Logitech International S.A. (SWX:LOGN)

Investor Day 2019

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Mar 6, 2019

Hello, everybody. Thank you all for attending. I'm Ben Lu, Head of Investor Relations here at Logitech, and welcome to our Annual Analyst and Investor Day here in Zurich. I've been told it's an unseasonably warm day, so it's nice that it's actually quite warm here. And I promise to be really fast with our customary forward looking statements. Otherwise, my legal folks will get really upset at me for not reading this, and I'll go through it quickly so we can get on with the show. The press release as well as the live webcast of this presentation is available online at the Investor Relations page of our website, logitech.com. During the course of these presentations, we may make forward looking statements, including forward looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. Forward looking statements involve risks and uncertainties that could cause actual materials to differ materially from those anticipated in the statements. Factors that could cause actual results to differ materially include those set forth in Logitech's quarterly report on Form 10 Q for the quarter ended December 31, 2018 and subsequent filings. The company undertakes no obligation to provide or revise any forward looking statements as a result of new developments or otherwise. Please note that today's presentation will include results reported on both a GAAP and a non GAAP basis. Non GAAP reporting itself provided to help you better understand our business. However, non GAAP financial results are not meant to be considered in isolation from or as a substitute for or superior to GAAP results. Non GAAP measures have inherent limitations and should only be used in conjunction with our consolidated financial statements prepared in accordance with GAAP. Our earnings press release includes a table detailing the non GAAP measures together with the corresponding GAAP numbers and reconciliation to GAAP. This information is also provided on our Investor Relations website. We encourage listeners to review these items unless you really want me to hear me repeat these again. Otherwise noted otherwise comparisons between periods are year over year and in constant currency, and all reported results and updated outlook are focused on continuing operations and do not include the performance of LifeSci, which is reported on the discontinued operations. These presentations are being recorded and will be available for replay on the Investor Relations page of the Logitech website. Today's agenda, unfortunately, I forgot to bring my presenter right to me. If you move on 2 pages, you'll see the agenda. We have Bracken, President and CEO, as you all know, start off the event. Then we have Alastair, our Chief Design Officer Scott Wharton, Video Collaboration, Yujes, whom you guys also know is in charge of gaming. We'll take a short break afterwards and then Delphine will come on to talk to you about creativity and productivity. Then finally, as we always bookend our Analyst Day, I'm sure you guys are all waiting for Vincent to talk about the financials. And with that, let me hand it over to Brackendaro. Thanks a lot. Before we go past this page, I'm going to take a second and just introduce each of these characters briefly. Alistair Curtis is standing in the back here. And Alistair is grew up as a designer. He's been a designer practically since birth. He went to the Royal College of Art, same place as Jonathan and I went. He'll talk a little about that later. And he was the Head of Design for Nokia for many years, and he and I have been working together since almost the beginning. Scott Wharton is a great example of a new breed of leader we have in the company, which is a former entrepreneur. Scott is where? Where is Scott? Scott is standing right behind you. Scott runs our video collaboration business. He actually came out of a startup that he created and sold in video collaboration again many years ago. And now he's been running this business wonderfully for the last several years, and I think you'll love his story. Yujesh Desai, where is Yujesh? Yujesh also has been deep in his business, which is gaming. What you won't tell from you, Jess, because he's wearing a lot of fleece shirts, he's got his tattoos of his favorite game characters from his wrist all the way up to his shoulder. And he somehow talked me into a tattoo, which I think Vincent may mention later. And then Delphine is another completely different version of character. Delphine has been with the company for a very long time. She's been with me as long as I've been here and before that. And Delphine runs our creativity and productivity business, which is the original core business. And Delphine has worked all over the world for us. She's French by birth, but she's really worked, spent a lot of time in Asia. She's been deep in almost every one of our businesses is doing an amazing job running this business. And then finally, I won't even try to introduce Vincent. Everybody in here knows Vincent probably as well or better than you know me. But he's been my partner in crime since almost the beginning. So we've got one slice of a very seasoned team at Logitech now. After this is my 7th time doing this, so almost 7 years. We've got a team with very broad shoulders, and I would say, maybe oversized for the size company we are by design, because we don't intend to be this size for very long. Now I'm going to walk you through, I'll try to be very brief in my section, because most of you hear from me every quarter and you know a lot about our strategy. I want to give you a quick evolution of the kinds of discussions about strategy that you've had if you came here year after year after year. And I'm going to give you a little glimpse at the way that at least I look at the business going forward. And then I want you to hear from the people who really are running the businesses and of course for Vincent. Before I start though, I just wanted to start with one thought, which is this. At the end of the day, if I were an investor, and I am, I would want to invest in 2 things, great capability and great trend lines. I don't mean business trend lines. I mean trend lines, secular trends in the world. There are 3 secular trends in the world. I'm going to mention them now. I want you to look for them in the presentation and at the end feel free to ask me questions about them. Here are the 3 trends. The first trend is if you have kids under the age of 30 or someone in your life under the age of 30 or if God forbid, there's somebody in this room and I know there is under the age of 30, you know that there are only 2 kinds of calls you make when you're under the age of 30. 1 is with earphones, moving around, walking somewhere and the other one's on video. Now if you do if you're on a today, when you go back to your offices wherever you are, I would guess that almost no one in here works in an office where every closed space is video enabled. I'll tell you right now, they will be. It's coming. Every single closed space will be enabled that has that's used for meetings. We're at the very, very beginning of this and we are the leader in that space right now. So Scott is going to talk about video collaboration, but that's the future. That's one big secular trend. The second big secular trend is this one. You know more people watched people play video games online, watch people play video games, didn't play them, watched other people play them, then watched any Formula 1 event or the Super Bowl. You might not realize that. If that sounds a little surprising to you, it's because everybody under the age of 30 is thinking and playing video games, at least some of the time, and they're very interested in it. And it's not a temporary trend. It's a long term secular trend. It's a new experience, a new pastime that is getting bigger and bigger and bigger. And as that group grows up, it's just going to keep growing. Their kids are going to do it and their kids are going to do it. So gaming is the 2nd massive secular trend. The third one is maybe the most surprising. So you just will cover that more. The third one is maybe the most surprising, which is this one. When most of us grew up, when I grew up, my favorite TV shows were Gilligan's Island. How many people know Gilligan's Island? Or Family Affair or The Flintstones? I'm trying to find one that everybody here is seeing. And those were created by companies like Paramount or Disney or Columbia Pictures. And so the content that I watched growing up was created by very large companies that had the scale to produce really high quality programming and then to broadcast it through the very narrow and very selective pipes that were at first overall broadcast and then became cable. So that was the way I got my content and most of you got your content. That is changing. Today, more people are watching content created by other people. It's as if everybody in this room was creating content for everybody. You still watch Disney movies, but most of the content you're watching is created by somebody else. It's created by a content creator in a bedroom, in a living room, somewhere. Now those content creators, those digital content creators, remember that term, those digital content creators are creating content everywhere. It's the democratization of the creation of content. We're at the very early stages of that age. And if they're doing that, much of the time they're doing it at a desk using a PC, sitting with a keyboard and a mouse and a webcam. And that's the reason why somehow our PC business continues to grow very nicely. And we've barely scratched the surface in customizing our products for those content creators, but we're going to do that. So 3 big trends driving our business. Now let's go to the strategy. When I started, when Vincent and I really started and Alistair and others, we started, we were a little shy about saying we were going to be a design company one day. Now 6 or 7 years ago, design wasn't talked about as much as it is today. But we had this hyper focus that we knew that we were going to be a design company. We did not mean Armani or Gucci. And I always say that because to many people design is that kind of design. We meant really putting the user at the start and building products around the user and making trade offs between cost and benefits and bringing and unlocking unleashing the technology that great engineering can have to bring new benefits, but always with the user at the start, not with the technology at the start or not even with the financials at the start, always with the user in the beginning, the users benefit. If this sounds common to you now, hopefully it's becoming that way because that's what we've slowly become. We are becoming a design company and Alistair will give you an update on what we're doing there. The second big change we started and this took us about a year to get to was that we this company was born a PC company from day 1. Within a year of its birth, we found the mouse We became a peripherals company for that PC platform. The entire PC, everything you needed to do what you to be productive at a desk was all located right in front of you on top of that desk, the hardware, the software, everything. And we are peripheral. We personalized that experience by giving you products around that PC that you bought after the fact, but they made it yours, and they made it a little bit better. That was always our goal. So we attached the PC platform. We actually improved the PC platform. In the beginning, we said, well, gosh, we've got a when I first came, everybody I listened to everybody told me at some point everybody was saying, you need to do the same thing for mobile. You need to be the mobile platform. You need to be the Logitech of mobility. Something about that seemed wrong. And what was wrong about that, and we figured it out in about a year, was that it wasn't mobile, it was the cloud. Mobile was, was just what the phone became was just a way to carry another way to connect to the cloud around with you. So your phone is just another way to connect to the cloud. A PC now is no longer you no longer have everything you need sitting in front of you resident on your PC. You're actually that's just another collecting device for cloud services and cloud experiences. Even if you're using Excel or Outlook, you're actually interacting with the cloud. You're not actually you're really not interacting much with that PC in front of you, you're interacting with the cloud. So we had this realization, we need to move not from being a PC peripherals player to a mobile peripherals player. We need to move from being a PC peripherals player to a cloud peripherals player. Once we realized that, it unlocked a whole new world for us. We said, wow, all of our existing businesses are actually cloud peripherals business. All the future businesses we could enter being a cloud peripherals player, there are so many, there's such a scale there and so much opportunity. So this was a big change for us. How? If you don't move resources, you don't change your investment model, you rarely get a different result. So very early on, we changed our investment model. We some of you remember that we've talked about every year here probably, trees, plants and seeds. The tree was our existing core business, very mature, very full. The plants were new businesses we entered the market right away, like video collaboration, like gaming. And the seeds were new business we could create, we could bring in and turn into future plants that could grow fast. That model was dependent on one important thing. We removed or reduced the investment in our PC peripherals business by 75% in the 1st year and a half and moved it into these new things. Now you could say, and some people would say, that's a very risky move because you did against your core business. But the reality is our competitors did the same thing and we were much bigger than our competitors in scale in that business. And so we ended up still having a disproportionate share of investment into our innovation for PC peripherals relative to our competition. And as a result, we've gained share every year, every year during this period. In fact, we've grown our business every year in PC peripherals, and we've created new businesses. Today, when I started, mice and keyboards were the majority of our business today, they're less than half, they're 38%, 37%, 38%. So this has been a very successful model for us. Now let me just run through. 2013 to 2016, what happened? We invested in new product categories, the ones you're going to hear about later on today. We attached not just we attached our peripherals to cloud platforms and we exited low margin businesses. So we really split the business into growth and ProfitMax. One of the most important things we did was restructured the business very early and we introduced and Vincent needs to take lots of credit for this, but it's been true across the whole business. We really improved our financial and cost discipline. We became a company that you could look at and rely on. If we said we're going to deliver a certain cost position, we would do it. And we've reduced our operating expenses and now we modestly grow our operating expenses relative to our gross margins, which Rich will show you later. And finally, I won't spend much time on this except to say the change we've made by introducing design as the primary driver of the business has been dramatic, and the starting point for that was bringing all of our design in house. Now if you were here, I think 2 years ago, we talked about this, which we've been using for about 4 years. These are the 5 core capabilities that we use to drive our vision, which is to be this large multi category, multi brand company. Those five things, operations, design, engineering, go to market and marketing, we invest in all the time and keep improving our ability to do them, keep upgrading our talent, keep upgrading our processes. But I'm going to suggest you look at them a little bit differently. When you look at this chart, I want you to see gross margin improvement. You're a numbers person, just look at this and see gross margin improvement, and I'll tell you why. Operations is about managing our cost position and our output and being able to do that efficiently. One of the reasons why we were not terrified about tariffs was that we have an operations group that we are really masters at moving from one manufacturing site to another, and we've improved our ability to do that over time, and we'll keep doing it. We've also, with Design for Cost, the operations team partners with our design teams and product teams to deliver lower and lower costs at the start of an initiative, which has enabled us to improve our margins within categories, and Vince will talk a little bit about that, as we improve our mix. The margin improvement comes from that. Design, I won't spend much time to say except that the combination of design and engineering has enabled us to create products from the start that have higher gross margins because they're more attractive to the consumer. That's the fundamental. And