Logitech International S.A. (SWX:LOGN)

Investor Day 2018

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Mar 6, 2018

Well, thanks everybody for coming to the Logitech Investor and Analyst Day. The press release as well as a live webcast of these presentations is available online on the Investor Relations page of our website, logitech.com. And as is customary, I'm going to have to go through the long forward looking statements and it's kind of boring, so just bear with me here. 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 Act of 1995. The forward looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in these 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, 2017, and subsequent filings. The company undertakes no obligation to provide or revise any forward looking statements as a result of the 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 is provided to help you better understand our business. However, non GAAP financial results are not meant to be considered in isolation from or in substitute for or superior to GAAP results. Non GAAP measures have inherent limitations and should be used only in conjunction with Logitech's 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 posted on our Investor Relations website. We encourage listeners and visitors to review these items. Unless otherwise noted, 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 Lifesize, which is reported under discontinued operations. We're almost done, so just bear with me. These presentations are being recorded and will be available for replay on the Investor Relations page of the Logitech website and we're pretty much done. So with us today in Zurich are Bracken Darryl, our President and CEO Vincent Pallet, CFO and Arun Nim, Head of Keyboards Scott Morton, Head of Video Collaboration and Yujesh Desai, Head of Gaming. And with that, let me turn the presentation over to Bracken. And that concludes our presentation. Thanks for coming. I have to say Ben, I'm really disappointed in you. I don't take it personally, but there's no better application for this or this, the spotlight feature. So first of all, it's been thanks a lot for coming again. It's so exciting to be here every year. And as we were getting ready for this year, Vincent and I were thinking about the fact that it's been 5 years. It's almost 5 years for him, a little over 5 years for me. And we've got a big group here. And Greeno, this is Greeno, where is Greeno? He is somewhere. I know he is here. He is hiding over there. This is 20 years for Greeno. And it's been an exciting 5 years. And what I want to do is just is do a little bit of setup, talk about kind of where we've been, what's our story been so far. And then we'll give you a few glimpses into where we're going and we'll certainly get into the numbers, which most of you are waiting for. So we'll make you wait for Vincent for that. But let me start by what you know. So you know that Logitech really started by growing on the back of the PC. And as the PC grew from 1981 at our birth all the way through 1998 when Garrino arrived, all the way through 2,008, the PC grew. We first entered with mice, then we entered with keyboards, then we surrounded the PC with more and more devices. So we had 3 different ways to grow. We could grow because the markets were growing. We could grow because we could innovate and that's always been the hallmark of the company. And we could grow because we could enter new categories. And so that growth curve continued for a very long time. When we arrived in 2013, 2012, 2013, we obviously needed to change our approach. The PC had stopped growing. We kept innovating. The PC had stopped growing. We had stopped growing. We'd actually started to decline and we needed a new approach. So hopefully, most of you in this room will know that these trees, plants and seeds analogy is the way we looked at the company back then. So we looked at taking resources away from the tree, which was our PC peripherals business and investing in new fast growing categories, which we call plants and starting to build new potential categories, which we call seed. So this was the approach we used starting at about 2013 and we kept we've applied this pretty consistently all the way through today. Now on the way there, it's not enough to just say, we are going to grow through trees, plants and seeds or we are going to change our company through trees, plants and seeds. We needed a new PC. And luckily we didn't need to create it. Somebody else did. It's called the cloud. Now I am going to go through why the cloud is RPC for a second. Most of you know the story, which is this. And I start with the most counterintuitive category. Why is our gaming business, which is a PC peripherals business, why is that a cloud based business? Because the way PC gaming works is essentially when you're playing a PC game and I was just talking to several of you about this, you're not actually playing with the device in front of you. You're bouncing off the device in front of you and you're playing on the cloud. And the cloud is a server or a set of servers in different parts of the world. And other people are doing the same thing. And that enables you or the gamer to play with not just few, not just people near them, but 1,000 and tens of thousands and 100 of thousands of people at the same time. It also enables the gamer to be able to get on every time and have the game be updated without them even realizing. So it's constantly new and refreshed. That's true in gaming. And so what we do in gaming is we create a mouse, a keyboard, a headset that enables you to play cloud based gaming. Now if it sounds a little like PC gaming, let me go to the next one. This is not a PC at all. When we got into Bluetooth speakers 4 years ago, the Bluetooth speaker business, a lot of people thought of it as a phone accessory and it is. As you would go out, you'd play music and you could essentially listen to the music that was on your phone on the Bluetooth speaker. But the reality is the growth of that business and so many others is driven off the cloud because companies like Spotify, they're streaming music. They're bouncing it off your phone, but you're playing it on your device. So you're actually listening to music coming almost directly from the cloud. And then we will go to video conferencing. So video conferencing is probably the most obvious version of the future, which is when you walk into a conference room or when you walk into a conference room 10 years ago, 5 years ago, you sat down and essentially there was a PC somewhere in the wall, the equivalent of a big PC somewhere in the wall. There was infrastructure in the building. And that infrastructure managed a point to point contact with another place that had an infrastructure in its wall. And you had a very high quality video experience going point to point through the hardware that was on the building. That's now moved up to the cloud. When it moved up to the cloud, it did a lot of things. It made it so that you didn't need proprietary equipment. It made it so that it was always updated. It made it so it's accessible to many more people that you could literally go into an Internet link, click and be in a video conference, which we all know by now, we take it for granted. What we've done there is obviously we create equipment that enables those video conferencing services. So we've become and I won't go on and on, but the point here is we've become not we're not surrounding the PC. We are enabling cloud services and there will be more and more and more cloud services as time goes on. That is the fundamental root of our strategy. So the result of that change, which is the change from reallocating R and D resources especially into new businesses and adopting a strategy that's not just surrounding a PC, although we're not letting up on Mac because it's still good, but actually enabling cloud services has been this result. When we started 5 years ago, the 1st year, people now joke because I was in a conference not long ago and I said, when I started my 1st year with Corino, I immediately made a big impact. I made things worse. And I did, I guess, because we declined 7% that 1st year and only about 20% of our business was what we would call strategic growth, So not PC peripherals, but really strategic growth businesses. And our operating income was a pretty low $67,000,000 Now roll through 5 years and things are different. Obviously, this year we have guided a 12% to 14 percent growth. We grew 2% the 2nd year. And Vincent is going to talk about kind of the stages of our renovation of Logitech. But in the early stage, we grew 2% the 1st year, we grew 4% the 2nd year, we grew 9% the 3rd year, we grew 15% last year. We've guided at 12% to 14% this year. Those strategic growth as we enter these cloud service businesses like video conferencing and accelerated in gaming, the portion of our business that was the old PC peripheral business, and I'll repeat it, which is still a good business, has gone from that has shrunk. And the part that's really the strategic growth future has grown. So it's gone from 20% of our business, the strategic growth future to 60% of our business. And obviously, our profit at the same time at the end of this year we will have almost quadrupled or will have quadrupled. So it's been quite a good story. And what I want to do is just remind you how we got there, because how we got here is how we'll go where we're going to go next. First of all, we talked at the last couple of these about capabilities. And as we're transforming our portfolio and as we're innovating in our products and experiences, we're also always building capability. We are building capabilities so we can build future businesses and keep innovating in the existing ones. Now you will notice if you remember this slide from before and we showed it at last year's Analyst and Investor Day, you will notice 5 capabilities there. Operations is the bedrock and I am not going to talk about that today. The headline is, in operations, we have something unique. And the unique thing we have is we sit in a sweet spot. We're not so small that we can't afford our own manufacturing and we are not so big that we can just we should just not worry about it because we can manage the really big manufacturers in Asia. We are at this sweet spot. We can make our own things when we need to and we do. And we can take on very difficult challenges and boy we do and we can be different. And we can also leverage that manufacturing operation to manage our own costs to have better costs coming in on the products we don't manufacture. So it's really a sweet spot. It's something we protect and we love. The other four capabilities are design and I'm going to talk about design in a minute, engineering which I'll talk about, go to market, marketing and the one that we've never talked about as a capability, because in a way it's not a capability, it's an attribute of the company, it's our culture. But I want to spend a few minutes on it today. Now this time, and I know my engineering team would be excited that I've done it this time, I've actually combined design and engineering, because design and engineering are actually the innovation. They are the innovation engine of this company. We have always been an engineering company. We will always be an engineering company. We are changing the kind of engineering we are doing. We are more than just hardware now, we are becoming a software engineering company too. Today, we have software engineering leaders in every part of our business and the number of engineers we're adding in software dwarfs the number we're adding in hardware. But design and engineering come together and they're creating for us a different point of view. And that point of view is we are moving from just products to experience. So that might sound like a subtle move, but it's not. Now the way we're doing that is there's no doubt that design is playing an incredibly important role here. So first, we've not only moved from hardware only to hardware plus software, and you're going to get a little taste of that today in a couple of cases. We've also in sourced our design operation. Today, we do almost all of the design you see inside the company. If you look 6 years ago, we did all of the design we did outside the company. That is a huge transition. We now have inside our company a design firm that would be an incredibly successful and competitive design firm relative to the best design firms you could think of if it were independent of our company. We employ it 100% into our own business. And the results are not only showing in our market shares, in our financial performance, but we are also getting awards. Last night was the Academy Awards in the United States, the Oscars, the movie industry is top of the top. And honestly, awards don't really matter. But once a year, I like to show how we did in our Academy Awards. And this is how we did the last few years. We won 100 awards in the last 4 years in our version of the Academy Awards, 50 of them last year alone. And if that sounds like it's accelerating, it's because it is. The other thing I will point out is, if you look across and this is not obviously not all the products that won awards, it's across almost every category in our company. So we're not just winning in 1 category or 2 categories, we're winning across almost all of our categories and we're winning across almost every country, every award company or organization that puts them out. Now we are trying to think of some way to figure out how to numerically since many of you in the room are quants, I'm kind of a quant too, Vincent's a quant. So how do we quantify awards? How do you quantify the value beyond the fact that we got a lot? That's good. So I asked Ben. I said, Ben, I want to understand awards per revenue dollar and I want to be able to compare it to everybody else. So A, B, C, D, we obviously didn't name names. The company that we don't necessarily compete with, but we look at is really top design companies. And obviously, A is being B and B and C are neck and neck. And this is us now. So we're actually we've moved beyond kind of the pack and now from an award standpoint, it's consistent with our performance, which is also about the pack. So we are about 70% higher in design awards per sales dollar relative to anybody else in this list. And finally, I'll stop with the design stuff. This just came out about a week ago. Fast company once a year, does a look at all the innovation companies around the world and they decided that we are one of the most innovative design companies in the world. So we are in the top ten. That's in the world, not in the United States, not in Switzerland, in the world. Now we don't believe we are anywhere close to where we need to be yet. It's very early days for us and what we are trying to do as a design company. We are going to be a design company, but we are not one yet. A great design company would be a company that not only innovates and creates amazing experience in every category it delivers to users, whether they are consumers or businesses, but also runs its company using design principles and design thinking, rapid prototyping, constantly iterating, always improving. We're not there yet. We are not even close to there yet. We have so much work to do. We don't budget that way. We don't run meetings like this that way. We don't do so many things that we can do better by doing that. So it's the very beginning of our design path. But we are already in the top 10 according to VIB. Next, we talked a little bit about marketing. Marketing, when I started the company, I one of the first things I did was get rid of marketing. And the reason I got rid of marketing was because I didn't think our products deserve to be marketed yet. And then as I think I said to you last year, after a few years, I became very proud of our products. And I thought, okay, now we're ready to market. But I don't want to do marketing the way a lot of companies do marketing. Because I don't like lying. I don't like stretching the truth. I don't like and that's and to me that's what marketing has become and that's not a fair comment about the marketing industry. It's a fair comment about some of the experiences I saw along the way. So I wanted a different kind of marketing. I wanted a marketing that's based on authenticity, authenticity, real things, real people, the real people behind the real products, behind the real brands. And it starts with this. This is the real Logitech. The real Logitech from 1981. I am not sure exactly when we created this eye at the top, but it was a powerful thing inside the company. And so when we started the company, this was our brand. The problem with this was the consumers didn't recognize it as us. They saw that and they didn't immediately say that's Logitech. So we moved to this. Now we moved to this, it's still Logitech, but it's a modern fresh logo. It's modern fresh colors. And if you drop the tech off of there, which you'll see if you walk out and look at those products on the tables, it's short, it's powerful, it's memorable, LOGI. And over the next 20 years, people will begin to associate that just like the Nike Swoosh or the Adidas stripes with Logitech. And so that symbol will represent Logitech. So we've refreshed Logitech and that's the first step that we made in trying to reinvent the marketing or the way people think about the brand of Logitech. But we didn't stop there because as you know by now, we are not just going to be a one brand company. That would limit our growth. We need to be able to enter new categories and we need to enter new categories authentically. Logitech G is actually the invention of a new brand, but it borrows so strongly from Logitech that it's become Logitech to people under 25. The really cool thing