Q1 2027 Logitech International SA Earnings Call
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Speaker #1: These statements are based on our views as of today. Our actual results could differ materially. We undertake no obligation to update or revise any of these statements.
Speaker #1: We will also discuss non-GAAP financial results. You can find a reconciliation between GAAP and non-GAAP results, as well as 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.
Speaker #1: These materials, as well as the shareholder letter and a webcast of this call, are all available on the Investor Relations page of our website.
Speaker #1: We encourage you to review these materials carefully. Unless noted otherwise, references to net sales growth are in constant currency, and comparisons between periods are year over year.
Speaker #1: This call is being recorded and will be available for replay on our website. I'll now turn the call over to Hanaka.
Speaker #2: Thank you, Nate, and welcome, everyone. Q1 was a strong start to the fiscal year, with net sales growing 5% in constant currency, marking our 10th consecutive quarter of growth.
Speaker #2: The business performed well despite tight component sourcing, elevated component and shipping costs, and the ongoing conflict in the Middle East. We were particularly pleased to see an acceleration of growth in Gaming and in North America, and continued strong growth in Video Collaboration and Pointing Devices.
Speaker #2: Our strong operational performance was driven by our strategic priorities. First, superior products and innovation. The MX Master 4 mouse and the Pro X2 Superstrike gaming mouse have scaled at an exceptional clip.
Speaker #2: These super-premium products, with unique technologies, are both big hits. Just a few quarters from launch, they now both rank among the company's absolute top-selling products, helping professionals work more productively and enabling gamers to win.
Speaker #2: This quarter, we also added four new releases to our product portfolio: the MobiFold Ultra portable mouse, the G512X gaming keyboard, the Spotlight 2 advanced presenter, and a really fun, limited-edition soccer Alto Keys bundle.
Speaker #2: Our elevated marketing efforts are supporting the success of our products. In gaming, our partnerships with iconic brands like NASCAR, McLaren, Call of Duty, and a range of top pro gaming teams helped accelerate growth this quarter.
Speaker #2: And on the work side, we are investing more in creators and social commerce, anchored by a fast-growing roster of influencers. We will continue to deliver superior innovation at pace.
Speaker #2: And the incremental growth investments we outlined entering fiscal '27 are now underway, laying the groundwork to fuel a unique product innovation pipeline for the years ahead.
Speaker #2: A second driver of growth in the quarter is doubling down on B2B. Video Collaboration net sales grew 9% in constant currency this quarter, extending momentum built over the past year.
Speaker #2: Logitech’s video conferencing solutions are now used by more than 70% of Fortune 500 companies, putting us on a very short list of preferred suppliers as organizations refresh and expand their meeting spaces.
Speaker #2: Third, excellence across geographies. This quarter, our geographic diversity really paid off, allowing us to balance tough spots like the Middle East with terrific, demand-led growth in the Americas.
Speaker #2: As well as continued strength in China. And in Europe, where the broader market was soft, our teams gained significant market share. Finally, operational excellence once again drove results.
Speaker #2: This quarter once again demonstrated the power and consistency of our operational teams, even in a volatile and uncertain macroeconomic environment. While tariff refunds positively impacted our reported numbers, we delivered excellent operating income growth excluding the refunds too.
Speaker #2: Thanks to the discipline and precision of our teams. All in all, our Q1 results reinforce our commitment to operational rigor and our belief in our ability to execute on our strategic pillars.
Speaker #2: And position us well for long-term success. Now, as we look ahead, we expect the demand momentum we are creating to continue. But, as you may have just seen, a new serious incident at one of our suppliers—which we're working hard to mitigate—is likely to temporarily impact our ability to fully meet demand.
Speaker #2: Let me hand over to Matteo to provide more details on both our performance and the outlook. Matteo, over to you.
Speaker #3: Okay, thank you, Hanaka, and thank you all for joining us today. As Hanaka mentioned, our teams navigated a difficult operational backdrop throughout the quarter and delivered very strong results.
Speaker #3: In addition to delivering a strong quarter, we received $61 million in tariff refunds, and as a result, non-GAAP operating income was $290 million, up 44% year over year.
Speaker #3: If we exclude the tariff refund, non-GAAP operating income was $229 million, up 14% year over year, reflecting strong execution from the team. Now, let me walk you through the quarter in a little bit more detail.
Speaker #3: So starting with net sales, net sales were up $1.2 billion, up 7% in US dollars and 5% in constant currency. Pointing devices, video collaboration, and gaming were the key growth drivers in the quarter.
