Hello, good morning to those watching in the U.S., and good afternoon to those listening in from Europe. Thank you for attending our fiscal year 2023 Analyst and Investor Day. The team is so excited to share our plans for the upcoming year. Allow me to quickly cover today's agenda, and we'll get started. Bracken will lay out the vision and future of Logitech, where we are focused on creating meaningful long-term relationships with our customers by delivering a seamless experience across all of our products. You'll hear from a select set of our senior leaders as they outline how they will bring this vision to life. Ujesh will provide an update on the always dynamic gaming and creator space, where Logitech is addressing customer demands with products spanning the casual gamers to the hyper-competitive professional gamers.
Scott will update you on our plans for B2B, where we're focused on delivering a seamless hybrid collaboration experience and comprehensive enterprise solutions. Delphine will walk you through our personal workspace solutions group, highlighting their unique approach to customer segmentation, innovation, and product development. Next, Prakash, our COO, will highlight his team's focus on reducing costs, optimizing inventory, and diversifying and automating our manufacturing, as well as provide an update on our sustainability efforts. To wrap things up, Chuck will lay out what all this means for our forward-looking financial performance. He will cover guidance for fiscal year 23 and beyond, as well as outline our capital allocation priorities. Then we'll head into our question and answer session, which will include all of today's speakers. I must point out that today's presentation includes forward-looking statements, including with respect to future operating results and business outlook.
We're making these statements based on our views only as of today. Our actual results could differ materially, including due to factors that are set forth in our most recent Form 10-Q and subsequent filings. We undertake no obligation to update any forward-looking statements. We will also refer to non-GAAP measures, and you will find a reconciliation between GAAP and non-GAAP results and information about our use of non-GAAP measures in our materials and SEC filings. Today's presentation is being recorded and will be available on Logitech's investor relations website, along with our press release GAAP to non-GAAP reconciliation and transcript. To get us started, please allow me to introduce Logitech's chairperson, Wendy Becker. Wendy?
Thank you, Nate. Welcome everyone to our annual Analyst and Investor Day. I am Wendy Becker, Logitech's chairperson. As you just heard, Bracken and the team will provide an update on the current fiscal year, and as importantly, outline our plans for the years ahead. Fiscal year 2023 was a year of transition for Logitech as we continue to navigate a series of external headwinds. While our recent results were regretfully disappointing, I am pleased with the team's actions and commitment to remove costs from the business to align with our top-line results. As the board and I look beyond the near-term uncertainty, we remain optimistic about the trends driving our business and the vibrant categories in which we participate.
We believe strongly in the positioning of the company and are always so proud of the positive impact we're having on the environment and the communities in which we operate. The board will continue to watch out for the best interest of our shareholders and other stakeholders. Again, thank you very much for joining us and for your interest in Logitech. With that, I will hand it over to Bracken.
Thanks, Wendy and Nate, welcome everyone to Logitech's Analyst and Investor Day. I am so excited to have you with us today, I'm grateful for your interest in Logitech. I spoke last year about my optimism for the future, the tremendous growth that we've experienced over the last decade, the dynamic growing categories in which we're market leaders, all of that's still very true. That said, while my optimism at our business is as robust as ever, this past year was disappointing. The strong external headwinds, including inflation and a strong dollar, macroeconomic uncertainties in general, and near-term demand visibility challenges were all worse than expected. Of course, we always prepare for downsides. It's in our risk management mindset, we removed costs quickly.
We stressed to our team and to you, our shareholders, that we needed to focus on what we can control: operational excellence and product innovation, and we did. In the end, as the market declined, so did our business. I'll touch on some of the factors that hurt our growth this year. We used this year to transform the organization for future growth. We invested into key growth areas and have reduced in areas with less clear returns. My guess is that you're here today, though, to more clearly understand our plans for the future. You want to understand how our product portfolio is positioned for long-term strong growth, gain a better understanding of where we're investing, learn about our views of the categories and markets in which we compete, and even get under the hood of our approach to product development. We'll do all that today.
In the end, you'll likely put all that information together and ask yourselves, "Is Logitech positioned to grow long term? Is management excited about the future? What changes have we made organizationally to set us up for the growth long term and an efficient structure? Are we through with the post-pandemic reset and prepared for a return to growth in the long term?" As I've said over the years, I'm focused on the long term, so you won't be surprised to hear me say that the answer to all those questions is an emphatic yes. As Chuck Boynton, our recently appointed CFO welcome, Chuck, will walk you through later in the presentation, the near term will be challenging. It's very difficult for us, and I'd argue for most in the industry, to have conviction around a precise date for overall economic recovery and a return to growth.
Even so, we'll provide our outlook for the next 6 months. One final thought before we get started. I've been here for over 10 years, and we've been on a long-term path to build a great company. We've come a long way. We transformed so much in my early years at Logitech, but I'd say we've evolved even more inside in the past 2. We've transformed our business in exciting, fundamental ways. We're moving from a hardware consumer company to a cloud peripherals company that serves both enterprises and consumers at scale, all wrapped in an outstanding seamless user experience across our products. We've combined organizations to simplify our decision-making. We're simplifying our portfolio, and we're narrowing our focus on the huge growth opportunities ahead of us. More on that later. Let me get started.
If you've been to our AID events before, you know there's an emphasis on our capabilities. We're continuing to invest in and grow our core capabilities. We are a design-led company that leads in the majority of our categories. We've evolved our world-class operations capabilities throughout the tumultuous years of the pandemic. We have strong go-to-market capabilities that we actively refine to meet changing end user preferences. We operate with financial discipline, executing a thoughtful capital allocation plan that's resulted in a strong balance sheet, no debt, strong cash generation, and a flexible cost structure that allows us to align expenses with revenue. We're guided by a dynamic marketing strategy that has the ability to flex up or down as macroeconomics change, the conditions change. We all do it all with an industry-leading commitment to sustainability.
You could probably take away our factory and all of our offices, even eliminate our products, and in a decade, we could rebuild this business as long as we had our people and sustained our culture. The small company mindset. The humble but hungry attitude we try to keep all the time. Being a place where people feel the freedom to create. They're always challenged as we grow. All these values are. We value them so much, we treasure them, and so we'll never stop trying to keep them alive, assuring new people learn them and adopt them, and our veterans feel buoyed by this historical, critical feature of Logitech. To what markets are we applying these capabilities? We keep trying to keep it simple and focused. We primarily play across four large, vibrant categories: personal workspaces, room collaboration, gaming, and content creation.
We are no longer the Logitech of 20 years ago that grew up alongside the rise of the personal computer. Now video conferencing platforms like Microsoft Teams and Zoom, gaming platforms like League of Legends, music platforms like Spotify and others, or creative and productivity platforms like Google Workspace and Adobe Creative Cloud, all of them are served from the cloud, and Logitech designs the equipment people use to engage with them in the cloud. We sell 3 million products every week to do that. 150 million a year, all around the world. Despite all the external factors that may swirl around our business, this is fundamentally who we are and where we play. This is Logitech. As I said earlier, we are very clear-eyed about our fiscal year 2023.
We're a substantially larger company than pre-pandemic, there's clearly a measure of reset taking place in our markets and in our results. What changed throughout the year that impacted our results? I'd point to three things. One, exogenous factors. Geopolitical tension, war, inflation, foreign exchange pressure, were all more numerous and longer-lasting than we expected. Enterprise spending weakened more quickly and steeply than anticipated, consumer spending was not as resilient and was more promotional than we anticipated. As a result of these pressures, we took decisive action in reducing our operating expenses, expected to be down nearly $215 million in fiscal year 2023. This work continues as we work to realign our cost structure to our top line going forward. As importantly, we continue to strongly resource the engine of our business, design and innovation.
Design and R&D investment are up over 50% from fiscal year 2020. 50%. In fact, in fiscal year 2023, we're on track to introduce the most new products in our categories in over 6 years. Our ability to fund this investment is a direct result of our diversified portfolio and a history of financial discipline. As the markets pull back, it's also important to remind ourselves that a bright spot in our categories in which we play, they are significantly larger than pre-pandemic. All of them. Let's take a more detailed look at what makes them so exciting for the future. I absolutely love where we play. You'll hear from Ujesh, Scott, and Delphine today. They lead our efforts across our many categories, and they certainly share my enthusiasm, and I think you'll see why.
I think about these categories and the powerful trends that will move them forward. While video enablement of all rooms seems inevitable, let's talk about the very near-term choppiness in this trend. Businesses are rethinking everything from their real estate footprints to their meeting room and workspace configurations. There's just a lot of change of thinking about what the office is and how we're using it. The need for video conferencing to support a hybrid workforce is obvious. In the personal workspace, that collection of our categories that go on a desk, hybrid work plays a role as users have multiple spaces, multiple workspaces that require high-performing peripherals with a more personalized design than ever since many of those are in their home. Finally, gamers and creators just continue to grow.
Over 3 billion gamers, creators that reach audiences in the millions, we have the chance to bring products to market that range from very affordable headsets for casual gamers to very high-priced, high-performing professional simulation racing kits. Leadership really is a huge advantage. I've always believed the best position from which to gain market share is the top spot, we again took share in most of our categories and remained number one where it matters most. Nearly 50% market share combined between pointing devices and keyboards and combos, industry-leading market shares at nearly 30% for gaming and video collaboration. This speaks to the resilience of our product portfolio, our strategy of portfolio diversification, the power of our innovation engine, and most importantly, the focus of our people.
When conditions improve, it will be nice to have a running start as the number one player in these exciting categories, all driven by nearly indisputable long-term secular trends. As excited as I am about our position in these individual categories, though, it's not actually the only way I'm thinking about moving the business ahead. Our goal is so much bigger than being a market leader in each individual category, 'cause we're moving beyond providing individual products that address isolated needs. We've built hundreds of millions of relationships with our customers, driven by great products and a brand that resonates. From these deep, meaningful relationships come customer insights that lead to product innovation and ultimately to a larger addressable market. These individual products can be tied together, seamlessly integrated with a unified, simple interface to create a solution. That's our focus going forward.
Our users should intuitively move across workspaces, meeting rooms, play spaces with a frictionless experience. To create an outstanding, seamless experience for our consumers, we needed to first organize ourselves for that purpose, then create that experience for our partners and enterprise customers, and finally, create that experience in our products. It's early, let's take a look at what that means. I spoke earlier about the opportunity for transformation, especially during challenging times. This is a prime example. We looked inward, knowing that unless we could create a seamless, efficient experience for our own people, we would come up short in creating that experience for our customers. We combined our commercial groups, which will allow more effective and efficient sales processes. This will make us more streamlined in the market and enables our teams to bring our entire portfolio to the sales process.
We integrated our hardware and software engineering teams to streamline product design and development. In a world where software will play an integral role in enabling an amazing experience between our hardware products, pulling these teams together made sense. We then combined organization and reorganized our businesses where commonalities exist. We combined gamers and creators, for example. This change is designed to facilitate scale synergies, but more importantly, it aligns product roadmaps. As we've made these changes, we've always focused on three things: more effectiveness, more simplicity, and more efficiency. We also realized that creating a world-class end user experience would require us to create an improved experience for our enterprise customers and channel partners. Historically, we've been a consumer-centric, retail-focused company. We didn't focus as we should have on serving the needs of our enterprise customers. We won with our products, not for our salesmanship or relationships.
Several years ago, we made the decision to begin to invest aggressively in our B2B capabilities. Often, our video collaboration teams would close a sale with an enterprise customer and quickly be asked by the CTO about personal workspace solutions, keyboards, mice, and webcams, for example. We weren't optimally aligned to seamlessly fulfill our customer's ask, so we made this change. Now we face the market as a single business-to-business team, driving increased scale, sales effectiveness, and attach rates for us, but more critically, a more efficient, integrated solution for our customers. Yet another example of a break in the past, a transformation in the way we operate, taking a historically small part of our business, B2B, and building it into a strong capability.
