Good morning, everyone. I'm Samik Chatterjee, and I cover the hardware and networking companies at J.P. Morgan. For the next fireside chat, I have the pleasure of hosting the Logitech CEO, Hanneke Faber. Mm-hmm. Hanneke, welcome to the conference, and thank you for taking the time to attend. I'll start you off with a few questions, and just given that you reported earnings pretty recently, I'll start off with questions on the FY 2025 outlook. You had Q4 results in which you essentially had 5% constant currency growth. You provided an outlook for fiscal 2025 of flat to 2%. Can you just walk us through what sort of informs that outlook and some of the underlying drivers there? Yeah, sure. Thanks for having me, Samik. Sorry for not recognizing you just now. No, no, no worry. We just met for the first time. Yes, so we were happy with our fourth quarter, back to growth, 5% top-line growth in the fourth quarter of our fiscal. We have this odd fiscal that ends on March 31st. And we've guided low single digits for the fiscal year ahead. And you, as you said, you know, we do just this plus 5, why only low single digits? There's definitely reasons for optimism that we see. Demand seems to be stabilizing. Some of our customers are actually asking for more inventory 'cause they're seeing some out-of-stocks at places like Best Buy and Walmart. And there's a little bit of a PC refresh underway as well, we believe. So those are reasons for optimism, but there's also reasons for caution. Inflation, as we all know, remains stickier than we all thought. The demand recovery is a bit uneven, and then, of course, there's all the geopolitical things that do affect us 'cause we're a company that's present in more than a hundred countries. So we're a little careful. We don't wanna get too far ahead of ourselves, but of course, should the macros be better, we're ready to take advantage of that. Okay, got it. You also talked about the company being mid-single organic growth in a normal macro. Mm-hmm. But the fiscal 2025 guide that you provided does have you exiting at a more modest growth rate than that. It seems like you're saying second half of fiscal 2025 will be below sort of a normal macro-led growth. What's driving that? Because I would have thought you would say, "I don't know-... I, I, this next six months look tough, but the next- Yeah ... six months after that looks more like a normal macro. Yeah. So we're actually, and we've talked about this in our earnings report, we are seeing that the first half of our current fiscal will actually look stronger in terms of revenue growth than the second half. That's not because the demand will be stronger. We actually believe the demand will be low single digits throughout the year. But as I said before, our channel inventory is running a little low. We've been decreasing it for two years- Right ... which is great. We're at really healthy levels now, but maybe even a little bit too thin. And some of our customers are asking for a bit more channel inventory. So, we'll be replenishing some of that with a lot of discipline in the first half, and that's why we believe sales in will be ahead of sales out in the first half, and that will reverse itself in the second half of our fiscal year. Okay. I mean, maybe I'll just extend that question. Yeah. If you had to project fiscal 2026, would you think of it as a normal macro? I certainly would hope so. You know, again, we are seeing things stabilize, and I believe that this company should be able to do mid-single digits top line, in a normal macro, which hopefully will happen from fiscal 2026. Okay, got it. What we are asking all of our companies to do as well is give us their thinking of how the world looks 12 months from now in terms of demand. Mm-hmm. You shared some of that, you think- sort of you're thinking about- Mm ... the puts and takes, Yeah ... the positives and negatives, but maybe break that down for me a bit in terms of the geographies. How do you think about Americas versus Europe versus APAC? Mm. Then maybe a bit more on the product side as well, which products do you think sort of are early in participating in a recovery versus a little bit more later for some of the others? Yeah. I think for our business, it's more about the product categories than necessarily the geographies- Yeah ... where the differences are not so stark. On the product categories, we're seeing gaming, really coming back, and really looking quite positive already. So we expect that to continue. And, you know, as a company, where we play is work and play. So play is gaming. Gaming is looking pretty strong. On the work side, I think the markets are still a bit subdued. Well, I know the markets are still a bit subdued, and that's true in both personal workspace and in our B2B video collaboration space, where we're gaining shares, so we're executing very well, but in markets that are more subdued, and we expect that to continue for a little while. However, it's a matter of when that will start growing, not if. Certainly, in the video collaboration space, you know, the levels of penetration are still so low, and everyone needs to collaborate. I don't know, you know, there's no meetings anymore that