羅技 (LOGI) 2013 Q4 法說會逐字稿

Good day, and welcome to the Logitech fourth quarter financial results conference call.

At this time, all participants are in listen-only mode.

We will be conducting a question-and-answer session, and instructions will follow at that time.

This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech.

I would like to introduce your host for today's call, Ms. Teresa Thuruthiyil, Director of Investor Relations at Logitech.

Please proceed.

Good afternoon and good morning.

Welcome to the Logitech conference call to discuss the Company's financial results for the fourth quarter and full year ended March 31, 2013.

The press release, our prepared remarks and slides, as well as a live webcast of this call are all available online at logitech.com.

As noted in our press release, we published our prepared remarks on our website in advance of the call.

Those remarks are intended to serve in place of extended formal comments today, and they will not be read on the call.

During the course of this call, we may make forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the safe harbor of the Securities Litigation Reform Act of 1995.

The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements.

Factors that could cause actual results to differ materially include those set forth in Logitech's annual report on Form 10-K dated May 30, 2012, and subsequent filings which are available online on the SEC/EDGAR database and in the final paragraphs of the press release and prepared remarks reporting fourth quarter and full-year fiscal 2013 results, available at logitech.com.

The forward-looking statements made during this call represent management's outlook only as of today, and the Company undertakes no obligation to update or revise any forward-looking statement as a result of new developments or otherwise.

This call is being recorded and will be available for replay on the Logitech website.

Joining us today from Zurich is Bracken Darrell, President and Chief Executive Officer, and here in Newark is Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer.

I'd now like to turn the call over to Bracken.

Thank you, Teresa, and thanks to all of you for joining us.

I'm not pleased with our financial performance for fiscal 2013, but I am encouraged to see that our retail business has begun to stabilize in our Americas and Asia Pacific sales regions.

Our performance in our EMEA sales region was impacted in Q4 by the combination of the difficult macro environment and the very weak PC market.

In response to these factors, during the quarter our channel partners further scaled back the amount of PC-related inventory they were willing to hold, which had a major negative impact on our sales in the region.

During the quarter, our channel partners in EMEA reduced their inventory by over 20%, on both a sequential and year-over-year basis.

Especially given the weakness in the global market for new PCs, sales in our PC-related categories in the Americas and Asia Pacific were solid, with growth in both mice and keyboards.

Even in the consumer webcam category, we saw growth in Asia Pacific and a modest single-digit decline in the Americas.

Across all three of our regions, I was very pleased with the continued strong growth of sales of our tablet accessories.

The Logitech Ultrathin Keyboard Cover was our best selling product, both in the quarter and for the full year fiscal 2013.

In the last 30 days, we've announced 4 new products for our tablet peripherals lineup, and there are more additions coming in fiscal 2014.

I want to briefly focus on two categories where our Q4 sales declined steeply -- audio wearables and wireless and PC gaming.

Though it was a down quarter for these categories in Q4, we believe we have substantial growth opportunities in both of them.

I'll start with wearables and wireless, a category that illustrates a principle you will see from me as CEO of Logitech.

That principle is, learn and adjust quickly and decisively to reality.

As you may recall, we launched a number of new products in this category in late summer 2012, including wireless speakers, earphones, and headphones.

We've taken away a number of learnings since then, with the most significant being that we would have benefitted from narrowing our focus to fewer products and fewer markets.

We spread ourselves too thin by launching on a relatively large number of new products in highly competitive categories.

One such product, our large mobile boom box, was not as well differentiated as it needed to be.

In the case of our headphones, we learned that exceptional product quality and consistently positive reviews were not enough to generate momentum in a category that requires a sizeable marketing investment to drive lifestyle brand appeal.

We've already adjusted our strategy accordingly.

I've narrowed our primary focus in the wearables and wireless category to the promising growth areas we see in small form-factor wireless speakers, such as the Logitech UE mobile boom box, and in ultra-high performance earphones, such as the Logitech UE 900s.

You will see some interesting things here from us in the coming months.

This shift in strategy, reflecting the weaker than expected demand for our headphones and the large form-factor Logitech UE boom box, resulted in a $5 million charge in Q4 to reduce the value of our owned inventory for these products.

We'll continue to sell these products during fiscal 2014, and we believe that this charge will minimize the risk of future negative P&L impacts.

Looking at PC gaming, our weak results reflect a timing issue.

Starting in Q4 and continuing into Q1 of fiscal 2014, we're phasing out many of our older gaming products to make room for the new products that we announced near the end of the quarter.