then the last one, which is a little harder for you to see so far is the relationship between go to market and marketing. Go to market is our global sales organization and marketing is what it sounds like. What we're doing now is we're changing our structure behind the scenes, and that's enabled us to bring the best in the world processes from all of our regions to every single point of distribution we have, whether it's online or retail, so that we can begin to systematically execute better in the marketplace, which again will enable us to invest more in marketing, less in discounting and raise our gross margins. So when you see this chart, I see it for I don't normally describe it this way. I certainly don't describe it this way in the company. But when I so when you see this chart, if you're interested in our financials, I would look at this chart and say, well, that is a gross margin machine. This is a way to systematically improve gross margins. And that's what this is a core reason why Vincent later on will be able to explain to you why we've raised our long term gross margin targets. So where are we today? If we look forward over the next 3 years, we now have multiple ways to grow. You're going to see our 3 largest today. And those 3 alone will deliver ample growth for us for the next 3 or 4 years that we don't really need to do anything else of any significance, but we will. We're going to keep expanding into new adjacencies. We're going to keep growing that enterprise expertise, which is critical to Scott's business in video collaboration. And we're going to keep investing in this core capability. Our financial discipline, we've had 3 years of double digit growth, 3 years of very strong profit growth. Our gross margin is now bumping up again at the high end of our former range, and we're reinvesting profits in the new growth category. So this engine is going to keep going now as we've got the engine rolling and we're going to keep doing this year after year after year. But the ultimate mission, make no mistake, is not short term. It's not about any single year. It's about creating long term sustainable growing healthy, profitable, attractive businesses. That's the mission. You'll notice that every business you're going to hear today, we're the category leader. And we intend to be the state of category leader. We're going to keep investing. Every time we look at a new business to enter, the first question we ask ourselves is, can we lead that category? If the answer is no, we think very hard, can we be number 2? If the answer is no to that, we don't go into it. So category leadership is fundamental to our model and so is consistent growth. So we're going to become this leading cloud peripherals player that we said in the press release today. We've moved from a leader in the PC platform to really a leader in the cloud peripherals. And that gives us a very broad place to play. Now I'm going to finish my opening here by just saying one thing. A lot of people when I first came to Logitech, it was we had just restructured and then we were recruiting. I was very enthusiastic about attracting talent. And luckily, we managed to attract most of the people in this room if they weren't already here. And at the other day, I think one of the things that I discovered along the way was something that Green Odeluka, our Chairman and the CEO for many years here, said to me before I joined. He said, one of the things that makes Logitech so magical for people who work there is that we have the power of a large company, but the feeling of a small company. And our goal is to never lose that. That makes us incredibly attractive. In Silicon Valley, there are lots of large companies. And boy, they're impressive, but they don't feel like a small company. They can't feel like a small company. And it's true all over the world. So everywhere we work to attract talent. If you look at our Glassdoor I encourage you to go in and look at Glassdoor, which is a rating, an objective anonymous rating from employees and former employees. Look at our ratings, look at what people say, and you'll find that we're a very attractive place to work, not because of anything except this, we still feel like a small company and we have so much opportunity ahead of us. Now with that, I'm going to hand this off next to Alistair, who's somewhere around here. Great. Thank you. So I'd just like to spend some time, first of all, reflecting on where we are as a design team, how we're evolving to increase our influence and impact. And then just a little bit about how we're laying down the foundations for the future of Logitech Design and how we want to see design grow and Logitech grow as a design led company. So I joined actually a little bit less than 6 years ago, but give or take we're 6 years old as a design organization. When I joined there was no internal design in Logitech at all. It was all outsourced to agencies all around the world, good ones, bad ones, but it was a mixed bag of agencies we were working with. When I joined for me, it was important that we actually took that design spend and internalized it. So I could actually then along with the team that I started to build, we could actually control the quality of design and actually start curating and providing, let's say, a creative compass for where we want to take the brand and where we want to take product. So 6 years later, we're now 120 plus designers globally in the U. S, in Europe and in Asia. They are designers from all walks of life, industrial designers, colors materials, finished designers, user experience designers, consumer insights, the list goes on. And those designers come from some of the best agencies in the world and some of the biggest corporate design teams in the world. And it's a testament to exactly what Bracken was saying. The ambition of what we are, the feeling of what we are is what is attracting the talent. Probably the one thing that also attracts the talent is as a design team, we're working across 6 brands. And so we're supporting as a design team, all of the brands within Logitech. And with that over the last 6 years, we've won 220 Design Awards, which I believe now is roughly 240 plus. We won another 23, I think last night. Now I know that you might say what's the big deal about design awards. For me, the design awards are a critical need sort of measure of where we are as a design team. They're a quick critical measure to the external design community. And more importantly, they are a critical means of attracting talent into the design organization. It's a key part of why people come to Logitech. It's the you can go to a large company and you can maybe design a small detail or a small widget or a small element of the UX, come to Logitech and you own your product, you're designing that product. And that's a huge opportunity in the whole a huge reason for why designers want to come to Logitech and be part of this organization. When Bracken talks about being a design company, fundamentally, it's about bringing design thinking to the core of the company. Now when we first started as a design team, we were well, it's 1 and then we grew to 10 and then we grew to 20 30. So in the early days, we didn't have the scale to actually embed ourselves into the business groups. We as a design team, we're working across as one team, we're working across the whole of the design organization. Now, in the last 12 months, we've actually got the scale within the team to actually now break up the design organization. It's not literally broken up, it still falls within my responsibility, but we've actually taken the design team and embedded it into each of the business groups. And we've embedded into the business groups to help drive design thinking at the core of each business, but also to help drive, let's say, a high degree of creative confidence into each of the businesses. It helps drive co creation, collaboration and hopefully also speeds up the development of products. But fundamentally, it's important because design thinking also is about people and Bracken talked about it. It's about having the obsession with the consumer and you could say it's the customer, you could say it's the consumer, but fundamentally it's about people. It's about understanding the people that you're creating products for. And for me, innovation starts with people. And if you don't truly understand who you're designing for, the motivation, the behaviors, the rituals of those people, you're never going to get the product right and the experience right. So this is one of the things we've been driving for the last 6 years and it's a constant thing. I don't think you ever can stop sort of putting the sort of the accelerator down on the importance of understanding the consumer and really driving innovation around your consumer. The image here is an image you may have seen out there of some models where we were understanding the issues of carpal tunnel and repetitive strain and actually getting people in and actually understanding that problem and really dialing into what that problem is, has helped us create the MX vertical. So when we talk about sort of innovation starting with people, I would argue that design excellence and product excellence starts with making sure the consumer loves your product. And the only way to do that is to constantly throughout the process test, test, test and refine, refine, refine from all of those stages of testing with the consumer. This image here again is the MX vertical where we were making different models and you can see all the models here. They're literally it's like a 40 degree angle, 45 degree angle, 50 degree angle, 60 degree angle, just trying to make sure that this was exactly the right angle or the optimized angle, which made sure there was a minimum amount of strain in your wrist. So the magic number in case you didn't know it's 57 degrees. That's the optimal angle that came out of this, but it came from testing and testing and testing. And I can't stress how much that's become part of our culture with testing products, but also all the way through for testing packaging, just making sure the copy on the packaging is optimized, the text on the website is optimized to make sure that the consumer is getting the best level of understanding of what this is. So when they experience the product and they take the product out, the hope is that they love the product, they love the experience we've created for them. One of the things that we talk about and the design team is about positive disruption. How can you constantly bring positive disruption to the business, the category of the portfolio? And it's not a negative, it's a positive and it's a way of saying, okay, how do you bring constantly fresh perspective, fresh thinking and new mindsets into a business. If you've been living with the product and in the product category for several years, you become not necessarily stage, but you become sort of set sometimes setting what you're thinking could be. So as a design team, we're constantly looking to rotate designs in or rotate external design agencies in or even rotate new design leaders in to challenge the business group and to challenge the thinking behind the product. The image here is rally. So what we've done here is, and it may seem a small thing, but it's all part and parcel of how video collaboration is evolving is we brought in some of the thinking from Ultimate Ears, the use of fabric and applied fabric into the video collaboration world. And that's not just because we like fabric, it's just a recognition that video collaboration is going from being a pure B2B sort of experience So actually now a more softer, more friendly, more home based experience. People are working remotely. People the offices are becoming less sort of corporatized and are becoming more humanized. So we have to recognize how that's going to evolve the design language within the video collaboration business. Next generation, so when we talk about positive disruption, the positive disruption starts with ourselves as a design organization. We have to be as a design organization looking at disrupting ourselves. How do we bring fresh perspective into the design organization? As Bracken said, I went to the Royal College, but it was a long time ago. And what I learned at the Royal College and how I learned to be a designer 20 plus years ago is very different to what students are learning today. Students today are designing using AR and VR. Students today are taking machine learning, AI and computational design and they're thinking in different ways of designing. We need to tap into those students and bring those students into the design organization. So they positively disrupt us. So what we've been doing, what we signed last year was we signed a deal with the Royal College as a 4 year partnership, whereby we're taking students from the college and bring them in as interns and hopefully develop them into full time members of the team. But also we're running projects with the Royal College, where we're effectively picking high level opportunities and getting to students to think about it through their eyes and through their perspective. So next November, we're actually getting the opportunity to take the whole college, every student within the whole of the college and actually work on a large project for 2 to 3 weeks, which is almost unheard of to get that level of talent working on you working on your projects. So we've got the Royal College. The plan will be to start with the Royal College, but my hope is that we will pick 2 to 3 other design colleges around the world, 1 in Europe, another one in Europe, 1 in the U. S. And 1 in Asia. And they will become part of a long term partnership where we will work closely with those colleges, but also then they become a vehicle to bring fresh talent into the design organization. So I talked about 6 years ago going from 0 to a world class design organization. I'm amazingly proud of what we've done and how we've managed to achieve that. But the goal really doesn't stop there. The goal now is how do we as a design organization help Logitech to become a world class design company, not just a great design company, but a world class design company. I think that's my ambition is how we as a design team now can help by embedded into the business groups, obsess about the consumer more, innovate with the consumer and actually create even more amazing experiences. But I think the elements on top of that is how do we now obsess about the consumer, not just to make great products, but to actually innovate around new businesses, new categories and new business models. That's where I think we truly will be a world class design led company. Thank you. Phil? Okay. Good morning, everybody. Thank you. So I'd like to talk about a few things today. One is a little continuation on the story from last year. The second thing I'd like to talk to you about how we're expanding our portfolio. And then the third thing is, what is the what are the implications from a financial point of view? So last year, we talked about the growth in video conferencing overall. And as Bracken said, part of the opportunity for us is to attach the cloud services and the video collaboration space is no different. So we picked here a couple of examples. One is Zoom, where you could see the number of minutes that they're using. And you can see that clearly the growth rate is just on fire and growing at an exponential growth rate. And then the second one is a product called Microsoft Teams, which is the newer version for Microsoft for Skype for Business. Now Microsoft has said that this is the most successful and fastest growing application that they've ever had in the history of Microsoft, all around collaboration. And these are 2 of our biggest partners and we attach to them. So as they grow and they're successful, we're able to grow along with them. Another area since last year, we talked about a product called Meetup as an example of great design and reimagining the huddle room. So just like Alistair said, there are magic numbers, 57 degrees for a vertical mouse. But we found the optimal field of view is 120 degrees for huddle room. You want it to be wide enough, so you get people that you can see in the front, but not so wide that the number is ridiculous. We've had incredible success since we launched Meetup for the huddle rooms. In fact, Meetup has won a whole bunch of awards, design awards, Product of the Year awards. And Meetup is now not only in a very short period, it's the number one selling VC product, but it's also the number one selling product, for huddle rooms around the world in a very short period of time. Okay. So I want to talk about beyond Meetup, what have we done to expand our portfolio? So I said Meetup is really targeted at huddle rooms or small rooms, which are continuing to grow. And as Bracken said, as more people have open space and continue to collaborate, you need more huddle rooms. But there are also a whole bunch of medium and large sized rooms out there. So we've now expanded with the product that Alistair talked about Rally. So now we can go after medium and even the largest rooms up to boardrooms, which we weren't able