The other tremendous benefit of this change is that it permeates throughout our value chain, from our end customers to our channel partners, to our service and supports teams, and then ultimately to our personal workspace and meeting rooms teams. Having visibility throughout this value chain yields data and brings us much closer to our customer. This deeper, more meaningful customer relationship helps us understand their needs and incorporate improved solutions throughout our products. With B2B sales now representing over 35% of our total revenue, we're generating solid momentum. As we were transforming ourselves internally, creating a better experience for our people, enterprise customers, and partners, we were working on creating an improved end user experience, too, for our customers.
In short, an integrated seamless solution and experience across our products. This work has led us to conclude that software would be the great enabler of that end user experience. This isn't new. In fact, we have more software engineers today than hardware engineers, but it's still in the early stages. To be clear, we are very targeted in our view of the role of software. We're not a SaaS company and have no grand ambitions of monetizing software across all of our entire user base. For us, software creates a better, more tightly integrated experience across all of our products. With a better experience comes brand loyalty, TAM expansion, quicker refresh rates, and ultimately, stronger growth. I'll wrap up where I typically start. Why are we here? We're here to help all people pursue their passions in a way that is good for the planet.
It's a very deliberate statement, central to who we are at Logitech. I spoke last year about the personal importance of three words: all, passion, and planet. Our commitment to this mission remains as strong as ever. While I've talked a bit this morning about the state of Logitech, we're leaders in exciting, vibrant categories. We're transforming ourselves in meaningful ways and creating amazing, seamless experiences for our end users. I think the thing I'm most proud of is our commitment to the mission statement, the purpose, inclusiveness, passion, sustainability, tremendous aspirations for us to chase every day. With that, I will hand it over to Ujesh to take a look at our plans for gaming and creators. Ujesh?
Thanks, Bracken. Hi, everyone. My name is Ujesh Desai, I'm the general manager of our Logitech G business. Today, I'm going to talk a bit to you about how the gaming and creator space is a business with a large TAM, has long-term growth opportunities, and our plans to gain share in the space. Let's jump in, starting with gaming. Gaming is no longer a fringe hobby enjoyed by a small group of consumers. There are now 3.2 billion gamers worldwide, made up of all ages, genders, races, and ethnicities. Me, I'm 51 years old. I grew up playing video games on Atari, Nintendo, PlayStation, I still play games today, so do a lot of my friends. The only difference is that we have a lot more disposable income to invest in them.
I have two daughters at home, and they play games also. In fact, when they were younger, we'd all play together. This is a picture of the three of us playing Overwatch. Nowadays, they play online with their friends, even ones that live out of state. Unlike other hobbies or sports, where you have to live in the same town or region to participate, gaming is a digital community across the globe, where you can play with others as long as you have a good internet connection. Gamers can also access content across a wide variety of platforms: PC, console, even on their mobile devices. The advent of cloud game streaming services opens this up even further.
This has enabled game developers to create a wide variety of experiences, from puzzle games that can be enjoyed in bite-sized minutes, all the way to deeply immersive stories that take hundreds of hours to complete. Unlike movies, TV, or music, games are living, breathing things that can get updated live and evolve over time to provide even richer experiences. Gaming has also enabled the emergence of new celebrities, game streamers and influencers who have become overnight superstars, amassing millions of followers, most of whom are under the age of 30. Gaming is now a major part of pop culture and the zeitgeist. It's intertwined with music, sports, and fashion. Big-name musicians, athletes, and celebrities play games and look for ways to combine their passion across these various activities.
As part of this, we're also seeing big sports and fashion brands partner with gaming companies to create collaborations that celebrate this convergence. Because of this, we make sure we design gear that delivers high performance but also looks amazing, enables gamers to show off their unique taste and their personal spaces. Think of our gear as extensions of people's personalities and their lifestyle, similar to how you think about sneaker culture and fashion. Now, all of this bodes well for our Logitech G business. With Logitech G, our singular goal is to serve the needs of gamers and creators and partner with gaming companies that are leading the way in the creation of digital spaces to play, create, and explore. Let's dive deeper into how we plan to address these important segments and what our unique value proposition is.
First, it starts with a deep understanding of the market, the consumers that we serve, and what are their motivations. There are different types of gamers, from sim racers to e-sports pros, all the way to gamers that play to have fun and socialize. All of these users have different needs. Our goal is to support them and celebrate play for all. Let's look at a couple examples of who these folks are and how we create solutions specifically for them. If we look at a sim racer, they're part gamer, part car enthusiast. They love technology, and they want an experience that's super immersive, and they're willing to invest a lot of money into their hobby. This is why when you look at our simulation product category, it's grown over the last eight years, and it now represents 21% of our overall gaming revenue.
Most recently, we designed and engineered our new pro wheel that you see here. This wheel enables us to enter the high-end wheel segment, a $1,000 plus, which is an area we've never played in before. It also features our TRUEFORCE feedback system, which monitors the current flowing through the wheel's motors, continuously adjusting power to match the outputs from in-game physics, every bump in the road and in changes in terrain are captured and fed through our wheel. This is why professional race car drivers like Lando Norris use and endorse our wheels. We don't stop there. We partner with the top racing game developers to implement TRUEFORCE in their games to provide a unique experience for Logitech wheel owners. Here's a small selection of some of the games that already support TRUEFORCE. Now let's switch gears and look at the pro esports space.
Its viewership is massive, rivaling traditional sports like baseball and hockey. Top games like League of Legends from Riot Games are like high-stakes digital chess games that combine fast reflexes with super high degrees of cognitive processing. Our pro line of gear is used by professional gamers that make millions of dollars. To them, the difference between winning and losing is measured in milliseconds. For us, our goal is to partner with these athletes to make gear that's tailored to their exacting specifications. We sell these to all gamers to elevate everyone's game. Products like our PRO X SUPERLIGHT Mouse that's under 63 grams, features our exclusive HERO 25K sensor and our proprietary LIGHTSPEED wireless technology for super low latency and rock-solid connectivity, even in large unfriendly Wi-Fi settings. Speaking of wireless, our LIGHTSPEED wireless tech has enabled us to grow share in the wireless segment.
As more and more gamers transition from corded products to wireless, this is an area that is showing strong growth, and our technological innovations give us an advantage, and it shows in our market share. The overall wireless gaming market is now over $1.7 billion, and we have 37% market share. Another area we're focused is women and non-binary gamers. Today, 45% of gamers are women. Looking ahead, we believe these segments will grow even more. This insight led to the creation of our Aurora Collection, our first ever purpose-built collection that meets the needs and wants of a deeply underrepresented segment, women gamers. With this collection, we designed a headset, keyboard, and mouse that reflect her personality and make gameplay fun and engaging. The entire collection is scaled for fit, feel, and comfort and can also be customized.
In fact, if you look at the G735 headset, it has different colored ear pads, our LIGHTSPEED wireless technology that I talked about for low latency gaming on your PC, but it also features Bluetooth and an optional carrying case if you want to take it with you and game on the go. Now, speaking of gaming on the go, cloud game streaming enables gamers to pay a subscription and access hundreds of games, similar to what Netflix does for movies. Major platform holders like Microsoft and NVIDIA are investing to build out the infrastructure needed to provide seamless game streaming experiences. On our side, we see this as TAM expansion. As cloud game streaming provides a new way to access your games on devices that previously couldn't play games. Our gaming gear can now attach to these devices.
What's more, we can even build dedicated cloud gaming devices like our new G Cloud Gaming Handheld. Now, let's look at the creator space. These are some of the creators we work with. As I mentioned earlier, game streamers and influencers have become overnight superstars, amassing millions of followers, most of whom are under the age of 30. We're quickly moving to a world where independent creators are creating shows catering to millions of people. As a result, we're seeing the emergence of creators as businesses of one. Businesses that need tools and services to create content, to grow and own their audiences, to monetize their audience, both online or offline, and to efficiently manage their business.
Our goal is to deliver the tools they need to make them look great, amplify their voice, manage their audience, and enable them to focus on what they do best, and that's to entertain their fans. This is why over the last couple of years, we've added more and more products to our portfolio, both organically but also through acquisitions like Blue Microphones, Litra, Mevo, and Streamlabs. By adding things like high-quality microphones, lights, cameras, and streaming software to our portfolio of high-performance mice, keyboards, headsets, and webcams, we're the only company that can deliver complete hardware and software solutions to meet the needs of content creators. One of the ways we accomplish this is through our G HUB software. G HUB brings all your gear together in one place. Your mouse, your keyboard, your headset, your webcam, your lights, and your microphone.
I can configure the brightness of my lights, adjusting both to temperature and brightness. I can adjust how my voice sounds through my microphone. We can even use our Blue VO!CE software to add silly effects to your voice. To make boring presentations like this one sound more fun. I can also adjust my mouse or keyboard settings. With the acquisition of Streamlabs, which is the software used by all the top streamers to control their broadcast, we've now integrated this into G HUB as well. This lets users control their gear and their stream at the same time. For example, using your keyboard to control scene switching, I can assign specific Streamlabs scenes directly to various keys, and even assign that silly Blue VO!CE effect we heard earlier.
With G HUB, Streamlabs, and our powerful hardware, we're giving gamers and creators a full studio at home at their fingertips. To complete the picture, we're also looking at the overall spaces that gamers and creators use to play and create. As the Logitech G brand and market footprint has grown over the last eight years, it's enabled us to partner with industry leaders such as Herman Miller to design high-quality furniture that meets the needs of this audience. This is another new attractive financial opportunity that we've added to our portfolio. Recently, ourselves and Herman Miller expanded the lineup to include a new collection called Vantum, which brings the same promise of advanced performance and ergonomics at a more affordable price. Well, hopefully by now you've seen that gamers and creators are at the center of pop culture, and these individuals have different needs and motivations.
As a company, our goal is to understand these and design solutions for all of them, whether that's a mouse, a microphone, a steering wheel, streaming software, a gaming handheld, accessibility controls, or even a gaming chair. Logitech is uniquely positioned to serve the needs of these users through our combination of hardware and software solutions. It's this focus that has enabled us to expand and drive growth. Now moving forward, as technology advances and large platform holders like Microsoft and NVIDIA invest in building out cloud streaming gaming services, we'll be alongside them, attaching our gear to even more devices and expanding the market even further. When we put all of this together, I personally feel really good about our future. Thank you. Now I'd like to hand it over to Scott.
Thanks, Ujesh. I'm excited to be back at AID with my expanded role focused on B2B, which, as Bracken noted, includes video collaboration and all of our products and services focused on the business market. I'm going to cover three areas today: a review of the market trends driving B2B, a review of our progress over the past year, and why we believe we are well-positioned to thrive moving forward. Let's start with the market update. There are a number of key insights driving the business market for Logitech. First, as we've said before, video collaboration is no longer a nice-to-have, but something that all organizations need to maximize their productivity. This is more true today than ever before. Second, many companies are continuing to hire remote employees away from their offices or headquarters.
What does it mean to return to an office if you are hundreds of miles away? IT leaders now need to support their employees wherever they are. In many cases, some will be in the office and some will be remote, most meetings will be hybrid. The very nature of the office is being reimagined. Many companies won't be returning to the same pre-pandemic office layout, one with fewer permanent desks and one more flexible ones. If the purpose of going to the office is all about collaboration, companies will need more collaboration spaces. Because of these changes, a theme we are hearing from our customers is that IT leaders are being asked to expand their mandate from PC and collaboration support to all technologies involved in making hybrid work setup successful, both in the office and anywhere else.
They are now increasingly responsible for solutions that were traditionally the domain of HR or facilities. Lastly, these changes are creating the need and new sources of data and analytics to make more informed decisions about providing the best hybrid work experience. We often hear that decisions are made based on guesses and anecdotal experiences. For example, a CEO might walk into the office on Tuesdays, and she thinks, "Wow, people are really returning to the office." On Thursday, the CFO sees no one there and thinks, "Why are we paying for all of this empty space?" Clearly, we need data, not opinions. The uncertainty of what hybrid will look like and the lack of real data make the path to supporting employees for hybrid work unclear and even sometimes confusing. Should leaders mandate that employees go back to the office?