is people under 25 think we are cool. People in this room think we are functional and really good, maybe I hope. But under 25, they are starting to think we are cool. And they are starting to think we are cool because we are associated with the hottest sport in the world today if you are under 25. It's not curling. Although curling is pretty hot, it's eSports. And eSports is the fastest growing sport in the world. I'll repeat some statistics that always shocked me. More people watch people play games online now than watch CNN, ESPN, Netflix and Showtime combined. So this is the highest thing in the world and that age group is all under 25. And you just going to talk a little bit about kind of what we're doing from a product standpoint to drive discontinuity in that market, leveraging what we've always been. Just like Logitech G Leverages the Logitech name, but brings us into new space. And he is going to talk more about that in a minute. This year, we a year a little over a year ago, we added Jaybird. Jaybird is a beautiful brand. Not enough people know about it yet, but it is beautiful. It's a brand that was born in the Rocky Mountains. It's fun staying in Switzerland saying it. It was born in the mountains to inspire people to get out and experience the outdoors and sportive, athletic. I personally am inspired by that and it makes me feel good that we are in a business that does that. We could have bought that business and integrated it right into our offices either here in or either in Lausanne or in Silicon Valley, but we chose not to do that. We left that office where it was. In fact, we moved the office and we moved it further into the mountains. Now when you walk out the back door of the office, you are on a running trail, it goes right up into the mountains. And we did that because we want authenticity, authenticity, authenticity. Ultimate Ears, you know, this is a super fun brand. It's about being super sturdy, being waterproof, soap proof, being providing great acoustics and leveraging a history if you peel back the story that comes from the best performers in the world standing on stage with something in their ears called Ultimate Ears Pro. This is another authentic powerful brand. And of course this year we also added ASTRO. It's the newest member of the family. It's early days, but we are really excited about that business and that brand too. Now I am going to go through another one of those capabilities which we call go to market or everybody calls go to market, which is we rarely talk about at a meeting like this. So I am going to just touch on it this time now, because it's actually been there has been 5 years of amazing change in that field too or in that capability too. When I started the company or we started the company 5 years ago, we were about I think that 1st year, it's hard to measure by the way, because you've got companies doing retail and detail. But by our estimate, we were at about 89%, 90% retail 5.5, 6 years ago. And today, if by our guesstimates, we're probably between 30% 35%. So it's more than tripled the retail the e tail portion of our business. That won't surprise you. What might surprise you, if you haven't heard me say it before, is that our China business, which is a very powerful business for us, is now 70% e tail, seven-zero, not 17. And when we started 5.5 years ago, it was about 13%. So our and that's enabled us and driven us to improve capability in marketing and going to market through e tail at such a rapid pace that it's put us in a great position going forward to take the learnings we've had in China and apply them into the rest of the world. And that's our game plan. Now the 3rd area, which we didn't even have a single Swiss franc or dollar of sales in was Telco, 6 years ago. And Telco wasn't an obvious place for us to go. It was the fact that we were entering these new plants and seeds that actually opened up the telco opportunity for us. The Bluetooth speaker business became a route into telco. We had talked about telco before. We tried to telco before even with our keyboard covers, but we've never penetrated Telco until then. And we're still at the very early days of opening up the Telco opportunity, but it's already become a very significant part of our business from a go to market standpoint. And then finally, B2B, Scott is going to talk about our video collaboration business. And it's we've now got a good strong first foot into the B2B space and we like what we see. It's very comfortable. Now in the past, we've always sold the B2B. We sort of sold the B2B because the products kind of found their way there. We didn't have a strategic strategy, a strategic priority of entering the B2B space. When we started the video conferencing business, we said, wow, we like what we see, but how do we get in there and create a meaningful, sustainable, competitive business? We've done it. Scott is going to talk to you more about it. And it's really exciting space. And that won't be the end. We're it's probably hard for you off the top of your head to think what other channels might open up. It probably would have been a few years ago too and if I stood in this room before we entered some of these. But we will enter new channels. There will be new opportunities for us. We're looking at them all time. Just like we're looking at acquisitions that can accelerate or differentiate what we're doing. Now I told you I'd talk a little about culture, which I've never done here, at least not at any length. And I wanted to because I'm super excited about where we've gotten to, here too. I debated what to put on this slide and after a discussion with Vincent and others, I decided the best way to describe this is we've kind of rediscovered our culture or rediscovered our soul. We didn't change our culture. We didn't create I think if you talk to people inside the company, those who've been there less than 10 years, they feel like, wow, our culture has really changed. Those who've been here more than 10 years say, wow, we're getting back to what we used to be. Feels a lot closer to what we were when we started. And that I love, because it means that we found a point of authenticity within our culture that we can leverage. What do I mean by that? Before I go to what I mean by that, so here is where we started. When we started, when Vincent and I started and others in the room started 5 years ago, our overall rating by the way, Glassdoor, how many people have ever heard of Glassdoor? Okay, more than I would have thought. So Glassdoor, for those of you who don't know about it, is a company that our website, you can go anybody can go on, you can go on today and you can rate the companies that you work for or worked for. And so people are doing it at a really fast clip now. They've got huge penetration in the U. S. They're very big and markets around the world are getting big. They're the leader in this by far. So in the early days, our overall rating on a 1 to 5 scale was a 2.7, which is way below average. Our culture and value, which is one of the attributes they rate was well below average. Our recommend to a friend was sad, meaning only 4 or 10 people would say, if I were you, I'd go work for Logitech. And our the positive outlook for the company was gloomy, was not positive. So people basically said, only 1 out of 10 people said, boy, this looks like it's going to be good in the future. So it was an ugly place. Now roll forward 5 years and this is the story. Our overall rating is 3.9. By the way, all these on the right are way above the averages. 3.9, we're right. We're approaching the best in class there of the really big companies you talk about every day. Our culture and value scores have not surprisingly gone way up as we've rediscovered our soul. Our recommend to a friend, which is in a way the nicest one because it means that the people I trust most, I would tell them come work here, almost 4 out of 5 people would recommend it to a friend and we have a positive outlook, a very positive outlook about the future of the company. And how do we do that? There is no magic here. We basically try to get back to being a small company and feeling like a small company, making sure that the leaders are accessible, flattening the organization. So there's not so much distance between Vincent Palette and the 1st level accountant or me and anybody. Trying to get rid of the bureaucracy as much as we possibly can. It's always a fight. We're always trying to hack out the bureaucracy. But we're trying never to have those stupid things that we all do. When I always say, we collectively are much dumber than each of us individually unless we work together in small teams. Then we can be really, really smart. So we try very hard to be humble. We are a Swiss company. And we are not I lived long enough in Switzerland and I worked long enough in Switzerland to really admire the fact that there is a confidence and humility here in Switzerland that you really don't have very many other place in the world and it's in the DNA of Logitech if we don't let it get away. And we try to cultivate that inside the company. And maybe most important of all is to stay hungry. A few years of what other people think of success can doom you if you are not careful. And so always trying to find the next frontier, the next goal, the next strategy, the next thing that could take us to the next level is in session. And of course, we're going to try new things. It's very easy to become risk averse and stay risk averse and to be afraid of the new and to be afraid of failing. And if you're afraid of failing, you're sure to fail in the long term. You'll probably be okay in the very short term and we're not short term. So where are we going next? That's what we're going to give you a few drops of the story from here and it won't be me. But I'm going to and I hope that will smile a little bit on the slide. But I we have cultivated 3 people to come up and talk next and they represent 3 businesses. 1 of our oldest businesses, actually our 2nd oldest businesses, which are keyboard business, an old business, but it is not an old product and an old experience as you are going to see. One of our newest businesses, which is video collaboration, which really is a new business, it's a new market, new category, new everything, new opportunity and our coolest business, which is our gaming business and it is super cool. So with that, I'm going to hand this off to our oldest business in art. Thank you very much. So yes, I'm representing our oldest business. So the core creativity and productivity part, mice and keyboards. But I hope and I think I'm going to show you stuff which is also new and which is also cool. I'll let you be the judge of it. What I'm going to do is talk about one product which in many ways it kind of can be used as an example of some of the capabilities that Bracken described earlier. And we go through a few elements of it and we'll talk about each of the capabilities. This product is a new keyboard called Logitech Craft. We launched it in September. You can take a look at it. We launched it in September last year. It's an advanced keyboard and it's at the flagship end of our range. So the flagship keyboard of course it's an advanced piece of hardware. Of course it has got our best typing. This year, this month we're going to celebrate 20 years of leading wireless keyboards at Logitech and all of that expertise is put into this as a typing machine. It's also got our best illumination. It's got backlighting that lights up as you approach your hands and it fades you take your hands away. It adjusts to the ambient light in a room, super advanced in terms of its lighting. In terms of its build quality, it's the best that we've made. It's got an aluminum piece of backbone, a spine, the materials, the finishing, the construction of it is the best that we could do. And it's got a new physical tool that allows you to interact in an entirely new way with the computer. So it is a beautiful piece of hardware. Let's see it in action. This is an artist that we worked with in Poland and if he's able to work faster, more precisely and with a greater sense of focus and control on his work, it's not because of this great piece of hardware, it's because above all craft is a stunning piece of software. I'm going to describe the software a little bit more, but this capability of engineering and designing software allows us to take hardware and then to create an entirely new experience on top of it. The Craft software is built into the operating system whether using Windows or Mac. It's deeply integrated into the main applications that people use. So creativity applications, the Adobe Creative Cloud, so names that you know like Photoshop, InDesign, Illustrator, Lightroom. The Microsoft Office Suite, PowerPoint, Word, Excel and many other apps And how it works, I mean it's beautifully understated, but there's so much going on under the hood in terms of engineering complexity that we've managed to overcome. So it's designed to be simple, but it's an engineering challenge that we don't serve. What happens is, when I touch the crown, the keyboard will know what I'm trying to do, what I'm trying to achieve. For example, if I'm in Photoshop, if I touch the crown, this overlay appears on the screen. If I've selected the paintbrush tool, that overlay will be brush size, brush density, brush opacity, and then I can just change it with the crown to where I want without having to manage the different menus and sliders and other things that would take my eyes off the work that I'm doing and give me lots of miles mileage and other things. So it's a new way of working. Let me take some examples which might also be more familiar to you from Excel. I guess many of you are heavy Excel users as am I. If I'm in Excel and I select a single cell within Excel and if I touch the crown, I touch it, it knows it's been touched and then this overlay will show horizontal scrolling, So I can scroll horizontally along a row. If I tap it, it will go to zoom and then I can zoom in and out on a spreadsheet. But if I select a series of cells, it will show something different. If I select cells A1 to D5, it will know that I probably want to create a chart. So there, as I touch it and I twist straight away, I can create a bar chart, pie chart and various graphs. So, it knows what I want to do. It's contextual. That's a huge engineering challenge that we overcame. It also integrates with the hardware. Sometimes I want smooth scrolling as I move the crown. I want it to be able to smooth quickly along a row when I'm on Excel. I don't want it to go click to click across all of the cells, but if I click on the tabs of Excel and if I want to navigate across different tabs, then I want more precision. So, then the keyboard will actually physically change to give me pick to click precision because it knows what I'm trying to achieve with the computer. So the software knows what I'm doing. It's synchronized with the hardware. It is deeply customizable as are all of our or most of our mice and keyboards. We know that people love to be able to tweak and customize the products. So Biologitech Options, which is our desktop software, which is used by millions of people for our mice and keyboards, you can customize what the buttons do. You can customize how the crown works. The software developer kit and SDK which we made available also to the developer community just last week which allows people to write how they want the crown to integrate with their applications. It's great for them. It's also great for us because it means it's a very scalable solution as others develop the integrations. And finally, it's got something called Logitech Flow which some of you may know. This allows cross computer control. I mean by that is that if you use let's say an MX Master Mass and Craft, if you got 2 computers, you don't need to have 2 mice and 2 keyboards. I can have a Mac and a PC at home and as I use my mouse, I can move the cursor. I can even copy some text on my Mac, move the cursor and the cursor will appear on my PC and I can paste the text and the keyboard will follow. So the light on my keyboard will go from connected to my Mac to connect to my PC and I can have the functions of Craft on both of them. So this hardware which is enhanced by this really complex but stunningly simple and to the user software enables an experience that you just couldn't have before and that nobody else can deliver. We're getting rewarded for it. We're getting rewarded in terms of awards. We just a couple of weeks ago got the IF Design Award for the craft hardware and software together. And at CES, which I'm sure many of you know, the Consumer Electronics Show, massive show beginning of January in Las Vegas every year, where they give awards for hardware, but they also give awards to software specific companies, app builders and enterprise software companies. Well, we got an award for the craft hardware, but we also got an award for the Flow software there, which I think shows how software design and engineering is now a core capability within Logitech that we're very proud of. Craft also allows us to exercise one of the other capabilities and one of the other muscles that we've got within Logitech and that's marketing as Bracken described earlier. Why? Because with Craft, we could talk to a new bunch of people. We could expand our reach to the creative community. Now the creative community, I mean, many of us are creative and in some way, the newer generation under 30 would all describe themselves as creative. But here we're really speaking about people who are heavy users of the Adobe Creative Cloud. And these people already use our mice, but on the keyboard side, we haven't really addressed them in the last few years, so we did, but we also spoke to them not directly through Logitech, but we