to reach before. So let me tell you a little bit about Rally. So Rally is really an amazing video conferencing system in a bunch of ways. It has world class video. It has some of the best audio in the world. And it does a lot of things for IT managers that you may not see, but being able to take all of the cabling that used to be a complex, wrapped nest of cable and put it over a single Ethernet cable. And we can do all that for about $2,000 which is an amazing breakthrough because it used to cost about $20,000 or $50,000 or even $100,000 to get, I would argue, not even as good as quality as this. So it really is truly revolutionizing the medium and large room in a way that we've done it for the smaller rooms. So we can go after now medium sized rooms, so showing you how it would fit into a room of this size, all the way up to large rooms and boardrooms. So one of the innovations we did when you talk about design thinking, when you're doing a video call, one of the strangest things with the older system is that many of them will have a speakerphone in the middle. I'm sure some of you have noticed when you're in a video call, the person is talking at the screen, but you're looking down at the desk or the conference room, which is a bit weird. So what we decided to do is we questioned that. We said, why are people building speakerphones? And the answer was, there was no reason. It was the way it would always been done. So we decided to reimagine how people did that. And we put the speakers at the front where the human being is talking, so very human centric. It also had a great ability to make the audio better. So what we realized is that the problem with speakerphones is the audio is going into the same place that it's coming out, which makes it hard to reduce echoes and so on. By splitting them up, we were able to make the world's best audio for a video conferencing system. Now this is important, I think as you know, when you're doing a video call, the video you can have a few problems, but the audio needs to be rock solid. And I'm proud to say that we have world class audio now, all built in house, all developed by us. Okay. I want to talk to you about another product, but instead of describing it, we'll let you see a video. Okay. So you get the idea. So when you think about video collaboration, most people think about cameras and speakers, audio equipment. But if you think about it from a design point of view and a user point of view, one of the most frustrating things about starting video meetings is how do you start the damn meeting? Usually there's some crazy remote control, it's got 30 buttons on it. The vendor will tell you it's intuitive, but nobody knows how to use it. So you have to get IT to come in and help you out. So what we realized is we want to make the experience better for video collaboration. We not only need to improve the audio and the video, but also the experience of how you start it. So that's TAP. And what we realized is that there were current solutions today, but they really weren't adequate. You have these very high end proprietary controllers. They're expensive. They're hard to program. And then you have consumer tablets, which are really not designed for IT. So I think what we did is we nailed the sweet spot right in the middle that's both friendly for end users and friendly for IT. And just since Alice was talking about numbers today, the magic number for the degrees, but not have it be in your face, but have it high enough that you can see it as 14 degrees. We spend a lot of time obsessing over even the number of degrees that you should have for TAP. Thank you. So when we launched TAP, we had a product before that had a touchscreen that we work with Microsoft called SmartDock. This product is a universal touch controller. So we not only launched it with Microsoft, but also at the same time with Zoom and with Google. And in fact, we were at a show in Europe that we launched this product last month and we had 23 partners that were already showing off tap and using it as their standard as their standard for doing touch controlling for meetings. So it very rapidly and in a very short period of time has become the de facto standard for touch controllers for meetings around the world. And if you think about what this does for us, it changes us from being just an audio and video supplier to really providing everything that you need in the room for video, audio, video, the cabling, the touch controller, a full systems provider, which puts us in a much different competitive position versus just providing a camera or just a speakerphone. So in addition to hardware, we've been spending a lot of time working on software and we announced this software suite last June, we call it RightSense. And RightSense is really about 3 things. The one is about fixing the right lighting in a meeting. I'm sure many of you have been on a video call where either the light is coming in, in the afternoon and it's completely washed out or you're at home and you're doing a video call and you look like you're in the witness protection program where all you have is a black silhouette on you. We said we needed to fix this and it can't be something that you have to manually adjust. It need to be automatically adjusting without the end user interfering. We also launched Right Sight, which I'll show you more in a minute. And then Right Sound, it's the ability to automatically adjust the audio so that you always get the right experience in audio. So I'll show you one of the first features that we launched is the one that we call auto framing. So it fixes one of the common problems that people either don't like picking up a remote control for video or they don't do it. So if I'm going to call with Vincent, sometimes he's sitting way in the back and I want to yell at him, hey, Vincent, zoom in. But I don't want to disrupt the meeting. So I just let him sit in the back and I can barely see him. But with this feature, you don't have to do anything. You start a meeting, it automatically looks for the number of people and frames. And then in this example, we have our designer who's walking into the meeting. And again, it just will automatically look for the people and have the right framing and shot. So it's an example of not only not adding a feature, but actually taking one away. Nobody wants to use a remote control. Now you don't have to anymore because the system is doing all the work for you. So again, moving from audio and video to complete room solutions, not just for 1, but for small and medium and large. So very quickly going from one camera and one room in the huddle room to having systems that can really serve any size room for any business. All right. So you guys are all financial types. You're probably saying our great technology, but what does this really mean from a financial point of view to the business? So one is just to show you that we've had continued growth in the video business. I've been here about 3.5 years now at Logitech and it's been really gratifying to go from a very small, I guess you would call it a seed to now we're a pretty significant plant. In fact, one of the top three businesses in the company and continuing to grow. The second thing is that it should by adding in these new products, it should significantly add the amount of money that we can get from a customer per room or the average amount of money per room. But before we launch these products, we would typically get, I'm using the end user price, about $1,000 per room for a meet up or a group. So today, if you take a meetup and a tap for a small room, you could get $2,000 per room. If you add a rally or a bigger system, it could go up to $5,000 per room. So not only is the market growing overall, not only we adding more rooms, but we also have the ability to get more money per room per customer and also leverage the same sales force that we have instead of selling in a certain amount of dollars per room at 1,000, the same sales resource can now sell multiple of revenue using the same sales resource. So from a total addressable market point of view, what's exciting too is that we were going after the huddle room. And as I said, having a lot of success for a market that has very low penetration and a high opportunity. But that market is still, while growing very fast, it's still smaller than the traditional video conferencing market. With Rally, we now have the ability to go after all the large rooms where there's still a couple of $1,000,000,000 of revenue that is still untapped by us to be able to grow. So now you have the huddle rooms, the large rooms. We can grow in the very exciting huddle space, but we can also take share from the larger rooms. So kind of summing this up, business has gone well and we think that with the portfolio we'll be able to continue to show strong momentum in this business. If you pick up on what Bracken said earlier this morning when he talked about the secular trend in video, where not everyone has or very few companies have video in their offices and everyone, but they will. I really believe that's going to happen. And if you look at the penetration today, it's still in the low single digits. So I was asked the question this morning, can you continue to grow for this business? I think if you look at our existing portfolio, even without innovation and new things, there's a huge opportunity to go from that low single digits to putting video in every room. I'm sure 70 years ago, some people were saying, should we really put a telephone in every room? Like would everyone want to use it? Of course, it sounds like a ridiculous point, but video is the same way. Video will be everywhere because it just costs the price of a chair. And I'm sure none of you have ever gone into a conference room and said, how come there are 4 chairs in this room and there's room for 6? And then some of those, well, we couldn't do the ROI. You'll just have to sit on the floor. It'll be the same way for cameras. Of course, you'll have a camera in every room. There won't be an ROI, you'll just go in there. The second thing is we're going to continue to focus on providing new technology. I was asked the question also this morning. Scott, is there more room to innovate in the space? I mean, you get a camera, you get some audio, aren't you done? My answer was, I think I have enough ideas until I die. And my birthday was yesterday. I don't plan on dying anytime soon. There is if you think about an example for those of you who like sports, when you watch a sporting event on TV, there are lots of cameras and the director is switching back and forth and there are statistics and information. In some ways, watching a sporting event can be almost better than being there, right? We'll take that same analogy to video. Think about a room with multiple cameras and AI moving everything around. There is no shortage of technology ideas to make the experience better. So we're leveraging our success in huddle rooms. We're expanding to medium and large rooms. And hopefully, you can see that not only is the addressable market growing, but our ability to sell into each of those rooms is growing a lot too. So more exciting than ever being in this space and thanks a lot. Good morning, everyone. So my name is Yujesh and I run the gaming business. So I've been with Logitech little over 4 years now. And during that time, we've seen our gaming business grow nicely. And what I want to talk about today is within our gaming business, we're now seeing 3 distinct businesses that we focus on. And I thought it'd be important for everyone to understand what are those three businesses and what are the subtle differences between those three businesses. With that, why don't we get started? So obviously, the first business that we focus on is PC Gaming. So PC Gaming, this is the heart of our business. It's roughly a $3,000,000,000 opportunity when you look across keyboards, mice, headsets, the market that we typically play in, right? And what is driving growth in this market is obviously the games themselves. By show of hands here, how many people have heard of Fortnite? Okay. How many people's kids are playing Fortnite and you want to kill them, right? So Fortnite is one of those games that's just completely taken off and there's a reason for that. They've created a new business model. It's called this freemium model whereby you get to play the game for free. The way they make money is in app purchases. But the beauty of the freemium model is it lowers the barrier of entry and you can have more and more gamers playing the game because they don't have to pay $60 for the game out front. In fact, how many people are playing Fortnite? Last I checked, it 200,000,000 people playing Fortnite, right? And that's not a flash in the pan. Apex Legends just launched last month. Within 1 month, they have 50,000,000 people playing that game. Once again, it's this freemium game. So these are the types of new business models that we're seeing on the PC that's really driving growth and getting more and more people to play. The other thing we're seeing on the PC is the rise of eSports. ESports, if you remember, I talked about this 4 years ago. And at the time, I think a number of people after the event came up to me and said, really, is this really a sport, like are you sure? And I think what we're seeing is it truly is. It is the sport of a new generation. I look at my kids at home. They love playing all these games. As Bracken said, even if they're not playing, they love watching these games. And if you look at the PC, eSports is where the PC or the PC is where eSports lives. All of the top leagues, Riot with League of Legends, it's on the PC, Overwatch from Blizzard, Counter Strike, PUBG, all of those games are on the PC and that's going to continue to drive growth for PC. That's the 1st market that we focus on. The 2nd market that we focus on is the simulation space. This is roughly a $300,000,000 market. So these are our steering wheels, our flight sticks. What we're seeing here is this market traditionally used to be driven by the simulation titles like Gran Turismo, Forza. We're now starting to see a lot of new games coming here as well. Formula 1 is a new game that's doing extremely well. NASCAR. But the bigger thing that we're seeing here is the rise of esports as well around eRacing. And I'll talk a little bit about that today. The interesting thing with simulation and eRacing is we're actually seeing a transition where gamers start in the virtual world and they're able to transition those skills and take it into the real world. And I'll give you an example of that today. Finally, the last market is the console. So, this is roughly a $2,500,000,000 market around console headsets as well as the game controllers. And just like the PC, it's primarily driven on new titles. However, the console sometimes has different titles from the PC. For example, Call of Duty is available on the PC, but it does really well on the console. There's other games that just lend themselves better to a console environment where you're sitting on the couch. For example, fighting games, a lot of times you invite a friend over, the 2 of you are playing the fighting game on your big screen TV. Those typically do well on the console or better on the console than the PC. Other games that do better on console than PC are some of the sports games. So FIFA, Madden NFL Football, NBA 2 ks. So these are some of the different genres that you see on console that maybe don't do as well on PC and that really drives growth. Speaking of console, our acquisition of ASTRO has proven to do really well for us because it immediately gave us a strong premium brand, a headset brand in the console space. So it gave us that overnight credibility. And then with the launch of our brand new ASTRO C40 controller that we just announced in December and we're going to start shipping this month, we'll be able to now start taking share in the controller space as well. So those are 3 of the main markets that we focus on PC, simulation and console. So with that, I want to dive a little bit into eSports and talk about why it's such a major trend and some of the new things that we're seeing in eSports. I thought I'd first talk start at the professional space and then work my way down. So those of you that have been here at previous Analyst Days, you've heard me talk about how we work with some of the players and the teams. For some of you that might be new, I thought I'd go through it really quickly again. So we have a line of products that we call our Pro Series. It's specifically designed for eSports players and fans and enthusiasts. In fact, we designed this product with the players themselves. So you've heard Bracken talk about this, you've heard Alistair talk about this, Scott talked about it, same thing for gaming. So we sit down with the players and we give them early prototypes. They give us feedback on the design. They tell us what they like about the sensors we use. They tell us where the best place is for button placement. They give us feedback on things like weight, because just like a Formula 1 race car that you want to be super light, a lot of eSports players prefer a lighter weight