These new products are just now beginning to reach the channel, and we expect to see improved performance in the PC gaming category in the coming months.

Before moving on to fiscal year 2014, I want to address the departure of Erik Bardman, our CFO.

As you know, Erik has resigned to take a CFO position at another company.

We thank Erik for his many contributions over the past three and one-half years and wish him the very best in his new role.

We have a strong team that will continue to execute on our cost savings and our turnaround as we look for a successor.

Looking now at fiscal 2014, first I want to update you on the results of my strategic assessment of our LifeSize enterprise video conferencing division.

After reviewing the LifeSize business, I concluded that the long-term potential is significant.

To realize LifeSize's potential, I believe it's essential that we focus on recreating the start-up mentality and the small company culture that enabled us to deliver industry-beating growth for much of its history.

As part of our strategy to realize LifeSize's long-term potential, we've restructured its operations to make it more focused, more agile, and better equipped to deliver on its original promise.

This restructuring, which resulted in a charge of roughly $4 million in Q4, is designed to help us to reach operating profitability by the end of the current fiscal year and, ultimately, reignite growth.

I believe that over time our approach will maximize LifeSize's value for Logitech shareholders.

My top priority continues to be driving Logitech to become a faster and more profitable company.

We'll manage our PC platform products with the goal of maximizing profitability while freeing resources to make selective investments to drive growth in areas such as PC gaming and unified communications.

Mobility remains our most attractive growth opportunity.

The tablet accessory is one example.

It carries very strong momentum into the new fiscal year and is a top priority for future investment as we continue to expand the breadth of our portfolio.

We've narrowed our mobile music focus in the wireless and wearable space, and we see potential for growth in both wireless speakers and earphones.

We continue to simplify our organization to enable us to move with the speed and focus of a smaller company.

I'm very excited about our product roadmap for fiscal 2014, which will reflect our progress in developing fewer and better products.

With significant restructuring efforts now behind us, we're well positioned to realize the associated cost savings during the new fiscal year.

While the PC market continues to weigh upon parts of our business and the ongoing economic uncertainty in much of Europe shows no signs of improvement, our product portfolio indications of stabilization in the Americas and Asia, combined with the expected cost savings resulting from our fiscal year '13 restructuring initiatives, position us for improved profitability in fiscal year 2014.

For this fiscal year ending March 31, 2014, we expect sales of approximately $2 billion, operating income of approximately $50 million, and gross margin of approximately 34%.

Looking back at fiscal 2013, I believe we've taken appropriate actions to affect a turnaround.

We have narrowed our strategic focus, restructured the Company, and prioritized our resources to create great new products for mobility platforms.

We're moving forward with urgency and clear priorities.

Any turnaround takes time, but given our expectation for normal seasonality in the new fiscal year, I expect that our progress will not become tangible until the second half of fiscal 2014.

Before opening the call to your questions, I want to remind you that we scheduled our Analyst and Investor Day for May 23, here in Zurich, where we'll share more details on our plans for fiscal 2014 and beyond.

I hope to see many of you here.

Joe and I are available now to take your questions.

Please follow the instructions of the Operator.

Thank you.

(Operator Instructions)

Is there a first question here?

Hello.

Operator, is there a first question here?

Andrew Gardiner, Barclays.

Good afternoon.

Thank you for taking the question.

I just had a question around two of the product lines.

First, on the wearable and wireless audio piece that you were talking about, clearly, as you say, it's a very competitive market and a lot of lifestyle type brands doing very well there.

Can you give us any more sense as to how you are going to compete against those areas?

You mentioned focusing on higher-end headphones.

Any more detail around that and whether it's going to require a lot more marketing?

Or how you expect marketing to trend for that particular product segment?

Also, audio PC.

In the prepared statements, you highlight a fairly stale product lineup.

Is that an area where we can expect a refresh, and you're expecting to return to growth in that particular segment?

Thanks very much.

Yes, Andrew.

Thank you.

Yes, I think your question is about audio earphones, not headphones.

In audio earphones, we've actually got a very strong performer there in our UE 900s.

You probably remember that Ultimate Ears, the business that we bought four years ago, is essentially a very, very high-end, very, very custom product that's used by performance artists.

And we brought that product over into the consumer market, and it's doing very well.

We believe that with the technology we have and with the grassroots understanding of UE, that's going to continue to do very well for us.

So, in the premium earphone market, we expect to do well.

Audio PC is a totally different animal.