anyone attends where there's not a remote participant. So that will come back. It's just not back yet. Yeah. Maybe just to follow up on that: so when you think about, like, pointing devices, for example- Mm ... do you think of them as more sort of tied to play, where you have gaming- Mm ... driven drivers- Yeah ... or do you think of them as more enterprise? Both. Both. So, you know, we have a big mice and keyboard business, endpoint, which was fancy name is pointing devices, but big mice and keyboard business, both on the work side and on the play side. And again, on the play side, we're seeing the markets coming back a little faster than on the work side. But if I look at that business, which is, you know, what Logitech is known for historically, again, still a ton of opportunity. We call that personal workspace. If you look at the numbers, I found it quite shocking. Only first of all, less than 50% of people use a mouse or a keyboard, which is just ergonomically not very sound, when you're sitting there on your laptop. Second, of those who use it, the average spend on a desk, either at work or at home, is $26. I mean, that's less than like a Nike T-shirt, and you're using that 8 hours a day. So that's kind of crazy. So we have big opportunities to drive penetration of mice and keyboards- Mm ... but also to get the ASPs up to, you know, products that are actually great for you to use every day, all day. Got it. Right. Moving to a more question about a bit more longer term, I guess. You, you've took over the CEO role recently. Since then, you've outlined a strategy, and one of the drive, pillars that you've talked about is investing in building the brand. Curious, maybe if you can outline how do you think about sort of building a brand, given your background... yeah, on the consumer space? Sure. How do you think about what kind of investments you need to do to build the brand further? Yeah, absolutely. Most of my background is with P&G and with Unilever, and I feel so fortunate to work on the Logitech brand. There's not many $4 billion brands in the world, so this is a big brand already. It's a brand with great awareness, more than 90% awareness in all of our big markets around the world, so people really know it, which is kind of fun. You know, when you're in a taxi in Shanghai, the taxi driver also knows what you're working on, which is super fun. And it's a brand that's known for a few things. So it's known for being reliable, being good quality, being affordable. So those are all good things. It's not yet what I would call, you know, really an iconic brand, a brand that's truly loved, that you cannot live without. And that won't happen overnight, but it's certainly something that we're going to be working on. And I see a few things that iconic brands do and that we can do. First of all, is being super close on your mission and your benefits. So we've positioned that as extending human potential. That's what we do. And extending is a pun on the mouse, because the mouse built this house, so, you know, you extend your arm. But we really extend human potential. We make you more productive. We make you perform better, win that game. We help you connect better, and we do all of that in healthier, more sustainable, more equitable ways. So being super close on your mission is really important to build an iconic brand. Second, a continued focus on design and visual identity. We have a great design capability, more than 200 in-house designers. Just in the last quarter, we won more than 30 design awards. So design is really a core capability, and it's really important if you want to build an iconic brand. And then third, really, the partners. You know, your brand is the company it keeps. So we're proud of working with all the big players in tech. So we work with Google, with Microsoft, with Zoom, and with Meta, and with Apple. Just launched the new Combo Touch keyboards for the new Apple iPads two weeks ago. So we're very close to all the big players. I think we still have an opportunity to do an even better job on the right influencers, the right gaming teams, those kind of partners as well. We do it, but we can do it even better over time, and again, that's an important part of iconic brand building. And then finally, of course, there's investment into the brand. We're not going to go crazy. We've guided for OpEx that will remain at about 25% of sales. But within the OpEx, I would like to start shifting money to the ES, away from the G&A by streamlining. Yeah. Yep, got it. Mm. You've talked about the opportunity on the B2B side as well. Just maybe share more details around that in terms of how do you sort of size up the opportunity that you have on the B2B side, and, particularly, what do you need in sort of S&M expenses to support that? Yeah. So we're really young in B2B, right? The business has doubled since 2019. The team that came before me really did a great job. We're happy that it's back to growth, so it grew 2% in the last quarter, so that's good, too. But there's still so much opportunity. You know, compared to some of the legacy players in B2B video collaboration, we're like teenagers, so there's a lot of capabilities yet to be built. But I