mouse. So these are some of the things that we do when we work with them. In fact, our brand new Pro wireless mouse that we just introduced last year took us over 2 years to design this product. And we worked with 50 different pros and we had 12 different design prototypes. So this is the level of design kind of methodology and input we put into designing our products. The other area that we focus, that's kind of the outside, the physical manifestation or manifestation of the mouse, but it really is important what's inside the product, especially when you're talking about wireless. So this slide is extremely important because it shows why we invest heavily in technology, so we can continue to maintain our lead and grow in the gaming space. So let me quickly talk about what are the 3 areas that we've invested in wireless. First is what we call light speed. Now how many people have heard all of the rumors that, oh, you don't want to use a wireless mouse for gaming because it lags and you'll just lose. That is a number one concern that gamers bring up. We knew we had to solve that. Otherwise, we would never get gamers to use wireless mice. If you talk to the pros, they don't want to use a wired mouse because it feels like a leash and it's dragging them. They would love the freedom of a wireless mouse, but they worry about lag. So we knew we had to solve that. So we challenged our engineering team. We told them, okay, let's invent a protocol so that our wireless mice are faster than the competition's wired. Just think about that for a second. And we succeeded and we call that light speed. And that is one of the reasons we're doing so well in the wireless space. We didn't just stop there though. We said, okay, we solved latency, but now we need to solve battery life. Well, how are you going to do that? Well, one way is you have to attack the part of your product that takes the most battery and that's the sensor. So, we decided to invent our own sensor. We call that the HERO sensor. It's exclusive to Logitech. That sensor is the highest performing sensor on the market, but it has 10x the battery life of competing sensors on the market. So the result is super high performance, but amazing battery life. But we didn't stop there. We said, okay, well, how do we solve battery life completely? And that's why we invented Powerplay. So Powerplay is our charging solution. You take our mouse, you put it on our Powerplay mat, whether it's at rest or whether you're using it, it's always charging. You never ever have to worry about battery life ever again. You get infinite battery life. What is the result of these three technologies? Well, Prophet, who is one of the top players on the London Spitfire, which is a team that's part of the official Blizzard Overwatch League, he used our mouse. In fact, we gave it to him before we announced it. So the week before we announced it, he used it at the finals. Not only did he help his team win, he was named the MVP of the match. The following week, we unveiled that that was the mouse that he was using. You could imagine sales of those mouses are just exploding, right, because the fans just like you think about someone wants to buy the cleats that Messi uses, right? The fans look at this player. They want to emulate this player and they want the gear that he uses. So that is the partnership and that's what we do with the players themselves. Speaking of the fans, Bracken mentioned some of these numbers. I'll just show them here again. Esports is exploding bigger than traditional sports. So I'm an NBA fan, I'm a football fan, I know Bracken plays basketball. Game 4 of the NBA finals, our Warriors won last year from the Bay Area, 13,000,000 people watched that game. This year's Super Bowl, granted it wasn't very exciting, wasn't very creative with Super Bowl, but 103,000,000 people watched the Super Bowl. The League of Legends finals, 200,000,000 people watch the League of Legends finals. So this is truly the sport of a new generation and I can't stress that enough until all of us really understand that. It's a new sport. It's a new hobby. It's a new pastime. It's what people love to do. I think what's really important though and really interesting is when you dig deeper into these numbers. So this looks at the growth and the predicted growth of esports. If you look here in 2018, 395,000,000 people were watching eSports. That's bigger than Formula 1. I think Formula 1 viewership last year was roughly 390,000,000 people. So it's bigger than Formula 1. That's interesting. But I think what's really interesting is the chart that's next to that. Look at the age demographic, 10 to 25 year olds, super high awareness of eSports, super high engagement on eSports. That is the trend that we're really seeing and that's going to continue because as Bracken said, these 10 to 25 year olds as they get older and older and older, on balance, they're going to continue to play games, they're going to teach their kids how to play games and the trend just continues. In fact, in certain countries, it's hard to see here, so let me pull out my handy spotlight. But in China, esports is already surpassing or coming close to surpass soccer. In Germany, if you look at esports, it's bigger than motorsports, right? It is a new sport. So what is this in turn causing? Well, look at what some of these traditional sports teams are now doing. This is Paris Saint Germain soccer team. Guess what? They now own an eSports team. This is Fernando Alonso. Guess what? He now owns his own esports team, FA Racing. They realize this is the sport of a new generation. If they want to tap into that new generation, they need to have digital sports as well in addition to traditional sports. You're going to see more and more of these investments. In fact, in the U. S, every single almost every single basketball team also owns an eSports franchise And you're just going to see more and more of this. Speaking of these trends and youth eSports, because of this, we're seeing a rise in amateur eSports. So maybe by show of hands, how many people here grew up playing soccer when they were kids? So I played soccer. I played in elementary school, middle school. I wasn't good enough to get a scholarship, but I played. What we're starting to see now is more and more kids are playing video games after school and after school programs. That continues in the high school. It goes into college. This is the University of California, Irvine, their Esports lab. They are not alone. In fact, the chart here on the left shows last year, colleges in the U. S. Offered upwards of $15,000,000 for scholarships around e sports. It is a new sport. And when you think about it, where are these sports starting? Well, this is in the computer science department, right. Highly smart, highly intelligent individuals. And it's no different than a traditional sport because when these teams come together, it's the same things you learn when you're on that soccer team. It's about teamwork, it's about communication, it's about empathy. But if you've ever watched the League of Legends match, it's like watching a 5 versus 5 chess match. There's a lot of cognitive skills that go into that as well, which is why all of these are being driven out of the engineering and the computer science departments. So it's a really interesting trend. To kind of highlight this trend and show how it's even going to grow more, I've invited Anne Hand, the CEO of a company called Super League Gaming. Before I have Anne come up though, let me tell you really quickly what is Super League Gaming. So Super League Gaming created an after school program. The founders saw that their kids that were playing Little League Baseball had fun, but when they would come home and they would play with their friends, Minecraft, it was clear they were having a lot more fun. And what one of the founders found out is, my child is probably more into the math and the science side of things than maybe the physical side of things. And you started looking, is there a Little League or anything that even exists for my child if they wanted to play after school and it turned out nothing existed. So that's how Super League was born. So they created after school programs around Minecraft. My daughter attended one of them. What was really cool is you go there, you get split up amongst teams, you get to wear jerseys. The boys and the girls play together. It's all coed. There isn't this is the boys league, this is the girls league, they all play together. They go and they host these events in movie theaters. So, the kids get to see themselves playing on a big screen TV. It's amazing. And guess what, the parents go and they're cheering just like it would be a soccer match. We were there cheering for our kids to see who had won and the kids are really proud of themselves. And if you interview and talk to the parents, it's just a pretty amazing opportunity. So with that, I'm going to invite Anne to come up and she can tell you a little bit more about what Super League does. So I thought, I'd first start by telling me, what made you get into Super League? What like what did you see? Because eSports at the time when you guys formed was still growing. What did you see coming? Sure, sure. So just like some of those other secular trends that Bracken talked about at the beginning, what we saw was really the mainstreaming of not just gaming, but esports in general. So just a few statistics. 30% of gamers these days are female, 50% are married. The average gamer has a higher graduation rate from college and average household income than traditional sports fans. And what we also saw as an insight was that 46 percent of gamers were doing it with their families. It was a way to spend more time together. So it was increasingly multi generational. And so you just talked about those professional players. Well, that's about 13,000 pros around the world that are paid full time salaries, no different than FIFA or NBA players. They have coaches, nutritionists, physical therapists, but there's 2,300,000,000 gamers. And we thought it was inevitable just like traditional sports that amateur systems would need to emerge, that people would have an interest in participating in recreational leagues and having that aspirational path to the pros. Yes, I think, I mean, it makes a ton of sense, especially when I look at just what I see with my daughters at home and how they play, it's just all their friends, it's something they do together. Speaking of my kids at home, so both of my daughters played soccer. And I know when I first went to the soccer league, it's like, okay, you get a list. These are the cleats you have to buy. This is the ball you have to buy. These are the shin guards you have to buy. Are you seeing similar requests on Super League or like parents coming to you and saying, okay, how what gear should my kids buy if they're going to come and attend these different events? Absolutely. So, we looked a little deeper at that 2,300,000,000 gamers and we asked the question, who are these competitive amateurs? And there were a few things that we noticed about them. They're playing at least 8 hours of gameplay a week. They're consuming an additional 9 hours of someone else's gameplay. So that goes back to that digital content creator class that we spoke about earlier. So what that means is why are they doing that? Well, in some ways it's entertainment, but it's also it's the way you learn. When I played tennis as a kid, my parents could give me tennis lessons to help advance my play. And then as I became more competitive, I could join the team, I could learn about teamwork and collaboration. Right now that competitive amateur gamer doesn't have those things. And another important trend we saw that's very relevant here is that, 48% had already made at least one investment in a peripheral. So they're thinking consciously about how to up their competitive play. And then what we determine we could do with our cloud based platform is actually provide the tournament book, some of the coaching and training, the league structure, that importance of wrapping yourselves, around a team structure to get that higher competitive experience. And then the field space, we needed to provide the court, the actual field space for gaming so that you could have that in real life experience as well. That's awesome. I'd say, I guess, the last question I have then is, where do you see youth esports going 5 years from now, 10 years from now? Yes. I mean, really, it's the whole kind of purpose for why we exist. So, we're at a place now where because of our cloud based system, we can transform fast casual locations, movie theaters. We announced a deal with Topgolf recently, Buffalo Wild Wings, we do a lot of work with. So we're really trying to think about what's that existing brick and mortar that's sitting out there, looking to turn those spaces into something that feels much more interactive and immersive. And Scott mentioned earlier the importance of when you're watching a professional sports experience, you get that experience of all those cameramen and that kind of stadium screen. And you can see with the slide there that that's really the important kind of aspect of what we do with our technology as well as we want not just the players to play differently than they play at home. We want them to have that big stadium screen experience and see themselves on that field. But we also want to engage the parents, the fans and really create something that feels like a high quality entertainment experience too. That's awesome. Well, Ann, thank you for your time. Ann will be here during the break if anyone has more questions. So the last trend I'm going to talk about, I mentioned simulation and how that's big into eSports as well. But what we're seeing here is this is really unique and I'm super excited about this area because we're seeing a transition from the virtual world to the physical world. So the image you see here is a racer and it's a simulation racer. So he starts training and doing all of his simulation actually on the PC using one of our racing wheels. And if you think of our racing wheel, we've invested a lot in having super high end force feedback technology. We've got hand stitched leather on the racing wheel itself. We think about the pedals themselves. We've got a built in clutch. Everything we do with that racing wheel, it's because we want the highest realism possible. The result is then we partner with game developers. And if you look at some of these new games that are coming out, the racetracks they have in there are exactly like the physical racetrack you see in the real world. But when you train on these using iRacing or Formula 1 or NASCAR, it's like you're racing on a real racetrack and you're building those same skills. In fact, to stimulate this, the other thing that's really important about this image that I'm showing here is we've partnered with folks like McLaren to create worldwide e racing competitions to find these virtual racers that have always wanted to be a race car driver, but they couldn't afford the high cost of going to the racetrack every weekend. They couldn't afford the cost of buying their own race car, but they can't afford the cost of 1 of our steering wheels, maybe a PlayStation or an Xbox or a PC and a copy of iRacing in Formula 1. And that's how they train. So to encourage this, what we've done is we've created these worldwide racing competitions. We call this the Logitech G Challenge and we host these events all around the world where these e racing fans can come and compete in these virtual competitions. In fact, one of the events we had was in Brazil. This gentleman, his name is Igor Fraga. We met him at Brazil, lifelong racing fan. He ended up winning the competition in Brazil. We were so impressed, we flew him to McLaren headquarters to compete in their grand finals. He ended up winning and now he has a full time job and he's part of the McLaren Motorsports family. So talk about this kid's dream coming true growing up in Brazil. So I thought instead of me talking about it, the best thing would be to show a short video so you can see the journey that Igor took. So take a look at this quick video. So I really love that story because when you think of where he came from and you could see the passion and the joy and how excited he was. And the images there were from our Brazil game show. So that was before he won the finals. You can imagine how excited he was now that he won the finals. The other thing that's interesting is at that Brazil game show, I attended myself personally, there were 450,000 gamers there just on a Saturday attending that event. So hopefully, you're kind of getting a sense of just how big this market is. And I use the word e sports, but I think a better way to think of it is your hobby, your passion, right? When I grew up, I played video games, but also I grew up watching TV. After school, you do your homework and you watch cartoons like The Flintstones, like Bracken said. And the interesting thing is not once did I refer to myself as a TVer, right? It was something you did. Well, my daughters at home, they don't call themselves gamers. The only reason they use that term is