Speaker #3: More specifically, pointing devices net sales grew 14% year over year, fueled by the continued success of the MX Master 4. Marking our fifth consecutive quarter of growth, video collaboration net sales increased 9% year over year, as a result of sustained corporate investment in our workplace solutions.
Speaker #3: And gaming net sales grew 9% year over year, driven by double-digit growth in AMR. Conversely, both webcams and headsets were down, driven by soft end markets in EMEA.
Speaker #3: At the regional level, AMR led the way, up 11%, with gaming, pointing devices, and keyboard and combos all growing double digits. Asia-Pacific grew 5%, with China ahead of the broader region.
Speaker #3: And EMEA net sales declined 4% due to the Middle East conflict, which impacted the region's net sales by approximately 400 basis points. Now, it is important to note that in Europe, we gained share in a subdued market.
Speaker #3: Turning now to profitability, our reported non-GAAP gross margin rate, including the $61 million tariff refunds, was 49.8%. Excluding the impact of the tariff reimbursement, our gross margin rate was 44.8%, expanding approximately 270 basis points year over year.
Speaker #3: We have now posted gross margins greater than 43% in the last four consecutive quarters. This year-over-year gross margin rate expansion was driven by favorable currency exchange rates, product mix, and product cost reduction.
Speaker #3: Now, product mix played a prominent role in the quarter, as we drove double-digit growth in our premium product lines and categories, including the sustained momentum in video collaboration.
Speaker #3: Now, these gross margin tailwinds were partially offset by higher promotional spend, particularly in EMEA. Now, looking at operating expenses, non-GAAP operating expenses were $320 million, or 26.1% of net sales, up about 150 basis points year over year.
Speaker #3: This increase was driven primarily by higher investments in Sales and Marketing and R&D. G&A was flat as a percentage of sales at 2.8%, as we continue to remain diligent in our G&A spending.
Speaker #3: As a result, excluding the tariff reimbursement, non-GAAP operating income was $229 million, up 14% year over year, and non-GAAP operating income rate was 18.7%, up 110 basis points year over year.
Speaker #3: Our profitability continues to translate into exceptional cash generation. Cash flow from operations increased more than 30% year over year, and we ended the quarter with a cash balance of $1.75 billion, while we returned approximately $115 million of cash back to shareholders in the form of share repurchases.
Speaker #3: Now, as we look forward, we expect the demand momentum from the first quarter to carry into the second quarter, despite the geopolitical and macroeconomic challenges.
Speaker #3: However, in late June, one of our suppliers of semiconductor components experienced a serious incident at their manufacturing facility, which led to its closure. The facility remains closed today, impacting our ability to effectively meet demand.
Speaker #3: And the supplier has not yet provided a definitive date for the facility to reopen. Now, our team is working through several mitigation plans, and in the near term, our robust balance sheet allows us to maintain a sufficient level of inventory precisely to mitigate this type of supply chain disruption.
Speaker #3: As a result, we are able to significantly reduce the impact of this incident in the second quarter. More specifically, we expect second quarter revenue to grow 0% to 3% in constant currency, with a gross margin rate of approximately 44%.
Speaker #3: This outlook contemplates a net sales impact of approximately $20 million due to the supplier incident. We expect non-GAAP operating income to be between $185 and $210 million, down year over year, driven by continued investments in R&D and sales or marketing, as well as prior-year austerity measures.
Speaker #3: Now, looking ahead for the full year of fiscal year 2027, absent the disruption caused by our supplier, we expect top-line momentum to continue at roughly the first quarter rates throughout the remainder of the year.
Speaker #3: However, based on our limited information to date, we are estimating the negative impact of our supplier incident to be up to $200 million in revenue in the third quarter. For the fourth quarter, we estimate the supplier incident to be largely resolved, which would mean little to no impact to our fourth quarter results.
Speaker #3: On profitability, we expect full-year non-GAAP operating margin to continue to track near the high end of our 15% to 18% long-term target range, helped by the strong underlying operating performance of the business and this quarter's tariff refunds.
Speaker #3: With that, we'll turn it over to Q&A.
Speaker #1: Thank you, Matteo. We will now move to the Q&A portion of the call. To ask a question, please click on the "raise hand" icon at the bottom of your screen.
Speaker #1: Please be sure to unmute and ensure your camera is on before asking your question. Our first question comes from Jorn Effert from UBS.
Speaker #2: Thank you very much, and good evening. Thanks for taking my question. I would like to start with two questions, if that's okay, and then I'll go back in the queue.
Speaker #2: The first one is, can you tell us a bit more about the risk of pulled-forward demand? What have you potentially seen in Q1?