spoke to them through artists, people that they follow and people that they respect. So we worked with a bunch of artists. These are the artists some of the artists that we worked with in Europe and in the U. S. In Asia, we had local artists that we worked with in China and in Japan and they brought craft into their lives. They used it. They integrated into their workflow. They loved it, so they told their communities and they told their fans and this word is spread across the creative community. Jessica Bellamy, the last one is interesting because she's actually a creative, an artist in residence at Adobe and so she took craft and she used it and she made a video and she closed her video by saying this is a game changer, it's insane. I can't imagine how fast I'm going to be able to work. Her words, I couldn't have said them better myself. So, we use these artists and we also took them to another place where the creative community goes for inspiration and that's Adobe Max. Adobe is the go to tool for the creative community. Photoshop, InDesign, Illustrator, these are the names that you know and these are the tools that people spend 8 hours a day creating it and they go to the creativity conference held in Las Vegas in October, in Tokyo it was held in November and it was about 25,000 professional and amateur creatives. So we're all going to find out what's new, how can I get tips, tricks, hardware to improve how I work and we interacted with them there? We also featured pretty prominently by Adobe in their blog in advance of the show. The Adobe, the principal creative director of Adobe, in fact he has a master class, a very well known guy in the field called Russell Brand. He has a master class on Photoshop and Illustrator that he brings people to show them the best ways and the newest ways to use the applications and he actually used Craft at every single one of the workstations for the people who came to his master class. It was a great honor for us. It was also a place where there was many reviewers, many journalists, many people that we could interact with and the feedback was pretty unanimous. The most impressive piece of hardware I tried from the 100 and display at Adobe MAX, Logitech Craft. The best input device at Adobe Max, Large Aircraft. So really a great response and something that we're investing quite a lot behind this relationship with the creative community. The other thing about the marketing of this product that's cool is that this campaign, all of the images, the video, all of these assets, these were conceived and created, many of them produced entirely in house by our in house creative team. The people who shop today online or in store for this product, they come into contact with work that was done in house, not by an external agency but by the wonderful people that we've got in our internal team. So Craft is a nice story. It's a great story to show those 2 capabilities. It wouldn't be such a nice story, it wasn't also a profitable story. So, I want to show you how we can take an advanced piece of hardware, layer on top of it this stunning piece of software and still make a profitable product. I'll do it by focusing on one part of the product in particular and that is the metal bar at the top of the product. Okay, so this is an aluminum bar and I want to talk to you about how we focus on ingredients and how we act early on designing for cost. Anybody who was in New York last year at this event or who saw the presentations from that would have seen Joe Sullivan, our operations leader, talking about how we moved our focus for cost from historically where we launch a product and then afterwards focus on how we could manage the cost to how we can advance in advance of launching, how we can design for cost. In the case of Craft, many of their products were actually moving way upstream and years in advance, we're beginning the process of designing for cost. About 5 years ago, we said we need to be able to integrate metal into our products. We knew that the consumer and you know we're in people's homes and talking to consumers every single day and we know the consumers expect that at the high end. We also know that it offers unique benefits that the sturdiness and the builds of craft is because of that metal backbone that it's got. The spotlight presentation remote that I'm holding, the use of aluminum here means that it stays cool in my hand even if it is a stressful presentation environment. So metal has got a benefit. We needed it. So we put together a team which was multi functional, multi size and who worked over multiple years to become experts in the material science of metal, in how to master the processes required to develop metal parts, qualify the right suppliers, to design for manufacture, but also design for optimizing the production yields, better yields, lower costs. And the result was that we have an extremely complex part. I mean, it doesn't look complex, but it's extremely complex. The 6 steps from when we stamp the aluminum to when it's finally anodized, but we can deliver that part and make it ready for assembly at about 60% saving versus the estimate that we would have had 4 years ago. So with that, I think Logitech Craft and all of the other products that we've got in this high end creativity and productivity space, they really do showcase, of course, our hardware capabilities that you know really well, but also the marketing design engineering capabilities, software engineering capabilities and then our ability to design for cost. So, with that, I'm going to pass you on to Scott Horton who's going to talk about our new big business video collaboration. Thanks, Art. Okay, good morning everybody. As Art said, I'd like to talk to you about the video collaboration business. So many of you probably know for Logitech that we're a big player in webcams and we're actually number 1 in the world for webcams. And as the newest business, we've been around for about 6 years And the business really started out of an observation that a lot of our customers instead of taking a very expensive traditional video conferencing unit, we're actually taking $100 webcam or in some cases lower cost and sticking it into a conference room. It's a really interesting observation. So we looked at that and said, okay, a lot of our customers wanted something more, not just for individuals that they're using webcams, they wanted in a conference room. And after 6 years, we're actually in a very short period, we're now number 1 in the world for conference room systems. That's a major accomplishment that we've done in a very short period of time. And part of how we've done that is instead of trying to tackle the entire business ourselves, as Bracken said, we've worked with cloud providers like the other parts of Logitech to be able to roll out equipment with the leading cloud video solutions. We also follow a lot of the Logitech script that we use a plug and play approach. So kind of like our keyboards and mice, they're USB devices. They're not really complicated. They're easy to use. But we also maintain that an enterprise class capability, but at a mainstream price. That's what Logitech is really good at. We know how to make things in very high volume with high quality at a reasonable price. And if you look at the overall market for collaboration and workspaces, it's really changed a lot in the last 5 to 10 years. So specifically for video conferencing, it used to be how it rolled out, you had these dedicated high rooms, usually they were boardrooms or rooms dedicated to video. You had to schedule everyone to get together because it was kind of hard and you use things that were mostly internal. As Bracken said, usually they were deployed within the company, which made it very hard to make communication outside. And they were designed really specifically for that room. So they were hard to really apply to different places. But the world is changing a lot. And what I would say is it's not only in Silicon Valley. We see it as big companies, small companies, in Europe, in Asia and in the U. S. There's a whole movement. I think many of you know, people moving from dedicated conference rooms and offices to huddle spaces where people are working more in an open environment. People want to be able to communicate anywhere as our businesses become more global. We need to not only communicate with people that are in our own office, but we need to communicate with people all around the world in different time zones. And voice is just not good enough anymore, especially as the millennials start entering the workplace, kind of like I had an experience when I first started working where I was using a Mac and it had a graphic user interface and then I started my first job and they gave me this computer and they said, look at this great computer. It's got word perfect on it with DOS, like what the hell is this. I think millennials are doing the same thing now. They're starting out with video conferencing, they're so used to it and then they go into the workplace. If you're giving them audio only, they're going to revolt. They just don't want to work in that way anymore. And then as Bracken said, everything is moving to the cloud. And then as things are moving to the cloud, people really want to be able to do plug and play. They don't want the old complexity of video and the way they communicate it. They want it to be easy to use. They want to take the same kind of capability that all of us know how to use in our desktop and move it into conference rooms. So if you look at the market for video conference, as I said, it used to be very focused on the top of the pyramid, these high end rooms and then a little bit of deployment in huddle rooms. Where that up where it's changing a lot as huddle rooms are becoming more prevalent and actually a much bigger opportunity, instead of us focusing on the 10,000,000 rooms that are at the top of the pyramid, we're really focused on the bigger opportunity, the 50,000,000 rooms. So in many cases, we're not actually competing with the traditional players because we're opening up a whole new market and a whole new opportunity for the way people communicate. We have the ability to go back and work for those big rooms, but we're really focused on expanding the market, not just replacing what already exists. And part of what's driving this market is not just more conference rooms and the way people are working, it's the actual cloud services. So these are some stats from the leading cloud providers, people like Microsoft with Skype for Business or Zoom. And if you see what they've done over the last year over year, they've grown it over 100 percent. So there's always been this question of our people using video conferencing, do they like it? I think these numbers show, yes, absolutely. It's more than doubling year over year and that trend has continued to 20172018 that more and more people around the world are using video as part of their workflow. But even having said that, looking at the growth rate of video, we're just at the very beginning. So video conferencing is around for 30 years and yet it's only penetrated 2.5% of all conference rooms around the world. So the opportunity for us and in front of us is to go after all of those rooms, the 97.5 percent. And maybe they've got a display, they've got a telephone, but they don't have video yet, but they will. So in fact, as an analogy, if you looked at where the PC industry was 40 years ago, Bill Gates famously said that he wants to put a computer on every desk at home and at work. And at the time people said, what? That crappy thing, people are going to put it on every desk? Nobody wants to do that. They're not that great. But we know he was right now that people not only have a computer on every desk, but they also have a computer we all have computers in our pockets. So the analogy for Logitech is we want to put video conferencing in every conference room worldwide. You shouldn't have to think about going into room saying do they have video in there or not, it just should be everywhere. In fact, part of the way we think about it and Bracken likes to say that when you're in a conference room and there's a table designed for 8 people, we never walk into a room and see 4 chairs and then you ask what's going on, why are there 4 chairs? And they go well, just don't have the budget for the chairs. Nobody ever says that. So video is going to do the same thing. People won't say I don't have the budget anymore. It's now at a very reasonable price of €1,000 plus or minus. So video will be pervasive, it will be everywhere and I'm completely confident that it won't take 40 years for us to get there. So how do we win in this business? So really, it's 4 very simple things. So like the rest of Logitech, we focus just on creating great products that people love. And I would argue that in the business space, people are consumers too. They love great products. They love great design. Maybe the buyers are different where you have an IT buyer, but the IT buyer doesn't want to buy something that people look at and say, God, who put that in that room? This is really ugly. So they want things that look great and perform at a great level. The second thing is we're not doing it all ourselves. We're doing it with partners. So instead of us having to convince people about video conferencing that they need to do that and going out and have to inquire customers, We work with big companies like Microsoft and Google and some of the other big players that are already going out and evangelize video conferencing and are driving cloud video conferencing everywhere into the business market, and we work really closely hand in hand with them, both in terms of integrating the product together, but also in joint selling and marketing. So it's not only us doing it, it's doing it with them. So we have a relatively lower cost acquisition than if we did it ourselves. And part of doing that really helps us create awareness. So we don't have to do it ourselves. We do it with these big platform providers. And then last but not least, it's a new market, so you can't just do PR. You really need a combination of high touch sales and marketing to reach customers to talk to them to really explain to them about what you're doing. So on the product side, what we've done is we've really looked at different rooms and said, all right, instead of doing what the incumbents have done, which is take expensive products and make them cheaper and scale them down for smaller rooms. We've looked at every room organically and said what do you need for a small room, different requirements for medium room and then of course large rooms you might have different requirements in terms of being able to see everyone and hear them. So I'll give you one example of what we did here. So we launched about 8 months ago a product called Logitech Meetup and part of what we were trying to figure out is what do you do for these new small rooms, these new huddle rooms. Now as I said, a lot of the traditional players what they've done is they've taken their big expensive products and they've defeatured them and put them into these rooms. But what we found is that you really in some ways need to make it better for a small room. So many of you have been on a video call in a small room have probably noticed that when you're looking out, they actually the people who are sitting at the front are cut off. Has it ever happened to any of you? We just can't see them. So what we decided to do is starting with a blank sheet of paper, we really needed to make sure that the camera, which in a traditional system would be very narrow for a boardroom, need to be super wide so that you can see everyone's size, actually better than the expensive systems. So here's an example how we're showing the traditional system on the left hand side, which could be 78 degrees or lower. You can't see the people on the front. They're cut off. Even 90 degrees on our webcams wouldn't cut it. So we had to go to 120. Now that's actually the exact perfect amount that you want because 120 can see everyone upfront, but you don't want any wider than that because you would actually be on the side of the TV. You couldn't even see it anyway, so it would be irrelevant. And as I said, we're engaged with lots of partners around the world, Microsoft, Zoom, Google, Cisco and others to tackle this market. This is really important, as I said, because we're not doing it ourselves. So we work with the cloud video platforms. We work with people in the PC business as they're selling PCs that go with every video system. And even people in the traditional AV world who have to go out and design lighting and screens and other things. They want to work with Logitech to move to this new world where they love the idea of instead of selling 5 units of video conferencing, how about selling 1,000 and going out to the entire business. So part of what we're doing and I think a big competitive advantage is really focused on enterprise sales and being able to go ahead and touch the customer. And if you look at our approach, I would say that we're really in the sweet spot for what you want to be in the enterprise sales side. From a start up point of view, they really struggle so that they may come book the product, but they're not going to be able to hire sales people all around the world. And on the other side, if you look at the big companies, the conglomerates, the tech generalists, they have salespeople that cover such a wide range of portfolio things. They don't really know how to sell collaboration. In many cases, they don't want to because it's a relatively small market. They want to sell the big things like routers and other things. They don't necessarily want to tackle communications. So we're kind of in the sweet spot where now we have a global team of specialists