would say what I found is a number of really strong things. First of all, great product at a great price. Our Rally Bars, our MeetUp 2, just offer a really outstanding quality, easy-to-use for IT departments, product at a really competitive price. So that's important, and that's there. Second, the partnerships that I mentioned, it's very important that your software works with all the big players, especially in video collaboration, obviously with Microsoft and also with Zoom. We have fantastic partnerships there. And And third, we're a Swiss company, so our standards of data privacy and security, again, in video collaboration, are at the very highest levels, and that's important versus some of our Chinese competitors in this space. So those are all good things. Again, we have more capabilities to build in the go-to-market space just because we're younger. Sometimes we're a little hard to use, so, you know, making that easier for the big corporate customers is certainly something on our list to do. And then we have an opportunity to just drive penetration. Again, less than 20% of global conference rooms are video conference-enabled. That's really, really low. And that's talking about enterprise and corporations. If you look at education, if you look at retail, if you look at healthcare, pfft, so much more opportunity in this space. So I'm really excited about B2B. We're gonna double down on it. And from a numbers point of view, it's accretive to our business, so both on the gross margin and on operating income. Okay. I guess first, just to follow up then on a couple of topics there. Mm. on the sales and marketing expenses. Mm ... importantly, that are required, is it primarily in the channel, or are there other areas that you need to invest? No, at first it's our consumer business. It's actually, you, you spend a little less on marketing. You spend a little more on overhead on people in the B2B channel. But compared to our historic or, you know, legacy consumer business, you spend less on marketing in B2B, and we benefit from the spending that we do in the consumer channel on that brand and that product that people know. Okay, and you mentioned it's accretive to both gross margin and operating margin. Yeah. I mean, I was going to ask you more about the competitive dynamics because- Mm ... it does seem like a different set of players- Totally ... to some extent- Yeah ... are competing. Yeah. Also, the enterprise or B2B is known for sort of volume discounts. Mm-hmm. How does that impact, so the eventual gross margin that you're able to drive? Yeah. The gross margins are very, very healthy, so we're- Yeah ... playing, you know, with the channel dynamics, but they're very, very healthy. And it is a competitive space, but we're used to competition. You know, if you look at gaming, obviously a very different set of competitors, but also a highly competitive space. Here, it's a set of more legacy, older competitors in B2B, and I think Logitech has done a nice job disrupting that a little bit. Okay, got it. Going back to the place where we started, which is talking about the inventory, and that you've drawn down over the last couple- Yeah ... of years, and now you need to put some more back- Mm ... which ramps in the first half- Yeah ... comes back down in the second half. Is that a more permanent change in terms of how investors should think about seasonality for the company, or is this just more a dynamic of where we are in the cycle? Yeah, yeah. No, definitely we'll continue to operate with discipline, and I don't think the actual seasonality of sell-out changes. You know, our third quarter, which is the holiday December quarter, will remain the biggest quarter in terms of sell-out. But this year, you just will see a little bit of channel restocking to make sure we have what it takes to have perfect shelf presence, both in bricks and mortar and online. Okay. Okay. Mm-hmm. Going back to the outlook again, you've talked about a gross margin of 41% for the next fiscal year. I think fair to say everyone was surprised after the gross margins you've had for the last few quarters. Yeah. What's driving that? What are you sort of thinking of in terms of headwinds after doing, I think, 43%, if I remember, in the last quarter? Yeah. Is it mix? Is it promotion spend? What are you trying to budget for? Yeah. So indeed, our last quarter was really, really strong, 43.5, actually, so very strong. But if you go back to fiscal 2023, our gross margins were actually only 38%. So for the fiscal, we were just over 41 in fiscal 2024, so I think it's prudent for us to be guiding at 41. There are some... the big tailwind for next year will be a continued focus on cost, and some of those costs are carrying over, so pretty good, you know, visibility of those. So we'll keep a strong focus on cost controls. But there are some headwinds as well, and I foresee those mainly in promotional spend. You know, we need to remain competitive. The promotional environment has been quite benign in the years ahead, and certainly in both retail and in B2B, we need to be sure that we're at the right price levels and priced right in the key promotional periods, whether it's 618 in China or the