, we would start to be plus in front of a number again and <unk>. There is a clock and I'll add we want to get their law because people will take some time, but we will get them.
Hey, guys. The rate is the right way to think about I guess sort of as we sit currently.
Does the company why sort of the financial community to think about.
Normalized growth go forward.
The same as we have kind of pre COVID-19 or or different whether positive or negative.
Look.
And you know me from Biolife, we always want more we always want to be a higher growth and we will continue to plan look at the IP acquisition that can accelerate that look at that I put out there is a lot of potential here.
To build on this company is super strong the muscles in innovation in design Super strong. The leadership team is Super strong we have a lot to build on so you'd know are ambitious.
As we go forward you with even more but we certainly like to do better.
Awesome. Thanks, a lot guys I appreciate it thank you Amanda.
Our next question will be from Erik Woodring at Morgan Stanley Good morning, Eric.
Hey, good morning, guys. Thank you for taking the question guys.
See you again.
I just wanted to I just wanted to kind of double click on your seasonality question because I understand there are uncertainties today, but you're guiding to the worst seasonality in at least a decade.
But also telling us the channel is normalize and so that would I guess would imply demand would be worsening, but I don't really hear that from your comments actually so I was just wondering if you could kind of help me square that circle and understand really why we're expecting such a below seasonal September quarter, and then I have a follow up thanks.
I think overall, we havent provided updated seasonality or targets for December or the March quarter.
I would say if the December quarter is really strong.
We would be above the estimates if the December quarter and the state of the consumer is difficult because of rising interest rates and inflation and global conflicts et cetera, then.
That's a different situation, but I feel like we feel coming into the year. We started off strong relative to expectations. In Q1, we feel like we've got a plan that we can manage to and that we're in a pretty good place and we'll have to just wait and see how the December quarter happens and what happens in the March quarter March is the tip is.
<unk> are seasonally worst quarter of the year. So if you look at the outlines of what I mentioned earlier.
Generally March is the March quarter is 22% of the year it.
Could be lower we don't know, but so were I think I would say we're balanced in.
That would be my view guide you have a different point of view I agree with you.
<unk> was part of a very extensive review operational review that we have done last week.
Informed us in decision to issue the guidance for the full year I would say I think you're spot on we are not anticipating demand to be worsening that's definitely not what we're seeing or hearing or planning on.
Awesome. Thank you for the color then maybe maybe Chuck just a question for you to follow up on one of your comments there in terms of Opex below 25% of revenue I think last quarter, we kind of talked about larger type of exiting the year at maybe like a $250 million quarterly run rate for Opex. If you did do below.
25% you'd get call it $8 million to $10 million or below that so just wondering if you are thinking you can cut opex beyond your prior expectations and then secondarily. If you are growing next year would you expect to keep cutting opex or would you kind of lean into reinvestment and try to grow op.
Next space alongside your revenue base and Thats. It from me. Thank you. So much yeah, good questions and maybe I wasn't super clear so our target by the end of the year is to have opex at a run rate of roughly $1 billion, which would imply an approximate $250 million Q4, maybe a little higher maybe a little lower but in that range.
We have taken a lot of costs out of the company. We do not have a cost reduction plan in place right now to reduce head count or Opex further that's not our plan we're focused on the top line and getting back to a.
A year that has a four in front of it and so if you if we're at $4 billion in revenue $1 billion Opex run rate is 25%. So we are if we're below the $4 billion, we're still going to stay at approximately $1 billion in opex or run rate. So the Q4 plan is think of that is approximately two <unk>.
<unk> hundred $50 million, if we're below four as we start to grow again, then we would have opex be below that 25% of total revenue number that is the long term operating model right.
So just to be explicit that like when we come back to growth, we like the 25%.
And we take the extra investment in Gulf failures, there's plenty of opportunities of investment, but 20, 25% is we like it as a long term focus.
For us.
Super Thank you so much guys.
Eric.
Our next question is from Europe at UBS Hello yarn.
Thank you good morning, everybody.
Two to see question space on my side I would take them one by one if it's the case.
The first one is can you. Please piece of kind of clarify again and cross profit margins what exactly was the one off benefit in Q1, and where do you see gross profit margins trending to in Q2.
Okay.
If you look year over year gross margins were 39% down from 40, a year ago. The primary difference there is going to be FX, there's other puts and takes but if you broadly.
Roughly.
100 basis points.
The quarter, though was quite strong.
Because of <unk>.
<unk> significantly reduced on hand inventory. So as we look forward into Q2, there will be some pressure because we don't think we can reduce inventory by another $110 million. So of course, there's a lot of dynamics with mix and FX and all of those things, but generally all things being equal we see.