If so, what would they do there, if not just sitting at their desk or video calling with remote employees? Uncertainty aside, we believe there is much to be optimistic about in the future. For starters, our VC sales are still nearly triple what they were pre-pandemic. Additionally, the room collaboration market is still in the early stages of deployment. Industry analysts estimate there are approximately 100 million rooms and about 10% penetration. Whether it's higher or lower, the bottom line is we have a long way to go in fulfilling the demand to service all of these rooms without video. The rethinking and downsizing of some offices might result in fewer collaboration spaces. We are also hearing from many of our customers that they are, in fact, actually installing even more collaboration spaces.
As the office transitions from a place you sit and do email to a place where you collaborate, we believe we could see an increase in conference rooms worldwide. Let's review our progress over the past year. We continue to lead the conference cam market as the number one player, both in revenue and units. This chart shows that while we lost a small amount of share in 2022, we believe it was due to one particular player catching up on backlogs which accumulated during the pandemic. You can see this from the spike in the player sales in the middle of last year. As we have discussed at prior AID events, one of our key strategies is to increase the ASP of conference cameras, attach more accessories and services, and grow our share of wallet.
This slide shows the progress in increasing our conference camera ASPs, driving more accessory sales per room, while also raising the overall revenue per room. In fact, we have approximately doubled the average revenue per room since the pandemic began, and our ASP per conference cam and room are still below the industry average, which might give us more room to grow. We are not standing still. Over the past year, our team has unleashed a flurry of exciting and innovative solutions, both in hardware and software. We've won a ton of industry and design awards, including Time magazine's top 200 innovations in 2022 for Logi Dock. I'm incredibly proud of what our team has accomplished. This next and final section will describe why we think Logitech is well-positioned to win for the future in this B2B space.
As I've said in the past few AID events, the market is continuing to shift from point products and hardware to software and systems. This raises the barrier to entry for those who don't excel at software and will require a competency in providing an entire room solution. Only a handful of players will successfully navigate this transition. I believe that Logitech, with the majority of our collaboration engineering team already focused on software and systems, is in an excellent position to thrive. We are delivering superior solutions that the market is demanding. One example that requires a software and systems approach is the challenge of meeting equity. I'm sure all of you have experienced this situation by now.
A number of people are dialing in from home, just like during the pandemic, except now, in our new hybrid world, we have people back in a conference room like this picture here. If we're honest, it's not that easy to see or hear people optimally like we do when everyone has their own video square. Wait, it gets worse. Someone now decides to share their screen, and those small people in the conference room now look small and tiny, like ants. Before the pandemic, this only affected a small number of remote workers. Now, with hybrid work so common, it's ballooned into a critical problem to solve. In fact, our customers nearly universally tell us this is the most important aspect of team collaboration to fix.
Fortunately, we've been actively working on this as a top priority, and I believe we've cracked the code to dramatically improve the remote collaboration experience. Our first step was launching AI-based speaker tracking, which we call Grid View. This allows our AI system to not only focus on the active speaker, but also to identify and pull out key people in the meeting. This emulates the experience of them being at home, even while sitting in a conference room. This shot shows that same scene from before, but by using our AI Grid View technology, where all the speakers are clearly seen by the remote participants. This is available today on our video appliances. For medium and larger rooms, we've announced Logitech Sight, a center of the room tabletop camera. Sight works in conjunction with the front-of-the-room camera to provide the best view regardless of where people are looking.
Everybody in the room can behave as they normally would, and the combination of multiple cameras and our AI software always gives you the best view of the action. I like to say this is a little less Silicon Valley and a bit more Hollywood. Multiple cameras with a smart director always giving the remote user the best view. I've been talking about this for a while, but now this vision is becoming a reality. I'd like to show you a short video of how this all works with our AI software and new Sight camera. I hope you found that as cool as we do. The feedback on Logitech Sight is just amazing. Universally, our customers are telling us that we nailed the experience, and they want Sight as soon as possible.
Fortunately, we expect to have Sight in customer conference rooms later this summer, and the benefit of a software and systems-based approach is that we can keep refining the user experience over time with a steady stream of software updates to make it even better. One of the largest opportunities for us in B2B is to build on our success in video collaboration and extend that further to the personal workspace, in particular our mice and keyboards franchise. While we've traditionally been strong in this product category, we believe there is much room to improve through tighter product and systems integration between our VC business and the mice and keyboards. For example, we've recently extended our device management platform, Sync, to also include managing some of our leading B2B mice and keyboards. Delphine will explain more about our personal workspace strategy during the next session.
As we've said before, we are not doing this alone. We are the largest room collaboration partner across Microsoft, Zoom, and Google today. Working closely with each of them, we can continue to co-innovate and drive the market to adopt these solutions. Speaking of innovation, we are far from done or slowing down. As the world dives into the hybrid experience, we are delivering award-winning solutions and running fast to solve these challenges. To sum up, am I disappointed by the slowdown and drop in sales? Absolutely. Despite the recent setback, I could not be more excited about our medium and long-term prospects. The world is moving to hybrid work. That will require new and better solutions that are software and systems-driven.
Equitable meetings are a critical problem that needs to be solved. I think as I've shown here, we have a breakthrough solution that will become the new standard for video meetings. We are the number one market leader in conference cameras. With our innovation humming, we are well-positioned for success. Last but not least, video meetings are the de facto way we now collaborate. The march to having video everywhere, in all rooms and all spaces, is inevitable. I'm super enthusiastic that we are in a strong position to help the world get there. Thank you. Now I'd like to welcome Delphine.
Thank you, Scott. Good morning. My name is Delphine Donné, and I lead personal workspace solutions. I'm standing here on behalf of an incredibly talented team. Today, I'd like to cover three areas: the long-term growth trends that fuel our performance, why that's an opportunity for us, and how we take advantage of the opportunity and maximize it through scale. We look at personal workspace holistically, introducing products such as mice, keyboard, and combo, webcams, presenters, and tablet accessories. It is our mission to create magical and intuitive personal workspace ecosystems for everyone to work, create, and learn anywhere, in the office, at home, at school, and on the go. I've never been more excited to share our ambition and strategies because times of complexity and change, like today, present growth opportunities for us. Let's start with a couple of the big long-term growth trends that fuel Logitech business.
First, hybrid work. This is, in fact, a blended hybrid reality where in-person and digital experiences merge across our professional and personal lives. It's a big driver of future opportunity with 1 billion knowledge workers out there, according to Gartner. Second, the democratization of digital content creation. As I'll share today when I talk through our advanced user MX portfolio, this trend has been important to the success of the personal workspace category. A large part thanks to the big, passionate community of creative professionals, software developers, and others, such as financial analysts and data scientists. 23% of people, almost 1 in 4, are creators, for example, editing photos and videos online. That's according to Adobe. The software developer platform, GitHub, counts a user base of 94 million people and reported that users grew by 27% last year alone.
Logitech is at the center of both of these trends. We offer amazing tools for all knowledge workers who want to work efficiently and comfortably, and for advanced users who want to stay in the flow and create easily with customizable tools. Hybrid is here to stay. Employers and employee agree. According to Ipsos, nine in ten people say they prefer to work in a hybrid or fully remote working model. Frost & Sullivan believes over 74% of hybrid-capable organizations are setting up for hybrid work. I'm sure many of you on this call today don't yet have the right setup, and you're not alone. We believe this is a huge opportunity for Logitech as people migrate to hybrid. The only question is, when?
The 1 billion knowledge workers in the world all spent time in lockdown, where they started to appreciate the value of the right kind of workspace. We believe these people will continue to build out their personal workspaces. In the U.S., still only about 50% of people have a mouse, usually the first peripheral people purchase. Plenty of room to penetrate the market even more. These knowledge workers will also be a catalyst for the organizations they work for. Businesses are still designing new office spaces, and employees will be vocal about their workspaces. If you have the perfect home setup, why would you settle for less in the office? Looking across all potential workspaces, office, home, or on the go, we can see that according to IDC, there are about 2 billion PCs and monitors in the install base.
We attach to this large base. I just said that about half people don't yet have a mouse. On top of that, about three-quarters don't have yet a keyboard. 90% don't yet have a webcam. The big install base is good for us. Whether people have an old PC or a new one, we believe they can improve their experience by upgrading or supplementing their peripherals. These opportunities are growing. For a start, there'll be more people. An additional 150 million advanced users are expected to come in the market by 2025, as well as we believe millions of content creators. Overall, we anticipate more workspaces per person to fit out as hybrid truly settles in. I personally have three different workspaces, two at home and one in the office.
Of course, we benefit from more laptops and monitors sold in the market. We don't see a strong correlation between our performance and annual growth or decline in PC shipments and install base. IDC estimates that another half a billion PCs will ship between now and 2026. Yes, it's an increased opportunity. Let's not forget the new categories and new experiences that hybrid offers us. I'll say it again. So many opportunities for increased penetration to increase the basket value for each users who engages with Logitech. Like any big change, it's complex. The way we work, create, and connect has changed forever. People work from anywhere, and work is not just productive, it's collaborative and creative. It's all blended. The big question for both individuals and IT decision-makers now is: how do I make it work?
IT managers, in particular, have to balance employees' needs against budget and security requirements. This complex world is a huge and growing opportunity for us to provide simple, intuitive, magical experiences and portfolios for people and organizations. We are doing it already with our diverse portfolio and innovation. How will we take advantage of this opportunity? The key is our multi-audience segmentation approach. One size does not fit all. There are multiple large and growing audiences. Each represent millions of people with different needs. We use our consumer insights and deep segmentation to unearth each audience needs. This allow us to design meaningful yet simple solution that help them navigate this complex world better. We are doing this already. Advanced users like coders, designers, and digital creatives push the edges, so we provide premium experiences for their demanding needs with our Logitech MX portfolio.
People seek health and wellness in their digital lives, so we offer ergonomic solutions. People like to express themselves, so we innovate expressive lifestyle experiences. People like IT decision-makers look for wireless connectivity, and we bring it with secure and cross-OS compatibility. People who prefer to create, work, or learn on the go, we offer a great set of mobile solutions. We've been in this category for years, but the true opportunity remains untapped. All our products are supported by 4 critical innovation leadership ingredients to make our multi-audience approach extra powerful. It differentiates us from competition, and it's a performance catalyzer. We are very serious about sustainability, both in terms of the environment and diversity and inclusion. Prakash will talk to this, but let me mention 2 stats I'm particularly proud of. Today, 75% of our mice and keyboards use post-consumer recycled plastic.
Innovating new environmentally friendly materials is a key part of our work. We're also innovating to increase diversity of our portfolio. More than 40% of our Amazon U.S. buyers this fiscal year are women. This wasn't the case just a few years back. Software represents another opportunity to be a catalyst for us. The combination of Logitech hardware with our software allows us to deliver magical and intuitive experience for our users that go beyond any individual product. Our users are increasingly recognizing the value of experiences like this. 38 million people have downloaded our Options and Option Plus software in the last 2 years, growing 26% from 2021 to 2022. Simple and intuitive experiences are available today. Option Plus already lets you mute yourself on a video call with a mouse shortcut the moment it recognizes you have entered a video call.
There is the power of Logitech wireless connectivity. We offer solutions that plug and connect in just 2 seconds across all operating systems, all apps, and all screens. Our wireless technology, like Logi Bolt, addresses the growing security concerns resulting from an increasingly mobile workforce, delivering a high performance and secure connection that is fully compliant with Federal Information Processing Standards. Put these ingredients together, we have a recipe for growth over the long term. We grow share in our existing markets through our diversified portfolio of industry-leading innovations that offer 5-star experience. Hardware and software combined receiving top ratings on retailer sites. Our go-to-market excellence ensure this gets into the hands of customers in B2B and B2C globally, it works. As you can see, we are up and a leader across nearly all categories.
We grow the market by introducing more people and new audiences to Logitech and growing the penetration rate. As I mentioned, so many people today don't have a mouse and a keyboard, and we believe we can bring them in the category. We also scale and grow using strategies to accelerate the refresh cycle, upsell with unique innovation, and drive cross-sell from mice to other peripherals. These strategies help us to increase basket value per user. Finally, we will create new markets by identifying new audiences and addressing their need with new, innovative experiences. All this is supported by our world-class, industry-leading capabilities in design, engineering, operation, and go-to-market and marketing. Let me show you a few examples of how it works. Advanced users have been Logitech's bread and butter since the company was founded.