holidays in Europe and the U.S. So promotions may be a little bit of a headwind, and then when you look at mix, that can be a headwind or a tailwind. You know, on the product side, if we grow faster in gaming, that's a bit of a headwind, 'cause the margins there are a little lower than on the workspace and B2B side. And if we grow faster in China, that's again a little bit of a headwind. Headwind ... versus the higher margins in the U.S. and Europe. So, but depending on where those pan out, we will, we'll see. But at 41, appropriately challenging, I think, for the year ahead. Okay, got it. I mean, the way you characterize it is promotional spend, 618 in China, etc. - Yeah ... like, when I take that as a, and sort of take it forward and say: How does that impact your strategy and how should we think about it? Is it more when we think about how do you balance revenue and margins, you're more inclined to pursue the revenue growth and give up a bit more on margin if required to drive that revenue growth? And probably the way for investors to think is, there's more upside on revenue, and maybe you're willing to sacrifice a bit- Mm ... of margin to get there. Yeah, I think we really have to walk and chew gum at the same time. So again, we've guided low single digits on revenue. If there's more to be had, we'll be the first to take advantage of it. But getting the business back to sustainable growth is an important thing for us to do in the next year. But at the same time, we've guided for really healthy gross margins at 41%, but also operating margins at 14%-17%. So we have to operate with discipline to deliver the latter- Mm. -and we're not gonna prioritize one over the other. We need this business to grow revenue and deliver great margins. Okay. Maybe dive down a bit more into the China piece that you highlighted. Mm. Promotional spend in China. Yeah. What you're hoping to achieve there? What's the competitive set there? I, I would imagine you're not running into the same competitors as the Western world, but- Yeah ... what would you call sort of a success in terms of what market share you want to get to? Yeah. So China, you know, I'll be honest, has been softer for Logitech than we would want it to be, and the competitive environment in China is wildly different from anywhere else. So there are 600 manufacturers of mice and keyboards in China. There's probably two in the rest of the world, maybe three, and there's more than 1,000 brands in our space. And again, there's probably, you know, five or six in the rest of the world. So it's a wildly more intense competitive environment, and while we have a few strengths, our brand is very strong in China, again, everyone knows it. We're very strong on the gaming mice and also the personal workspace mice side, where we have the leading products in the markets, but we have a few weaker spaces, and we have not been gaining share there. So, I've challenged my team to get more competitive in China. That starts from innovation that is suitable for the very discerning Chinese consumer, and delivering that at China speed. Mm ... which is faster than the speed of the West. So, we're getting our arms around that. We call that China for China, and the beauty of doing China for China is it obviously often works for the rest of the world as well afterwards. So China for China and then China for the world. And if I look back into Logitech's history, there have been years where Logitech did that really well. So if you look at the Pebble, I don't know if you guys know that Pebble mouse, it's a great mouse, that was a China for China product that then did really well in the rest of the world as well. We need to do a bit more of that. I carry one of those in my bag. Oh, way to go. Thank you so much. I agree. Yeah. Maybe just outside of the discussions on the promotional spend, talk to us about a cost structure, longer term, a bit more in that, where can we find leverage as you grow mid-single digit long term? Mm-hmm. Where does the leverage come from? Is it more on the Gross Margin? Is it more because you've said OpEx will remain relatively sort of at 25. Yeah. How do we think about where to get leverage from? Yeah, I think in the longer term, we do have... Well, the first thing is really revenue leverage. So getting back to mid-single digit growth is what will really drive scale. So that's, that's the top priority in the longer term, but we probably have - we have opportunities on a number of other lines in the P&L as well. If you look at gross margin, you know, ASP, so average price, is an opportunity. As I said earlier, you know, you look at personal workspace, the average consumer spends $26. That's nothing. So the personal workspace team has done a nice job over time to drive the higher ends of that portfolio. So MX, which is a great line of personal workspace products for coders, and financial analysts, people that are in Excel all day, really premium priced. Also, a line called Ergo, which is ergonomically perfect. So driving ASP, and therefore, improving gross margin through price is an opportunity. Mm. Cost always remains an opportunity. And then within OpEx, again, I think there's some opportunity for G&A streamlining