because they've heard me say it. But in their mind, when I talk to them and their friends, they kind of just shrug. They're like, yes, what's the big deal? We play games. Everyone does. That's what you just do. So hopefully, the takeaway that you have here is, this is really a hobby, a passion, just like you would invest in tennis or basketball or something else. That's what these gamers are investing in. Kind of just to show how much there is and where this is going, The other reason I think gaming is so big because it's fun, it's playing. Life is more fun when you play, right? So the last thing I'll share with you here is partners of our Giant Software, they've announced they're getting into eSports as well with their game Farm Simulator. I bet you don't know this, not only do we make a racing wheel, we make a tractor wheel as well. And they've standardized on our tractor wheel and I can't wait for this to come out watching people virtually farm, I think is going to be hilarious and it's going to make for some amazing funny YouTube videos. So in conclusion, hopefully you understand how big of an opportunity there is in gaming. There's 3 main markets we focus on PC gaming, simulation and console. The way we plan to lead is everything that Alastair and Bracken talked about, really understanding the user, partnering with the user to understand what their needs are. So we're constantly innovating and delivering better experiences and better technology. With that, I want to thank everyone for coming. And I think now we go on a short break. Thanks, Jess. We'll take it probably about 15, 20 minute break. All right. I hope you had a good break. So when 10 months ago, Bracken asked me to lead creativity and productivity, I was very excited because, first, it's a large part of the business. It's a very important part of Logitech history. But I was actually really excited because I could see all the opportunities we have ahead of us. So today, I'll talk to you a little bit on where we are and why we think there is a lot ahead of us. Generally, when people after the excitement around video communication and gaming, when we talk about creativity and productivity, the mice, keyboard, presenters, webcams, people tend to associate our performance with the PC shipments. And actually, if you look at the past few years, the PC shipments have been flat or declining. But if you look at the trend line of Logitech PC peripherals in the past few years, we've actually consistently grown. And our business, you probably know from our performance year to date, creativity and productivity have done pretty well this year. And if we look at the past 3 years, we've grown consistently by about 5%. So now we are looking at what record we are going to beat in the next few years. So last week, we actually had a very important milestone. Logitech has now shipped 2,000,000,000 mice. That's a pretty big number. But what is more interesting in this number is that we shipped the 1st 1,000,000,000 in 25 years, after 25 years. We shipped the 2nd $1,000,000,000 in only 10 years. So if you look at this trend line, you can see how we can evolve. You would probably ask me, but why do we think we are disconnected from the PC shipments? What do you think is creating this trend line? On one side, we can say, okay, well, Logitech is a very well organized operation machine. We distribute in 100 countries. We have absolutely great manufacturing and supply capabilities that gives us great scalability and cost. We are also able to develop products really fast. I mean, now it takes us between 5 to 4 months to develop a mouse and a keyboard from start to finish. And we are also continuously delivering very high quality for our product. So is that the only reason? Well, the other reason we can say there is we have a very large portfolio. We have a portfolio that actually cover 100 countries, But we are also able to deliver products for specific countries. The Chinese millennials is not necessarily having the same food the same amount of money that a millennial in the U. S. Would have. So at the end, it's very important for us to offer different products for different people and not one size fits all. And a mouse will not fit a child versus adults, man and woman. There are different sizes. That applies to keyboard as well. These two reasons makes us being the number 1. We are the number 1 in all this specific foreign category, which is a pretty incredible achievement. But is that the only reason that makes us grow? And I think Bry can open this saying that we are moving from being a PC peripheral to a cloud peripheral company. In the case of creativity and productivity, what we focus on is to attach to digital content creation application and services. So you're probably familiar with the type of creation we all do on a regular basis with Excel files and beautiful spreadsheets. And we write emails, we write books digitally. Our own designers more and more create all their content online. But you see also millennials, for example, they are creating video content to post on YouTube, Twitch. They all want to become famous and have followers, but you have to create that content. That content is all done digitally. I look at my son. He's 4 years old, doesn't watch TV today. And the one thing he loves the most is to look at the video content creation from young kids that are like showing how to be on the track, a train track and that's what he loves. It's video content creation you create, but you also communicate. And all these different application serve different hobbies, special profession and it gives us multiple opportunities to create new need for the mouse, the keyboard, the webcam, the presenters. They create multiple target audience we can reach to either to come back into the category, find a reason to buy the product again or to bring them in the category and help them create their content more easily. Our focus is to make it as easy as possible to create that content so consumers can focus in what they are doing. They don't have to worry about anything. They don't have to worry about the learning curve. We are making it easy for them. And Alistair touched on the consumer obsession. The more and more we are looking at all these different target audience and the more we understand them, the more we discover new opportunities and new innovation. And that's really what helps us innovating every year on every category because we focus on this target audience, we focus on different use case and we constantly can innovate, disrupt ourselves and create new opportunities. We innovate in the high end. We innovate at the affordable level, but we also innovate in software. And I'll show you today a couple of examples of innovation we have done in the past 6 months. The first one, you heard about MX Vertical Mouse. The goal of MX Vertical Mouse was to help people feel better so they can work better. And more and more people have actually carpal tunnel syndrome pain. I mean, more and more people have been using a computer for quite some time. You hear a lot about about 35% of consumers in the U. S. Have some level of pain in the rest of their arm when they're working. So for us, it was really important to find a way to help people continue engaging with their content, but remove that pain. I'll show you a little video that shows how the process and what we focused on. What is important to know is that we have entered this new vertical this vertical mice category in September. So we were new in the category. In a very short period of time, we've taken major share within this segment, still small today, but we've taken major share and we've led the market growth by 200%. So when Logitech gets into the category, we can literally disrupt the category, take share and grow the market. And that's for us a great opportunity as we look at this multiple pool use case and opportunities to create. Now give you another example of software innovation. We don't always have to launch new products to stimulate the category. There is a lot we can do as well on software. So we I talked earlier about video content creation, which everybody has access to. You don't need a very advanced production company now to create content. So today, you can do it with your mobile phone. There are a lot of things you cannot do actually with your mobile phone. And if you want to do it at the desk, there are a lot of application you can use to do the capturing of your content, but sometimes it's very complex. And if you think about young users or people who are just new to the category and they just want to create the content and engage with people they want to engage with about their hobby and the things they are passionate about, we want to make it really easy for them to do it. So instead of me talking to you about this new software, we launched as a pre release beta version in November. We launched the actual version of Logitech Capture Software in January. And after just 3 months, this is the most downloaded application that we have within Logitech Creativity and Productivity. The adoption and the feedback we got on this software has been incredible. So I'll let an influencer. She is so her name is Mrs. Meer. She's an influencer. She's actually doing a lot of gaming streaming and activities. She has more than 200,000 followers on Facebook. And I'll let her introduce a little bit what Logitech Capture do Logitech Capture does, but you cannot do within a mobile phone or just a regular video. So this is Mia. And she really described what you can do very easily. It's accessible tool. It's compatible with our webcam C920 and C922 and it's literally creating a lot of stimulation for the category. So more than ever, I'm confident that the digital creation evolution will lead to many new growth opportunities in the future. And Logitech is extremely well positioned to capture these opportunities and disrupt the market and grow the market. We have an obsession about consumers. We can constantly innovate as we target all these new use case and new opportunities that the digital creation application gives us. And we have the scale and the breadth of the portfolio because not one person is equal and we can really go after every single opportunity. So I'm sure Vincent will talk about our target. I may not fully agree with all the targets he will talk about, but more than ever, I'm confident about the future. Thank you. I have to tell you a quick anecdote. When I joined 6 years ago, the portfolio was growing at about 2%. And Delphine was basically the operational person in Asia, driving the discipline behind the growth agenda that AP was on. The rest of the company wasn't there yet. And people were more conservative, prudent. And so I used Delphine's work and Delphine herself to really drive the growth agenda across the division, across the regions and say, hey, you guys have to lean forward, you're going to fall behind, keys what they do in Asia, you guys should definitely look after that. And they were very disciplined, very data driven. And then happens what happened. You fast forward 6 years later, Delfin is the head of the biggest business we have. And you know, I call that the low growth business. And every week, they'll stop by my desk and say, Vincent, you really have to look at this data. You're going to fall behind. You have to lean forward. You have to go for the growth. And I think she's right. So I told her if next year she can deliver growth of 8% to 10%, I promise her to call her business a high quality business. All right. That's rendezvous next year as we say. Let's start with confirming the fiscal year 2019. This will be the 6th fiscal year that I'm closing with Logitech with the team. Most of the team joined with Bakken. Every year, we close the fiscal year on a higher number than we started the fiscal year with. Now don't get used to it. Maybe next year is the right guidance I'll give you. But definitely, we've had great momentum behind us and we're going to have that. This would be the 3rd year of double digit growth if I use the midpoint of the guidance, 9% to 11% in constant currency. For those who are modeling here, I look at few models sometimes and remind you that in Q4, we have a currency delta that's bigger than the other quarters. I just want to make sure you look at that. That's for the top line. Bottom line, dollars 340,000,000 to $345,000,000 on track to that guidance. We'll use moving forward the midpoint of the guidance for the next few slides. But overall, it will be a very good year, 9% to 11% top line and twice that growth rate for the bottom line, pretty impressive once again. You remember that chart we put up in 2017. 2016 after a successful turnaround, we turned from a turnaround agenda to a growth agenda, investing into our business, building up our capabilities and fully leveraging those capabilities to capture the potential in the market. And then in March 2017, we said, but it will not be gross at any cost. We need to put a framework into place until we think we can double the earnings over a 3 year period. To my surprise, someone at the last earnings call in January asked me if I was still committed to that $2 EPS for 2,000 well actually for 2020. And I think I'll reply something like we virtually have achieved this year, right, within the 5%, if that's my margin error. We kind of are within the range. And when you look at guidance for next year, it will be higher than that. This was not kind of our driving overall strength, but it was kind of a commitment to say, hey, it will be within certain boundaries, we're going to drive the course agenda. The biggest benefit would come from growth, initially planned at high single digit. We delivered double digit growth through that period. Margin improvements that we had planned for, there too we've over delivered and then reinvestments of some of that gross profit into our capabilities. And there too, we invested more than munition plan. So the way we've achieved that $2 also is a high quality achievement. As I mentioned double digit over 3 years, some businesses did better than others, others did worse than what we had planned and that's the life of our portfolio. Overall, the diversifications help us to drive the performance. And we know that over a life of a category, some will be up, some will be down, some will be back up after a few years as we stay really consistent to our approach of becoming the peripheral leader to cloud based applications. We've improved the margin over 3 points. 2016, 34% gross margin, we're at today on an operational level around 37%. And as a result, despite the investment we've done in our capabilities, we have improved our profit at twice the rate of revenue. More importantly, we've done it every year. Operating leverage is a very important concept in our consumer hardware. So every time someone comes through the planning cycle or as we review the financials of our business and tells me they need to lose money first because they'll be profitable later, that's a big red flag, especially in consumer hardware. I can understand it in software, I can understand in many other areas, but not in consumer hardware. I cannot promise you that every product line, every SKUs is always positive from a contribution perspective, but I can promise you that we have the principle to always try to drive incremental profit as we sell more. We understand the importance of market share and presence and brand, but it has to be a profitable way. Consistency is also very important. So being able to count on the operating model that has that operating leverage capability, wherever we go in new categories, adjacent categories, we always look at leverage points. There's nothing that's totally new that requires to be everything from scratch and therefore invest first before we can get some return. When we started 5 years ago, we said, hey, you can count on us to not grow OpEx faster than revenue or align our investments to the revenue growth. But we quickly changed that into number one metrics inside the company was about gross margin or gross profit. And making sure, as Bracken mentioned, that every one of our capabilities translate into a financial metrics into contributing to improvement on the gross profit, whether it's better brands or better innovations, whatever price premium it is or better operation or lower product costs, it's all about that gross profit. And then we really are investing a portion of that incremental gross profit back into marketing, sales, product innovation as the 3 main categories. 