They are our most demanding users, often creative professionals, software developers, financial analysts or engineers. They tend to buy a full set of products and refresh more often, about 1 year faster than other users. We serve these demanding customers through our MX portfolio. They're willing to pay for the best tools that help them focus, stay in the flow, and create effectively. For example, a few years ago, we would sell 1 MX keyboard for every 4 MX mice sold. Today, thanks to our cross-selling marketing capabilities, the ratio is about 1 to 1. Partnering with the likes of Adobe helps. Adobe is the go-to platform for creative professionals. Together, we can develop better experiences and meet our shared audiences' needs better, and it works.
We have more than tripled MX net sales in the past 3 years, doubled the user base and market share in the high-end in 4 years. What's next? That remains my secret, but I've given you the breadcrumbs: software, new audiences and categories and ecosystem. Let me show you a short video of our latest MX innovation. MX Mechanical Keyboard is helping us to accelerate the growth of this subcategory of non-gaming mechanical keyboard worldwide. Similarly, our digital health and wellbeing audience understand the technology we put in their hands to help them feel better and more comfortable throughout the day, and they're passionate advocates for it. The equation is pretty simple. Millions of people work long hours every day, on average, 82,000 hours in a lifetime, according to Gallup, often in uncomfortable, inactive positions. The productivity and creativity lost in the process is beyond imagination.
There is also the very real cost of strain to the body. We have developed our ERGO range from trackball to keyboard and vertical mice, they all help millions of people feel better every day. 90% of them say they'll never go back. Our Logi Ergo Lab helps us do this, we believe it's a unique in the industry, as does our audience segmentation. Simply by launching Lift, our vertical mouse tailored to women needs, we brought in women buyers in the category, converting a new underserved audience. We also welcomed Mac users and left-handers with Mac and left-handed ERGO version, both industry first. What's next? We have only just started tapping this huge opportunity, according to Logitech research from July last year in the U.S., only 5% of people who use a mouse use an ergonomic mouse.
Our task in this category is to continue innovating, educating, and driving awareness. Our lifestyle category is a great example of what sounds like a small target audience opportunity that can actually be very big. We kicked off with an innovation project for young people in China. There are millions of them. The POP keyboard and mouse proved so popular, we launched them globally, scaling geographically. We added emoji software features, colors, and accessories to the portfolio, and we designed it to be sustainable and recyclable. We supported it with unique marketing addressing this new young audience, and it worked. 40% of our POP users are Gen Z, and by the way, 60% are women. They didn't stop at buying one product. We saw an increased interest from users in expanding their personal workspace.
1 in 4 users bought a mouse and keyboard and even a desk mat. Incredible cross-selling power. This workspace has yet to be completed by Logitech. What's next? There is plenty of space for us to grow into, serve our audiences better, complete their setup, and enter more workspaces and address more mobile needs. When does people's needs for self-expression end once they leave their home? You've seen the recipe, and I've given you a few examples. Let me remind you that this is repeatable. There are many new audience opportunities out there. Scott already shared the incredible opportunities we have in enterprise, and it's clear already that we have plenty of innovation that meets the expectation of enterprise customers. Their employees will expect the kind of advanced or ergo solutions they have at home.
IT decision-makers will appreciate more mainstream solutions, such as the M650 wireless mouse, a platform that replaced 6 other products in our portfolio. This simplified our portfolio and also simplified the choice for IT managers, all the while delighting their employees with the right tools and different color and size options of the same mouse. Add to that our secure wireless technology like Logi Bolt, which is perfect for any office environment. We empower everyone, no matter their needs. Just the use of a mouse enhances your productivity by 50% over a trackpad. That's an investment of as little as $20 gets you. Step by step, people will also value the benefit of a great keyboard and a webcam.
For those advanced users who want more power, more customization, and a full ecosystem, they can build this incredible personal workspace worth up to $1,000. We are well set for sustainable and long-term growth. As people plunge into the hybrid reality and the demand for digital creation, the value of a good workspace will become even more apparent. We believe people will come to Logitech for the solution at home, at work, and on the go. Why Logitech? Well, we are a market leader. We have an incredible portfolio with simple and intuitive innovations, we have the right setup for everyone or nearly everyone. We have so many opportunities to grow markets with faster refresh cycles, upselling, and bringing in more audiences. Not to mention the many new categories we can pursue using precisely the model I've just shared.
To be honest, as GM, my biggest challenge is to decide where to focus. We have so many exciting opportunities to tackle. I will now hand over to Prakash. Thank you.
Thanks, Delphine Donné. Hi, I'm Prakash Arunkundrum, CEO of Logitech, it's great to be back to talk to you about operations and sustainability. We've had a crazy couple of years. Despite many disruptions, we delivered revenue and market share growth in FY 2021 and 2022. This fiscal year, we've also navigated a market situation to maintain our market shares while positioning for the future. Underlying all of this, we have a proven track record. Firstly, to execute cost, inventory, and diversification at scale while navigating a diverse business. Secondly, creating products with great design and build quality. Thirdly, doing all this and more sustainably. In my session today, I'll talk to you about these three. First, a quick reminder, we manage a diverse portfolio of brands and categories, featuring high-quality products that win design awards, we pledge to do it in a climate positive way.
How we do all this through our operations is that we source thousands of components with hundreds of key suppliers globally. We've added dual-source components and alternate suppliers through our portfolio through the COVID years. Our manufacturing is a unique blend of in-house and outsourced production capacity. We're able to manufacture a diverse range of products, everything from a $4,000 Rally Bar all the way to a $10 mouse. This unique capability enables us to scale up and down fast, and we make more than 150 million products a year. Our global distribution reaches 80 countries through retail, e-tail, distributors, and direct customer model. We've shipped over 5,000 cubic meters, or more simply, 15,000 containers to customers annually via many modes of logistics.
Through all of this, with our differentiated customer experience, we reach millions of end users through our diverse channels. Really, what does all this mean for our operational capability? What is our focus? First and foremost, it's cost. The strong inflation we've seen in the raw materials and labor markets we track seem to have peaked. Now we're looking at end-to-end our product cost, from design, components, assembly, all the way to distribution to bring our costs down. Second, we're looking at inventory. The unprecedented global disruption from the pandemic meant we needed to hold more inventory and manage our shortages. Now things are settling down a bit, we're working to bring our inventory back in line with the current needs and free up cash for other activities. Finally, supply chain diversification.
We're on track to produce more than 20% of our products outside of China by end of this year. Our own factory is automated 75%, giving us unparalleled flexibility. We can also make many of our product categories out of China and are beginning to component diversify on a path to accelerate further diversification. By focusing on these three areas, we're ensuring we're resilient in face of market shocks, and we are positioned to deliver sustained product improvements on our product costs. Let me start by first talking about product costs. Product cost reductions have been in Logitech's DNA for many years. We've been on a cost reduction journey, actually, since I joined in FY 16, driven mainly by design company ethos, which is designing for cost. You can see our track record in the consistent performance on COGS as percent of value shipped.
Like many companies over the past several years, we had unprecedented shortages while we supported growth. During the same time, since 2019, we've also been diversifying our supply chain, our suppliers, taking advantage of second sourcing opportunities, and leveraging our larger size and our manufacturing know-how to move rapidly. In the last 18 months, we've had inflationary pressures, which have resulted in some product cost increases. Looking ahead, we are redoubling our focus to bring cost reductions back to the portfolio. Our focus is now to reverse this recent upswing in cost. We're gonna employ a variety of techniques, strategically controlling parts of our supply, using value engineering to support and supercharge our design for cost efforts, utilizing our diversified and second-source supply base for leverage, and really using next-gen logistics capabilities to supply to our customers.
We are maniacally focused on cost, and this is our DNA we've had at Logitech across our operations, engineering, and product teams, and we're turning it on this year to bring the cost curve down over time. Inventory. As I mentioned briefly in the last slide, there's been multiple shocks to the global economy, the pandemic, and its aftermath. The component shortages that you saw from semiconductors resulted in severe shortages. The shipping routes were disrupted due to port congestion and an unexpected global demand surge caused lead times to balloon. Consumer demand for goods saw unprecedented growth, and then inflation and currency headwinds kicked in, and while the world opened up, all this led to global demand volatility. We built inventory to satisfy higher demand and to guard against these supply disruptions.
Now the lead times are actually coming down, shortages are getting resolved, and we are bringing inventory back in line with our improved global conditions. You already saw us bring our inventories down last quarter, we know what it takes to operate with better inventory turns. To make that happen, we are actually focusing on sales actions by region, adjusting our forecasting process, being more deliberate in our launch plans for new products. We're also rebalancing our inventory across regions, so we're best positioned to take advantage of a shifting market demand. We expect to bring the inventory curve also down over time, barring any other macro events. We're continuing to diversify our supply chain, evolving from mainly dominant production in mainland China to secondary locations for assembly spread across new countries and regions.
By end of this fiscal year, we are on track to make 20% of our products out of China. We've automated more manufacturing, and this really allows us to move production lines easily. We have shifted manufacturing for every major product category and now have the know-how to move assembly for all product categories. Really moving forward, our focus is both on finished goods assembly and ultimately moving the associated component supply chain and corresponding supply networks. We're looking to optimize our supply networks to take advantage of production opportunities aligned with our end markets in the US, Europe, China, and the rest of the world. Our focus is to leverage tariff favorability, proximity to customers, while maintaining our strategic priority to continue to rapidly diversify. We've talked to you for the last few years about the disruptions and the many challenges.
As we look right now, we still have headwinds with intermittent disruptions, geo-tension, inflation-led market issues, and variability in our product mix. We also have many tailwinds. Components are no longer short, as they were when I talked to you last year. Cost pressures are showing signs of easing. Shipping congestions are resolving. Ocean lead times are better. China has, at this point, reopened. Overall, while many challenges remain, the operational environment appears less disrupted than it has in the past several years. With that, I now want to move to talk briefly about our product design DNA. As you heard from Scott, Ujesh, and Delphine, we continue to innovate both in our hardware and software experiences. As a design company, under the leadership of our Chief Design Officer, Alastair Curtis, and our leadership team, we've employed an ex-experience framework when we're thinking about future products.
Our framework for product innovation is based on two axes: users and experience. Using this framework allows us to move faster on sustaining products while putting additional time into framing and visioning for transformative products. Enhanced products fall in the middle. Our product innovation playbook starts with iterate and prototype to design an appealing product that meets the financial criteria. We iterate quickly, bring engineering technology ingredients and software into our product development process, finally, we commercialize the product, leveraging our supply chain and go to market to enter target markets. The framework, the design principle, the launch process are all applied across the company have really allowed us to continue to innovate new categories and in existing product. Granted, this may look similar for many companies, but here's the key difference.
We launched over 200 products in the last 5 years, including during COVID, and we're working on a lot more. All this has resulted in us being great at design, and you don't have to take my word for it. Logitech has won over 180 design awards over the last 5 years. This is a testament to our innovation muscle. With that, let me now talk about sustainability. As I told you last year, we've been working on sustainability for years. We recently published our 14th annual report detailing our sustainability impact. We are publicly committed to our path, and in 2019 we announced our formal support for 1.5°C climate pledge. In 2020, we pledged to provide uncommon carbon transparency by carbon labeling all our products.
We became carbon neutral in 2021 and pledged to become climate positive by 2030. In other words, take out more carbon than we create by 2030. Look, we are unique here in the tech sector. Very few companies are carbon neutral on their entire footprint and even fewer on a path to pursue climate positive. What is our strategy? Our climate positive strategy has three key pillars. First, we reduce our carbon footprint using design for sustainability principles to get footprint reduction, not only in our direct operations, but also in our extended value chain. Second, we drive uptake of renewable energy as part of our RE100 pledge to drive renewable energy across our value chain.