Of course, audio PC is the speakers you use with a PC, and in that market, we haven't refreshed our product lineup in years.

I think it's been at least four years since we touched anything.

We will have a refreshed portfolio.

It's underway right now, and you'll see it in the fiscal year.

OK.

Thanks very much for the explanation there.

Thank you, Andrew.

Tavis McCourt, Raymond James.

Thanks for taking my question.

Bracken, the first one is, if I look back at fiscal '13, you guys had executed on, I think, what was an $80 million restructuring effort.

But if I look at the OpEx in 2013 versus 2012, it was basically flat.

And, so, I guess, where is the savings?

Is it all coming out of gross margins?

Have we not seen it yet?

And give us some comfort that this cost structure is being addressed.

And, then secondly, in terms of the product lines that you intend to be in at the end of fiscal '14 versus today, run us through what the guidance includes, if you were to exit, either wind down or sale some product lines?

Does guidance include that?

Or does it exclude that?

Thanks.

Sure.

On your first question, yes, the cost -- in Q4, we were even versus a year ago.

This was a direct decision I made to invest in marketing and sales expenses at the end of the quarter -- during the fourth quarter to make sure we got off to a good start here in 2014 with some of the new products we're launching.

So, we absolutely -- you will absolutely see significant cost savings in OpEx going into 2014, exactly in line with what we quoted to you earlier.

So, you're going to see that in its full spectrum during the fiscal year.

On your second question, which was --.

Which was, what is included or excluded in that roughly $2 billion revenue guidance?

I think previously you had said there was product lines that you may exit or wind down or sale.

What does the $2 billion include?

Essentially, the two product lines we announced that we were going to exit or sell were going to be the remote controls business and the security business.

We've assumed for purposes of this they're in for the full year.

Got you.

And, then final, on the LifeSize restructuring, I understand downsizing, getting it more focused.

From a product perspective or geography perspective, is there any paring down of what the Company sells or where it's selling?

We don't have -- there's no big restructuring of the geographies we're selling in.

We continue to sell in all the geographies we were in.

What we are doing, though, is we're very focused on the small- and medium-sized business market, where we feel like we really have a strong position.

We're going to continue to sell at times through larger customers, but our focus will be on the small- and medium-sized business.

And and our product line will really focus on the smart video solution, which is about really making video conferencing easy, almost consumer easy, for a business customer.

So, as one of our LifeSize employees said the other day -- it should be so easy that the CEO doesn't have to hand the remote to the IT guy next to him.

And is there a management change there?

Or same leadership?

There's no management change there.

Great.

Thanks a lot.

Thank you.

Paul Coster, JPMorgan.

Yes, thanks for taking my question.

So, I know you're planning on exiting the remote control business, but you also came out with a product refresh.

And can you just explain why that is?

And was that residual R&D activity that has since been ratcheted back?

Yes, you gave the answer in your question.

We absolutely already had that product underway.

It's a very big product.

It's already one of our top 20, and we certainly aren't going to starve that business as we sell it.

And, so, it was underway as we announced that, and we're executing it.

That makes sense.

And then, you came out with a range of headsets for unified communications.

Can you just talk about the enterprise and how you'll go after that enterprise customer with that product?

Yes, we're really excited about this business.

It's early days in the onset of UC into the big enterprise players, but it's going to be an incredibly exciting market, and we're going at it in a couple of different ways.

First, we're partnering directly with Cisco and with Microsoft for both Jabber and Lync to sell into these enterprise customers.

And our first sales are coming in right now.

The nice thing is, you probably realize, about this whole UC business is that it pulls -- it generally pulls a webcam, a keyboard, a headset, and often even a mouse.

So it's got very big potential for us.

As I said, it's very early days, and I don't know if it will take 5 years or 10 years to really take hold across all of the big enterprises.

But we all know it is coming.

All right.

Got it.

And, then, my last question is on LifeSize.

You sound confident that there's growth here, and of course the most recent results really don't underscore that at all.

So, what is it that you're seeing that gives you confidence that that justifies retention inside the larger Logitech?

Well, the first thing is the current growth is probably a little deceiving -- or lack of growth.

The decline of 19% is deceiving, because, one, we all know the video conferencing market has been a little soft over the last year.

But, even more important, when I announced our plans to evaluate whether the business belonged with us, I think we naturally had customers and our distribution partners who were concerned about whether to buy from us.

So I think we went through a quarter of some pretty hard times, really some soul searching among customers about whether they ought to buy our products.