Our strong gross margin trend here, but theres a bit of a onetime benefit in Q1 that will put a little bit of pressure on the results for Q1 and in four to six quarters, we see that trend improving structurally to a 40 ish percent gross margin as a company our long term model for gross margins 39.
44% now to get to the high end mixed shift more video things have to happen, but four to six quarters, we see structurally 40% ish gross margins.
Next question. There you said you had three that's the first of three yes, exactly so it means in four to six quarters you may reach the 40% gross profit margin run rate not in the next four to six quarters just to be clear well, we may have quarters, where it's above 40, we may have quarters, where it's below but I think structurally in four to six quarters, we see that.
Business on average being 40% and growing because we said the long term model is 39% to 44, but theres a lot of puts and takes that can happen with gross margins primarily mix being one of the biggest impacts now.
Guy mentioned earlier, we've got some new products coming out those could be really helpful and be a tailwind, but it's uncertain as to what's going to happen in the short term. We're just we've got more conviction in the intermediate term that we can hit our long term operating model.
Okay. Thanks.
Second question would be please and on Q2 on the revenue guide.
In the Q2 is yes.
Significantly higher versus Q1 due to normal seasonality what have you seen in July so far.
In the first weeks of July do you see a stable flattish development year over year, and we actually started with some with some growth quarter on quarter, sorry, I was speaking about quote unquote went up year over year and just to double check with what Youre seeing in the first week of July .
The data that we have so far is the first couple of weeks and I would say, we're we're cautiously optimistic about the results. So far we don't have the final analysis and yet from Prime day.
So we still have a lot of wood to chop for the quarter and I think we feel like we're in a good position for the second quarter.
Okay. Thanks, and the last question then please on media conference Videoconferencing, instead of <unk> 5 million down. So we can assume it's bottoming out here that Q2, and videoconferencing and also gaming should be up quarter on quarter is this a fair assumption.
I think a lot of that level, yes, we haven't provided that level of specificity.
As video bottomed out I hope, so, but I can't guarantee that.
It was fairly in line with last quarter down a little bit and with new products coming I think we've got tailwind in video.
Alright. Thank you thank.
Thank you.
Thanks Joanne our next question is from Andreas Mueller at <unk>.
Yes, Hello, Thanks for taking my questions I've got the question about the difference of growth rate between keyboards and combos.
And.
<unk> Standalone what was the reason.
So keyboards and combos.
It was down a bit but better than our expectations. It was quite a strong quarter relative.
Relative to our internal expectations pointing devices also performed quite well with it with share gains.
I don't have a lot more to offer in terms of.
Color, but generally I would say both categories were a little better than expectations in pointing devices being a hallmark of our company. We're just thrilled to see additional share gains.
Okay.
Then the cash on the balance sheet. This is now really high.
Would you accelerate the share buybacks I think it's wrong in a bit.
Lower than $100 million is that.
The room to improve.
Well there is room to improve first of all in Q1, we pay our annual dividend. So that's being paid this quarter and that will reduce the cash balance.
We have put in place a new buyback plan b.
All buyback plan of $1 5 billion, we were able to execute $1 1 billion of buybacks on the old plan Thats now expiring.
The new plan, we will go to for shareholder approval at the AGM and we have announced an acquisition. So we're I would say we are executing on our capital allocation strategy of targeting M&A for growth now loop deck is a modest purchase price, but we are targeting M&A for growth paying.
The dividend and growing the dividend and then excess cash returning back to shareholders. So I think we're following our playbook.
Right down the middle.
Okay understood.
Last question on the <unk>.
Stripping costs this one timer.
What was that exactly.
We don't disclose the individual details, but it was a kind of.
Millions of dollars. So it's not a huge number either but that was sort of a one timer, we should see a benefit in Q2.
Okay perfect. Thanks, a lot.
Thanks, Andreas our next question is from Michael but advanced development.
Michael I think you're still on mute.
Michael We'll circle back, let's go to <unk> at Jpmorgan.
Hi.
Can you hear me.
Good morning, Chris.
I jumped on late so I apologize if you've gone through this already but and some of the PC companies we.
Jack.
The conditions for a second half seasonal improvement in BC volumes due to the post hub I'm just wondering as you look at your sort of momentum into the back half of the Euro U.
Associating any movement given the attach rate that you would typically expect to see with BC volumes into your model or are you largely sort of keeping that as more potential upside that comes if that comes through good otherwise you sort of went to more flat.
Flattish half over half and have a quick follow up thank you.
Part of the analysis and reviews, we closed late tracking PC shape not attach rate with that.
So obviously those are good news from our perspective the outlook, we're seeing some of the big PC providers as.
As Jack said, we're trying to be cautious here it is.
Just the first quarter, we are very pleased with the over achievement don't get me wrong, but we're not going to build on other company's stocking.