Speaker #2: You had a very strong sales through double digit, and if you exclude the 20 million sales impact from the semi-supplier issue, you would give an outlook of one and a half to four and a half percent sales growth for Q2, though quite a material slowdown.
Speaker #2: Though, is this pulled forward demand you're seeing in Q1, or what how do you explain the slowdown? And the second question would be, please, when we look on the full year outlook, and you're still saying you're coming up at the 18% or close to 18%, including the 61 million tariff refund, which would be then, if you exclude it, around 17%.
Speaker #2: It's a 200 basis points drop versus last year, almost. I mean, how do you explain this? Is this really only SG&A, as gross profit margin seems to hold up quite well, or do you also pencil in some additional cost for the semi-component sourcing here?
Speaker #2: Thank you very much.
Speaker #1: Yeah, Jorn, let me take the first question, and then I'll let Matteo answer the second question. So, we think there was very little to no pull-forward in the first quarter.
Speaker #1: Why do I say that? Pull-forward would particularly happen in video conferencing, where the memory shortages are well known. And we took pricing, but we took pricing in May, so if there was any pull-forward on the absolute price increase, it would have happened in April.
Speaker #1: At the end of the quarter—and, in fact, what happens when you take price increases in B2B—you actually continue to honor the old price for a little bit, because you've got deals that are in progress.
Speaker #1: So, in the quarter, the actual impact of the price increase was not very high. We'll see the positive impact of the price increase starting from the next quarter.
Speaker #1: So there was no reason for our customers to pull forward in the quarter. And certainly on the consumer side of the business, we tend to really shift to demand.
Speaker #1: So there's not a lot of pull forward there. So we continue to be optimistic, excess supplier. I think your math is right on what we would have guided for the second quarter.
Speaker #1: We're always looking at kind of the high end and the low end. On the high end, we need North America to continue to perform as well as it has, in the high single or double digits.
Speaker #1: On the more conservative side, that might come down a little bit. So that's where the original guide came from, but your numbers are about correct.
Speaker #3: Yeah, Jorn, so if you adjust for the $20 million from the supplier incident, as it pertains to the second quarter, the outlook would have been something between 2% to 5%.
Speaker #3: We closed the first quarter between four and a half and five. So I think we are in the zone. And obviously, there is, as Annika said, a bit of uncertainty in the macroeconomic world today.
Speaker #3: Overall, the numbers are close to what we achieved in the first quarter. As far as the second question, if you recall, last quarter we mentioned that, on the backdrop of a very strong fiscal year 2026, where we almost reached a 19% operating income rate, we wanted to take some of these outsized gains in profitability, particularly out of a very strong gross margin.
Speaker #3: And reinvest this towards the growth of the future growth of the company. And this is really what we are planning to do. And now we stand in the supplier incident that we just described, where we can talk more about it later.
Speaker #3: So that's the driver. So, Jorn, I would not expect G&A to increase. It's really the focus on investment for the future growth of the company, which would be sales and marketing and R&D.
Speaker #3: And your point on the gross margin, I think, is valid. We are very happy with where the gross margin rate has been now for several quarters, and we expect the gross margin to continue to be strong.
Speaker #2: Thank you very much for this. If you allow me to zoom in on one thing: when we adjust now for the $61 million tariff refund, your underlying non-GAAP EBIT would be more around $850 million.
Speaker #2: Is this a new starting point we should look at, how you can grow then in '28, '29? Or is this then, okay, look, I mean, you're using the $61 million, you're reinvesting, and next year you will play down the investments again?
Speaker #2: Just a little bit of feeling from where we can start to model the company for the midterm.
Speaker #3: I think it's a little premature to talk about fiscal years '28 and '29, but right now we are committed to the range that we provided at Investor Day, and that's the commitment of the company—which you can expect the company to deliver.
Speaker #2: Thank you very much.
Speaker #3: Sure.
Speaker #1: Our next question comes from Asia Merchant with Citi.
Speaker #4: Great, thank you for the opportunity, Jorn. Just if you can highlight how you guys are thinking about channel inventory here. How is that performing relative to the sell-through, which was obviously pretty strong here?
Speaker #4: How should we think about, perhaps, some buildup of inventory, if there was any? And then, if I may, just the supplier incident that you talked about—seems like you have pretty good line of sight to it getting resolved in Q4.
Speaker #4: And then, sort of, your revenue growth rate probably accelerating back to what you saw in Q1. So, just if you could peel that up a little bit—why do you feel so confident that that supplier relationship or that supplier issue could be mitigated? Are there alternatives there that you're looking at?
Speaker #4: Thank you.