2 third of that incremental gross profit floating into investment, a third to the bottom line seems about the right ratio considering where we are from a profitability perspective. So where it's coming from the gross margin improvement. First one is design for cost. 3 years ago, as Alastair matured his organizations, we added an element into design, which was the cost element and floated many of us due to a design for cost program, if you want. But now really is more of a discipline than a specific program. You think about revenue generated in the year is about 20%, 25% from new products, right? And we started 3 years ago, you would say, already 3 quarter of your revenues run through that program. But the problem is not always successful. Maybe we have a 60% or 70% success. And so I would say about half of our revenue is run through. We still have another half as potential. And it will continue, the portfolio will evolve and it's like doing a diet, you may lose some weight and then if you don't tell attention, you regain a little bit and then you continue discipline to realign. A disciplined promotional environment, definitely moving more from a really promo driven demand environment to more of a brand demand. We have a line in our P and L that we don't report and therefore you don't see it called contra revenue or gross to net is another example. And there's over 10 points there of sales and marketing expenses that are really driving the demand. Being more efficient in that environment, aligning that spent to real performance sales out and consumer indexes is pretty important and gaining more efficiency that we then reinvest not into the gross margin, but into OpEx and into brand building to have a brand driven demand is part of the discipline. Scale and mix is another contributor to our gross margin, an improved logistic environment, and Bracken mentioned a little bit, but we've definitely have diversified our supply chain and made it more nimble, which helped lower the costs that we've reduced by significant amount. G and A is one example. When we started 5 years ago, we had about 5% of revenue. Today, we are at 2.9%, and I think we'll continue to go lower. So where did we invest? Obviously, at the core, we are a product company, right? So more R and D, new product building, definitely key. Building new capabilities within that product environment, the software capabilities is another one where we continue to invest. Building up the capacity or capability to manage multiple brands to have a better branding environment, whether it's infrastructure processes and also program does has been part of that thing. Building a direct sales force in the enterprise. Years ago, we said we're going to start to hire a few direct sales force to support the distribution environment And we've continued to grow that enterprise sales force to support the video collaboration business, which is part of the success that Scott have shared and we're continuing to do that. And then new capabilities, I would argue with you that the capability integrating companies we've acquired, as we've done a few now, has been part of building new capabilities we have not talked about, but we continue to invest in. So when we started, we're about a breakeven company. We set a long term target of 10%, which at the time felt aggressive. After 2 years, we're at 10% operating profit. As we move to a growth agenda, we felt we could have a potential of 10% to 12% operating profit margin, but there we're slightly above 12% and are within the high end of the range we set for the portfolio. So let's talk about next year financial outlook. And I have to tell you, when I look at the market opportunities and the presentation from Scott or Ushesh or even Delfin frankly, I want to say, oh my God, all can drop double digit growth, it's fantastic. But at the same time, we have to continue to be conservative, disciplined, making sure that we align our investment to something we can deliver. And so we'll continue to do that. The opportunity, the potential is there to over deliver, but at the same time, we have to consider the macro level environment. If I were to give this guidance in October November and we're listening to you guys, the world was falling apart. Now I still receive today some bank reports that say this year will be a recession year and it could be. That's not what we see today, but who knows, right? And so considering this environment around currencies, tariffs and other things, we're going to widen the range a little bit going into FY 2020 and moved our growth rate from high single digit to mid to high single digit in constant currency. On the top line though, we're delivering with great drop through and a 10% to 12% growth feels appropriate today based on the mix we have and the plan that we put together for next year. So we're guiding next year $375,000,000 to $385,000,000 10% to 12% growth. You can read the assumptions, which are similar to prior year supporting this overall guidance. When you look at the growth rate by market, with the PC peripheral in this low single digits, Delfin, I definitely count on you to win for next year, but I think at this point in time, it feels prudent to be there. Video collaboration, same opportunities. Actually, great momentum, as you've seen Scott talking, exiting the year to year with a 45% growth. And we continue to invest both in the portfolio and in our direct sales force. Of course, the low of the big numbers, and we still have 5 quarters before we deliver these numbers cores for 25% to 30%. Gaming 15% to 20%, still supported by a market that has double digit growth. By lines, whether it's simulation, PC gaming or the console environment, may have different growth rates, but overall that's the mix we have. The music is definitely the guidance impacted by the fact that the current mobile speaker market is in slight decline. We see a minus 5% to a minus 10% in mobile speaker at this point in time. We'll continue to work on our operations, try to gain share in a declining market, And I think calling for a flat to slightly declining set of categories makes sense. And smart home at this point in time is too small to really matter in the overall guidance. So long term model, 3 years ago, we said, hey, high single digit is the potential of that current portfolio addressing the 5 markets that we have. Gross margin that was raised from 33%, 34% to 35%, 37% and then the operating profit margin 10% to 12%. Now we've over delivered over the last 2 years. The mix has changed. We've improved the profitability of our business structurally of all of the business lines and also the mix. And so as a result, we're putting a new long term target model and long term could be 5 years for the conservatives, 3 years for the aggressive people and maybe 2 years for the ambitious one. I'd like to decide the time, but when we look at the long term model at 3 plus years, call it 3 to 5, we see the potential to continue to deliver high single digit growth rate. When we look at the market themselves, the market share opportunity, the adjacencies that we could penetrate, we feel pretty good about holding that. At the same time, we're widening the gross margin range and raising the high end to a 40% gross margin. The increase of that gross margin is 3 vectors. 1 is a normal cost structure improvement, lowering the cost, higher premium as we invest into design into branding. So that's factor number 1. Factor number 2 is a mix and a positive mix moving more towards the gaming, the creativity and productivity, the VC business, which all have better margin than the music categories structurally. And then the third one is about our desire to change the business model from promo driven demand to more branding or a better balance between promo and brand, which means that some of the cars that we're hitting gross to net or contra revenue impacting gross margin will be spending marketing OpEx. And so that's just a different geography on the P and L, and that's about one point. So that business model has to be coupled with 2 other comments. The first one is that we'll focus on the long term growth of the business over margin or profit margin expansion in the short term. So if we have the opportunity to grow at the high end a 9% or a 12% like we've done for the last few years CAGR, we may not be at 40% gross margin yet. So we'll definitely favor the growth in dollars over the margin expansion. And the second one is, we'll continue to relocate some DARTs from the promo bucket into the brand, building value in the different brands we have in our portfolio. On the capital allocation, no change. Priority number 1 is M and A. When you look at the past acquisitions and the return we've had so far with those acquisitions on a cumulative basis, we feel that's the best return for our capital investments. The second one is we maintain our growing dividend policy and then we have the share buyback program open. In fiscal year 2019, we'll have invested a return over $300,000,000 between the Blue acquisition, the dividend and the buyback. So M and A objective number 1, and that brings me to the next topic, which is build versus buy. After the rumor that we're looking at Plantronics, which we had confirmed, and after the success of Blue, a lot of people, many of you are asking, hey, what's your organic growth? What's the inorganic growth? And of course, I can always answer, but it's not exactly how we look at the business, organic versus inorganic. Another question I got was, how did you find that target? And I was surprised by the question whether it was blue or another because it's not like suddenly we have a banker and come say, I have a brilliant idea, how about this company? As a result, due respect to the bankers, they never bring new ideas. They just get fee on ideas that you already have, but that's a different comment. And we have a very broad strategic environment. We know what we want to be. We want to become the leader of the ripples for cloud based application. And so we almost look at everything. There's very few companies we have not looked at. There's many we have not engaged with, but we look at everything. And when we find a market that we think is attractive to us, we're not waiting for a company to be acquired We already put a seed investment in place or we start to invest our bank. That's a great idea. Let's move on. And then sometimes the company comes in and for many reasons, they would be ready to sell at a reasonable price and we decide to engage. At that point in time, we say, okay, should we continue to build on our own or buy, right? And one of you, I won't name him to not shame him, but tell me that I don't understand because organic growth is so much more sexy than acquisition. And I don't know what he meant by sexy, but I can tell you acquisition is very sexy. So I'll explain that in a minute. The case I want to bring to illustrate this is the Astro Gaming case. And did Yousshesh one day woke up and say, brilliant idea, I met the Astro guy and you should enter into console gaming? Of course not. Was looking at the console gaming market always, say, okay, maybe in the past year, maybe it's too cyclical, maybe it's but as we saw online gaming moving on, say, hey, there's less and less differences between PC gaming and console gaming and so forthright people can play on all platforms. And so that's another interesting adjacency we should go into. And so we already was looking at it and preparing and some investigative dollars went into, okay, what should we do into the console game and where should we start with the value of our brand. And then we look at the competitive landscape and Astro for many reasons became available. We say, okay, what should we do? We need to build on our own or do the purchase of ASTRO. And then we look at all the criteria. We say if we build, we'll take longer to get to market, right? ASTRO already was at the high end of the pyramid for headset console gaming and was already relevant in that market. We said, okay, we take longer time to profitability for Usher to first invest, build this relevance into the market versus being immediately accretive in the case of the P and L of Astro. GE was not well known in the console market. So we would have spend some marketing to us to make sure we build the brand in that console environment, while Astro is a very strong brand for console players. Of course, organically no need for integration. We have a good brand G and we have already some marketing R and D dollars. On the other side, we had to integrate the business and we had to manage another brand, which brings another complexity, another value, but also another complexity. And of course, we had to purchase the business. So we did a simple analysis. We made the decision to purchase ASTRO, which at the time fell maybe on high end of a purchase price we're willing to pay. So for some, we're seeing that we're paying too much for acquisition. I was the one here saying, yes, I can get comparable, but it is on the high end. Looking back a year and a half after, that was really cheap, right? So that's also something to keep in mind. We won't always get it right, but we look at the risk reward at all the criteria as you have here, and then we make the decisions to go. And what happened in the ASTRO sales case, we immediately after we purchased the business, we launched the mid range product, the headset A10 and A20, trying to compete with Turtle Beach and capture market share in that environment. We leverage our sales distribution environment and started to increase the sales internationally. And then as you've seen recently, launch a controller to expand the portfolio. Basically, all of the dimensions of growth that we've been applying to all of the other businesses and you've seen here the results. Now of course, the market itself grew faster than we thought and it goes back to if we had decided to go organically, we would have missed maybe the 4 line effect or we would have come at the end of it, right? And so in this case, it was the perfect acquisition at a perfect time in what was after the fact actually a very cheap price. Now when you ask me organic or inorganic growth, I don't know how to answer that. But if I answer inorganic, they only brought to us this baseline. All of this is organically driven by Ushesh, the sales team and with the true finance support that I provide. So frankly, what's really sexy in the business, it's not whether you acquire or you grow organically, it's once you have something, an asset, you really can develop and grow it. And that's really exciting. Whether the asset was acquired or already existing in Logitech, it's 0 difference to me. But once you have it, what can you do with it? Where can you go? How do you invest? How do you prioritize? That's really what's exciting. How do you innovate? Those are the exciting piece. So someone after I talked about Plantronics, we had looked at say, okay, I understand that you integrate M and A in your agenda, which we had said for 3 years, right? But that was a bigger potential acquisition. So there were more questions and say, what are your criteria? And those have not changed, but let me summarize them again. We look for secular growth trend. And these criteria could apply to our organic selection of projects, right? So it's no different. But looking at adjacent opportunities with secular growth, something that helps us continue to be or build upon our leadership for cloud based peripheral or an acquisition that could enhance some of our capabilities, whether it's operational, design, R and D, distributions, online distributions, then always ways to improve from where we are, something that brings scale and we scale synergies. It's a fantastic C and D platform to invest more, accelerate double R and D. And then as we look at tuck in acquisition initially, it's by design because like with the financial results, we felt we had to build credibility that we could acquire assets, put capital at work, get the return and build the muscles. Initially even started the 1st year where we knew we're not going to do acquisitions, Bracken and I said, hey, everything that comes our way, let's put a term sheet non binding in place, so we can really learn on how to look at an asset, right? And so we did a lot of that and then we did a few acquisitions and Jibre and Astro and Blue. And now size is not anymore the main factor. The primary factors are what you see above and then, of course, you need to be able to finance it. But otherwise, we look at almost everything that's in these criteria when they come available. So I was in Zurich early February. Some of you were smart enough to understand that the $2 EPS would kind of be delivered. And so I asked all, Givens, what's next? In March, are you going to say $4 or what are you going to do? And I didn't want to answer that. I didn't want to put a further EPS. Let's say that's interesting because we look at the business slightly differently. And we look at the business, at least for the main businesses we have, at their full potential. And someone asked me, hey, can you do a $3 or $4 EPS as a next step? And that's not even a question for me. So the way we look at it is say, okay, the creativity and productivity, what's the full potential of that business, right? So they are at $1,200,000,000 If you look at market opportunity, market share gain adjacencies, and I'm not even integrating content creation or broadcasting, we just look at that business, could easily be in the mid term, could it 3 year, dollars 1,500,000,000 They operate at 40% plus gross margin. And the investments leverage a lot of what we've already done, the IP we've accumulated and everything we already have. And that's how we discuss with Delfin. Then we go into Ushesh. So Ushesh, and a little story you've heard, when we started 5 years ago, so we're trying to lean