A little bit more bullish on the second half.
Okay and for my follow up it was an interesting acquisition loopnet to see sort of looking at doing there, but maybe if you can sort of highlight how youre thinking about what the addressable market does that have and as you look at your portfolio. What are these other sort of niche opportunities that you're thinking off in relation to eminent.
Yes, so on the <unk>, it's a small relatively small team, but very important IP that will allow us to add very sophisticated capabilities.
Two.
Two keyboards and mice in the future and.
And we will use it.
Infill gamers and creators, but we see the potential beyond that.
And I'll leave it at that we'll talk about it when we get to this.
As far as M&A, we review of the M&A funnel.
Encourage the team to lead flattish it look at that we have the optionality, we're not desperate for M&A organically I like our chances in the Gulf trajectory, but I think we can accelerate in certain areas, whereby small tuck in or buy something that allows you to that.
And we want to see you know, we obviously have to bring into the both but if we have targets we want to see what else is out there that can allow us to accelerate the coming back to go open the Gulf beyond that.
Okay, great. Thanks for taking my questions. Thank you. Thank.
Thank you.
Michael I believe you are back.
About the Bell Hey, Michael.
You May now, yes, yes, perfect. Thank you so just one U K.
<unk> reporting structures for the some of the categories and I was wondering if the what's in other now so the speakers.
You're planning to faze any of this if these products out.
And if that has any impact on your on your rather cautious guidance for the full year as well.
No we are not facing those products out the challenge I gave to the general manager of that group was grow it so it's its own standalone category.
So we just tried it for housekeeping, we don't want a bunch of small cats and dogs categories and so the idea is to put those together so.
We're focused and then if they can outgrow them will create a separate line for them and that's the challenge to the general manager and he has accepted that challenge.
Okay. So if you can talk or maybe just a few words about.
Boom and.
If there is any plan to reposition that.
For growth going forward.
It's a great question, we actually the company invested not much in this but invested in we actually expecting.
Couple of new products in the coming months.
To do in the reminder of the Ultrashape and hopefully will energize the category there, but it's too early to say and as Chuck just said he told the GM wants to go out of other we want to see good growth and we'll get you out of auto Gotta go but at this point to give you the best.
Balance the or not what are categories, we felt like it's better suited than the others.
Okay perfect good to hear thank you.
You very much.
Our final question for today is from Serge roster at Credit Suisse, Hey, Serge, Yes, good morning, everybody and basically I had a similar question like Michael because of this other.
I'm wondering that you want to see growing these product categories is in the past you want to say that you would take out research and development costs that you squeeze them down and we know that these product groups has the lowest margin. So it gives no sense for me that you want to grow again in these product groups is it will dilute your margin so for me its own some.
More did you want to do to close these product categories.
At least on your <unk> strategy.
Well, so clearly we our goal is to grow the company profitably and there is a margin threshold. So the challenge for the team is to build great products and grow those with attractive margins that makes sense for the company and if they if they don't meet our thresholds then we.
Will not seek to grow those what we have been doing historically in those categories is kind of profit Max not investing necessarily but harvesting the profits and I believe there is a strategy that they can execute to do bolt now we'll see that's why it's in the other category. It's small it's not worth you focusing on as an.
<unk> today, but the challenge for the internal team is to build great products with attractive attractive margins and if they can get to the level that it's worthy then it'll create its own standalone category and rest assured there is no product development here that these targeted the lower margin category.
Are those R&D dollars are going after higher margin higher growth products.
And that's really good.
And I are aligned it's really portfolio management, how do you manage the portfolio for growth and profit not either or.
Probably follow up here is there a significant goodwill position linked to these products. So speakers J Burke UE boom.
Can you give me any information to you.
I don't believe so I think that any goodwill associated with those acquisitions would be fairly immaterial.
Okay. Good.
And then the last one that you have increased slightly the capex from $90 million to $100 million sort of any reasonable do you start to capitalize some of the opex holder its a very small position I know.
It's tied to our new building here in Silicon Valley, and we hope to have you all visit US here and host you if you're in town in the Silicon Valley, We've got a really.
Our new office that we're just opening and that we're calling in from today using our great technology. So.
Come visit US here and we will give you a tour of our of our new facility.
But still $10 million for new building changed quarter sequential change from only three months. So it's a so the accounting rules for leases has changed now where your capitalized operating leases so I wouldn't read into it too much.
Got it many thanks.
Moving on for the next quarter.
Thank you. Thank you. Thanks, Serge guide Chuck that wraps up our Q&A for today. Thank you. Thank you everybody for joining us pleasure to be on the closed everybody and I also want to expand.
Many thanks to the very hardworking logitech theme that allow us to deliver this over achievement then build for a great future.
That's helpful. Thank you.
Okay.