that we can then reinvest into marketing to get that flywheel going on the top line. Okay, got it. Let's go into some of the product areas. How do you think about the gaming TAM outside of PCs when you think about either smartphones or consoles? Yeah. How do you quantify it? Yeah. Yeah, so we've talked about that in our strategy. The way we look at gaming today, or what I would call play, is pretty limited. We basically do PC gaming, which is a great space to be in, but there's obviously other play opportunities in the world. So, that starts from mobile and console gaming. I'm excited, we're dipping our toes into the water there. In the last quarter, we launched the A50 headset, which with a single press of a button, you can switch between a PC and a console. That's doing really well, and it's driving some of our good headset numbers in the last quarter. But there's clearly more to be done there. And then you could even think of play beyond gaming. You know, as humans, we do a lot of play that is not gaming. So you know, we, as a company, we do design-led, software-enabled hardware. You. There could be opportunities even beyond computer gaming. Okay. I mean, would that involve... How do you think about the mobile gaming ecosystem outside of even console? Also interesting. So we're looking at that. We haven't quite figured out the right exact go-to-market and innovation on that, but there may well be some of that in the future. Okay. Mm-hmm. Turning to video conferencing or collaboration, however you want to refer to it. Mm-hmm. Low penetration growth rates probably took a back sort of seat after, Yeah ... we came out of the pandemic, and- Mm-hmm ... we saw an initial sort of increase there and now sort of a step down. How do you think about what do you need to sort of again trigger demand there? Mm-hmm. What would be sort of your competitive set? It also looks like with some of the acquisitions your larger customer, competitors have done- Mm. It's a more competitive landscape probably compared to sort of a few years ago. Mm. How are you looking at the competitive landscape? Yeah, I mean, I feel good about how we're performing competitively. So again, the market is still in decline, but we grew 2% last year, last quarter, and we're growing share. So we're competing against a few legacy giants, but Logitech is really disrupting that market, which is great. So I feel good about us competitively. What we need is that market to start growing again, and what's needed for that really is, you know, IT budgets are kind of flattish for most corporations from what we can see, and within that, they're having to prioritize AI at the moment, you know, things like Copilot licenses and stuff. So as that normalizes, I would see that video conferencing would be pretty kind of next on their priority list. Then, office vacancies are still at a high, but we also see many companies moving into new offices, which of course is always a great opportunity for us, to sell them. Mm, mm ... new video collaboration equipment. So, as that ramps up, again, those are good things for the market, and we're looking forward to that coming sooner rather than later. But again, it's a question of when, not if. Yep. You talked about essentially how you think about the product as a software-enabled hardware, right? Yeah. I know in terms of, like, AI as a demand driver doesn't have immediate implication on your products, but- Mm-hmm ... when I think about VC, that has a lot of opportunity to sort of- Absolutely ... adopt AI and differentiate. Yeah. How do you- Yeah ... think about VC differentiating and some of your other products sort of using AI to differentiate? Yeah, absolutely. So, we think AI is a tailwind for us, so in three ways: of course, internal productivity, we're already seeing it working, which is great. Second, indeed, in our video collaboration, but also in our audio products, headphones, using large language models and machine learning is really improving the superiority, the quality of those products, and this is not new, but it's accelerating. So just last week, we launched the MeetUp 2, which is our biggest video collaboration tool, with what's called RightSight and RightSound. That's based on large language models, which really give you the right sight, which means when you're in a room, you know, with 12 people, it knows where to focus. It acts a bit like a producer. So the AI is your producer. Puts two people on, puts three people on, it zooms in on the right person, which is a really different video conferencing experience. And then it also has RightSound capability so that it gets crystal clear sound, but when you're opening a packet of crisps or you're typing, it doesn't pick you up, which is what you want, because you don't want to be in the view, or you don't want to be hearing that. So those are examples of AI really improving audio and video quality for us, which is great. And then the third way is really is more software. It's us as an interface to the big guys. So we launched, for example, the Logi AI Prompt Builder, which is software that's available through every mouse and keyboard. That's a shortcut to ChatGPT. We also announced some shortcuts with