forward on a growth agenda as we were coming out of the turnaround. And in one of our business meeting in the evening, all the GMs are out there and Bracken and many is trying to mobilize the mindsets towards growth. So someone like you, Shesh, makes a bet with Bracken and say, hey, if we double gaming and we drive it to at least $500,000,000 business, you'll get a tattoo. You've heard the story. Now I don't have a picture of his tattoo, but I can tell you we're $600,000,000 business to this. So you can ask him where it is. That business has a gross margin of 36% to 40% as we grow double digit. I could argue with you, it could be higher gross margin if we grow less. But for now, I think there's a lot of growth potential in all three areas, the market, the market share and the adjacencies. And so that's where we've been driving that business. Over $1,000,000,000 absolutely reasonable at 36% to 40% business. That business, video collaboration, you've seen him growing at 45%. If he grows at a very reasonable rate of 30% for 3 years, he'll be already at $1,000,000,000 And I'm not talking about adjacencies, potential acquisitions and then everything else you can do, I've not talked about. So $1,000,000,000 are absolutely not unreasonable. You know the gross margin in the enterprise world well above the high end of our corporate gross margin range. If you do the math, sum up everything here, I'm already at $3 And so we're not looking at the total portfolio and the total, but we really are developing those business at their full potential. And that's how we prioritize investment. And then I'm already well above $3 I have not talked yet about all the other businesses or business opportunities we have, existing businesses, fleet investments, other applications we have never discussed and all in a context that we look of course at building, but also acquiring, right? And that's in none of the model. So I don't have to give you a one number or one thing like we did the $2 EPS because it has a very good function. It's giving you the credibility that when we're going to embark on a growth agenda, it wouldn't be growth at all costs. That discipline is integrated and will continue. Now we're really looking at building the full potential for our 3 main businesses, while we continue to explore many other opportunities. And that's whether we, again, do it in house or acquire and then do it in house. So again, we don't separate it fully on that spectrum. Okay. So with that, Bracken? Is that slide up? Yes. So I'll just wrap this up real quickly and then we'll take questions. It's a good chart actually and I wasn't planning to use it. But if you go but before I do that, let me just talk about Vincent. So Vincent and I have been together for 6 years, I mean. And Vincent and I don't go out to dinner together. Our families don't go on vacations together. We're not best friends outside of the company. We're partners. We're really partners. It's true. We're really partners. And we're and he is a great CFO, but he's so much more than that. And he plays a much bigger role. And I really feel like in this business that I have a partner here. I I also feel like I have a partner and everybody else you've seen present today. Every single one of them feels like my partner. And I'll go beyond that. There are a couple of people, Chris De Todd and Brian Coe, 2 more members of my leadership team. I feel partnership there. And Gruner de Luca, our Chairman, who's been with who I we've literally been with each other since before I started the company. So the reason I'm using the word partner is because I mean it. We I have a broad shoulder team of great partners. This is a partnership. We have the capacity to do much more than we're doing, but nobody's taking the eye off the ball. And the reason I'm setting that up is because if you go through these existing businesses one at a time, I talked I started today and I hope you track right through it on the secular trends that are driving these businesses. The one that is very difficult to communicate, I think Delphine did a really good job. It's really difficult to communicate what an opportunity, actually the original creativity and productivity businesses, surprising to everyone, including me when I got here. But what's happening is as digital content creation, the democratization of putting things out for other people to see, which used to be the domain of Walt Disney and Paramount, it's now the domain of anyone who considered a desk or walk around and film themselves. This is driving this business today and it's going to drive this business tomorrow and for the next 5 to 10 years. If you weren't blown away by Ujesh's presentation on gaming, then boy, you must have a house full of gamers, because no matter how many times I go through this, I'm still a little awed by the numbers of people under the age of 30 or under the age of 25, how much they're watching and how much they're playing. This is not a trend. I mean, this is not a fad. This is a long term trend. This business will grow for a very, very long time. And the last one, which this is just almost undeniable at this point. I'm now getting to the point where I spoke to an investor during the break and he said, yes, the video collaboration piece no longer surprises me. If you're not already experiencing a day full of video calls, you're not at the front of the curve. It will come. It saves money on flights. It gives you better video connection. And if you're under the age of 35, you only make 2 kinds of calls. You're either on earphones or you're on video. There is nothing else. So video is going to sweep through every office, everywhere in the world, every enclosed space. Those three things are your safe bet. Those are the safe bet. If you're looking to invest in us to play it safe, that's a great bet. Now, we're not going to stop there. The reason why number 4 is out there is because we're not here to only do the safe bet. We're going to go beyond that. We're not going to take unnecessary risk. One of the things we do extremely well that I rarely ever talk about, but I'm the most proud of and it's absolutely not sexy to use your words, Vincent, is risk management. If we take on something, we risk manage extremely well. If we take on something small, trust me, we are thinking risk management. If we're launching a new category, we are thinking risk management. If we look at something big, believe me, we're thinking how do we risk manage this. The risk management is the formula underneath our engine that you must rely on and we must always, always do well. So I'll close by saying, I'm super excited about the business. I'm super excited about the team. The number of opportunities and the size of the opportunities we have is certainly unparalleled in Logitech's history, but unparalleled for a lot of companies. I mean, we're in a luxurious place. The pressure is on us, keep building this capability, to keep the ambition high and to keep risk managing. So we'll stop there and we can open up for questions. Yigalisa, you want to cover too? Yes, absolutely. Probably, yes, I think so because I think we're bracketed. Hey, great presentation to everyone. Just a very quick question, Bracken. As you think about diversification, like how do you balance the enterprise and then the consumer side? I mean, I get that question a lot from investors or kicking the tires or already invested in Logitech shares. There's enterprise, the opportunity is there and then there's the consumer side and the diversification is great, but then the investment, the go to market. So maybe you can anecdotally talk about how do you balance that? And then as a follow-up, sort of where as you look into 2020 2021, sort of where is the bulk of your R and D or go to market investments flowing into? Thank you. So if you think about the enterprise, we didn't actually, I'll go back even further in history. We're just following users, okay? Every business we're looking at, we're following the the safest thing you can do in our business is follow the user where they're going and then build a great experience for them. So we don't tell users where to go. We don't dictate. We don't try to create trends. We follow trends and we create an amazing experience. That's the goal we're trying to create. Inside years ago, when Apple started or when BlackBerry started showing up in businesses around the world, it went from it became an enterprise play. What we're doing what we've done with our original PC, Delphine's business, it started as a PC business. What happened next? People started using it for gaming. So what did we do? We followed them into the gaming experience. We upgraded the capability of our products. We took engineering way up as you just showed you, and we created much higher performing gaming peripherals. And as a result, we're leading in gaming peripherals. Let's just go through all the other business that we talked about today. We could go through more. Scott's business, what did we do? Somebody took a webcam. When I first got here, I'd see people I'd go to small company. They'd have a webcam on top of the TV, they'd have their PC in front of them and they'd have a video call with me. And so what do we do? We said, we can do better than a webcam for that call. We can create a better field of view. We can create better mics. We created a product for that. We followed them right in. And a few years later, we had a full scale business. Now we can sell it into anybody. So it starts with, we're the enterprise. You asked the question, how do you balance the enterprise versus the consumer business? Is that too much diversification? We're just following what's happening. The consumerization of enterprise experiences is there with or without us. We're just taking advantage of it. In terms of the technology required to invest in, these same investments we're making for a Bluetooth speaker, as Scott said, are now being or I actually didn't mention it, are now being used in our video collaboration equipment. So it's actually leveraging our engineering capability. In terms of go to market, you're right. We have to build a go to market and we are aggressively doing that. So we've been investing now month after month after month on building a new go to market to make sure we can serve the enterprise. But I think that kind of in the past, I think you could have said, gosh, is that too much diversification? I feel very I hope you do. I feel super comfortable that we can play across those two fields very well. Your second question was? Investments anecdotally, if you could talk about where the bulk of your investments are going even near term like specifically like what kind of projects, I know AR and VR and gaming comes up quite a bit as well. Yes. We're always investing in the engineering and technology capabilities of the business. So we've got we have a lot of investment in Scott's business, a lot of investments in Yu Giush's business, continue to invest in Delphine's business. So there on the edges, we are we have a long term the only seed we talk about externally is AR and VR. We're not investing a ton in there, but we're staying highly engaged in it because we believe that a few years from now, as the especially mixed reality starts to form, we want to make sure we're there with a lot of the not only the know how, but even helping drive some of the specification for what is relevant from a user interface experience in a VR mixed reality world. So that's there. Beyond that, in terms of new products, we don't usually talk about it publicly, but we're always investing a few more things usually between 5% and 10%. Yes, Michael. Thank you. Mike for Bankfront. Just one question on the software side. In the past you talked about hardware being tip of the iceberg and so and more and more software content in your product. And my question would be, how is this software content actually developed over the last, let's say, 3 years? And how is that affecting your gross margin and the change in your gross margin guidance? That would be the first question. And second one would be, obviously, you've increased your gross margin corridor long term. And my question would be, do you think you could actually, if you invested more of that money, actually grow faster? Would that be an alternative for you? Because in the past you've always said that you would favor growth over We'll go back and forth. I'll answer the first one. I'll let Vince answer the second So, and the first one, so we're how has our software capability developed over the past 3 years? We've gone when I joined when Vince and I started, we had, I think, 59 software engineers, which were really firmware engineers. The difference between software and firmware firmware is a kind of software is firmware is embedded software, it's really embedded in a physical piece of hardware. Today, we're about 1 out of every 3 of our engineers working our product lines as a software engineer. And we're hiring probably the rate of 2 to 1 software to hardware. So we continue to grow our software engineering capability. And on top of that, we're using a lot of contract, in some cases, contract engineering talent outside for software. So software has become a bigger and bigger part of our business. Do I think it's affecting our gross margins in these targets? No. I think that's an upside. If we if as time develops, if we develop capabilities to add services and other things that software could enable, I think there's potentially ability to do to add to gross margin. But I don't know, that's not really embedded in this assumption, but it is embedded in our outlook. Over the long term, I envision we will continue to add software that can do a lot more than just enable hardware. Yes. So we're going to focus on gross and gross margin will be 37 percent, 37%, half of you were saying, oh my god, you can deliver better gross margin. And then over the last 4 quarters, we're running at 37 percent. So everybody says, oh, it should be at least 40%. And so we go through our plan. We knew we were going to raise it at one point in time. And then you raise it and now people are saying, oh, does that mean there is no more gross opportunity that you think it was margin? And of course, the answer, Michael, I understand your question, but it's no. When you look at a purely theoretical potential and look at everything we can do on the whiteboard, we definitely can grow faster. How fast can you get to that full potential, that blue sky scenario or that hypothetical case? It's maybe with very low probability, you need to be able to execute and etcetera. And so at this point, I mean, where we stand, we don't feel we have the confidence, also we have the potential, but the confidence to raise a long term growth rate for our portfolio to a double digit growth rate. So that's the first answer. If we deliver more than that, that's different. And we've delivered the last 2 years at double digit, then who knows, so it will deliver next year if it will be double digit again or not. For now, I think it's very reasonable and prudent to guide at that mid to high single digit. On the gross margin side, two points of the improvement is coming from 1 mix. And when you look at the long term potential of the VC business and you've seen the word $1,000,000,000 of gaming, of C and P, there's a mix flow through that will come in. We already operate at 37% today. We have more cost savings opportunity about a point and we'll redirect the business model for more brand driven, right? So some of that will be reinvested. And then you look at all of our investment opportunities, say, what can we really reasonably execute on? And that's the discussions we have with Bracken with the management team. And that's how we determine the bottom line target. As you've seen, we raised the gross margin 3 points, 2 points for the bottom line only. So we need to increase investment at least one point. We'll continue to invest growing on high single digit. And so it's not that we're not investing, but we're also realizing our capability to absorb that incremental flow through of gross profit. Again, I think the corridor, as you call it, is wide enough for us to entertain a lot of investment opportunities and favoring growth over margin expansion as we progress towards that long term Charles? Yes, many thanks. Alex Duvall from Goldman Sachs. A couple of quick questions. Firstly, you talked about this exciting opportunity to go upscale in VC. So I wondered if you could give a bit more color on what strategically you might need to do that and also in terms of any tweaks in terms of channel. 