Speaker #1: Yeah, maybe let me start with that one and then we'll go back to inventory with Matteo. So I was expecting quite a few questions.
Speaker #1: So thanks, Asia, on this incident. And I’ve got to say, we will share transparently what we know, because we still have, I would say, limited info, and we also need to protect competitively sensitive information.
Speaker #1: So I'll do my best to give you a bit more color on that. But at the very end of June, one of our many semiconductor suppliers had a serious incident at its manufacturing site.
Speaker #1: That resulted in a temporary shutdown, and that facility is still shut down. We are now in the early stages of receiving information about the impact of the event.
Speaker #1: We are confident that the fab will reopen, and we'll be open again, certainly in the fourth quarter. But the supplier has not yet confirmed definitively when it's going to reopen.
Speaker #1: So in the meantime, we are working very hard, obviously, on a set of mitigation plans. We do have secondary suppliers for most components, including semiconductors.
Speaker #1: Including this one. But as you will know better than most people, the general supply situation for semiconductors is unusually tight across the industry at the moment, which means that getting significantly more supply at a time when we need a lot ahead of the holidays is particularly challenging.
Speaker #1: So, hence, as we told you, in Q2 the midpoint of the outlook still shows growth of 0 to 3%, despite the fact that we think we'll be short about $20 million because of this incident.
Speaker #1: And that's because, in the quarter, we can leverage some of our regular inventory that we have, and Matteo can give you a bit more detail on that.
Speaker #1: In Q3, it gets a little trickier. And again, based on the limited info we have today, the negative impact could be up to $200 million in net sales because of the incident.
Speaker #1: And it's going to depend. When does the fab reopen? How much supply can we get from our secondary suppliers and other plants that we have in progress?
Speaker #1: By Q4, we're confident that this will be resolved. And again, this is a temporary supply issue. We're confident that demand is going to remain strong.
Speaker #1: And that will resolve this by Q4.
Speaker #3: So, Asia, let me address the first question. Yes, the sell-through, going back to the first quarter, was strong. You remember, though, that the sell-through is a gross number.
Speaker #3: So it does not include—obviously, it's not in constant currency. So it includes any FX movement, and it does not include the promotions. So if we spend more dollars year over year on promotional activity...
Speaker #3: So if you take the 11% growth in sell-through and try to walk it back to the 5% growth in net sales, really, you have two components.
Speaker #3: One is the effects, which is about two points. And the second one was primarily higher promotional spend. So the channel inventory was actually in good shape.
Speaker #3: Nothing abnormal happened in the channel, but we promoted a little bit more than last year, particularly in Europe. We saw the market at the beginning of the quarter being pretty subdued, as we said in our prepared remarks.
Speaker #3: And quite frankly, we took an opportunity to gain share. And we are pretty happy with the outcome because, as Annika alluded to in her prepared remarks, we gained a few points of share on the majority of the product lines in Europe.
Speaker #3: So, we are happy with the outcome. But that's how you bridge from the sell-through to the net sales in constant currency. As far as maybe one last comment on the channel—back to the impact in the second quarter of the supplier incident—the beauty is that we have a strong balance sheet.
Speaker #3: And this is what allows us to maintain a healthy level of inventory of this type of component, exactly to withstand this kind of situation that sometimes happens, like we are experiencing today with the supplier.
Speaker #3: So, thanks to the inventory that we have on hand and the finished products that we have in the channel, we will be able to serve our customers for the vast majority of the second quarter.
Speaker #3: And that's why, to Annika's point, you see that the impact on the second quarter financials is limited. We will continue to grow; it's about $20 million.
Speaker #3: Obviously, the situation for the third quarter, to Annika's point, is a little bit more challenging. But we are happy where the channel sits, and it is healthy and in the range, in terms of weakened hands, that we want it to be.
Speaker #1: Our next question comes from Alicia Rees with Wedbush.
Speaker #2: Yeah, thanks for taking my questions today. I wanted to start with just an overall question on the impact of the supply chain incident. I assume that that impacts predominantly the video conferencing.
Speaker #2: But I wanted to just double-check that there isn’t anything within gaming or the other segments that is particularly impacted.
Speaker #1: No, that's—so thank you for asking that. And hello. But the impact is actually on a portion of both our Gaming and our PWS portfolios.
Speaker #1: So, these are not memory chips.
Speaker #2: Okay, all right. Thanks for elaborating on that. And you did call out share gains in the Americas and MEI—I believe that's from the Superstrike predominantly.
Speaker #2: If there were any other categories or products that drove some of those share gains, if you could call that out. And you did also call out that Asia Pacific growth was led by gaming, but there were no share gain callouts there.