That delayed some things.

We probably lost a few deals.

Now that we're through that, I think that part of the uncertainty really goes away.

Second part is video conferencing in small- and medium-sized businesses, like us, continues to be a big opportunity.

We really believe in it, and as a customer of our own -- as a customer in the kitchen of our own business, we really use this intensively here and we believe in it.

We talk to small- and medium-sized customers.

We just have great solution.

OK.

Got it.

Thank you.

Thank you.

Joern Iffert, UBS.

Hello.

Thanks for taking my questions.

Three questions here, please.

The first one is I'm not fully understand the [materialization] of the cost savings.

So, is it correct that in your $50 million operating profit guidance for 2014 that savings of $95 million or $96 million are included?

And, if revenues would remain stable in the next two to three years, would you see further cost saving potential supporting EBIT growth?

The next question would be, can you confirm that tablet peripherals are above breakeven on EBIT level?

And, the last question is on the [cash uses].

I think by end of fiscal year 2014, you could run close to $400 million net cash.

Is a share buyback, for example, likely in the next 12 to 18 months?

Thank you.

Let's take those in reverse order.

I'll take the last one first.

I think you said -- is it true that at the end of fiscal year '14 you could end up with $400 million of cash?

-- if I understood that correctly.

We aren't giving guidance on cash.

We are sitting on about $335 million of cash, $334 million, this year.

And we haven't determined yet how we will -- what we will do with that cash.

We obviously have all the options available.

And at Analyst and Investor Day, we may have more of an answer for you there.

So, yes, we certainly do expect to generate cash next year.

I didn't understand what you asked about PC peripherals or tablet peripherals in your second question.

The tablet peripherals.

Sorry.

Tablet peripherals.

Yes, tablet peripherals, we're not giving a specific gross margin or profit level there.

What I can tell you is that when we look at for the full year on tablet peripherals, we expect our tablet peripherals to get more and more profitable, and eventually they should be about the same level of profitability as our keyboards.

It's essentially a very similar product with similar price points.

And cost savings --.

Yes, Joern, could you repeat that first question?

I wasn't clear what cost savings you were referring to in the $50 million.

Sure.

I think you stated total cost savings of $96 million to $98 million, and I quickly want to understand if these $96 million to $98 million cost savings are fully materialized, or captured, in our $50 EBIT guidance for 2014?

Or are there some delays into 2015 fiscal year?

No, they're all captured there.

Just as a reminder, the $80 million out of that $96 million to $98 million total wasn't entirely operating expenses.

There was a piece of that that's COGS.

But, yes, the $50 million outlook for operating income in FY '14 includes the $80 million plus the savings from the restructuring that we announced in February.

All right.

Thank you.

Alexander Peterc, Exane BNP.

Yes, hi.

Thanks for the question.

I have three questions.

One is LifeSize.

The other one is PC market.

And, the third one is on wearables.

So, on LifeSize, if you could help me understand if you decided to keep the business because you wouldn't find a suitable acquirer at a suitable price?

Or did you really find faith in this business, having looked into it thoroughly?

Because it was up for sale.

I understand why, because you don't have exactly the same channels, sales channels, for the rest of your retail business and LifeSize.

So, I was just wondering if you could clarify what was the main motivation behind the decision to keep it?

And, the second question on the PC market is I understand you have some stability in certain markets and geographies and that's to an extent macro dependent, but do you beyond that also see the PC market overall stabilizing in the near future?

Do you have that confidence?

Or do you think that we could see further deteriorations here and that would then obviously impact your business?

And, finally, on wearables, are you exiting the over-ear headsets or headphones audio and just keep the inner ones?

[I didn't] understand that.

Thanks.

OK.

Thank you.

Yes, Alexander, the answer to your first question, we looked at every option when it came to LifeSize, obviously.

We looked carefully at all of them.

But at the end of the day, we determined that the best way to create value here was to keep the asset.

And we feel good about the decision.

The announcement of the restructuring plan for LifeSize that we did today is part of that.

So, at the end of the day, we feel very good about the decision.

We think it's the right one, and I think over the next several years it will prove that it was right.

The second one is in terms of stability in the overall PC market.

The stability in some markets was actually, if you excluded EMEA, it was all of the rest of the world.

So, we had pretty good stability for us.

The PC market was down.

So the PC market continued to be off, even as our business stabilized, and even in our keyboards, desktops, and mice, we actually had growth -- 6%, in a down market.

So, I think we're confident that we're seeing some stability.