Our own manufacturing operations already use 100% renewable energy. We are driving our tier 1 and tier 2 suppliers to convert more and more to renewable energy. Third, we're adopting a climate positive approach by investing in carbon removal through forestry while we work on reducing and renewing. As part of our efforts, we're really rethinking our business to utilize Circularity principles, Circularity in our raw materials such as recycled plastics and working to responsibly engineer reverse supply chains and give second life to all waste. Our efforts are helping us take very important steps forward. We have recently reduced our carbon intensity, which is carbon per dollar of revenue, by 20% since 2019. We introduced post-consumer recycled plastics across our portfolio and use it in more than 51 major product lines. We use more than 9,700 tons of recycled plastics.
In overall, one in three Logitech products use second life materials. Last year, we also launched the first keyboard using low carbon aluminum, one of our more carbon-intensive materials. We use design for sustainability tools when developing new products, and it's embedded in our innovation process for every new product. We are eliminating plastic bags and limiting single-use plastic. Just in FY 22, we eliminated 29 million bags, a threefold increase versus FY 21. Our long-term goal is to eliminate plastics in packaging completely. We put a lot of effort in redesigning printed circuit boards to reduce their carbon footprint. We've also kicked off an effort called Future Positive to attract many small and large businesses to invest in cleaner PCBs and power management technologies. All these are detailed in our FY 22 impact report.
We've now applied these exact principles to all our products, mice, keyboards, headsets, video products, audio products, everything. More than the numbers, let me show you just one example of how we bring this to life during our design process and what it means in practice in this video.
Our goal is ambitious: to significantly cut the carbon impact of Logitech products across the portfolio. One example is Logitech G's A10. We did a life cycle assessment of the first gen, found all the carbon footprint hotspots, and rebuilt it, maintaining the durability of the early design but expanding its lifespan. We added swappable parts and eliminated glue on the headband, making A10 easier to potentially refurbish. We also cut the length of the mic boom by 10 millimeters without affecting audio quality. We rethought the color. Desaturated pastels are a welcoming, non-traditional color option for new and younger gamers. We maximize the use of recycled content in light-colored plastics by overcoming many engineering challenges. There's no paint, so the plastic is recyclable at the end of its lifetime.
The plastic parts in A10 are now made from 35%-85% recycled content with PVC-free cables and low-carbon aluminum made with renewable energy, not fossil fuels. To make packaging more sustainable, we utilize space better and use more universally recyclable materials. This new packaging is almost entirely made from recyclable paper. Like the hang tag and tray used to be plastic, now it's paper pulp. The plastic bag is gone, replaced with printed tissue paper. We think it looks pretty cool. Users seem to think so too. " Yo, hold on. This feel mad recyclable. This smell mad good for the environment. Hold on."
The only single-use plastic is a piece of film on the high-gloss mic finish. That's a big reduction. A10 looks great, achieves up to 38% carbon impact reduction compared to the previous generation, plus a 32% increase on the Logitech Circularity Index. That carbon reduction adds up to 57 tons of CO2 equivalent per 100,000 units, which equals about 140,000 miles in a gas-powered car. Our goal is for every design decision in every new product to take account of environmental impact, this is just the beginning.
You saw in that video, some great work is in place to reduce the amount of carbon in our products. This is one commitment we've made publicly. Being transparent with our consumers, showing the carbon footprint impact is another commitment we've made. As I've said before, carbon is the new calorie, and as a consumer, you should know how much carbon you're consuming. Logitech is still the first consumer electronics company to continue to provide lifecycle carbon information openly and transparently. We're committed to sharing our methodology and measurement processes for others to use and really join us in carbon transparency. We've actively engaged with many peer companies and industry think tanks to do exactly that. We're doing as we committed. We have over 45 products already carbon labeled on shelves and on our way to carbon labeling all our products.
Our consumers are starting to notice. Finally, I want to share how our efforts are being recognized. We continue to receive acknowledgment and high regard from noteworthy sustainability ratings organizations and are listed on major climate-oriented indices. We continue to be on the Dow Jones Sustainability Index. We're on the Morgan Stanley Triple A rating, EcoVadis rated as top 1%, Financial Times actually rated us number one in Europe, and much more. We're demonstrating our commitment to sustainability to customers and consumers and most of all, to our shared blue planet. With that, I'll turn it over to Chuck to talk about our financial outlook.
Thank you, Prakash. As you know, I recently joined the company last month. Prior to joining, I was so impressed watching Logitech's performance through the pandemic and global supply chain disruptions. Now, after being on board for a month, I'm equally impressed with the cost discipline as we navigate through this transitional period. I joined Logitech because I believe in the long-term opportunity we have in front of us. First, video is in the next phase of technology-disrupting communications, just as the telegraph, landline, and mobile all did back in their day. Second, as you heard from Ujesh, gamers and creators keep redefining the world that we live in. Given the pace of change, just think of where e-sports and gaming will be in a few years.
As Delphine Donné mentioned, the legacy of Logitech will play an even bigger role with the transition to hybrid work and growth in the creator and content consumer economy. With that in mind, a few points Bracken made really resonate with me. First, we're a design and innovation-led company. Second, we have evolved our world-class operations and go-to-market capabilities. Lastly, something that is very important to me, we operate with financial discipline, sizing our expenses for the opportunity in order to protect our operating margins. Let's start with wrapping up fiscal year 2023. We are maintaining our recent outlook, which calls for net sales to decline between 13% and 15% in constant currency and non-GAAP operating income of $550 million-$600 million. Fiscal 2023 has been a difficult year, clearly, we're disappointed with the financial results.
With that said, we expect to roughly maintain or grow market share in most of our key categories. To build on that, we continue to navigate a dynamic market condition and on multiple fronts. As we've seen in the headlines with many companies, they continue to focus on cost reduction, announcing layoffs, and delaying spending as near-term visibility remains low. As you heard from Scott, the pace of return to office has been uneven. Companies are still in the process of determining their strategy for the hybrid model. We remain steadfast, though, in our optimism that we will see further investment in personal workspaces and collaboration rooms. When it comes to inflation, interest rates, FX, geopolitical tensions, we expect these to be ongoing issues based on what we have seen in the market. Finally, consumer sentiment has improved moderately.
It's an area we'll keep a close eye on as interest rates increase and workforce reductions continue. You can see, we expect fiscal year 2024 to be a year in transition. Once again, I believe in our diversification across geographies, customers, categories, and they'll be key in softening the impacts of these headwinds. Now let's shift gears and talk about what we control. I just stated, fiscal 2024 will be a year in transition, and I believe companies win in transition. We are well-positioned because of our financial discipline: no debt, a meaningful cash position, and a very clean balance sheet. We navigate this dislocation following the pandemic, we are taking actions to quickly reduce our costs while maintaining our key investments. This short-term versus long-term trade-off is critical. We could, for example, cut significantly more OpEx to improve the short-term results.
That could jeopardize our position when the markets return. We believe we are striking the right balance to protect our margins in the short term, yet position us to take full advantage when the markets stabilize. A couple of specific examples. First, we expanded the capabilities of our enterprise sales team. This has driven significant growth in our B2B categories, which now represent more than 35% of our total company sales. Another example is our expanded software engineering and R&D teams, which has accelerated the launch of many new products. One of our key priorities that Prakash touched on is to have a lean and efficient value chain. Simply put, when we eliminate and reduce trapped working capital, that is good for our vendors, our customers, and for Logitech. With that said, we'll see an opportunity to improve the cash conversion cycle.
We have taken actions to reduce our on-hand inventory, which is down sequentially 3 quarters in a row. We are also focused on channel inventory, which is within normal operating levels. However, there are certain categories that need to come down and others that need to increase. This requires constant and active management, both in up markets and down markets. The objective of our focus on the purpose-built value chain is to improve return on invested capital. Our plans with respect to capital allocation remain unchanged. As we've said in the past, we are focused on investing for the long-term growth, including M&A, and then returning excess capital to our shareholders. We remain prepared to acquire companies when we identify a target that can accelerate our entry into a new category or strengthen our position in an existing one.
In addition to organic and inorganic investments, we've used our stronger cash generation to increase capital returns to shareholders. We've returned more than $1.4 billion over the last three years. In the near term, we plan to continue our share repurchase program and payment of an annual dividend. Let's talk about our long-term model. As Bracken mentioned, we still believe the fundamental tenants of the long-term model make sense. Pre-pandemic, our gross margins were just below 40%. The pandemic hit, we limited discounting. That, coupled with significant volume increase and the mix shift to video products, drove gross margins well above 40%. In this transitional stage, we are back below 40%, but as you heard from Prakash, we have some potential tailwinds that will help over time, we believe, to improve gross margins from the high 30s to the low 40s.
While their plans are not final, our goal is to reduce OpEx to a run rate of approximately $1 billion, which is down approximately 27% from fiscal year 2022. While we can further reduce costs, as I mentioned earlier, we believe that the best strategy is to protect the core investments, specifically in enterprise sales force and R&D, so we emerge strong when the market stabilizes. To help understand our business in fiscal 2024 in more detail, we are providing information on the rankings of our products based on profitability and growth expectations for next year. The key point here is that we are dynamically managing our portfolio to deliver financial results. The table on the right-hand side is the quarterly breakdown % of full-year sales based on recent trends.
Our current thinking is that the markets in the first half of 2024 look a lot like our business today in Q4. Now to update you on our outlook. With the current market uncertainty, we have limited visibility to the second half of next fiscal year, therefore, we are focusing our outlook on the near term. Over time, we plan to revert back to a full-year outlook. We expect first half fiscal 2024 revenue of $1.8 billion-$1.9 billion, down approximately 22%-18% respectively versus the prior year. Our corresponding operating profit to be between $160 million and $190 million, down approximately 47%-37%. To end where I started the presentation, we are very excited about the road ahead for Logitech.
Our ability to grow market share as a larger, more efficient company holds true. We have a consistent approach to winning in the market through scaled innovation, diversification, and operational excellence that will continue to deliver results. Now, with that, let me turn it back to Bracken. Bracken?
Thank you, Chuck, and thanks to everyone that presented today. I am so proud of this team and what they bring to Logitech every day. In a moment, we'll take questions, and we're excited to hear what's on your mind. Let me close by circling back to where I started. As you all know, I'm guided by the long term, and I remain super energized about the long-term opportunity in front of us. We have strong capability advantages, and we're building out those capabilities further. As importantly, and as you've heard, we have leading positions in our markets, and our markets are backed by strong long-term tailwinds. This is an exciting time for Logitech. I can't wait to take your questions. Give us just a minute to get to the same room, and we'll get started. All right, here we are.
I am super excited to see all of you. I wanna start just by saying Delphine Donné is the one presenter who's not with us today here physically in California. She's in Zurich, if you're wondering. She couldn't come 'cause she has to give a presentation, I think later today or tomorrow, right, Delphine? Okay. But you can also ask questions about absolutely anything in the business. I do wanna start by just saying it's really fun to watch these presentations, you know. Sometimes I realize I'm so close to the business that when I step back and listen to all these people present, I am absolutely blown away by two things. One is just the incredible potential and capability we really have, and the second is these people.
T hey only represent a small percentage of an incredible, incredibly talented team across Logitech. Yeah, I am super proud. Enough. Let's take your questions. Let's start with the first one, Nate.
Great. As a reminder, for those that would like to ask a question, please raise your virtual hand. We'll get started with Asiya Merchant from Citi. Good morning, Asiya.
Hello, Asiya.
Hey. Good morning, everyone. Thank you for all the details. I have a couple of quick questions.
Hey, Asiya, if I could direct everybody in the beginning, let's just do one at a time so we can kinda keep track of them, 'cause sometimes people ask two or three at once. Just one question, and then...
Sure
... and then you can have another one, but we'll answer it then go to the next one.
Okay. Sure. Some of the larger PC players are calling for a bottom in the March-April quarter. Logitech just sounds a little bit more cautious than that. I know PC and PC peripherals are not tightly correlated, but just broadly on consumer sentiment, consumer spending, and enterprise spending, to what extent has the first half 2024, the near term guidance, been de-risked at these levels?