Speaker #2: Can you talk about the overall strategy there, or if there are any particular products that are leading that growth in China? That would be helpful.
Speaker #1: Yeah, sure. So, in terms of shares, actually the biggest share growth—fantastic share growth—was in Personal Workspace. So, we gained about 220 basis points of share in the quarter across Personal Workspace, which is giant.
Speaker #1: And that included gains in the Americas, in Europe, and in Asia Pacific, including in China there. So, PWS really had an outstanding performance.
Speaker #1: Gaming also saw strong share gains in both the US and in Europe. In Asia Pacific, shares were flattish, but on the premium end of our lineup in gaming—again, thanks to what you already alluded to, the Superstrike Mouse—we also saw share gains.
Speaker #1: And then, video conferencing also saw strong share gains in the quarter. So, really strong performance across the board that we're really, really pleased with.
Speaker #2: Excellent. Thank you.
Speaker #1: Sure. Our next question comes from Alex Valero with Loop Capital.
Speaker #3: Hi. Thank you for taking my question. My first question is gross margin excluding the refunds is above your 43 to 44% structural range. Which piece of that is durable, the mix FX or cost reduction?
Speaker #3: Sure. So, Alex, overall we are obviously extremely pleased with the gross margin results now for quite several quarters. As I alluded to in my prepared remarks, we have been printing pretty good gross margin, well above 43%.
Speaker #3: If you look at the year-over-year walk—so, if you go from last year in the first quarter—we were about 42%. So, we expanded.
Speaker #3: About 270 basis points, excluding the tariff reimbursement. There were a couple of drivers. Obviously, one is foreign exchange—when you look at the year-over-year numbers, because last year, the euro was pretty weak.
Speaker #3: So, that's accounted for about 240 to 250 basis points of the margin lift. When you look, highlight a couple of components. One is the overall premiumization of the portfolio.
Speaker #3: So, the positive mix — if you look at the high-end product lines, right, look at all the MX, Ergo, Pro, simulation — they all grew double digit.
Speaker #3: And really solid double-digit. Okay. And then also, video conferencing in total, as you know, we are doubling down on B2B. So, as video conferencing outpaces the growth rate of the company, that is good for mix.
Speaker #3: So it's good for margin. That was another big component. So when you combine a little bit of price and this premiumization of the positive mix, it's about a 100 basis point lift.
Speaker #3: Year over year. And then the continuous tremendous work of cost reductions, then three and the team continue to do notwithstanding the environment where we are of higher commodity cost, higher freight cost in the first quarter, product cost reduction helped us about 100 basis I alluded in my prepared remarks, were offset partially by higher promotional spend.
Speaker #3: So, of these categories that I just mentioned, if you look at at least the short term—call it the next quarter—probably the number that will be more challenging is going to be the product cost reduction.
Speaker #3: We see freight rates increasing, and this is going to be a little less of a help when you look at the second quarter compared to the first.
Speaker #3: But overall, you heard in the prepared remarks, we're still going to be around 44% gross margin rate, so still a good number. Got it.
Speaker #3: Thank you for that. Just a quick follow-up, just changing it up a bit. What are your B2B customers telling you about their AI budgets right now?
Speaker #1: Obviously, everyone is investing in tokens, so there are people spending on tokens. But at the same time, we're seeing a really healthy market for video collaboration.
Speaker #1: Why is that? I'm sure you’re all using either Microsoft or Google in your video, or Zoom in your video conferencing meetings, with their AI note takers, AI assistants, et cetera.
Speaker #1: So, to use AI properly, you need to enable your people with video conferencing in all of your meeting rooms. And I've said this many times before, but globally, less than 25% of meeting rooms are video conferencing enabled.
Speaker #1: So there's so much white space in that market, and you see that in the market growth. AI is a tailwind for video conferencing. And beyond the white space, video conferencing equipment tends to last between five and seven years.
Speaker #1: We're now about six years post the beginnings of COVID when many companies put in video conferencing for the first time. So that's another tailwind.
Speaker #1: So all in all, it's a really healthy market for video conferencing equipment that we're taking advantage of.
Speaker #3: Thank you very much.
Speaker #1: Sure. Our next question comes from Torsten Sotter with Kepler Cheuvreux.
Speaker #3: Hi, Torsten.
Speaker #4: Hi, guys. I didn't have a question, actually. I mean, sorry, I think there was a misunderstanding here, because my question is just...
Speaker #1: It's great to see you anyway, Torsten.
Speaker #4: But yeah, I go back to the queue, but I'll yeah, sorry, I don't know what happened here.
Speaker #3: No worries.