2nd of all, on the gaming side, I saw on your target for 2020, you talk about 15% to 20% guidance for growth, but you obviously laid out some very interesting structural drivers. So that seems potentially a little bit conservative, particularly in the context of what you've achieved in the last year. So maybe could you help us understand that as well? Thank you. Sure. On the first one, one, I think it starts with products. And Scott spent time to repeat the question. So the question is, what do we need to do to really go up into the bigger rooms to be successful, both from a product standpoint and from a go to market standpoint? On the product side, it does start with products. We feel like we've got really world class products now. We have a lot more to do, by the way. There's a lot more opportunity there that Scott and team are working on, obviously, beyond what we talked to today from a product standpoint. From a go to market standpoint, we're building our go to market across the board. I would say we're still at a relatively immature level compared to what we will be in terms of go to market, and we're doing that across every part of our world. We've had really incredibly strong performance despite that. So it's one of the key focus areas we've had and key investment areas for Scott's business. In terms of gaming, yes, you could look at the gaming story and say, you had such strong growth last year. You just gave such a great presentation. Why are you decelerating your growth rate? Look, call us conservative, but the Fortnite effect hit this year, the fundamental secular trends are not changing. So they're right in line with where they were. We felt like, okay, with that one time burst of Fortnite, as we look out, we should probably make sure that we're not being too aggressive on that side. On the other hand, there's something like, as you just showed, and I'll bet there's not a person in this room who's played Apex. There are 50,000,000 people who have in the 1st month. So who knows, maybe there is another Fortnite effect. But over time, I expect our growth rates to continue to be super strong in gaming. Great, thanks. Thank you. Yes. You haven't talked. We should have gotten the blue microphone. You wouldn't have heard me. No, it works. You haven't talked a lot about music today. How strategic is this business to you? And you compared M and A and Seed, when should we expect another or new product category coming to your P and L via seed or M and A? Okay. I'll take it first, so we're dividing and conquering it. On music, we love the music business. We've been in music since what year, Garena? When did we first buy PC Speaker Business? 18 years ago. So we've been in the music business for a long time. And when we got into Bluetooth speakers, we really focused on great design, great innovation, great experience. And we have a and we created a first great product, then we later on. Like many of our categories, some of our categories, they grow for a long time, sometimes really spike, slow down, go south, even grow again. Webcams, as I said earlier, had this period where it had incredible growth rate, slowed down, declined, started to grow again. That's grown pretty strongly. And then it transformed into another business called Video Collaboration. So I don't know exactly what will happen with the Bluetooth speaker business. We've taken a conservative view of it given the market trends around the world for next year, for the next couple of years. And I think that's smart to do. Is this strategic? Yes. From a technology standpoint, we're using we're sharing some of that same technology for music in both our earphone business and our video collaboration business. The business is still attractive. It's large. We're a key player in it. And so, yes, it's strategic, but we're being conservative on our growth rates. You want to take the acquisition? Yes. I know you're ready to announce one. It was just not on the acquisition. The timing of new categories, right? So the last two news were console gaming and microphone. We don't plan to talk about timing. And frankly, we don't even internally plan timing of new categories. We work on many projects, organic or inorganic, that are about categories that are not in our portfolio today. But we won't make the mistakes of realigning on those new categories in our financial models because it could lead us to deliver maybe subpar innovation or try to rush to a target. And so for 5 years, we haven't done it and we won't do it today. In fact, I'll go back if you put that last slide up again. Those first three things we feel so strongly about give us such growth potential that we wouldn't the number 4 there, which would be new categories, there could be new categories inside the others, but there could be the 4th one. We're always looking. We've got a small group of people always talking about. Vincent and I had a meeting on Monday, where we're working on a new seed that certainly would sit in that space that we're super excited about. But you got to manage your enthusiasm because new things sometimes come out, sometimes they don't. And we have between 510 new categories in development right now. I can't tell you if or when they will come out. So we're always working on them, but this is the visible bet. So those numbers are basically based on your current portfolio, right? Right. Those numbers are basically are based on your current portfolio? Somehow, yes. Meaning these numbers are based on our C and P Gaming and Video Collaboration portfolio. I cannot tell you that under gaming, there will not be another new adjacencies. Or under Video Collaboration, there will not be another application that today's cuts does not address. Or there could be an acquisition inside one of those that was even within an existing category that gave us new technology or gave us a new extension of the play geographically or something. Okay, understood. Thank you. And there is no time here and there's no limit because it's over $1,000,000,000 I didn't say when I stopped, right? So it's just to show you, we're very confident about the potential of those 3 pillars and that's what we work on. And if I used to do like the sum of the parts at one company, I would do the sum of the parts here. Again, I would argue that I can drive a lot more than the value of today's total Logitech portfolio. Hi, it's Chris at Credit Suisse. I have two questions. The first with respect to video collaboration, I know it looks like slides. On video collaboration, I mean Scott kind of indicated that he thinks the market growing 35%. You invested heavily in distribution. You're basically expanding to the upper end of the market, but yet your guidance is only 25% to 30%. Could you discuss some of the headwinds? And the second question is actually the ASTRO Gaming C14, when is that available on the Xbox? I urgently need one. Okay. So let the record show that Alex called our gaming 20% conservative and then Chris calls our video collaboration at 30% conservative as well. Look, you will always and thanks, God, because it wasn't the case 6 years ago, you will always have our GMs so much more excited about all of the opportunities, right? And versus what Bracken and I are planning for the corporations, are committed to the Board and to the investors, right? You know our track record and you know our approach. That's a healthy thing. Normally companies align, they meet the day before and they say, okay, Scott, don't say more than 25% to 30%, because that's what I told you. But we've been very transparent. We give you full access. Scott definitely has a higher plan, but he's in a higher number. Delphine, again, every week she's at my desk, right? And she has a higher plan. Overall, can I really rely on all of that and put all of the investment behind over 1 year? That would not be great risk management as we discussed. So we look at all the potentials, all of the headwinds. You can come up with 10 headwinds that you and I would discuss is China currency, tariffs, on and on, including we have great sales force. We have to run the sales force. We have to train the sales force. We have to build infrastructure for sales force. And on a conceptual basis, if it's 2,000,000 quota per sales rep, that's great. It takes 9 months to build. Can we do that? And you have all of those operational macro level and operational risk, if you want, that need us to disconnect. Again, we won't be shy to say, hey, we call it annual guidance. If we beat them, we beat them. That's great. But you can count on what we tell you that we're going to deliver when we risk manage the business. Get to $1,000,000,000 in sales. No, I mean, you need to grow fast. Yes. I understand. No timing and over $1,000,000,000 I said. Don't forget the over. Yes. Okay. Next question. And the controller? Sorry? And the controller? Yes, you should be the controller. When is it going to be available in Xbox? Sorry about that. Okay. Go ahead, Johan. Yes. Hi. One question on the gaming side. Where I'm I mean, I see the growth trend, but where I'm a bit skeptical is that people who start gaming now, the younger ones, will continue gaming once they're 30, 40, 50. And is there another risk that these guys are stopped gaming so that the growth rates, if you really look long term is not as big as you think? Yes, I think 30 years from now, there will be somebody standing up here telling a different story. And it might be that one. But I have a hunch that there will be somebody standing up here saying, wow, gaming is bigger than Logitech in total back 25 or 30 years ago. So who could call it, who could say what's going to happen over that longer timeframe, but I think gaming is here to stay. I really, I think if you look at all the trends underneath it, you just an interesting example. He plays games with his kids. My kids were 1 generation back. I don't play with my kids, but my kids play with all their friends and they and when the my nephews come in, they're playing with their nephews. I think gaming is here to stay and I think it will be here for a very long time, different forms. Just today, here's an interesting one. Sorry, I'm taking your question and I'm hijacking it to say something else. Just today, if you look at the headline, there's a headline, I don't know if it was today, it was in the last month or so. A guy who is a sim racer, sim racers means using our wheels to learn how to race car drive, beat a former NASCAR driver on a real track and then beat a Formula 1 driver on a real track. So this just drives more hype. And the storyline is so exciting that I think gaming is going to keep growing. If I can add, who knows, right? You might be there or you might not be there. I wouldn't be there here in 30 years, but I play less than it than when I was 10, 100 times less. Guess what? I spend more on new t shirt and new rackets than when I was 10 years old. And so in terms of the gears and the environment, I'm sure my son, 12 years old today, will play hopefully less, but will play when he will be 30 or 40. That's unfortunately, I'm sure. One question more on, I mean, you mentioned in the beginning you want to be number 1 or number 2 in each category. I mean, you have certain category where you're I think at least you're not yet 1 or 2. How long of time do you give these categories? And when do you decide to pull out of certain categories? Because we haven't seen you're pulling out of certain categories where I would think, okay, maybe smart home, I don't know, you could still decide to stop that? Yes, it's a wonderful question. So first of all, there are 2 kinds of number 1, I would say. There's number 1 where if you look at the category in total, you're number 1, period. Keyboards, mice, webcams, we're just outright number 1, no matter how you slice it. And the other categories we'd say, category doesn't actually operate like that. It operates with segments that are very strong, very differentiated based on use case, like earphones. We say there's really a set of products that are used for running. There's another set of products that are used every day, AirPods, used to communicate. So those are very different. So I would say, you're right. And when we will look at that category and say, that's what we're trying to aspire for, for example, in the earphone space. How long do we give it? Every situation is heterogeneous. I heard Jeff Bezos one time say, somebody asked him, how long do you stick with his version of seeds? And he said, and I'll never forget it, till the last passionate advocate folds. Folds means you're playing a game of cards and you finally say, okay, I'm out. So the last passionate advocate folds, and it's usually me. And so that's true with us. We will stay with something until the last passionate advocate folds, It's usually me, sometimes it's Vincent or Alastair, but usually it's me. It's too early to judge. What I can say is we've acquired great capabilities in an environment and a methodology and a playbook to drive the organic growth of the asset we acquire. We've acquired a great discipline on analyzing everything upfront and presenting against still a conceptual business case to the board when you decide capital allocation. Thank you. Thank you. Andreas, we lost Tuchel, Continental Banker. I've got a question on the promos, which you try to deemphasize. I mean, in the past, you use these promos also to clear the shelves to get new products into the shelves. I mean, how do you migrate from O2 to new products going forward given that promise should end more or less? That's the first question. And then the other question on gross margin, I mean, the lower logistics costs you try to achieve and also the G and A efficiencies. I mean, in the past, you did a lot on that field. It's hard to imagine how you can improve there. And then can you give some insights in the measures you try to get to these targets? I'll let this take second. I'll jump in at first. So we won't go away from promos entirely. We actually promote less with new products than we do with existing products that are already out there. With a new product, you tend to get automatic, thanks to Chris and Todd, who is in corporate communications and which some extent is marketing. We tend to get a lot of attention when we launch new products, and our products tend to be well differentiated versus whatever else is out there. So we don't usually promote new products at all or not much. As they've been out there a while, they tend to need more promotion to get attention. And so shifting from promotion to marketing there is valuable because then you're spending something that drives sustained value as opposed to temporary value. And we won't go away from that either completely, but it will come down over time some. I think the bigger picture story here is, we certainly do want to build a marketing engine that's able to build our brands as we sell products and moving to a lower promotion environment is the way to do that. You want to take the other one? And it's not that we're going to drop promo and we're really talking about like we did in infrastructure or G and A, it's talking about the efficiencies of that promotional environment. And if you get for a week into my world, there's a lot of different offers and approach to stimulating the sales at the point of sales and making that or the criteria. So we use to improve some of those is where we can improve, giving us the room also to work away from promotions we feel and not addressing the efficiency we want is also part of our strategy. On the infrastructure side, we first started by reducing in dollars the infrastructure spend, right? Standardizing, globalizing, doing a lot of the good sense approach to our infrastructure is what we did. We now have an environment that's flexible enough, we feel, that has more capacity, including the management team's capacity to absorb the growth without increasing DAF. So it's much more keeping our infrastructure flat and continue to adjust the environment to absorb the goals versus growing it with the growth. Michael here maybe. Yes. Maybe a clarification to that for next year, the gross margin, I mean, what are the drivers for the gross margin? Yes. So we don't guide in our new business, as you know, both OpEx and gross margin. I'll let you simulate what you want to model. We have a bottom line number that we have and we'll give indication as we continue. We'll exit the U. S. Around 37%, right? And at this point in time, I don't see a major change to that. Yes. One more question. When I look on your new operating profit margin targets, you raised upper end by 2 points and the lower end only by 1. So you're already at 12%, the lower end is at 11%. So what is the thought process of that? And is there a risk that you the margins could decline at some point? I don't like to call it a risk. We also said we would prioritize growth over margin expansion. I think at this point in time, we kind of need to be conservative. That's the range we feel good about. If in the short term, we see, hey, we're moving more to brand and we build that capability faster because it returns better growth, That's what we'll do. So it's giving us the flexibility if you want. You also seen that in our next year guidance when you put it into your model, we're guiding well above 12%. Any other questions? Well, let me just finish by saying thank you. You devoted a whole half morning, and I know how many company meetings there are right now. So I really appreciate it. I hope you walk away if nothing else, I hope you walk away with 2 things. One is, wow, they have big growth opportunities in those 3 main business driven by big secular trends and great capability. And 2, they have a really strong team that can handle it. So thank you all very much. Thank you.

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