Well, first of all related to the other PC players, I can't speak for them. We can't speak for them. What I would say is we just reflected really the continuing momentum into the first half that we saw in the last half of the year. Really didn't alter it much. You wanna add anything, Chuck, on-
Yeah, I mean, I think, Asiya, it's a, it's a good question. Certainly, the consumer's fairly strong right now, but you know, we're on sort of a short-term rising interest rates, you hear in the news cycle. So we're probably a bit more cautious than they are. We just believe that the first half looks a lot like where we are right now in Q4.
Okay. Just clarification, this is sell-in and not sell-through? Because I know you guys at your quarterly updates do give some commentary on sell-in and sell-through levels.
Our, yeah, our guidance contemplates sell-in. Of course, we're very disciplined about looking at the value chain and constantly monitoring channel inventory to make sure that we are in a really good spot. Yeah, our guidance is the P&L, and it's our revenue, which you know, we believe is approximate what sell-through will be as well.
Okay. Great. I'll get back in queue. Thank you.
Thank you.
Okay. Terrific. Yeah, by the way, I should say, it's fun to have Chuck here. I feel like he's plugged in, like, I mean, it's like he's just another person who's been here for the last 10 years.
Well, it's great to be here, so thank you for...
Well, good.
...recognizing that.
Good. Okay. Next question. Thank you, Asya.
Next up is Adam Angelov from Bank of America.
Hi, Adam.
Hello.
Hello.
Good morning, good afternoon. Yeah, if it's just one at a time, I can jump back in the queue. Just the seasonality you kind of indicated for the past years, is that something we can take as a bit of an indicative guide for FY 2024 on revenue?
Well, yeah i we don't have great visibility of the back half of the year. You know, our Q3, our December quarter, is the biggest quarter. If you look at how the trends have changed over time, Q3, our December quarter, used to be by far the biggest quarter. So we wanted to provide that to help you model the business and to see what the overall linearity would be. It's not, we're not providing full year guidance, but it will give you an idea to model what we expect the year to look like based on newer trends with the emergence of video.
Adam Angelov, you don't have to go back in the queue. You can go ahead and ask your next question. I just wanna answer them 1 at a time.
Oh, okay.
Yeah.
Great. Well, I just wanted to double check another one on the financials. The $1 billion OPEX comment, was that supposed to be for FY 2023, or is that, sorry, FY 2024, or is that more like a midterm OPEX comment?
That's a run rate.
Just wanted to check that.
Call it midyear 2024. Think about that sort of the September-ish timeframe. We expect our expenses to be at a billion dollar run rate. In around 6 months, as we are reducing costs, we'll get our OpEx down to roughly that range.
Okay. Okay, great. Maybe it's a bit of a cross-functional question, but curious a lot of the different presentations from the different teams is about raising awareness of products and upselling users. How do we kind of square that with this focus on OpEx efficiency? Is it you just were spending more than you needed to in the past, and now you don't need to spend that to get the same levels of revenue? Or is it more short-term versus long-term points?
Yeah, I think, the way I've answered kind of that question before in other calls, and I'll Try to give a little more perspective maybe. You know, our general view is in an upmarket you really tend to spend across the marketing funnel from awareness all the way to conversion. In a downmarket, you tend to focus it on conversion 'cause you're really pushing, kinda pushing water uphill. We're really focused on that conversion right now. We're spending right against conversion. We have ample marketing spending to really convert the users who are out there into sales for us. You can see that in our market share gains across our key categories.
You know, over time, we'll certainly always relook at marketing and the marketing effectiveness and invest more at where we think we need to. But we have a pretty tight view of what our OpEx as a percentage of the total business should be, and we're gonna, we're gonna stay on that.
Okay. That's great. Thanks for letting me on. I'll jump back in the queue.
Thank you.
Next up is George Wang from Barclays.
Hi, George.
Hey, guys. Thanks again for all the details. Just the first question, can you kinda comment on when do you think that you can return to kind of long-term model? You know, you kinda guided for kinda high single digit to 10% growth. Just curious when do we expect to kinda get there?
Let me start, and then I'm gonna ask Chuck to jump in too. You know, first of all the long-term model is a long-term model, so it's not tomorrow or next quarter, of course. We've just guided for the first half. I think we've got several really strong things that give me confidence in long-term model, and you heard all of them today, but I'll try to touch on a few. One is the secular nature, the secular growth in the, in the individual categories seems inevitable to me. I mean, it's just super strong, whether it's video moving into every room, and it's only in a fraction, as Scott said, and we also have the ability to drive mix within those. The, the gaming phenomenon that Ujesh went through is just stunning.
Personal workspace. You know, I have to say, I'm every time we go through the personal workspace business, like Delphine today, I'm really kind of blown away by the potential there. It just seems like it's like a, it's almost like a fountain of youth that just never stops being potential. So all those are good. And then we've got the secular opportunity, I think, on the gross margin side that both Chuck and Prakash talked about, which is you've got inflation currency that are kinda working against us and have been for the last year and a half. Those are gonna unwind.
Trying to figure out exactly when the unwinding of the inflation currency general cost piece, as well as when does the market come back and when do we start to see a recovery in the macro, it's hard to say, but I feel really good about it happening. Just can't pick a quarter or anything like that. You wanna add anything to that, Chuck?
Well, I would just add that it's a really great business model. I mean, right now, our gross margins are in the, in the high 30s%. As this, as the environment normalizes, we think that we're gonna be up in the, call it, low 40s%. Then we'll grow faster, revenue and margins will grow faster than OpEx, and we'll get that leverage and that kinda spring-loaded model. When does that happen? I have no idea. Is it 1 year, 2 years? We just don't know. It's, it's the factors that Bracken just mentioned. This, the business model that we have, the long-term model, is just such a great model. It makes money in bad times and in good times. We feel really optimistic about the future, but unsure of the short term.
Okay, great. Yeah, I have a quick follow-up. Just maybe you can kind of unpack kind of your thoughts on the pace of the recovery across different categories. You know, last time you commented on kind of first in, first out, being the gaming kind of first to recover, because somebody went down the first and also kind of faster refresh, the VC being the opposite. I mean, are you still sticking to the same viewpoint? You know, as it relate to, you kinda laid out in this one slide, kind of pecking order in terms of the growth rate for FY 2024, and I kinda saw the VC being the third place in terms of the growth rate. Just curious and you have any kind of later thoughts in terms of the trajectory of recovery across categories.
Let me start with that. I'll just say, we don't have a crystal ball on that, but if you know, my intuition is that you'll, that gaming probably will start to come out of it a little earlier. We got several really strong things in gaming that are more short term. I don't expect it to turn around this quarter or next quarter but we got some really good things. There's a lot of game titles coming out. You know, we've got a great wheels business that Ujesh talked about, that I was really impressed by and continue to be blown away by. We've got some really good dynamics in the gaming business, and the gaming business is a, it's a super high interest business for consumers.
You know, when the availability of cash comes, is there I think, I imagine it will come back probably a little earlier than the others, but we'll see. I don't think I have too much more to add than that. You wanna add anything to that?
No. That sound... That's great.
Okay, good. I'm gonna jump back to the queue.
Okay, thank you. I like that you're going back in the queue. That means you have more questions, you and Adam, Obviously you all have more questions. Oh, kidding. You know, you might not. Okay, next question.
Next up is Paul Chung from JPMorgan.
Hey, Paul.
Hey, guys. Thanks for taking my questions.
Thank you.
Chuck, good to see you again. Just wanted to take, just get your take on kind of your initial takeaways from kinda looking under the hood after your previous position at Poly. You know, where do you see some competitive strengths in B2C? Where can the firm improve, in your view? Do you see more kinda material share gains in kind of the larger conference rooms? I have a follow-up.
Yeah. Well, thank you. Great to see you again as well. I'm just so excited to be here. I'd say the strength in this company is the people. It's a really, it's a design-led company, and I'm just blown away meeting with Alastair and the team, talking about the roadmap and the products. It is just so cool. The diversified portfolio we have is super exciting. This is we're more consumer than Poly was by far, and that energy and excitement just permeates through the company. That part I am just really excited about. I think every company has their strengths, and I would say on the video side here, the business that Scott built in a relatively short period of time is amazing.
The product portfolios, the market share, I mean, number 1 market share, it is just astounding what Scott has done with this, with the video category. I'm not gonna go through and say anything negative about Poly. They're a great team, and had a great experience there, but I'm just super thrilled to be here.
Okay. I guess just on the cash flow outlook, you mentioned kind of that 1 times pro forma operating profit for 2024. You know, how do we think about inventory levels as we exit 2024? Can we see that coming down year-on-year? Given the working Cap drag over the past 2 years, can we see some upside to that 1 times pro forma EBIT, given some of that catch-up there? Thank you.
I think so. I'm gonna have Prakash answer that one because he's just a absolute machine on the operations side. The answer is yes.
Yeah. Thanks, Chuck. I think, as you probably saw, we've been bringing inventory down sequentially quarter-over-quarter. As I kinda said in my prepared remarks, we deliberately focused on actually doubling our business and therefore actually looking at the disruptions that hit from COVID, the logistics issues we had, the component shortages, and really put us in a position to gain market share over the last 2, 3 years. If you go back before that, we've had the track record to run at 5 turns to 5-6 turns, and we've had that DNA to actually execute. The way we do that is look at regions, the sales forecast, actually look at the run rate, look at what products and what geos, and actually manage that really tightly and respond to that pretty quickly.
You know, as we look at, like, some of the new products and launching and looking at kind of the market situation and the guide that we just gave, we're gonna keep a very close eye on it and essentially make sure that our inventory levels comes back to that operating range over time. That's our game plan, so you should expect to see it come down.
You know, can I add to that? First of all I just can't overstate what an amazing job Prakash has done leading the operations team to ramp up and ramp down across different parts of the business, not just inventory. I would also say Chuck said something about transitions. You know, great teams win in transitions. I think you said that.
Yeah.
I'm, some of you know I'm a basketball fanatic, and it's amazing to me how great teams really do win, shifting very quickly from offense to defense and defense to offense. I played last night, and I was really thinking about this because I knew this presentation was gonna happen this morning. That, if you look at what we've done in cost, for example, how fast we ramped up, hoping that we could you know, really kind of bridge the period when maybe there would be a slowdown, but not too much of a slowdown. We had a bigger slowdown than we expected. We ramped way down this year, as you know, and we'll keep it down, and we'll take it down further if we need to.
That move in transition is really, I think that flexibility of Logitech is another one of our big strengths.
Okay, great. Just my last one I'll squeeze in, just on the manufacturing expansion across Asia, Southeast Asia and Mexico, can we see more expansion maybe in Mexico? If you could expand on some of the cost benefit of moving there, and are you also thinking about outsourcing a little bit more?
Great.
Thank you.
Yeah, no, thank you. I think, we've been working on diversifying our manufacturing footprint out of mainland China for over five years now. You know, we're at about 20% of our production capacity outside of China. More importantly, I think we've been able to move all product categories that we make at Logitech across everything that you see, the diverse portfolio, actually move them in and out of our manufacturing facilities, be it in China and in Southeast Asia. One of the key strengths there is to be able to actually move these production lines on and off, but also look at moving the adjacent component supply chain and the logistics footprint with it.
When we do that, one of the main things that we've looked at is to be close to the market, get some tariff benefits, while also making sure that we keep the same eye that we have on quality of the product. The key criteria are those, right? It's actually looking at what makes sense from our end product markets, what makes sense from our cost structure perspective, what can we continue to do from a quality standpoint, and how do we actually move the component supply chains along with it? As we look at expansion beyond Southeast Asia, we're certainly looking at Mexico. We're also looking at other markets, as I alluded to in my prepared remarks. Depends on the specific products. We make a lot of different products.
There is all of these are options, and we are definitely moving to a world where we're gonna have a more diversified supply chain.
Perfect.
Thank you.
Thank you. Thanks, Paul.
Thanks, Paul.
Next up is Andreas Mueller from ZKB.
Hello, Andreas.
Yes. Hi, everybody. Hope you can see me.
We can perfectly.
Good. Hello also to Chuck, great to see you the first time here. I've got The first question will be do you see price pressure or competitive pressure in general from people coming into your turf? In what segments is that the most intense?