Speaker #1: Our next question comes from Tim Long with Barclays.
Speaker #3: I think you are in mute.
Speaker #1: Sorry. Sorry about that.
Speaker #3: Perfect. Now we can hear you.
Speaker #1: Yeah, great. Maybe just to follow up on the B2B question, you covered the video conference you saw. Just curious, last quarter you talked about just the overall B2B doing better than B2C.
Speaker #1: And it's a real focus for the company. So maybe you could just talk more broadly about that. And then second question, at the beginning of the call, you mentioned some new releases.
Speaker #1: Just curious, kind of feedback there and how you think those will go into the portfolio, particularly on the gaming and the pointing device side.
Speaker #1: Yeah, definitely. So maybe starting from B2B—again, we continue to see a healthy B2B market, also beyond video conferencing. About half of our business in the B2B channel is video conferencing, and about half is personal workspace.
Speaker #1: But robust markets, good performance in the first quarter across. And I'd say there's a number of trends. There is clearly the video conferencing trends that I just talked about, which is a lot of white space in terms of meeting rooms and a refresh now post-COVID.
Speaker #1: But hybrid work in general is also good for the rest of our business. There's a real increase in people working from anywhere. Most companies have decided on some sort of hybrid arrangement.
Speaker #1: And for some companies, that's four days a week in the office, some three, some something else. But the fact remains that versus pre-COVID, people are working more often in places that are not the office.
Speaker #1: And that then makes companies want to make sure that their employees don't only have a great mouse or a great webcam in the office, but also in the other places that they're working at.
Speaker #1: And then AI is another tailwind for our business portfolio, as I just mentioned. So B2B, we continue to be pretty bullish, and we're going to continue to double down.
Speaker #1: A lot of growth in the years ahead in B2B. In terms of the new products for the quarter, first of all, again, the Superstrike and the MX Master 4 are the gifts that keep on giving.
Speaker #1: It is really rare that we see new products, within a couple of quarters from launch, end up amongst our absolute top sellers. These two products are really big.
Speaker #1: And they are a huge hit, so that's great to see. And then we have our regular pace. We launch between 30 to 40 new products every year. In the past quarter,
Speaker #1: We highlighted four. Maybe I'll talk a little bit. There's the new Mobi Mouse, which is a foldable mouse. I should have it here so I can show you, but it's a really super cool product.
Speaker #1: It's the first time we launched something exclusively first on TikTok Shop. And it that was really successful, became the number one seller in the overall electronics category on TikTok Shop before we then expanded it to our full distribution.
Speaker #1: So after a really promising start, also a premium product that sells at $79. So we're excited about that. Then we launched the G512X new gaming keyboard.
Speaker #1: That is a fabulous gaming keyboard that really has all the bells and whistles you can imagine. And that's after a really strong start as well.
Speaker #1: And then there were a couple of other fun things. The remote presenter for meetings—that had not been refreshed in God knows how many years, a lot of years.
Speaker #1: But we've come out with a presenter which leverages the haptic feedback technology, which is unique to us, and actually lets you breathe before your presentations.
Speaker #1: Which is pretty cool. And then finally, my personal favorite: for the soccer frenzy this summer, we had a special edition soccer keyboard and mouse pad, which are really, really cool.
Speaker #1: You can see it on the top of the shareholder letter. And that sold out in 10 days.
Speaker #3: Okay, great. Thank you.
Speaker #1: Sure. Our next question comes from Maya Newman with Morgan Stanley.
Speaker #5: Hi, thank you. Maybe just to start, I think the biggest debate in the market right now is the risk associated with PC shipments declining by low double digits this year.
Speaker #5: If these projections from industry analysts are correct, mid-single digit revenue growth for Logitech would imply a touch per PC shipment growing over 20% this year.
Speaker #5: And reaching over $14 of attach—that's versus $10 to $11 for the past five years. What initiatives do you guys currently have in place that would drive such a material uplift in that attach per PC shipment?
Speaker #5: And then I have a follow-up. Thank you.
Speaker #1: Yeah, sure. Thanks, Maya. Good to see you. Obviously, we're well aware of the debate. And PC units, in fact, in Q1, were down about 5% in the quarter.
Speaker #1: Yet our categories and our business were tracking very well. The mice market or pointing device market was actually up 5% globally. And Logitech mice and pointing devices were up 14%.
Speaker #1: So I think that means we continue to see that our growth is driven by the installed base, not just new PC shipments. And in terms of initiatives, there's nothing new.
Speaker #1: We will keep doing what we've always done, which is focusing on the installed base—attaching to that—because less than 50% of PC users, people who already have a PC, use a mouse.