dedicated to selling communications and we're arguably in most of the major countries and cities all over the world. Now we'll keep expanding that on a prudent basis because what we found is every time you add a new salesperson, we add more sales. So we'd love to be able to keep adding more, but we're going to do it in a prudent and methodical way. But we feel really good about the fact that we now have this global sales force. So why is that important? So it's important because in a mature market, people may know your products, they may go out and ask for it. In a market that's early like this, probably many of you didn't know that we were number 1 in the space, didn't know about our products. So the way to sell to those people is you still need to have human to human contact where you talk to people. And it allows us to both drive the sales so that we're not allowing competitors in, but also to let people know what we're doing and drive the sales that way. And the proof is in the results of what we've done over the last 6 years. So we've grown from a relatively small amount where we started entering in with small systems to now almost a $200,000,000 run rate. So we've roughly doubled the business since I've been here 2 years ago at the last AID. And the state of the business is really strong. We have great partnerships with the leading platform providers and we've expanded our portfolio products from the early days of our little eyeball stick, the BCC950, to a bunch of products that really cover all the different conference rooms. So now we can say we can sell a small room, a medium room, a large room and other things. So kind of summing up, over a relatively short period as one of our newest businesses, we've become the market leader in this space. And we've done it partly by having great products that have completely changed the market from being very high end and working really well, but targeted a very small sliver of the market. It's something that can be in every conference room that anybody who knows how to use video conferencing can use in any place. We've also done it by partnering with the key players. So we haven't done it ourselves. We work with Microsoft and others to go out and show people how they can have great video conferencing at a very affordable price. And then last but not least, high touch sales and marketing all around the world where we can sell globally, where when you're selling through a large company, they don't want to hear that you can only sell in Switzerland or the United States. They want to put video conferencing everywhere in all their countries. And this is a real strength of Logitech that we can go to 100 countries, sell locally, support locally, which very few people, very few companies can do. With that, I'll move on to the coolest for you, Josh. Thanks very much. Thanks, Kathy. So the gaming market is cool. I am definitely not cool. I will just admit that first. I am the biggest nerd you will find. So my name is Ujesh. I run the gaming business here at Logitech. I have been with the company for little over almost 4 years. So really excited. So I'm going to quickly talk through what is our strategy for 2018, what are we focused on. So with that, we'll get started. So there's 3 main areas that we focus on. We keep it very simple. One is we're going to continue to develop superior products and experiences and the way we do that is, Bracken already talked about it's all the way through design and engineering through manufacturing. We sit down and we get to know the gamers. In fact, many of them work on our team. Our team is comprised of a bunch of different gamers that love to play video games, myself included. I've been lucky enough to have been able to make a career out of playing video games. But we sit down and we actually go into gamers' houses to see how they play to understand what they need. That's how we focus on the superior products and the experiences. That leads us to what I talk about next, which is wireless. And I'm actually going to a little bit of detail on what we've done in the wireless space. But if you think of console gaming, they've had wireless controllers for a while now, wireless headsets. This is not the case in PC gaming because there have been some limitations. I'm going to talk about that. But as a company, Logitech does a really good job of wireless products, as you heard Art talk earlier. And even in the workspace, our wireless products are used everywhere. So we wanted to take that expertise and leverage that and bring that and solve a fundamental problem in PC gaming and how do we bring wireless to PC gaming. I'll talk about that. And then last is the choice of pros. Bracken mentioned eSports is a brand new sport. It's a sport for young kids. My daughter is 12 years old. All she does is watch Twitch and YouTube. Those are her favorite athletes. She does look at some traditional sports, but esports is just as important to her. So we partner with these players just like a Nike or an Adidas would in developing our products because if it's good enough for them, it's good enough for everyone. So with that, why don't we start by talking about wireless? So as Bracken and Vincent have mentioned in the past, if there is an area that we believe we can add real value, then we're not afraid to take our gross profit dollars and invest them into those areas. Wireless is one of those areas, as I mentioned, because we understood that we wanted to make PC gaming better, wireless is an area that we had to invest. What I'm going to talk about though is it was not an easy solution, and it was a multidisciplinary thing that we had to go embark on. It involved the business group. It involved design. It involved engineering all the way through manufacturing and marketing. And it wasn't just one area. We had to solve multiple things and I'll talk about that. So with that, why don't we jump in? So the first thing we did, as I mentioned, is you have to put yourself you have to have empathy with the customer. So we had to understand what are they feeling. So the first thing they told us is, I'm never going to get a wireless product. I'm worried about lag. So if you think about it, gaming is very different than just standard office use. You have to have the highest performance. The difference in milliseconds matters between winning and losing. So they didn't want to have any lag. So this is something we had to solve. We had to make sure our wireless products were as good as a wired product. And in some cases, if we could, make them even faster than the competition's wired products. So that's the first thing we had to solve. The second thing we had to solve was even if we were able to solve lag, they would worry about their battery dying. They'd be in the middle of a raid with their friends. They didn't want to let them down and have their battery die. So battery life was something we had to solve. And if you go back to the first one where I just talked about is for gaming, you needed higher performing products, while those higher performing components take more battery. So that was a tough problem that we had to figure out how to solve. But that said, when you talk to all of these gamers, even the pros themselves, they actually don't like cords because it limits their freedom. But they were worried about latency more. So what you'll see is they come up with their own wacky ways to kind of solve this. In fact, this is a real product. This is not a joke, but this is a product that they create called a mouse bungee, like a bungee cord for your mouse. And the whole idea is it moves the wire out of the way and it's an attempt to make a wired mouse feel like a wired mouse. But it completely fails. If you've ever seen anyone use this in a competition, the minute they get in the middle of the match, the thing tips over, it falls apart. It's just a total nuisance. So, this is an area that we just solving it by subling this is not going to work. Here's another analogy that you can think of. So if you go back, this was the original diving bell in the 1800s. It was functional. It worked. You could go underwater, but it really limited your mobility, right? Fast forward today. This is what a modern diving suit looks like, right? You can now enjoy whether it's for work or whether it's for play. And if I look around, I'm sure most of you probably if you're not using one today, you probably have a wireless now somewhere in your laptop bag for work. That's not the case for PC gaming because of all of those things that I talked about. So that is what we fundamentally had to go solve. So the way we solved it is there are 3 areas that we had to innovate. The first is what we call light speed. Light speed was technology we created to address lag. The second area was power play. So power play was technology we created to go after battery life. How do we solve the battery life issue? So those are 2 solutions I'm going to talk about. But the third is just as important and it's not a linear solution. This is why we're showing the problem to solve wireless is multifaceted, multidimensional. So here we realized if we really wanted wireless to be available to the masses, we fundamentally had to design a brand new gaming sensor. The gaming sensor that we use in our mouse is the most power consuming component inside. So that's the last thing we had to do. Let's start with talking about Lightspeed. So with Lightspeed, what we did is we wanted to go after lag. Now if you think about wireless, inherently it is harder than wired, right? You have to encrypt the data, you have to decrypt the data. So we made sure we optimized that to make it as fast as possible. But we couldn't stop there. We had to look at the entire pipeline. We measured things like click latency from the time the electrical impulse comes off the switch goes through the USB microcontroller. We optimized that to make sure it was as fast as possible. We looked at our signal. We wanted to have an perturbation. You can imagine interference. There's tons of modems, tons of cell phones. How do you fight off interference? So we wanted to make sure we looked at that and we had a very robust signal. You can imagine if you're a gamer playing at a professional tournament and you're on stage, there's thousands of people in the audience with their cell phone. You don't want to have any interference that cause you to lose that shot or miss that shot and it causes you 100 of 1,000 of dollars in prize money. Even if you're not a pro, think about a gamer that works in the dorm room or lives in the dorm room. The dorm room has tons of interference. So that's something we really had to make sure we tested because for a gamer, the difference between winning and losing is measured in milliseconds. So, with that, I'll show you a quick video that shows how we tested for that. So the picture you saw there was just one of the many anechoic chambers that we have around the world and that's where we measure our wireless performance to ensure that even if you're in a LAN party with 1500 to 2000 people that we have no interference whatsoever. That's what we did. We created light speed and that solved the lag issue. The next thing we had to do is solve battery life, right? So it doesn't matter if you have great performance. If your battery dies, it's useless. So that's where we created Powerplay. What Powerplay does is we created its charging mat and if you look at this charging mat, in this exploded view, we created electromagnetic resonance technology. We use that to create an energy field on the top of the surface. We then have this coin that we created that goes into your wireless mouse and that coin harnesses that energy and uses that to charge the battery inside the mouse. We are the only vendor in the industry that's invented a technology like this. And what it allows you to do, it is charging the mouse while it's at rest, but also while it's at play, which is fundamentally different. If you look at what some of the competitors do, they use what's called Qi charging, which is I'm sure you're all familiar with, you use that on your phone. You take your phone, you put it in one place, it charges overnight, you take it the next day. That's great for a phone, not really good if you're trying to play a video game, right? You really want to be able to use your mouse while it's charging. So that's what we've created here. There's another solution on the market that's called capacitive charging. There's a limitation to that as well. The capacitive charging solutions out there don't have a battery in their mouse. When you're using it on those pads, it charges The minute you take it off that mouse pad, it doesn't work anymore. You have to plug a wire into it and it becomes a wired mouse, kind of defeats the purpose. So, we are the only solution in the market where it's a wireless product. You can use it while at rest or while at play. And when you take it off and you use it on your laptop, fully charged. You come back, it's ready to go as well. So that was Lightspeed and PowerPlay. Now the good news about that is we solved those solutions. So the problem was not everyone could afford that. So the PowerPlay charging mat is €100, the PowerPlay mouse is €100. So someone like me could afford it. I think Bracket could get one. But if we wanted to take this out and we wanted to go to the masses, we had to fundamentally invent something different. And that's how we came up with HERO. HERO is a brand new gaming sensor that we created so that we could democratize wireless and make it available for everyone. So here's how we did it. So going back to 2013, we had a product called G700S. At the time, it had the 9,800 sensor in it, highest performing, most power efficient sensor on the market. That said, from an engineering standpoint and a design standpoint, we were not satisfied because that G700 mouse still wasn't as good as a wired solution. We invented some more. We came up with 2 new sensors, our M010 and our 3,366. The M010 we used in our G602 mouse at the time once again revolutionary. It went from 9 hours of battery life to 125 hours of battery life. Really, really efficient. The problem was it still wasn't as fast as a wired mouse. So we said, okay, let's come out with 3,366. Now we've solved the performance issue. 3,366, amazing sensor, just as good as a wired mouse, but the battery life again was a problem, only lasted 32 hours. We didn't solve this quadrant over here that was this magic space that we wanted to go after. So that's what challenged us and caused us to invent Hero. 10x the power efficiency of the 3,366 to get all the performance that you need just as good as a wired mouse, but extremely efficient. We just introduced a brand new gaming mouse we call our G603. And with that mouse on 2 AA batteries, you now get 18 months of battery life. And what's better is the HERO sensor actually costs less than the 3,366. So it improves our gross profit dollars and allows us to build a gaming mouse that G602 only costs €60. So that's how we're going to bring wireless to the masses. So those are the 3 technologies we created. Lightspeed, Solve Lag, it's wireless that's faster than the competition's wired. Power play, solve battery life, gives you infinite battery life. You never have to worry about your battery again. Then we said, okay, now how do we take this and bring it to the masses? And that's where we invented HERO, a brand new sensor. So it's wireless for everyone. So now the last thing we had to do is, okay, now that we've solved all those technical issues, we have to go educate those people that still have those perceptions of what wired wireless used to be like. So that's where we create a very simple marketing campaign. We call it no wires, no limits. And it's a combination of everything from awareness to consideration all the way through conversion. And because gamers inherently live online, a lot of the material we create is online digital content, photos, videos, working with top influencers, bloggers, working with the pros so that when they're in their video, they're telling the stories. We then bring that into point of sale through product ads and online through e tail and at retail. Here's a quick look at one of the videos we put together to show off PowerPlay so people could see what PowerPlay was and get a little bit excited about the technology. Let's take a look. So in summary, that's what we're focused on for gaming. 