I'll start with that. You know, Delphine, get ready because I might bump this, part of this off to you. You know, I would say overall naturally you saw it in our Q3, there was more promotional activity, kind of our products sold more during the promotional periods. I'm not sure that was as much competitors coming in and doing that to us. I think it was more the consumer making choices to buy competitively. Generally speaking, I don't think we're seeing a big change in price pressure across the board. You know, I do think we're very cognizant, and now I'm gonna hand it off to you, Delphine. I think we're very cognizant, especially at the low end of our lineup, not to let somebody come in and undercut us on price deeply.
you wanna add anything, Delphine?
We always had pressure in the low end with some level of competition across the world, but at the same time, we've done exceptionally well in adding value to our portfolio and upselling people to the mid-range, to the ERGO series, Lifestyle series, MX series, and actually the value of our revenue has increased significantly if we compare with the fiscal year '20. If you look at mice only, our revenue in mice is 40% more than what it was in FY '20, and our average selling price is also significantly up. I think this whole strategy on focusing on the right audience and providing better experience and cross-sell at the same time has really helped adding value to our portfolio, while obviously competition is always there, and we'll always try to stay ahead.
I'm gonna. Thank you, Delphine Donné. No, that's a great answer to the question. I'm gonna ask Scott to jump in on this too, because I do think, yeah, Andreas Mueller's question may have been focused more on video collaboration. I'm not sure. Are we seeing price pressure that you're aware of?
We're, like Delphine Donné said, I think we are seeing healthy competition, and we've always seen that. I would say if you look at our presentation that I gave, we are seeing our average selling price both for conference cams and for rooms go up substantially. I think we said, I said about double from before the pandemic. I think we're doing pretty well overall in moving up market, just like Delphine Donné said, as part of our overall strategy to add value. We have great competition. We have a lot of respect for them, but I think we're doing pretty well in terms of holding our own and then moving up market.
I do think this is one of the magical things about Logitech. You know, this company started as an OEM company, and if you know anything about OEM, you are so cost-focused when you're an OEM. You listen to Prakash, you can feel he actually had the word maniacal on the slide focus on cost. You know, we have an incredible cost-focused DNA. We also, as Chuck said because of the orientation to design, the very strong engineering capability here, we have an incredible focus on innovation and trading up and selling, which both Delphine and Scott talked about, and you, Jesh, too, you know. I really feel good about that combination of being very cost-focused where we need to be, innovating well, and you can see it in the, in the average pricing that we're selling at now.
Okay. Thanks. One question about the asset allocation. I mean, if inventory is coming down, OpEx is coming down, CapEx is also a little bit coming down. Are there different priorities now, or what's the priority and how do you see the share buyback program, which is running out at some point, being renewed?
Well, to be clear, the number one priority is growth, we are going to grow organically and inorganically. Not sure when because of the market dislocation, that is the number one priority, period, full stop. Excess cash we will return back to shareholders. We're just very proud of our financial discipline and the strong balance sheet we have, the cash position. In this market uncertainty we're looking for ways to grow, and that is the top priority. Excess cash we will return back to shareholders via buybacks and dividends.
Okay. Thanks. My last question then I go back to the queue. Is marketing the marketing spend, has that some sort of floor, which you can't really go underneath? Or is that. Is the floor already reached, say, run rate in the first half?
I mean, I think from a marketing standpoint, we're investing at the appropriate level. We could probably bring it down a little bit more if we needed to. We're still up significantly versus pre-pandemic levels. You know, we are the leader in most of our categories, so that gives you a position that you can play to. You know, the extent to which the market's down, I don't, as I said earlier, I don't believe in over-investing in marketing when the market's down. I think it just feels like really wasting money. On the other hand, if the market comes back, I think we've got room to ramp up and still stay in our OpEx envelope that we're gonna require ourselves to stay into, because it's really critical to this business model.
No, I feel like we're in a pretty good spot from a marketing standpoint. We probably have a little room to come down if we needed to.
Okay, thanks.
Thank you. Thanks, Andreas.
Thanks, Andreas. Next up is Jörn Iffert from UBS. Good afternoon, Jörn.
Hello, Jörn.
Hi, everybody. Hi, Chuck, good to see you and good to meet you. Thanks for taking my questions.
Thank you.
The first one is, on your overall top line volumes. Why do you think you are sitting in a cyclical downturn? When I look on the consumer, we have full employment, we have some macro-sensitive areas like passenger across .
It's a kind of transitional period where you've got interest rates going up. You do have very high employment, which is the contradiction, I think that's driving the central banks to continue to raise rates, which it's just working to dampen it. Consumer confidence is kind of wobbling now because I think consumers aren't sure where this is going either. You know, you could see it during the holiday quarter when so many companies reported challenging challenging Q, our Q3s. I think we are there. I think the real question is, where do we go from here? Is it a soft landing? Is it a hard landing? Is it all that stuff?
We're kind of on the assumption that the momentum's just gonna keep going where, the way it is for a little while, and then eventually it will turn. I'll let anybody else jump in any, and answer any part of that question you want to.
I mean, I can jump in.
Great.
You know, we talk about Logitech and how diversified Logitech is. The thing that I love is just within my business, how diversified we are just in gaming and content creation. The way to think about this business is, I know we wanna think about the natural upgrade cycle, but actually the way I think about it is, these folks are buying our gear to perform better, look better, sound better. You might wanna also think about our business almost like you do sports or pop culture or fashion, 'cause that's how these gamers or these kids or a 51-year-old gamer like myself, that's how I think about it as well, they're buying the gear to perform better.
Think about the kid that buys those Air Jordan 'cause they wanna be like Michael Jordan or LeBron and play better. They're buying our pro gear, our keyboards, our mouse, our headsets. Now you add content creators on top of that. They're buying all of those products I just talked about, but now they're buying a camera, a light, a microphone, our Streamlabs software and putting that all together and, I don't know if you have kids at home, but if you do, you should talk to them, ask them what games they play, what content creators they follow. Those creators are on Twitch, YouTube, TikTok, Instagram, all the place our kids are, and they're buying all of our gear to do that. That's the kinda way I think about it, and that's why I am personally excited about our long-term growth opportunities.
Let me just touch on the penetration question for each of our categories. You know, I think you saw in Ujesh's presentation, he talked about $150 million new gamers coming in. You know, you've got this constant fuel of new people coming into that market all the time because you've the age cohort that comes in, the older ones don't go out. As long as we innovate well, or the excitement cycle and things like wheels driven by cultural dynamics, that's, we believe that's gonna keep growing this overall market. There are more people to come in and get and more trade up to do. You know, I was with a very famous musician not too long ago, and he said, "You know, everybody wants into gaming.
Every musician wants to be part of this gaming world," you know? There's a, there's a magnetic, magnetism to the gaming universe I think is gonna keep driving trade up and, and purchase cycle, as well as the penetration. You know, and Scott's presentation he talked about the number of rooms. You know, it's just a head scratch, you know? How, if we're only at, regardless of what percentage you think it is, whether it's 10% or 15% or 20%, it's a low number relative to a world where we're all in video. I mean, we all, almost everybody on this call can remember the time when you went into a room and there wasn't a phone in there.
Now it's very, almost impossible to remember, to think about a phone not being in one of these enclosed rooms in here. Video is now in 10% of them, only 10% of them. That penetration. Then you heard Delphine talk about a really interesting dynamic, which I'll tell you is a new one. You know, when I joined Logitech, it was one of the reasons I joined was everybody said, "well the mouse and keyboard's dead, right? Because the iPad's come out, this thing's on a long-term secular decline. You guys gotta get into new stuff." I was super energized by that because I wanted to serially enter new things. Well, that was wrong because guess what?
Not only did the market do fine, but we actually kept finding ways to innovate against new audiences, and you heard Delphine talk about that. You know, our ability to bring an offering, whether it's an ergonomic one or just excitement in terms of emojis or, there's just an almost, I feel like there's almost an endless number of things we can do to generate more and more interest in the category, and you've heard Delphine hit them. In fact, she also said something, Delphine, I'm gonna call you out on this. She said, she didn't say seeds. She said, "We're working on new categories." We've got opportunities for new categories in all of these businesses. You know, in fact, within the last year, I don't know how many new categories we've entered, but quite a few.
Not all of them are gonna work they're seeds. Some of them will. We entered cloud gaming. Just today in The New York Times. What's in The New York Times today?
Financial Times.
Financial Times, okay.
There's just Microsoft's talking about how well they're doing in the cloud gaming space and how they're gonna use that opportunity to bring games to more and more gamers.
Yeah.
Things like Call of Duty.
Our cloud gaming product's pictured in there, I think.
Our cloud gaming product is pictured in there. When i look at the work they're doing, they're doing tremendous work, both Microsoft and NVIDIA in that space.
Yeah, amazing. There, so there's so many, Jarn, there's so many opportunities for us in these spaces. You know, I think people tend to look at it as there's one thing. We have opportunities within those places we're in. There are over 30 different categories. We have opportunities to enter new categories within them. You know, Scott talked about Sight, which is a completely new category. It's a new product that goes in the center of the table. Scribe, our whiteboard, that's really a new category. It doesn't, it didn't exist before. We're just scratching the surface of some of these things.
Maybe I'll add to Jörn, 'cause I know you have some research that shows the penetration numbers that are slightly different than what the analysts are saying. I'd say just purely on the upgrade cycle, part of what we're seeing is a pretty significant change, where before if you looked at video conferencing, it had an upgrade cycle that was more akin to the PBX or the telecom industry. It was about seven years. If you look at where we in the industry are adopting it's now more of a mobile phone infrastructure. Every year you get faster processors, more software. We're adding a lot of new functionality that looks a lot more like a mobile phone world than it did like traditional PBXs. That in and of itself is driving more innovation.
You saw some examples that Bracken talked about, like Sight and Scribe. If you look at the entire installed base of video conferencing, almost the majority, almost all of it is either old legacy H.323 stuff or even our stuff that is USB stuff, which I would say even up to the last couple of years, if you wanna adopt Scribe or Equitable Meeting Technology or AI, you have to upgrade. I think we're gonna see a faster upgrade cycle. What exactly the number is, hard to say, but it's definitely gonna be faster than what you saw in the past. If you wanna use some of the new things that we showed you know, customers are gonna need to upgrade, and they're telling us that they wanna do that.
You've obviously touched a nerve, so now I'm gonna go to Delphine and let her have the last word on this.
No problem. I just wanted to say, actually, our penetration has increased in the past four years for our category. We've improved that penetration for mice and keyboard in particular. We see for the MX lineup in the high end, we've actually accelerated the refresh cycle by almost one year. There is a real interest in the innovation. If we look at where we were a few years ago, where we were selling one keyboard for four mice, and now in the high-end lineup we are one to one, you can imagine the acceleration of adoption in keyboard this represents. I think also the value of our categories has increased in the sense of the desirability of our categories. I'll give you just one example.
We have, there is a new Amazon fashion store in New York, the number 1 product sold in that store is the Logitech K380, one of our lifestyle keyboard.
All right.
That's not what you would have expected a few years ago. There is a lot of transformation and appreciation of our categories. Thanks to the pandemic, people working in, Sorry. In spite of the pandemic, people working from home, having not necessarily the right setup and now upgrading to the right setup. Plenty of opportunities.
You know, Jörn, I'll take advantage of that comment and say Prakash mentioned our design team and what a great job they've done working with our product teams. Prakash oversees, like, half the company, but overseeing this engine that we have for innovation. We will soon announce their biggest award yet, but they continue to win awards and that's because we do have this innovation engine that creates opportunities for more penetration and more upgrade and more of everything.
Thanks a lot for this. If you allow me, really just one quick-
Of course, yeah.
... technical question on the gross profit margin. Is your FX benefits on the current spot rate and the freight cost benefits, are you still sitting and hedging for the next 2, 3 quarters on more unfavorable terms and we only see the benefits in the second half? How should I think about this?
You wanna take that one?
I'll take it.