Speaker #1: And less than 30% use a keyboard. We've had a great track record over the last decade to add about a percentage point to those numbers every year.
Speaker #1: So that's number one. Number two is, of course, driving share growth, which you've seen us do very effectively in the first quarter. And that's part of that growth algorithm.
Speaker #1: And the third one is ASB growth. Again, the Superstrike is $180. The MX Master 4 is $130. Some of our other new innovation is also premium.
Speaker #1: That is very important in order to deliver growth in peripherals. And again, this is all about the attached base. It is not about the number of new PCs sold.
Speaker #5: Got it, thank you. And then, maybe just on video conferencing, could you give us a bit more detail on what's driving that strength, and how sustainable it is?
Speaker #5: So how much of that is pricing actions versus refresh opportunity? And then, as you think about the impact of this significant inflation we're seeing across the tech portfolio, is video conferencing at risk of seeing a delayed refresh?
Speaker #5: Or elongated replacement cycles going forward? Or, I guess, what are you hearing currently from customers?
Speaker #1: Yeah, so the market, again, in video conferencing is growing very robustly. And that's driven by new offices—a lot of companies, both Fortune 500 companies and smaller companies, are updating their workspaces for their new ways of working.
Speaker #1: So new offices is one. Low category penetration again, I've talked about it many times, less than 25% of global meeting rooms VC enabled in the age of AI, you need video conferencing in every meeting room.
Speaker #1: And then a COVID-era refresh. So, this is a really good neighborhood, I think, for many years to come. These are not one-off quarterly events.
Speaker #1: These are long-term trends that we believe will continue to be there. Now, in the quarter, we also took pricing to reflect the increased cost of memory.
Speaker #1: So, we took 13% in May. You don't see the effect of that yet, because, again, we honor previous prices for deals that are in progress.
Speaker #1: But you'll start seeing it from the next quarter. But the 9% that you saw in Q1 did not have a pricing benefit yet in it.
Speaker #1: That was material.
Speaker #3: Maybe just to add, Maya, so B2B—we've said this a few times—tends to be lumpy. But we have been growing video conferencing pretty nicely now for a few quarters.
Speaker #3: And you alluded a little bit at memory supply. I think Sri and the team continue to do a fantastic job in securing memory components for video conferencing, at this point we are pretty much secured throughout the full fiscal year 2027.
Speaker #3: And obviously, if, as we just did to mitigate the impact of the cost increase, we just raised prices, as Anika just mentioned. So we're pretty pleased with where the VC team is right now.
Speaker #5: Yeah, got it. Thank you very much.
Speaker #1: Our next question comes from Lucas Glemser with Barenberg.
Speaker #6: Hi, good evening. Hi. I've just got two questions. So, starting with the pointing devices, which had a very strong quarter. What drove the acceleration of growth here versus Q4?
Speaker #6: Is it essentially still all from the MX Master 4? Is it from something else? And then also, looking forward over the next two quarters, how sustainable is that?
Speaker #6: Or is double-digit growth expected over the next two quarters? And then the second question is, could you talk a little bit about the partnership with Call of Duty, as well as some of the others that you mentioned?
Speaker #6: What are the economics here? And what is the goal here in terms of how you expect that could translate into numbers? Thanks.
Speaker #1: Great, thank you. Yes, indeed—pointing devices had a very good quarter. Market growth was 5% globally, and we grew 14% globally, so that's very, very healthy.
Speaker #1: The growth is driven by premium innovation as well as marketing. So, premium innovation—the MX Master 4 just continues to go from strength to strength.
Speaker #1: And then we added the Mobi that I just talked about, which is another premium product, foldable—our first foldable mouse. And that's done very well.
Speaker #1: Marketing is supporting both those new products as well as our existing product range. And I'm super excited by what the Personal Workspace team is doing.
Speaker #1: We're really stepping up on social media and social commerce. We talked about the TikTok Shop—our first ever launch that was exclusive on TikTok Shop—which went very, very well.
Speaker #1: And we're really stepping up on our roster of creators. So we now have more than 400 creators on the global roster for a personal workspace.
Speaker #1: And we're creating better content—content that really converts. So these are not one-quarter pieces. We'll continue to innovate. We'll continue to elevate our marketing quality and quantity.
Speaker #1: So that's on mice. Partnerships are another important part of our business, really across all three business groups. But since you specifically referred to gaming, there are some really exciting partnerships there.
Speaker #1: NASCAR is one, obviously—specific, but we had some great events at the San Diego NASCAR race in the quarter. McLaren is a fantastic global partnership, which of course makes a lot of sense.