Copilot and some integrations with Copilot last week. So that's another role that we can play, and that's a role actually Logitech has played over the years. We're an interface to the big boys. Yep. Mm-hmm. Okay. How should we think about... And you can talk across the portfolio or focus on pointing devices as well- Yeah ... but how should we think about the tie-in with the PC refresh cycle, and what are you seeing from your partners telling you about when do they expect to see AI PCs and that sort of integration? Yeah ... that you talked about starting to really drive the market? Yeah. I don't think there's, like, a huge PC refresh that's here, but we do see, again, demand seems to have bottomed out and is starting to go up, and there's no one-to-one correlation of us and PC sales, but it does help. You know, even if you just walk into Best Buy here in the US, you know, we're often shelved together. So if someone's buying a PC, there is an opportunity to buy a keyboard or a mouse to go along with that. So, it's definitely not a headwind for us if more PCs are sold, but it's not a one-to-one, if I buy a PC, I'll get some Logitech stuff as well. How do you think about what your customers are telling you for timing of the AI PCs and the integration actually starting? I think no one really knows. So, I'll pass on that one. All right. So, let's turn to capital allocation- Mm ... and just talk about the priorities, relative to how you think about M&A versus buyback. You definitely mentioned that M&A is not something that's top priority- Mm ... on the last call. So just, walk us through how you're thinking about where the investments go for the next few years. Absolutely. I mean, first of all, we're proud of our, of our balance sheet. So we ended the fiscal with $1.5 billion in cash, so it's a really pristine balance sheet, no debt. How are we gonna allocate that? First of all, of course, we invest in the business as needed, CapEx. Second, we pay a dividend. We just announced another $0.10 increase in our dividend. That's important for many of our shareholders. Third priority is M&A. When the right thing comes along, we are absolutely interested, but, just because we have firepower doesn't mean I'm gonna get trigger happy. It has to be the right thing with the right synergies as a strategic buyer. And then cash left over, we will return it to shareholders in the form of buybacks, and we have. Okay. On M&A- Mm. How should we think about what would be interesting to Logitech? Is it, as you said, like, buying iconic brands? Mm. That even sometimes I've seen companies buy iconic brands outside of their sort of technology area- Yeah ... right, to get that brand. Mm. How should I think about it? Is it more going after brands? Is it more going after very specific technologies or- Mm ... even software to then enable the hardware? Yeah. So if I were a betting woman, you know, I'd like to stay in those big spaces of work and play. That's what we're good at. But today, we've defined those markets fairly small, actually. So if you look at work, we play only in office work. Mm. Well, most people in the world don't work in an office. They work in retail, in education, in healthcare, in construction. So there may be opportunities in that bigger workspace, and the same in play. You said it, you know, we do PC gaming. There's more to be had in play. If you define those terms a bit more broadly, they actually become almost twice as big. So that's kind of the space that I'd be looking for M&A. And then what we're good at is design-led, software-enabled hardware. So, you know, ideally, we would find targets- Mm ... that do that, so we can add synergies in our go-to-market, because, again, we have excellent go-to-market in more than 100 countries around the world, and in technology, because we also have some great engineering. So, let's see what comes along. Great. Okay. Let me do a quick check if anyone in the audience has a question they want to ask. Mm. I can wrap up. Okay. If there's no question, let me wrap up with this one, that I had for you. Mm. You talked about the cost focus, and I'm just wondering, when you think about the manufacturing footprint that you have, what do you see as optimal there? How much should be done in-house? How much should be done through outsourcing? Because we are in an industry where we see a lot of outsourcing. Yeah ... but how do you think about the optimal structure for the company to have long term? Yeah, definitely a mix. We have one very large owned factory in Suzhou, in China, which is an excellent factory. But we also have a number of really, really strong third-party manufacturers who have worked with us for a long, long time and really are strategic partners. So it will be a mix, and as the company has talked about before, diversification in terms of geography of where those partners sit is important. We all learned that during COVID. So we have diversified into Southeast Asia, into Mexico, and that is likely to continue. Okay. Good. Great! I'll wrap it up there. Thank you, Hanneke, for coming to the conference. Thank you, Samik. Really appreciate it. Samik. Really appreciate it. Thank you to the audience as well. Yeah. Thank you.