And if the PC market becomes even more stable, it will be great.

We're not planning on any growth in the PC market for next year.

We do plan for declines.

Now, I hope they won't be the kind of declines we saw in the fourth quarter, down 15%, but we are planning continued soft PC market.

The answer to your last question, the over-ear headphones, we're not exiting the market.

We'll continue to sell those through.

But we're not planning a big marketing investment behind them, either.

OK.

Thanks a lot.

Andrew Humphrey, Morgan Stanley.

Hi.

Just one question from me, if I may, and that's on the inventory reductions that you've seen among your channel partners, particularly in Europe.

Could you give a bit more insight into what level you think inventory is at at those partners in terms of days or weeks of sales?

And also, any indication of whether that inventory reduction has carried on into your first quarter?

Andrew, so we certainly don't give the number of weeks.

I think that the reductions that we saw in the quarter were really a continuation of what we had seen in Q3.

You may recall in Q3 we thought that that was more of a one-time effect.

But I think given the weakness in the overall PC market, combined with some of the continued economic issues in some of the countries in Europe, they chose to scale back a little further.

So channel inventory is always the kind of thing -- at one point at the start of the quarter, you look at it and say it looks reasonable.

You get to the end of the quarter, you look back.

You may say -- gee, maybe it was a little high, or maybe it was a little low.

Right now, based on everything we see in the market, we think it's at a reasonable level.

OK.

Thank you.

Michael Foeth, Bank Vontobel.

Yes, hello.

I have three questions.

I was wondering if you could give us any update on the progress of the divestment of the two businesses you're looking into divesting -- remotes and digital video security?

Second question would be if you could give us an update on any M&A strategy that you would have?

And, finally, I wondered if you're expecting any further restructuring costs in fiscal '14, or if you have booked everything already in fiscal '13?

OK.

I'll take those in reverse order.

We don't expect any further restructuring right now in fiscal 2014.

So there are no further plans.

It should be all in.

I'll jump to the first.

In terms of the divestiture updates, we're in the middle of those discussions now.

We should be -- we plan to be divested or out by the end of the fiscal year, hopefully sooner than that.

And, as I mentioned, we're in discussions with potential buyers right now.

In terms of M&A, I think I said this last time; we continue to move forward internally on thinking through these things.

I don't think you can expect us to do some big acquisition in a new category, but inside our strategy we're looking carefully at potential bolt-on acquisitions that make sense.

OK.

Excellent.

Thank you.

Thank you.

(Operator Instructions) Felix Remmers, Credit Suisse.

Yes, hello everyone.

Thank you for taking my question.

I wanted to ask a question regarding Rapoo.

I noticed that Rapoo gained significant shelf space, here at least in Switzerland and also in other countries in Europe, and I wanted to know how you evaluate that competition?

And do you see Rapoo also moving into the US market?

Thank you.

Well, I'll react more to our own position than to Rapoo's.

We continue to gain market share in our core categories.

And in all of our categories, with the exception of PC gaming, the core categories, we saw market share gains.

So we feel good about our position.

We expect that to continue.

We've been -- we're very aggressive on making sure that we're winning where we're playing.

In terms of Rapoo, I think they're a good company, and I wish them the very best luck.

But it's a war out there, and we're going to continue to fight it.

OK.

Thank you.

I should mention one other thing.

I can't resist.

We are the leader in China, and that gives us some confidence that we have the kind of cost position and innovation program that we can win anywhere.

OK.

But, is Rapoo --?

Do you see Rapoo also in the US?

In a very limited way.

They're not a big player in the US.

OK.

Thank you.

John Bright, Avondale Partners.

Thank you.

Bracken, you mentioned aftermarket mice, keyboards grew in the US, I think, in Asia.

What explains the demand, given the PC platform declines?

I think there are a few things.

I think one is -- I'd give three or four different answers.

The first one, I'd say, is there's only a certain amount of time you can delay [the purchase] of a PC before you decide you've got to refresh something.

So, I think there's some of that going on here, both in mice and keyboards.

The second thing is there is -- our keyboards, especially the multi-switch, are used for multiple different platforms.

So some are used for PCs and some are used for tablets, and some are even used for phones.

So I think we have a lot of things going on there.

The third one is one of our best selling products is actually a keyboard that's often used in the living room with the TV, which is these smart TVs are opening up an opportunity here.

So I think we've got a lot of drivers there that are making the keyboard business look pretty interesting.

And, of course, I can't resist saying we are gaining share.