1 is continue to build superior products and experiences. Wireless is a big piece of that. We've just started with Lightspeed, Powerplay and Hero. There's still a lot more to be done to really make wireless truly accepted by everyone in the PC gaming space. So we just started that journey. We're going to continue it. And then to validate that, we're going to continue to partner with our pros make sure we're building the highest performing product that can meet their standards. So with that, I'm going to turn it back over to Vincent. And before we do that, we are going to take just I want to make sure you are fresh for Vincent. Vince will be very disappointed. I would take 5 or 10 minutes to stretch your legs, get out, walk around, get something to drink and then we will come back and Okay. If you could make your way back over. If you could make your way back over to your chair. You'll put on the last page of before you let Thank you. All right. Hopefully, we had a good coffee. Pronorola, okay, good. All this newest coolers, they don't fool me. All that matters is that they show me the money. Just to be very clear, that's how we drive the business. And so I'll walk you through the financials. Bracken mentioned it's been 5 years that I had the privilege to join him and drive the turnaround of the company. And I remember May 2013 was not in this room, but it was in Zurich. And Bracken presented its 1st outlook for the year. And many of you were there actually. If you remember, the first year was presented at minus 5% top line and 5% operating profit margin and it was a small little individual investor and I was thinking, oh my god, it is so conservative. They can only make it. And to my surprise, many of you were very skeptical. Felix was at Credit Suisse and he wrote like, oh, that's really aggressive. And I remember that. The reason I bring this anecdote is because I woke up this morning and as you know, we put again some high single digit top line growth rate and use midpoints for the operating profit margin, it's 15% growth, which by any one of my standards is very good guidance. And all I could read is, this is really conservative. The world has changed and it is what it is. Why that change is because we've driven this over turnaround, right? FY 'fourteen, FY 'thirteen was really resetting the business, rationalizing the product line. Bakken mentioned over 80% of the revenue was associated to PC or the PC environment and we only had 20% of our revenue positioned on growing market. But very quickly, we started to improve profitability and credibility by delivering every quarter. If you remember, we had a concept of profit maximization for certain categories. We're focusing on growing the profit first and foremost and then the concept of growth categories where we were growing the top line. And then we delivered a turnaround in about 2 years, confirming my first impression that Bracken's target were very conservative. And we started to shift our mindset. So how do we position the company for growth and we refine our methodology and came with the analogy of the tree, the plants and the seeds And every one of them needing care to be able to continue to evolve and live in the garden. And we started to invest and I'll come back on that methodology. And we started to put new guidance and I don't know if you remember, but around that time, we started to say, hey, we can grow the company mid single digit. I think that was our only point in time that you and me were kind of on the same page. Yes, that's about right. And we delivered. Bracken mentioned some of the growth rate, and I'll come back to that, but 4%, 9%. Then 2 years ago, in this room, we say, hey, we're going to need to think about our portfolio and our methodology. We believe we have growth opportunities in every of the markets we participate And we're going to really invest for growth. I remember it was Yuan, UBS Sesh. Is that possible? Really think you can grow in PCs? Yes, we think we have growth opportunities. We attach an installed base. And we started to guide the company high single digits. And you know what we've delivered, 15% last year and 20% to 20% this year. And then we put a road map in place, dollars 2 EPS. Now invest for growth and $2 EPS maybe don't match, but the reality, we put this $2 EPS road map in place as a guiding and a framework moving forward. I think if we are ahead of our business, we're going to continue to invest and our goal is not to pull up $2 EPS or be it 1 quarter or be it 1 year. Our goal is that you can count on the $2 EPS by FY 'twenty. And in the meantime, the upside we have, we're going to invest to accelerate the performance of the business. And that's the framework that guide us forward on that principle. Why did I come back on that is because everything we've done over the last 5 years, we've integrated that into learnings, how we manage the overall portfolio and then reproduce some of those learning on how we manage each one of the categories in each of the markets. Now the result is about to close here our 5th year of growth. We constantly reevaluate the portfolio. Every category, every year, we go to our strategic planning framework, say, where are we in the overall life cycle of the category, how do we want to treat it, how much do we want to invest, what's the board supporting adjacency market share gain, etcetera. We have about a good base now down to 40% of our overall revenue to show you the transformation we've done over the last 5 years. But as you went to rationalizing the resources allocated to that category, we started to see opportunities to grow and we've been growing in low single digit in that build base. If those who have or invested in the software business model and was for software business in the past, this is our maintenance revenue. This is the revenue that really delivers our base that we can leverage to then grow into new categories. It's a very important piece of the business. Definitely, Art here is giving me the money that I expect for all the SKUs you put out there. And then we start growing, gaining share in every one of the markets, entering new categories. Scott has talked about video collaborations, it was almost non existent or starting from a webcam 5 years ago. And then adding acquisitions to those growing categories, mobile speaker becoming an important part of our portfolio, but then knowing that, that will come to a certain maturity level, we're going to continue to add new categories, and we bought Jaybird about 2 years ago now. Gaming is the best example of all of those, right? It's some of the technology is older, then we started to invest more. We're gaining share in the market we participate. We started to build adjacency going to the console and going into other categories, and we complement that growth through acquisitions. That's definitely the business today that has the best momentum across all of the growth levers we have. And then that delivers the growth rate that you've seen 2, 4, 9, 15, 12 to 14 for the year. So very strong performance overall. And as you know, we've guided for 6 consecutive year of growth moving forward. The trick here to continue and sustain that growth is really to develop and continue to develop a diversified portfolio. We know that every one category will have its ups and downs and some will be in growth, structural growth for many years, others will have a shorter life cycle. But the diversity of the portfolio enable us to continue to invest into the different areas and maintain growth overall. For the year, if I use midpoint for the guidance here for FY 'eighteen, we have creativity and productivity on track to close at around the low single digit growth rate, 3%. It's really linked to the installed base. You've heard about the PC market being somewhat stable, flattish, minus 1 plus 1. But the installed base is really big and offer us a good opportunity to maintain a certain growth rate. The 2 key growth drivers for next year is really gaming and video collaboration. When you look at the current momentum we have in those markets, when we look at the market momentum and the competition, we believe we have a unique opportunity to grow those businesses significantly. Therefore, 2018 growing video collaboration, 25%, gaming, 45%, granted some comes from acquisition, but we look across all growth drivers to maintain that momentum. Music becomes like a big market. That's more dynamic at this point in time. There's many categories for us that are below that market that we address, mobile speakers becoming Bluetooth mobile speakers, becoming more mature, low single digit course rate. We still have some PC audio that's obviously in decline, has been in decline for a few years. And then new areas like the wearables that we have or new seats we've tried with the mobile speakers, blast and mega blast, it's voice enabled, it could be used as personal assistant, but we'll see where that goes. But definitely a lot of dynamic into that market. And then smart home, it's very fragmented. Still last year or this year, we benefited from the traction from integration of our HomeControl and Alexa that will stop at 1 point in time. It's still a small piece of our overall portfolio, but we're staying close to that smart connected home. We know we have a lot of technology and DNA to play in. Mentioned we're on track. You remember our number one commitment when we give you financial guidance is to deliver the bottom line. We guided the year at $270,000,000 to $80,000,000 Overall, we're trying to create operating leverage year in year out. It may change. We're on track to our long term model of 10% to 12%, which we put out 2 years ago. And that really comes first and foremost since we're in the period of investing for growth from the growth. Organic, 10% to 12%, adding acquisitions, You'll continue to see a very solid organic growth then supplemented by adjacencies that you would have acquired. Gross margin or earnings growth, gross margin midpoint of our long term range, 36% for the year, slightly under last year. You guys know we had a couple of one time items this year, but overall, trending in the right direction towards the high end of our range, 35% to 37%, and then delivering on the bottom line. And then we plan to continue to develop our capital allocation framework, acquisition of Astro this year, very successful acquisition and then dividends or growing dividends, which is our policy, you know that and then the buyback program. Let me come back on the approach with some numbers. And this is a graphic that represents for a period of 2 years the incremental revenue, incremental gross profit and incremental OpEx. In the 1st 2 years, remember revenue was declining minus 7% in FY 'thirteen Overall, for the 2 year period compared, revenue was down where we're setting, rationalizing all of our product lines. As you know, as a result of that, we exited the OEM business and did a few things, Lifesize and others. And gross profit was declining and we are reducing our resources. Then we position for growth, started to have a moderate growth to 4%. With that we started slightly improved gross margin. In the first period, it was 33%. In the second period, it was starting to move to 35%. We're still lowering our OpEx, but we're shifting a lot of our resources from one place to the other, from the place where it's declining to the place where it's growing. And then we're investing for growth. And you see as the last 2 years, a lot of incremental revenue, gross profit and incremental expenses. I put this out there because one of you was not nice to me in one phone call and say, Vincent, you lost your touch, you're not cutting OpEx anymore. And I was like, yes, because we are here and we're really investing here for the growth opportunity we have. Now, say, okay, I understand and I understand the priorities. This is a methodology we apply to almost every one of our categories. We acquired Japert. They were doing many different things, wearables, but also like fitness bands, etcetera. We first resetted the business, rationalize the product line, focus on 1 or it was interesting, trying to see what we need to do from a spend perspective. They were really developing like a start up, invest at all costs. And started to reposition it for growth And then started to say, okay, how can we focus better with the brand Jaybird on sports only, develop a portfolio that's really tailored to that market segment while we are preparing for a bigger period, which is not here yet, investing for growth. And that kind of approach is across all of our categories. And I would say, Astro is the same. We bought Astro. They didn't have to go through a reset because they have very strong, solid portfolio and a lot of things we can take. But they are in the position for growth. They're at the high end of the segment, and we're now developing and they launched 2 products, as you know, in the last fall to try to penetrate the mid range where we have a lot of market share gain to have. And we are now shifting Astro into invest for growth as we move forward. That methodology and that approach is across our various categories. And we're constantly reassessing. 1 category could move from all three cycles and then through market dynamics that's evolving, we bring it back to a reset. Okay, now the market has changed, things have changed, should we reset where we are? And we're not shy of doing that and internally we're trying to not be married to our decision and constantly review that portfolio allocation, resource allocations through that plans. I'll come back on one thing. So the priority here you see an invest for growth, which is where the overall portfolio is, is really grow the top line, improve the gross profit to create the funding capacity profit in And it's not really profiting dollars or so that count, it's improving the structural gross margin of the business in which we play to then make investment decisions to invest more back into the gross margin, price, other or do I go into building the brand and then more in OpEx and we make those trade off real time. As we focused on improving gross margin, we talked 2 years ago and last year we formalized a little bit more about this design for cost savings framework that Arch reminded you about. Last year, we had about 20% of our product that had gone through that framework. I would say on an annual basis, we have about 25 percent of our revenue coming from newest product. They all run through the framework, but they're not all successful coming out with a better gross margin. I would say about twothree of our product today that we put to the framework come out with the objective that we initially designed to better gross margin at the time of launch. So today, we have maybe 30% to 35% of our portfolio that has gone through that overall framework. Let me give you an illustration with a real case. UE Roll, the first version of Roll came up in June 2015, the second one in June 2016. And when the time came for the people to put the spec out and define what they wanted for the products, by what time they wanted to launch, what the cost should be. The focus is really at that point in time getting the product ready for launch with the right functionality. On time is the number one metric, obviously consumer feedback is not the one. Customer is not immediately part of the design framework initially as we have explained. And then our approach was post launch as volume scales, we start to drive savings and improve the margin over time. And then as we now have this notion of at least one notion in design framework is discussed, we run the other side of the family wonder, Wonderboom, which will be the successor of Roll through that framework and say how do we design now for a better gross margin product in that price niche. And you can see the success with roll that we've had. We launched it in June 2017. When it came out, it had about 10 points of better margin than the roll before. Now, of course, we don't deliver the same savings post launch, but it enables us to do a lot of things at launch to get traction. And today, it is a very, very successful product in our overall Bluetooth mobile features. Back to the financial scorecard, I think I mentioned last year my number one objective actually, every year I mentioned, is really to create an increased shareholder value, my shareholder value. And we're a product company. So the number one metric, of course, is the product, the NPI, the innovation. But behind that, at the end of the day, we need to translate into financial results. We have about 8 dimensions that looks at a very high level. We view with the Board every quarter and say where we are on those different dimensions. And this is kind of a high level scorecard, and I put some score. Now someone told me these are American scores, it was not Kita 9 American schools. So yes, they are American scores. So just for those who don't know, A Street, A Students is the guy you see at the front row. S is the guy who see that back row. Sorry, Bracken. Yes. Yes, I didn't expect that. But that was not a very good carrier move. But in any case, here's where we were in FY 'thirteen. Organic growth minus 7% was an add. Acquisition, we even didn't look at acquisition. We really had to first rationalize our portfolio and get our operations in order. Gross margin was 33%. We're not focusing on investing for growth. We're spending to survive. Meeting or exceeding our profit targets, the thing I really enjoy the most when I look at the business case before joining is they had missed 8 quarters out of last 11. So I'm thinking, can I do worse than that? This is no one was going to do up from here. Anyway, so cash flow operations. The other thing I was looking at is companies that have maybe operational changes at one point in time, but are very healthy and balance sheets are very healthy. Cash from operations, always very good cash generator. There There was no policy for dividends and buyback at the time was a missed opportunity I would say. So when we look at shareholder value creation, I've had many shareholders telling me out of the Q3 results telling me, oh my God, where do you go from there? You guys smash it. You're straight A student. And I can tell you, actually, I wore my tie to tell you, if you remember, because I don't think we did a straight A quarter. I don't think we did a straight A year. You look at FY 'eighteen, opening growth, not too bad. Low double digit is pretty good. Acquisitions, but okay. I think we can do a lot better. There's a lot more asset that I think we can acquire, but for many reasons, unable to do it. But I think we can do a lot better there. Gross margin improving, turning in the right direction. But if I look at the cost framework, and I'm not guiding when I'm going to say what I'm going to say, I think we have the potential to run the business at 40% gross margin. That would be before investments. But at one point in time, I think I predict we'll get there. Now I want to put a time line. I think we have more room to go. And with 36% today, we've improved from 33%, but as we continue to build a very strong brand and continue to innovate in our products, we're going to improve that metric. Investing for growth, Bracken