Speaker #1: We are a long-term partner of McLaren. Their drivers practice with our simulation gear at their facility in England. We develop products together. That is a wonderful, wonderful long-term partnership.
Speaker #1: And then, of course, games. So, Call of Duty: Modern Warfare 4—we have a partnership with them as well. And I think what you'll see from us increasingly is working to make sure that we work with game developers to elevate the experience of a new game when it comes out.
Speaker #1: So that, for example, in driving games with our TrueForce technology, which is unique to us, you really feel it. When you get into the new Forza game or another new driving game, you feel those turns.
Speaker #1: You feel the skids. You feel it all. So, and you can think of other ways in which we offer immersion through our products in new games that you wouldn't have with someone else's products.
Speaker #1: So that's what those collaborations with games are about. And we're excited about the new Call of Duty and other things in the pipeline. Our next question comes from Torsten Sotter with Kepler Chevron.
Speaker #7: Yes, I can try. I actually do have a follow-up question, but I'm a little less shell-shocked now. Can I get back to you quickly on this supplier situation?
Speaker #7: Are you aware if the specific supplier of yours that has run into problems is also serving some of your friendly competitors in Gaming and PWS?
Speaker #7: And maybe, more generally speaking, can you remind me of your supply chain strategy after the implementation of this China Plus 5 strategy? Is it getting tighter?
Speaker #7: Or are you able to implement dual sourcing everywhere?
Speaker #1: I'm not going to piece because that's competitively sensitive information. So unfortunately, I can't do that. In terms of China Plus 5, that is a little different from this incident.
Speaker #1: So this incident is at a component supplier, not at one of our China Plus Five manufacturing partners. So, we manufacture in China and we manufacture in five other places.
Speaker #1: Our components come from all over the world. There are hundreds of them, not just six. This is at a component supplier, not at one of our own manufacturing sites or contract manufacturing partners.
Speaker #7: Just to maybe readd a couple of comments that were made earlier the obviously, we do have multiple sources for this type of critical components, right?
Speaker #7: We really consider this as, in a way, a rare and unique incident because it happened, obviously, at an unfortunate time. If you look at all the supply ecosystem around this type of semiconductor components, the ecosystem is very tight.
Speaker #7: So obviously, we are working on a multitude of mitigating plans, which includes obviously parallel paths and includes also working with our diversified supply base.
Speaker #7: But we obviously have a diversified supply base for this type of component. Thank you.
Speaker #1: Our final question comes from Martin Jungfleisch with BNP Paribas.
Speaker #8: Yeah, hi. Hi, guys. Good evening. Just two quick ones. The first one is really on gaming. Gaming was really strong. Is that sort of growth that you're seeing now kind of steady state and sustainable?
Speaker #8: And with GTA 6 now being released in November for the console, would you already expect some increase in demand growth, maybe even potentially towards the double digits also, as resellers and distributors?
Speaker #8: I'll be stocking up on tools. That's the first question.
Speaker #1: Yeah. Yeah. You're absolutely right, Martin. It's good to see you. But you're absolutely right. In gaming, the markets were strong and we outperformed. The markets globally accelerated to high single-digit growth.
Speaker #1: That's faster than in previous quarters, and that is before the launch of GTA 6. So, we see a good trend in terms of market growth.
Speaker #1: And in the markets, we're really pleased to see the US back to mid-single-digit growth, which is also a pretty significant acceleration from where that market had been.
Speaker #1: So that's all great to see. And then, what we were obviously even more pleased with is that we outperformed that strong market with 9% net sales growth.
Speaker #1: Really driven by our premium innovation, the super strike first and foremost, but also that new gaming keyboard the G512X. The growth, again, the North American market was a piece of news, but our growth was super broad-based.
Speaker #1: Again, demand in North America is double-digit, EU high single-digit, China double-digit. So again, a good neighborhood driven by premium innovation on our side, and we think there's much more of that great demand momentum to come in the quarters ahead.
Speaker #8: That's great. And then just a follow-up on the Middle East. I think you mentioned, or you expected, 150 bps in the quarter. I think you said you had 400 bps now in Europe, which I think is probably equivalent to the 150 for the group.
Speaker #8: I'm not sure if you mentioned it, but what is your expectation for the calendar Q3 on Middle East?
Speaker #7: So yes, Mari, your map is correct. It was 400 basis points for the EMEA region, which translated to about 100 basis points for the company.
Speaker #7: Right now, our assumption is that in the second quarter, the impact will be very similar.
Speaker #8: Thank you. Thanks.
Speaker #1: This concludes the Q&A portion of the call. Back to you, Hanukkah.