I think you also mentioned that tablet keyboards, a product that's going well for you, that gross margins are expected to be similar to the desktop keyboards' historic margins.

I think that's what you said.

[That's right.]

Is not the competitive environment different for the two products, maybe less competitive for the traditional desktop keyboards and more competitive for the new tablet keyboards?

Yes, it's a different competitive [set].

I wouldn't say it's any less competitive in the regular keyboards, or more competitive in the keyboard covers.

Yes, I think at the end of the day we really expect, in the keyboard cover business, that we're going to see our margins continue to improve there, especially as we get to the back half of the year, to the point where they're going to look a lot more comparable to our traditional keyboards.

Remember one thing.

We come at this as a keyboard maker.

So we have economies of scale and understanding for how to get efficient keyboards, and we're incorporating those into covers.

So that probably gives us some kind of an opportunity to create more margin there.

Two final questions.

One, you decided to give FY '14 top line guidance.

Maybe talk about your level of confidence and visibility in that?

One.

And then, two, appetite for share repurchase?

I'd say in terms of confidence in the top line guidance, we're pretty confident.

There were a lot of moving parts in 2013 that made it so that I and we simply didn't feel comfortable giving guidance, but believe me, we wouldn't be giving guidance if we weren't pretty confident.

In terms of share repurchase, we obviously have all the options available to us.

We're sitting on a significant amount of cash.

We expect to generate a significant amount of cash in 2014.

And, so, we're talking through that now among ourselves and with the Board exactly what to do with that.

Thank you.

Thanks, John.

Simon Schafer, Goldman Sachs.

Thanks so much.

I just wanted to go back on the restructuring plan.

I understand that that's incorporated in your guidance, but I guess I wonder at which point in terms of timing would you have to decide to pursue a larger one, just in light of obviously another year of revenue decline?

I wondered --.

I understand the conclusion of the strategic review, and so on, resulted in what you have announced already, and you're executing against that.

But I wondered whether you had any thoughts as to whether you may have to revisit that at some point?

And, more specifically, when you may decide to do so in case you don't manage to see a reacceleration in growth?

Thank you.

We certainly -- as I just mentioned to John, we're confident with our top line guidance for next year, right now.

So we have no plans to do additional restructuring.

Now, if something happened and the bottom really fell out of our business, we'll do what we need to do.

We're not going to sit here and wait.

But we certainly don't have any plans or any indications that we'll need to.

Great.

Thanks so much.

Thank you.

Thanks, Simon.

Corey Barrett, Pacific Crest Securities.

Hi.

Thank you for taking my questions.

First, is your revenue guidance based internally on an underlying PC unit growth rate for this year?

And, if so, can you tell us what that assumption is?

In our revenue guidance, we're assuming that the PC market is soft, somewhere between flat to down 5% -- down mid-single digits.

Perfect.

Thank you.

And then, secondly, on tablet peripherals, can you --?

Or, at this point, do you know how the attach rate to regular iPad or larger form-factor tablets is different than to the iPad Mini, or the smaller form-factor tablets?

Yes, the attach rate for the Mini is significantly lower than to the large iPad, but it's surprising us that it's higher than we predicted originally.

And it's going up.

So it's a little hard for us to say right now how high it will ultimately be.

I wouldn't give you specific numbers right now, but let me just say that neither one of those attach rates is nearly as high as it probably will be when we're done.

They're both climbing.

OK.

That's very helpful.

That's all I have.

Thanks.

(Operator Instructions) Tavis McCourt, Raymond James.

Bracken, just a follow-up on the couple of product lines that you're looking to exit.

In terms of their incremental profitability to the business, should we view those as kind of rounding errors?

Or are they meaningfully profitable or unprofitable?

And then, secondarily, it looked like on the unit pricing, if I look at the revenues and the unit growth, come to an assumed unit pricing on some of your more mature products, it seems like it was decently positive in the quarter.

Are you taking pricing actions, in terms of less discounting, than historical on some of these mature product lines?

Thanks.

OK.

Yes, to answer your first question, the product lines we're exiting are unprofitable.

So that's as definitive as I can be.

And then, in terms of our pricing, we're continuing to look at where we can work around the edges of our pricing, especially the place between gross and net, to try to trim that back and improve our overall net pricing.

And you saw some success in Q4.

Great.

Thanks a lot.

Thank you.

We have no further questions.

That concludes our conference call for today.

You may all now disconnect.

Thank you for joining.

Thank you very much.