would tell me and I would confirm that there's always a lot more opportunities you could invest in. And we very every day, we're trading off a short term commitment on profit versus long term growth investment for that long term growth. And you know today, I told you where the priority would be. Meet or exceed profit targets from that perspective, I think we've done pretty well. Cash from operation, good. Growing dividend, we've grown the dividend. They have not caught up with the value and how many investors think they want, when are you going to create a higher yield. We can't have both. You had capital appreciation, right? So we'll do at the right time yield improvement. But at this point in time, I think we continue to just focus on growing steadily every year the dividend without looking at where the share price is. Opportunistic share buyback, we have a $250,000,000 open, which is good. I couldn't be because there's so many times I saw a pullback. We're very confident in the business. But for whatever reason, we're blocked from purchasing it. And so I think we could have done better execution on that side. So where we are going from here, long term business model, 2 years ago we raised it to high single digit. I mentioned that to 10% to 12% of operating profit margin. The good news is we're on track to get to that long term business model. The bad news or the good news is it requires really hard work every day. And you can see overall high single digit growth rate for last year have been there. We're guiding there for next year. But every day, we're trying to be innovative and bring new product to market. Gross margin, 35% to 37% requires a lot of effort, not only on generating the capacity to be there, which is the cost or design forecast, the cost savings in the supply chain. We need also to be able to keep the price in the market and compete and continue to gain share while we do that. We are about midway there, and I think we've made good progress, but there's more to go. Operating expenses, 25% or lower. Last year, we are at 26%. I think this year, we'll get to 25%. It's not bad, And then we'll see where we go. Operating profit margin, we're above the midpoint and you see the rest. So a lot of work. The good news here is there is no change and we're on track to get there. That brings me to the growth rate for next year. As we mentioned, we sustain the growth our project to sustain growth at the high single digit. We don't guide by category, but we give some indication what we see in the market for each of the market areas we play. Someone was asking me how is the PC market doing. I hope you understood by now that we're not directly correlated or tied to the units of BC shipped in the market. So if that goes up 5%, we won't see our sales go up 5% immediately. We don't have any more an attached OEM business that go with it. But we really are farming the installed base, 1,600,000,000 PC out there. And if PC unit is stable, like it's projected today, that's all good news for us in the long run to maintain that maintenance revenue stream, as I described in the business model. So continue to plan that business around flat to low single digit for next year. Video Collaboration is a good growth opportunity. We'll continue to invest in that business. We have a unique opportunity at this point to capture a lot of those empty rooms, and we wouldn't want to miss the window of opportunity here. Music, low single digit. It's a mix again of 4 submarket or subcategories. Mobile speaker, Bluetooth mobile speaker getting a lot more mature. 2 years ago, we had said, hey, we forecasted this market, mobile speaker Bluetooth, to be flattish to low single digit or to have the growth rate to slow down. And in Q4 'sixteen, if you remember, we tailored our channel inventory, we're down 36% and say this is how we compare the year. And then we grew up 30% that year. So the market was a little bit higher than our expectations. Today, I would say we are here. The market is maturing. There's still growth opportunity and market share again, etcetera, but we see a market that will be more flattish moving forward. We have then the PC audio will continue to be double digit decline. We have the wearables, which is double digit growth rate and a huge opportunity for us to play and continue to grow that market. And then we have what I would call a seed today, which is this personal assistant with 2 guys with Valuing, Amazon and Google, and we launched Blast and Mega Blast and JBL and others have launched other similar products, and that market is not really taking off yet. And it will be slower and we're coming to upgrade our software and stay close to it in case it takes off. So that's a mix of dynamic in the music business. Gaming is definitely a huge structural growth opportunity for us. You'll continue to see us trying to invest and act on every one of our growth dimension in that business. And then smart home, we benefit from a huge help from the Amazon Alexa integration with the home control. We always plan this. It's too small for us and it's a very fragmented area, relevant, but we're not forecasting anything at this point time. We've got you to invest and monitor. So I built this slide this morning because I kept reading with 2 conservative in I guess you meant the profit, I wasn't sure, all of you. And the question I got indirectly either via email or in what you were writing is, what's the real potential? And so rather than you guessing me, why don't I show you? That would be the best story for them, say, let's quickly build a bridge. So this year, we'll be, call it, midpoint, euros 275,000,000 and this is how we drive internally. We had a onetime issue last year in distribution center. There's no word I was being in touch with that we do not expect to repeat next year. And so that's baked into the base as we drive our business. We had hedging costs. When there is currency volatility like we've had, everyone is asking me where is the currency benefit when it's favorable to us. But in reality, every quarter changes by more than a few percentage points. We have the corresponding hedging cost, about 10,000,000 We're planning next year at relatively the same exchange rate as today, which today would mean upside, but I have no idea what it will be in 2 months, actually even in 2 weeks. So we're not going to forecast that. We just say at equal exchange rate, this way it would be and so we had that in our base. And then the way we sum up and of course, there's a lot of details behind, we have about €30,000,000 of incremental profit coming from the high single digit growth rate plus the margin expansion in the various businesses we have. So that brings me to an FY 'nineteen potential of $330,000,000 That's ahead of our internal math to get to $2 by FY 'twenty. And so, Bracken and I, when we sit down on the morning, say, okay, what do we want to do? We look at all of those investments, say, what else do we want to go? And we pick areas that we say, let's invest to accelerate our transformation. And so we put €15,000,000 across incremental investment that would be long term in nature. So that's continuously upgrading the software skills that Bracken mentioned this morning. It would be giving more money to Sesh to continue to move a portion of its portfolio more towards wireless, continue to increase partnership in esports. We go to Scott and say, Scott, where are we not covered yet? Can we monitor and see if we have room to invest more and accelerate the performance of the awareness into the market and that's what we do. And so that brings us to what we can commit to you, which is we're driving the business towards delivering $310,000,000 to $320,000,000 which again year on year would be a 15% growth at midpoint using post midpoint. Real time, we'll manage the business. There will be plenty of dynamics. One thing we know is every numbers in that over chart will be wrong. In aggregate, it will be wrong. Continued to be a strong cash generation. 'fifteen to 'seventeen generates $650,000,000 of cash from operations. We have a strategy well aligned. 1st, it's business investment acquisition and we're going to do that. We have a growing dividend policy. We've grown a dividend 10 percent and we're going to grow at a certain rate over the next few years and share buyback open. Over the next 3 years, FY 2018 to which is about to finish to FY 2020, which is this $2 with EPS Walmart, we'll generate $1,000,000,000 of cash from operation. And the priorities have not changed, acquisition and investment in our business. When we draw on the strategic process, Mr. Bakken, we're not thinking just FY 2020, saying in 5 years, how different the company will be, what's our opportunity? Joon was asking me, when I sit here in 5 years, Winston, what do you think it will be more of the same? The transformation, you were skeptical 5 years ago. The transformation between the last 5 years and the next 5 years are going to happen and you'll be a lot more than what you've seen. We are battling to regain credibility, profitability. I think we have momentum And when you see the opportunities we have in front of us to transform the company and create value, there are a lot of those opportunities. That's our number one priority, investing in the business, including M and A and looking at other we need to accelerate that transformation. And then we continue to grow the dividend and an open buyback. We know it will not always be a linear path towards the success. And when there will be a pullback, we'll look at leveraging our balance sheet to create value. So this was the slide that actually was giving the profit. I gave you the bridge so you understand how we think at a very high level and the assumption that goes in. So I'll repeat high single digit course rate, the 4th year of organic high single digit course rate, 15% growth on the profit, 3.10% to 3.20% and then the various assumptions that you can see here. And if you finish on the $2 EPS, We're on track to that. If you compare to what we presented last year, it's about the same assumption, an assumption to grow at high single digits for the next 2 years. Moving towards the high end of the gross margin by the end of this process and continuously investing for growth. If we're ahead of the plan, do not expect us to put the plan, expect us to announce new things and continue to invest to sustain at the moment. And with that, Bracken, I'll pass it back to you. Thank you. I was looking at you, Josh and Scott standing right next to each other. If you turn around and look at them, sorry guys, didn't mean to embarrass you. Couple of things about them, they had birthdays a day apart. Scott's was yesterday and you just used to say before. So happy birthday. Second thing is, they are a good reflection of the fact that we are a portfolio business. And so we are a portfolio of both categories and brands now. And you just represents one part of Logitech, which is cooler and younger and no offense, I think you are almost the same age. But it's one part of Logitech and Scott represents a different part of Logitech. And I have to say, which is in the enterprise now. We've actually slipped ourselves inside the front door in the enterprise and we're and we belong, which is good feeling. I want to wrap a little bit here. So if you look at the portfolio story, portfolio of products and now beginning to be a portfolio of brands, I have to say, I love being in a portfolio. I would hate to be in a single brand company, a single product company now, not single brand, single product. I hate to see in a single product company, because if you think about the single product companies that you know of that play in our space, it's hard, because a single product company in a single category gets to experience front on. Well, in the beginning, they get the amazing tailwind of the category they started in and it's a good feeling. Boy, it's beautiful. So it blows and it blows. And the later they get either the strong headwind that is inevitable in any category and then maybe that dies down, the tailwind comes again. So they end up in different categories. We have a portfolio and we will always have a portfolio and our portfolio will be expanding. And that's our whole concept, the whole strategic one part of the strategic value of this company is that we will have a consistent long term sustainable growth rate because we are a portfolio. That gives us room to breathe where we need to and room to push the accelerator where we want to. Now I talked about the capabilities and I walked through some of them today. I won't repeat any of them, but I do want to come back to culture. Vincent said, boy, we have so many opportunities ahead of us that will probably look more different in 5 years from what we look like today than we did do today compared to what we look like 5 years ago. And I think that's probably true. I think it's also interesting, just a different observation, on culture. I would say we are more different culturally than we were 5 years ago than we were than we are from what we were 15 years ago. We've gone back to what we were. We've rediscovered who we were. And I think we're going to try like crazy to hang on to it and keep honing it and keep making it more valuable, because the future is not going to be it will not reward the old world of the big thick hierarchical organizations. It's going to reward the fast, the agile, the ones that act and think and feel small, no matter how big they are and we are going to try to be one of those. I want to quickly step through the different presentations you saw from the business group leaders. If I start with Art, I love having Art come to present. I could have had somebody named Toya, who is Art's counterpart in MICE come to present. The reason why I like having those 2, either one of those 2 and Art did a phenomenal job is that in either case, I wanted to tell a software story. I didn't want to tell a hardware story. Art's story, if you listen closely was, this is maybe the best piece of hardware we've ever created in this category, but that's not the story. The story is that the software unlocks an incredible new experience that no one has ever done before and we are just getting started. We could have told exactly the same story in the mouse where we brought something called Flow, which enables you now for the first time to be able to use the multiple computers on your desk in a seamless way with one mouse dropping and dragging pictures from one computer to another one from a Mac to a PC. It's never been done before. So I wanted to tell that story, that software story on the oldest world we have, which is the PC, because we are doing it everywhere. So get ready and look ahead. You'll see it in the future in everything we're doing. The second thing I wanted you to see was Scott. I said it already, but Merit's repeating. Our products always found their way into the enterprise. We've been a B2B company for as long as we've been a company, but we never thought of ourselves as a B2B company because we focused on the user. And our product somehow wound up in companies and somehow got dragged through the side door or the somebody brought them in. They ended up on desks. They ended up everywhere, but really weren't a B2B company. 