Yep.
up most of that. FX, as you know, has been a significant headwind. It's been depressing our gross margins. We don't do revenue designated hedges, so we protect the balance sheet and hedge cash flow hedges and the balance sheet. But effectively the revenue line is at effectively the spot rate. As the currencies hopefully stabilize and we have increased prices in a lot of our categories to offset that, I think the future looks a little better. We're cautious, though, over the next 6 months, year, we're unsure. But I think the combination of price increases, cost reduction, decreased freight we've seen some tailwinds now with freight, global supply chain issues easing.
We think there's upside to gross margins going from the high 30s to the low 40s. Unclear over what time horizon, though.
I was just checking the spot rate for the dollar right now against the euro. You know, it's wobbling a little bit too, so we'll see. Yeah, I think there's upside coming out. Exactly when it will show up, I mean, I think that's probably a pretty good explanation.
Thanks a lot.
Thank you, Jörn.
Thank you.
Our next question is from Serge Rotzer at Credit Suisse.
Hi, Serge.
Yes. Hi, Delphine. Good afternoon, Delphine, in Zurich, and good morning, gentlemen, wherever you are. First question, not sure whether I misunderstood something, but on one slide you say fiscal year 2024 projected net sales grows high to low. That means that you expect growth for fiscal 2024. Is this true? You mention every category, so you expect in every category growth.
No, the slide is a ranking of growth from high to low, meaning.
Okay
... a lot of those categories will be declining. maybe not all. We haven't provided the numbers.
Uh.
With the guidance that we provided for the first half of the year, $1.8 billion-$1.9 billion, suggests a pretty moderate decline in the first half of the year compared to prior year.
Thank you for asking that, Serge.
Okay
... 'cause it probably clarifies it for anybody else...
It's not per se growth, it's also decline. Because it's a little bit misleading.
Yeah.
Okay, got it.
Thank you.
Thank you. On that, a follow-up question on the margin. For the first 6 months, you are guiding a margin of 9-10%, which is rather low. Is this mainly due to the sales mix, so mainly lower sales in video coloration, obviously also in Delphine's product, or is it still a huge overhead or fixed cost you still have to carry out?
You can take that.
Yeah, yeah. It's a timing issue.
Yeah.
If you think about the linearity, and there's a slide where we show linearity by quarter, Q3 or December quarter is our biggest quarter.
Our operating expenses are coming down. The first half is suppressed because OpEx gets to a $1 billion run rate by midyear, and then December quarter is the biggest quarter, more absorption in the factory, a higher margin. It's really a first half/second half phenomenon with declining costs.
Perfect.
It's a CFO job, it's not a marketing job, huh?
Every job is a marketing job.
Okay, back in the cube. I release you, Bracken, you know? We'll see what Chuck is able to do. Bye-bye, gentlemen. Speak later.
Thank you.
No pressure.
All right, our next question is from Michael Foeth at Vontobel. Hello, Michael.
Yes. Hi, good to see you all.
You too.
Thank you. First question is, again, on the long-term growth model, and I was wondering how much sense it still makes in the context of 2 years of revenue decline, or even 3 years, why you're sort of maintaining, or how should we read that long-term growth? Does it make sense to put it in perspective of the sort of the pre-pandemic trajectory you were on, and you're picking up on that trajectory in the future again?
Yeah, I think that's a pretty good way to think about it. I mean, I think if you look at the pre-pandemic, we were on that long-term growth model. I think, really the underlying assumption there is that the secular trends that are there are, I would say, continue to be very strong across those three things. They're depressed right now because of the overall economic climate and then the big pandemic lift. We believe that that long-term model is intact, including the growth rate.
Okay, thank you.
It's a fair question.
And maybe-
I'm sure you're not the only one with that question, 'cause it's got to win, you know.
I mean, obviously we don't know.
Yep
when you get back on that track.
Yep, we don't either. You know.
Depending on what the starting point is.
Yeah
is it makes it quite different.
That's exactly right.
One question, maybe for Delphine or Rajesh or both. I'm a bit confused regarding the positioning of your creator business. Do I see it correctly that it's shifting somewhere away from the productivity, creativity business towards gaming? How do you manage that?
Okay
... who's actually in charge of creators now?
Let me try this, and then I'm gonna ask both of them to comment on it. It's really split. There are two pieces of creators. There are creators, like professional creators, that are creating content, so for example, who are using Adobe Creative Cloud and other things. When Delphine talks about creators or You know, we have them, for example, in this company, we have a lot of creators who are creating content using different professional suites, like Adobe Creative Cloud, so that group is growing rapidly. They tend to be premium product users. I was just reading something this weekend from CivicScience.
I'll get the number wrong, so maybe I can find it for you, if you're interested, that under the age of, I don't remember the exact age, let's say 25 or 30, about 10% or 15% of people expect to do that for a living. There's another one, which is when Rajesh talks about creators, he's talking more about the creators who are creating content using podcasts and they're streaming gaming, especially gaming. You know, the Streamlabs business when we bought it was almost completely gaming streamers and it's kind of there. When he's referring to, he's referring more to that audience. You want to add anything to that? Let's go to Delphine first, then Rajesh.
Thank you, Bracken. Well, I think it's, when we talk about segmentation, the segmentation, I mean, creators is a huge audience. There is about 1 in 4 people creating content on social media every day. My group focus on the creative professional video editors, photographers, designers, and they. It's really understanding their workflow, how they work remotely and collaborate remotely when they're creating. We help them staying in the flow, staying focused, and creating these amazing experiences. I'll let Rajesh to talk about the other audience we're focusing on at Logitech for creators.
Thanks, Delphine. I could understand how that could be confusing, 'cause we both talked about it, but it's, hopefully now it's clear. You know, there's the graphics artist piece that Delphine just talked about. When we talk, we talk about those content creators that are, they're performers, for lack of a better word. You know, they're performing on Twitch, youtube TikTok, Instagram. They have podcasts. Those are the ones that we're talking about in my business unit, and that we serve.
Perfect. Missed result-
Okay, great. I'll just slip in one very quick one.
Okay.
The Logitech G HUB you're talking about, how are you monetizing that? Is that basically an add-on, whether it comes with your products or is it a separate product?
It's a great question. G HUB, we don't monetize. G HUB is the, what we call is our device software that you use to unlock all the features of our devices, whether it's surround sound or the Blue VO!CE capabilities I talked about, or DPI settings for your mouse or keyboard. The piece we do monetize is Streamlabs that we bought. That is a SaaS business. We sell that to content creators. They pay a subscription, and it's to use all of the tools to manage their content, put on their stream, manage their audience. I was showing in the video is once we acquired Streamlabs, for the most part, we ran it separately. You know, building that as a standalone SaaS business.
We're now at the point where we're integrating it with our hardware and our software that comes with our hardware, which is G HUB. Now that we've plugged those in, imagine the power we can give a content creator. They can now take their existing keyboard and map different things that they're doing in Streamlabs, which is our software revenue piece, but do it on their existing hardware. It's this real nice synergy between hardware and software that builds a nice revenue model for us.
Okay, got it. Thanks. Thanks a lot.
Thanks, Michael.
Our final question for today comes from Erik Woodring at Morgan Stanley. Hey, Erik.
Hello, Erik.
Hey, good morning, guys. Thank you for.
Good morning.
for taking my question here. I guess just to start I appreciate the sales seasonality you provided in the slide deck. Should we be thinking about operating income in fiscal 2024 kinda following the same seasonality as those periods that you called out as well? Or could this year be a bit more second half weighted, just given some of the cost actions that you guys identified earlier in the presentation?
Bracken
Yeah, I think, yeah, second half weighted would be the idea because we have OpEx coming down, and the first half guidance we provided, you can do the math and see the relatively modest operating margins. That should improve because of the seasonality into Q3. i again, I think the long-term model we're excited about because this kinda spring-loaded-
Yeah
benefit that we can get once the markets stabilize. A point that was made earlier on looking at pre-pandemic growth rates from 2013 to 2020 we were growing at a rate of in some years 5%, other years 13%. You average those out, you're in a 8, 9-ish range. The pandemic was a really big acceleration in revenue, unprecedented, and now we're in this normalization period. We just don't know when that returns back to the historical rates. We are well-positioned from an OpEx standpoint, from a business model standpoint, to benefit in the long term.
You know, that's a great answer because it kinda delves into my second question, which was when we think about the 8%-10% long-term revenue guide. Realizing you're not putting any time constraints on that your revenue base is bigger today. Which segments do you think would grow at or above that rate longer term versus which might be growing below that or in the case of maybe the music business declining? Just help us understand when we think about that long-term growth rate, what is really driving that first and foremost? Thanks.
I would say the video collaboration business should grow faster than that long term. I would say gaming probably will grow at that long term. Never know, though, could grow faster. Then personal workspace is the wild card. You know, if you ask Delphine right now, she'll tell you she could grow faster than that growth rate. The good news is they all feel like they can grow faster than the growth rate. The bad news is it never happens quite the way you plan. I think we've got great growth opportunity across all those segments, Erik, and I really feel strongly about that. Part of it's gonna be where do we invest and what kind of innovation do we come out with?
The ones that will definitely grow slower or almost definitely grow slower will be the music business, as you said, and some of the businesses that were below that line.
Okay, perfect. I will, I'll wrap it up there. I look forward to talking to you guys later today. Thanks
I, thank you. You said that was the last question, Nate. Is it really the last question? 'Cause if it is, I've got one.
It is, yes.
Okay.
Go for it, Bracken.
I'm gonna Prakash, I'm gonna ask you to jump in on this because Prakash and I, well, Prakash really represents the company in so many ways, but including on this, in this area that's so vital to us, which is, to all of us, which is environmental sustainability. I wanna ask Prakash a question, which is: Where do we go next? What could this group of analysts and investors do to help the world move faster beyond us on environmental sustainability?
Thanks, Bracken. I think, as you probably saw, we've been focused on this topic of sustainability from a design perspective, actually really thinking about our products and thinking about it ground up. You know, everything from the plastic hang tag that you see when you walk into a retail store, we've replaced that with a paper hang tag. It's a very simple example of an innovation. You'd look at that and go, "Why was that not done before?" Well, it was quite simply started with somebody asking for that to be done, somebody in our team saying, "It can be done," lo and behold, it's there now, it's now becoming a retail standard.
The real ask for you as you think about your roles and the voice that you play with the many companies you guys cover, is one of the things that we have actually done is actually carbon label our products and disclosing our carbon footprint values. You know, quite simply what that is is the lifecycle carbon value. It looks at exactly what carbon emissions are created in sourcing, manufacturing, distribution, consumer use phase, as you plugged in and actually drawing power from the grid, all the way to end of use. Our pledge has been to actually disclose that carbon label value, essentially the carbon footprint value, 'cause we think of carbon as the new calorie.
You know, we think, you can't really influence something if you don't measure it and if you don't report it, which is why we came out and actually declared to be transparent and actually started reporting it. Since then, we've been working with many other peer companies, including some of our competitors, and actually collaborating with them on sharing best practices on how we could do it. If this little mouse company, which is now a lot more than that, it's a gaming, personal workspace, video collaboration company, if we can do it, a lot of others can. The companies that you represent, if they wanted to, they could.
That puts you on a path to actually really looking at the total carbon emissions that you create for every single product at the point of purchase to be more sustainable in the future. That's my ask to you.
if to Prakash's point it's one thing for us to say it. It sounds like marketing, you know? We're trying to market that we're this great sustainability company. If you start asking every CEO you're talking, at some point in the call, one of you says, "Are you guys planning to carbon label? Because we hear it's starting," it will make a difference. I wanna close by just thanking you. You know, first of all, I wanna thank the presenters today. I think they did a phenomenal job. You know, they also represent very big teams that are doing so much work, and there's a lot of activity around the company, and there's a lot of excitement. It's, it's also hard.
I wanna thank everybody in Logitech for all the effort they've put in. I wanna thank all of you. You know, this has been a super engaging event for us. It always is. We put a lot of time into it, but it's worth it. We'll look forward to seeing all of you as we progress through the year. You know, it's gonna be another interesting year, and I can't wait until some of the macroeconomic things settle out. I'm really, really excited about the places we play and the capabilities we bring to them. Thanks a lot