5 years ago, we made a decision. That's an interesting space and maybe we can play there. Roll forward, we're at $200,000,000 run rate in a pure B2B business and we like what we see. This feels like a place we belong. And I wouldn't have said that 5 years ago, but I will say it now, we belong there. So it's a really cool space and it's just the beginning. And then if I have to go through and talk about the gaming business, which I think in some ways, it's really ironic that I am in a room full of people who are over the age of 20 or over the age of 30. I won't go beyond that. And I am calling gaming cool. If you had been here 5 years ago, certainly 10 years ago, the gamers were the nerds. They were the nerdiest. Now gaming has become the coolest. And if you don't believe me because you are a little distant from it because you don't have kids that are in it or you don't quite get a yet, stay tuned and watch the Olympics. It will come. This will be an Olympic sport within the next Olympic or 2 and it really is the hottest, coolest thing there is and it's so fun to be in it. So Vincent went through our forecast and I think at the end of the day we continue to be confident about what we're doing. We're excited about what we're doing. We're not short term, but we realize there is a short term. We have live in the short term. We love the short term because it helps give us the heartbeat of the company. It drives us to deliver in the short term, so we deliver the long term. But we are here for the long term. We are really here to build an amazing company. And we are going to keep working at that and keep doing these sessions here and in New York and in London, wherever it is next. But year over year, you will hear a very similar story, which is we think there is a potential. We think there's a potential to build a multi category, multi brand company using these technologies that are of today and of the future in a way that hasn't been done before. And we want to be one of those companies. So I'll stop there and we can take questions. Thanks. Yes. You probably do need a microphone. Are we recording this? Yes, I guess we are. And Busy, you might want to come up here because I'm sure we're going to get enough questions for you. It will keep you busy. Thanks. Thanks a lot. Ananda Baruah, Loop Capital, Congratulations on everything that you guys have accomplished over the last handful of years. I guess a couple of questions for me, and these are appropriate for both of you guys. So just going to the long term forecast, it seems really clear that you guys feel really good about the platform that you've built. You sort of said a couple of times today, each of you, that you think you can accomplish more, which is anecdotal, over the next 5 years than you have the last 5 years. And just if you sort of work the weighted averages, particularly with the traditional business or the growth businesses, let's say, becoming a larger representation of the revenue stream, What's the thought process behind sort of the high single digit view on the long term forecast? I can appreciate the sort of the 2019 forecast, but what's the thought process behind high single digits on long term forecast when it seems like you guys feel really excited about the platform you created and you've had recent success that would suggest it's possible to do higher than high single digits? And I have a couple of follow ups. Mitch, I'm going to let you respond to that first, then I'm going to follow-up on it. You don't want me to respond. So when we say we'll do more over the next 5 years, I'm not even sure I'm thinking financials. Financial, we have to follow, right? You have to show me the money at the end. But I'm thinking about transformation. If 5 years ago, right, when we're 90% PC centric, Bracken would have done today's presentation. You guys would have walked him out of the door and say, these guys totally out of reality. And sometimes we portray on when we do the strategic planning, say, where would the company go with our current skill set, R and D, the market opportunities, where do you think it's going? And we put on the board 5 years that we're surprising ourselves. And then Bracken finished the meeting by saying and I'm not even telling you what I'm thinking for 10 years. And I think the opportunity we have ahead of us, this amazing diversified portfolio in the middle of the year. And you think everything is working well? I can tell you, every day I come in the office and I'm yelling at everybody because it's not working the way I would want to work, literally. Now if you translate that into financials, I don't know and I don't want to predict it, to be honest with you, how big or because I don't want to be driven by a number. I want to be driven by the market opportunity, a real transformation of the company. And I can go into all dimensions. Distribution, we would have a different distribution, more distribution, answer would be yes. Business model, would we have other business models? I can tell you. And once we look at the board, yes, we would have different business models. And so from all of those dimensions, I think we're not talking about 5 years because there's no point, right? We need to go into this reality. But we're definitely thinking about that. Yes, I'll just add one thing to that. I totally agree with it, Cosmos. I guess, when I think about long term business model, we look out a few years. Our long term ambition is very significant. And otherwise, I wouldn't be talking about multi category companies. So I'm just not that fixated. When we think about the business model, really just thinking, okay, that's kind of what we don't exactly guide to that in the long term. We basically say that's what you kind of ought to be able to count on. And then we should be trying to hit that or better. We may have years where we don't hit it or we may have years where we over deliver it. But that's what the role of that. And maybe you give me an idea to rename the long term model as medium term model. That's actually helpful. All of that is very helpful. Thanks. And then just one quick one, Bracken, on the near term since you actually just expressed your enthusiasm for near term. In the press release this morning, you mentioned maintenance of maintaining maintenance of the 2018 guidance. We're into the last handful of weeks here of the March quarter. You have good business momentum at your backs. And I believe if we calibrate to say the midpoint of the 2018 guidance, it suggests, Vincent, revenue seasonality. Well, I think it suggests sequentially revenue down 30% to 35% you guys typically do down 25% sequentially. So is there anything that we should put for? I know you had some one time things, I think, in the March quarter of last year that we should be keeping in mind? Or is there maybe just some prudence going into the last month of the quarter here? So a few comments I want to make. We closed Q3 with 18% growth in constant currency, 22% growth in U. S. Dollars and everybody say, fantastic course. Yeah, yeah, but that's not where we're guiding the whole thing, right? And the dynamic in Christmas quarter, you need to really understand, you want to be on the shelves, you want to be present everywhere until December 31. You don't know what sales out will be and you don't want to take anything. Q4 is the reverse. There's no really magic event at the end of the quarter. And you want to finish the quarter as lean as you can going into next year and as prepared as you can. Normally Q4 and it's not foreign to you because we talked about it 5 years on the call, I said, if we have room, we put in investment. If we position all of our products, we're trying to be as lean as possible going into FY 'nineteen. So when we give our guidance, we consider all of that into our mind. I think the only dynamic I've talked about is the mobile Bluetooth speakers. Q3 were up over 30%. So guys, this is not what the market is. We sold in a lot of blast and mega blast. We gained share in mobile speaker, but we know the market is slowing down there. And so we'll be as cautious as we can preparing for FY 'nineteen. All of those dynamics, like it was in Q4 'sixteen, if you remember, so all of those dynamics are incorporated into the overall Q4 number. Thanks. Appreciate it. Thanks. Next. Thank you again, gentlemen. Quick question. One of the things I often hear from investors is the gaming has been on a pair for you guys, the segment, but how much longer? And I see you guys are obviously increasing kind of your outlook or expectations for that segment in terms of growth for fiscal 2019 relative to what you said in fiscal 2018 at the Analyst Day. So are there any key drivers that makes you even more positive on the gaming portfolio? And how long does this I mean, I know it's still under penetrated. We still see a lot of but is there anything anecdotally that you could point to that would suggest the gaming accelerates into fiscal 2019 relative to what you saw in fiscal 2018? Yes. I mean, I think at the end of the day, you're just you're seeing the same thing we're seeing, which is every quarter, every year, every year since I've been here, every quarter this year, we look at our results and we look at what's happening underneath them and they just look very sturdy. And we're not executing as well as we could. I mean, I'd say we're not executing as well in product execution, innovation execution. We're not executing as well in terms of investing in the right marketplace. So I think we've got opportunity. Will we get that exactly right? I don't know. But I'd say from a secular growth standpoint, I don't see any reason why gaming won't continue to be a very, very strong growth picture for the long term. And in that case, I'd say 5 years plus. If you got that, who knows? If you can add a couple of details. So in the gaming number, you also have the run rate of Astro, which we closed on in September, right? So it needs to be normalized. But that overall gaming, I would say, is structural growth. It's kind of the same growth, continue to penetrate more. It has more room for penetration. And then we have our own dynamic, whether it's Astro being able from the high end of the market to gain more share in the mid range where we see a lot of market share gain opportunity or U shares that still need to transform from 80% wired, 20% wireless. And if you compare that to C and P, we think we have a huge opportunity. All of that are more opportunities specific to what we're doing today in the Since we rented this whiteboard, I'm going to use it. Great. I was waiting for the moment. I'm going to draw you a picture that I think is maybe you'll think this is maybe you'll think this is interesting, maybe wrong. And I apologize if you can't see it, I'll turn it around. So this is age and this is percentage and this is 100%. Okay? This is age 80. This is age 70 and this is 60 and this is 50 and this is 40, and this is 30, and if there are a few people in the room, 30, this is 20 and this is 10. So and this is sports. Now this is participation sports, okay? When everybody is kind of age 80, 70, we played regular sports, regular physical sports. I played basketball. I ran I did a little track and field, played a little football. Okay. So if you go down and it's 60, they were still playing a lot of traditional sports at 50, 40, 30, even today. If you've got kids, they go to school, they play traditional sports. So it's not changed very much. Maybe it's slightly less than the 90% it used to be, maybe it's dribbled up. Now let's put gaming or eSports on here. Those 80 year olds out there when they were growing up they didn't play a lot of eSports, right? Not a lot of gaming back then, not that kind of gaming, nor was it for 70 year olds or 60 year olds. I'm 55 and there wasn't a lot then, a little bit maybe. And then you just I'm not going to give your age, you just he's not 50. But yes, there was a little bit. People like you just were the Friends players and it's getting a little bit here. And then now we're getting into the 30 year olds and I've got 25 year olds. And this is what happened. This is eSports, okay, and this is regular sports. So this is the picture. Now the reason why I'm drawing this picture and reacting to your question is, this is what's going to happen. So 3 years, 5 years, 10 years, 20 years, 30 years, one day it's going to look like that. And so this is destined to be the permanent long term growth. This will be the biggest sport in the world. There's almost no doubt in my mind about it. And so this is the future. Now in a very short timeframe, which I'd say a year is, can you predict exactly what's going to happen? I don't know. But I would say over the long term, this will happen. Next question, yes. Yes. Michael Ford Bank, Von Tobel. You're showing this cloud as your new platform for the last few Investor Days and there are 2 question marks. Okay. And they always have stayed 2 question marks. And now we have I'm not sure that consistent with those questions. And now we have some of your growth categories, tablets disappeared sort of and music maturing. So I'm getting nervous. If one of the other starts to mature, then we're going out of growth. So when does one of these question marks turn into picture? We're a portfolio, right? So today we're portfolio of not question marks but actual categories that are driven off of different service platform, largely now cloud based. And I believe that we're and we're always working behind the scenes on new categories. Earphones is our latest one. And it's really interesting because I think everybody in this room has some kind of earphone or maybe 90% of the people in this room have some kind of earphone. And I would say, of you, probably 15% have a true wireless, totally wireless earphone. And so that category is that is absolutely a cloud based category because what we use our UE runs for, which is totally wireless, is for listening to music predominantly. But whether it's making phone calls or enjoying entertainment or whatever it is, over time, all of you will have true wireless. It will happen. It's inevitable. That category will continue to grow. That question mark will turn into a couple of different cloud services, some overlap with some of the other clouds, which is the way it's going to be. But I would say as we continue to work our way through our seed growth program and build out new categories, we'll naturally get there. Can I tell you exactly when though? Then maybe as you mentioned, Jaybird, can you maybe give us an update on sort of how the positioning looks like now in terms also of the distribution? Where do you stand in sort of redirecting your distribution to sports and how the growth dynamics sort of look like? The good news is we didn't really have to reposition the business around sports because it was a sports brand. So the users who love it, it's a sports brand to them and that's the way it is. Where we are doing repositioning and it's a very direct, clear, strategic, pure distribution is both inside and outside. We're making sure that our products are completely viewed as positioned for the athlete and that our people and our the people who work in that business live and breathe that so that we're through and through. So we're still in, I would say, the early days of really building a platform that is a sports platform. It is a global platform. So we've started to distribute in Europe, a little bit in Asia. We're still early days. We're not going to rush this as fast as we can. We are going to be very systematic and careful to build a long term sustainable and sturdy business model. We're not going to go after the whole market. We're going to go after a slice because if we try to go after all of you with for all kinds of communication for everything, we're going to be competing directly head to head with people we don't like to compete with. And you know my view of that. We'd much rather be a big fish in a small pond. The first one would be, you were mentioning software will become more and more important for you. To reduce the complexity for me, can you please provide us with some more clarity? For example, I mean, are you really looking for 20, 30 new software engineers? What do you need to invest to give us really some more visibility here? And also, how many percent of your product launches will be to some extent be, yes, supported by software improving price point and gross profit margin? Let me answer that one first before you go on because it will be easier to keep straight. So first of all, are we looking for 20 or 30 more software engineers? Yes. We've already done that times 2 or 3. We're continuing to staff software engineer. And often it's at the expense of other positions within the company. You saw our G and A, we brought it way down and we'll keep it down. So we're investing strongly in software engineering. We now have, as I mentioned earlier, we have a software engineering leader in every business category now. And that's not just to put them there, it's because we really need them. Even in our PC Purposes business, we have very strong software engineering going on inside that business, but we also have it inside of our camera business, inside Scott's business. Scott's software engineering our engineering leader by the way is actually a software engineer by training. So we're headed there. And what percentage of our business will be of our new products, physical hardware products will also have a software engineering or an app content with them? The vast majority. We're already there now. It's really already coming. I think you'll see more and more interesting things coming over the next 3, 4, 5 years as we continue to invest and build into the future. We're doing machine learning and video machine learning in just one category right now, but we've really aggressively built our capability there. And that's got opportunities across several different areas of our business. All right. Thanks. So the second question would be based on video collaboration. I remember there was a start of a shift from indirect distribution towards direct distribution. Can you give us an update here, how many new sales people you're looking for, how successful this model was and what is the increasing client penetration? Yes. I would say it's not direct distribution. So it's still going through 1 or 2 step distribution to get to those customers. We are calling on sometimes directly with our own salespeople. So we have our own salespeople now. Some of them are calling directly on enterprise, okay, but it's not. The products are physically being sold from us to the enterprise. We're still going through other steps. But I'm mentioning I mean, I'm slicing it a little thin to be clear. Yes, we have added direct sales people as well as sales people for our indirect channels And we'll continue to do that. I don't think we've quoted numbers publicly. We probably don't want to do it here. But I would say we're up by 100 percent or something like that over the last year and we'll keep growing it. It's not a huge number. And I don't think it needs to be I don't think it needs to grow at 100% every year. Now I will say, I think the opportunity if we have more sales capacity out there is there. We had a slide we took out of the presentation, which showed the kind of jumps we get when we add direct sales capacity into our video collaboration business. We have broken down by a few different countries where we've done tests and really tried to do AB tests and it's very dramatic. But we're on the conservative side. Our general view of the world is we want to add systematically and make sure that we're really getting the payoff. So we aren't just really filling it up as much as we probably could. It would be nice to have more sales capacity out there. And maybe the last question if I may to Vincent. You mentioned gross profit margin potential can be 40%. Can you help us to better understand the bridge where this is coming from? Is it equally split between product mix, cost savings, scale or is there anything that you want to highlight on the bridge? So 40% just to be clear, I think they're not new model because out there, I don't have a timeframe. I think at the core it comes to transformation we're trying. 1st is great product that has great consumer feedback, the consumer want. And so for which you can get a price premium, right? And making sure that you can drive that value if you want from your product and the consumer feels he gets the value for the pricing base. That would be number 1. Number 2 is, as part of the overall branding, it continues the followers. If you have the specific brand on J Brand, give great products, we need to have more and more of those things. And then it's everything else that's tactical, say, hey, designing for lower cost, managing every line item of your customer source from your contra revenue all the way down to you. The mix changes also when we're growing very fast, we're not focusing on gross margin. We're focusing on penetrating the market, pushing like we did in mobile speaker a while ago and now deliver $400,000,000 opportunity. And then as the growth rate slows down, then we refocus on improving that margin as well. So that's also another dynamic by category. Other questions? Here you go. Gunther Rolfeler, Baader Helvea. Just a follow-up on your PC gaming forecast. Can you break down the current organic growth rates you're seeing by units and average selling price? I mean, I understand there are some innovations also going on right now, which might support also growth rates, not only in terms of units, but also in terms of pricing. I mean, I understand that your medium- and long term forecast mainly about units and increasing penetration. But right now, are you seeing also on top of it a component from pricing? Yes. No, I'll answer it. Vincent, feel free to jump in. No, it's largely I'm largely talking about units. So it's really about the number of people entering the PC gaming space. Our business has been fairly consistent in terms of mix. Now some of our products sell at much higher price points. If you look at mix across categories, steering wheels versus the lowest end gaming mouse we have, that would obviously be a pretty big difference in average price. But overall, I wouldn't interpret my comments as we've got a big mixed story to have here. Although, I will say wireless mice have significantly higher prices and are very interesting from a margin standpoint relative to the games, to wired mice. So we certainly the innovation profile we have naturally lends itself to a better mix story within category. But that's not really the guidance we're trying to give you here. It's really to give you a more general view of what we think is going to happen in our overall gaming business. Yes. Hi. Three questions, if I may. 1 at a time. 1 at a time. Okay. Then start with a quick one on VC. Can you elaborate a bit more on the collaborations which you have with Microsoft, Google and Zoom? So how does this collaboration work? Does the Microsoft sales people push your product? Give a bit more color on that. I don't really normally like to talk much about our relationships we have with other companies because we would we're Swiss and most of you are Swiss and you know that if you are Swiss and you go talk about all your relationships, you don't have relationships very long. So what I would say is that we are Swiss. So we try to play in a very neutral way with multiple parties and we've always done that and we're a very reliable, I always call us a I hope you understand this, but I always view us as a harmless, capable partner. Harmless because we are not a threat to any of these other companies at all. Capable because we really are and partner because that's the way we were born. This company was born on partnerships. And so we will try to sustain those. To answer your question very directly, in some cases, they certainly are encouraging the use of our equipment. But generally speaking, we don't rely on that. We rely on ourselves. Okay. The second question is on one category, which I when I sit on front of my spreadsheet, scares me a bit is still that the big chunk rather big chunk of audio speakers for the PC. And I always fear that this will collapse. How do you see that particular market? PC speakers have been in a secular decline for, I don't know, Vincent said 2 or 3 years. It's been a long time. I think as long as I've been here. And I guess that will keep going. If it suddenly collapsed, it will probably grow something else because people are listening to music. So they're going to keep listening to music. I doubt it will collapse, but no guarantee. It's getting smaller and smaller. So at some point, collapse would be kind of a side instead of a bang. So I don't think it will collapse. We are in our guidance, we don't assume it's going to collapse. We also assume that we're going to keep innovating very selectively there. And we've done a nice job in the past few years. I always say inside our company, I'll share something inside that I've never shared before. One of the best managed categories in our company is our PC speaker business. The fellow who manages that business is a Swiss leader and he does a magnificent job of innovating on a very low budget and executing very, very well in such a way that we are gaining market share and we are also learning things that we can apply to the rest of the company about cost reductions and go to market. So the PC speaker's business in some ways is a lovely little microcosm of Logitech because it shows you how to innovate without overspending, to innovate in such a way as you get market share and to reduce cost in such a way as you can do it elsewhere. Okay. Maybe and then the last one is on gross profit. It seems to be that you're sticking to the 35% to 37% gross margin target despite the tailwind from the currencies, design for cost as you reinvest. I understand that. But this has been going on now for a while now that you reinvest your benefits here. How to make sure that these investments will lead to the desired results, meaning higher sales growth. And if I take all these tailwinds that you have, it's quite a significant amount which you will invest. Is it not fair to say that you should grow double digit? I'll react. I will let Vincent react too though, but I'll come in at the end. Oh, you want me to write? Yes. Sorry, I thought you were going to write down. Plenty of things to say. I know you do. You're not talking about it. So we're debating a lot, right? So when currency was unfavorable, right, we knew we have a direct hit and we started to raise price and we saw a lot of leaders in the market raising price, try to protect the margin, right. When currency creates room, a lot of people don't take that to the bottom line and use it to compete more aggressively in that market. So it's not a one to one either and we want to keep the room to be able to compete and continue to gain share. And so there's plenty of dynamic in that. Now you've seen also that I've assumed currency flattish to FY 'eighteen. So I don't want to we want to retransform the business operationally as opposed to counting on currency to get a benefit, right? The other comments that came to my head is, I don't know if I have a direct measure to give you here. We have plenty of metrics inside, but I would say we are growing virtually in every one of our categories. We're gaining share in every one of our categories, and we continue to invest for growth while we grow operating profit faster than revenue. That by itself is a very good measure of success. And all of what there is plenty of different things. We create the costs, the savings in the cost of goods sold, then we can decide, you know what, rather than pricing at the same price, we may price it a bit lower and penetrate different. So there's plenty of dynamics there. Let me attack that one. This is what I was going to bring up. I think this is probably a benefit of my background or benefit or detriment depending on how you look at it. I came out of I've worked in several different businesses in my career. One of them when I came here, when Gerino brought me in here, one of the first articles is about a guy came in from running the washer and dryer to get into high-tech. And the benefit of working in that washer and dryer business is that I saw in a low gross margin business the skin on skin reality of currency. And what I saw in currency is this, currency if currency tailwinds came, it got very quickly reflected in pricing in the market. So you didn't get very long before your competitors dropped price. So I'm used to that reality. Now I know that reality also happens in our business. It just happens over a longer timeframe. So I'm very hesitant to count on a big currency benefit before it's realized in a sustainable way in a market through innovation or something else. So that's probably partly what you're feeling is, you won't see us come out. Now I know that currency swings both ways. And so we all know it. So you've also got to be ready on the downside. If the currency swings the other way, you got to be ready. But I'd say on the upside, you have to be really careful because you can disadvantage, you can really cripple yourself for a while by being a little too greedy on the currency side. And it might feel very good in the short term and not very good in the long term. So that's probably part of what you're feeling. Okay. You had one more question? Yes. Yes. You redesigned your brands or actually maintain some independence. And here is the fact that you're having a premium in some markets, for example. But is there any anecdotal evidence on how you are kind of markets you cannot grow with the market? Yes. I'll do my best to give you a snapshot, a high level snapshot. If you look over the last year, we've been gaining share in most of our categories. The good news is, we're not gaining share in every category and we're not and even where we are gaining share in a category, we're not gaining share in every single country. We have opportunities everywhere. I mean, we really have opportunities to better execute in almost every category somewhere in the world and in some in many parts of the world. If I go through it by category, I would say, as good as our gaming business has been, boy, we can do much better because we're not realizing our full potential in many different countries. But we're where we should be we really should be gaining share. And part of it is our innovation, part of it is our execution. But overall, we've been gaining share. So on the surface, we feel good. But I see it as an opportunity more than a strength. I really think that's a really big opportunity. If I look at video collaboration, it's very difficult to carve up a market there because the market almost doesn't exist. So we're helping create a market there. Bluetooth speakers, Vincent mentioned that we've been gaining market share for many years on Bluetooth speakers. Now the category started to slow and level out. We'll see. So it's going to be I'm sure it will be a competitive market. We'll play to win, but it will be very competitive. If I look at our PC categories, we continue to gain market share fairly consistently. We've in different parts of the world, as I said, we have different pockets of opportunity. But I would say overall, our innovation profile is enabling us to gain market share, but we never can relax on that, never. And even where we think we can relax, which we don't, there is some pocket or pockets of opportunity that we are missing. And so it's really it's kind of an obsession within the company and it needs to be. Other questions? Yes. Yes. Again, on music, I was wondering what the reason is that you are not specifically targeting the home audio market? I mean, you're a very strong brand now in audio, like the multi room home audio applications, you're not at all in? Why is that? Well, Vincent mentioned, we really we break our music business into 4 pieces. So there's headphones, which is completely different. There's PC speakers, which we talked about. There's Bluetooth speakers, which are ultra mobile. And then there's the home. And we really haven't participated, as you said, Michael, in the home. We really viewed that as we're going to stay away from that for now. We're always looking at it. It could be one of those seats we're working on, maybe not. But we've always looked at it. Our first kind of step into it was with the 2 Alexa enabled speakers that are sort of mobile, but they're really Wi Fi speakers at heart because they have Wi Fi capability and you can go in there. Now as we've gone in there, we're learning. We need more feature functionality actually from the Bluetooth story. So we're working to upgrade those. So we'll be doing that. And we're also aware that we're now entering a space. You know us. We don't really like to go in and compete head to head with big players in something that's really important to them. That's not our general rule of thumb. Unless we have a differentiated way we can carve it out, we don't. And so we are not in the I would say, we're not in any significant way, in a really big way anyway into the Wi Fi speaker business. We will keep looking at it. Could be an direct way. And if we can't find an indirect way, then we probably wouldn't do it. Because when you made this gaming picture there, it made me think of the music actually because the young people, they use all these UE booms and they sort of naturally bring it probably into the home. So, maybe that same picture could apply to the way You defined our strategy perfectly, which is exactly what we're We believe that if we can if you've got a mobile speaker that you want to take elsewhere, you want to take it out to the pool, you want to that's a good space for us. I mean, people know us, especially here in Switzerland, for example, where you know that if you get a UE boom, it's waterproof, it's sturdy, if you drop it in the water, it's okay. It's great sound quality. And you know what, I would like to use that in this room and that room. And so that's exactly what we're up to. And from that perspective, we have entered the WiFi speaker market. Now we got to make sure there is the right capabilities in it, the right experiences in it to be competitive there. But it remains to be seen. One more for Winston. I mean you have a lot of cash on your balance sheet and I know acquisitions you've done a couple over the last few years, maybe a couple of small ones too. Should we expect to re some sort of an acceleration in acquisitions going forward? Are you comfortable with kind of the run rate you have? And what does the acquisition pipeline look like? So I always answer, I don't think we have a run rate of acquisition, right? We've identified acquisition as part of our strategy to complement our organic course rate. And the reason we acquired is because maybe we didn't have enough capacity to do own organic investments or because we want to short the development cycle or there is a brand or there's a certain capability to bring to the portfolio. The funnel has been always very good, always since we started. I don't know if you remember when I started, I said, hey, the whole model does not include acquisition. If we're successful there, would be like on top of it. But we also stay very, very disciplined. And for many reasons, it could be valuation, it could be culture, it could be we don't really understand how we're going to add value within pass on those acquisitions. We're not giving a target or run rate or anything that forces to go. With that said, plenty of opportunities. And if we're successful, I think you'll continue to see us using acquisition as another way to continue to grow. In terms of the cash, yes, we have cash, a good cash balance. We'll continue to use along the three lines that we mentioned, right, which is acquisition, growing dividend and buyback. And I think we can do more. Thanks. It's a follow-up question then also on the balance sheet. I mean, you're very dynamic on the P and L, it's your upper side on the balance sheet in the last couple of years and here in particular focusing on the dividend. You have an equity free cash flow generation €250,000,000 €300,000,000 you have a pile of cash in 5 years north of €500,000,000 What is preventing you of increasing the dividend significantly to €250,000,000 per year? I'll switch the table here. I'll answer the finance question first. Sure. I would say, look, obviously, we could increase our dividend, but I don't think most people are investing in this today or invested in this as a stable very stable low growth dividend paying stock. And so we would rather be upper single digits or even better and investing in the many, many opportunities that we see ahead of us. So we want to keep enough powder dry that we can do that. And if we keep raising the dividend every year, run the risk of getting to the point where you suddenly are in a position where we don't have as much cash as we think we need to be able to drive those kinds of moves. And you want to add anything to that? No, 100% agree. I think our number one activity today is we're looking at the M and A pipeline. We keep driving everyone. We stay disciplined, but I think that's the number one opportunity to create value. And the rest is kind of a fallout from that. But even I mean when you have an efficient balance sheet, it's maybe, I don't know, call it, onetime net debt EBITDA, this would give you firepower of €1,000,000,000 for acquisitions of being very opportunistic and still you pay out the cash flow. Sure. Or more if we use that, frankly, right, and we never use it. So look, as we said, it's a maturing process. Was no capital allocation strategy. We put 1 in place, then we put a dividend, then we now move to growing dividend. We didn't have acquisitions. Acquisitions is priority number 1, and we didn't really close at the rate we told we could close. And we did Jaybirds, pretty good acquisition. Astro, so far a wonderful start. And I think we see a lot of more opportunities. And in terms of the buyback, it's just opportunistic. So we continue to evolve that

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