羅技 (LOGI) 2015 Q3 法說會逐字稿

Good day, and welcome to the Logitech third quarter financial results conference call. At this time, all participants are in a 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 now like to introduce your host for today's call, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech. Please go ahead.

Welcome to the Logitech conference call to discuss the Company's financial results for the third quarter ended December 31st, 2014. The press release, our prepared remarks and slides, as well as the live webcast of this call are available online at Logitech.com.

As noted in our press release, we published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments today and they will not be read on this 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.

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 November 13th, 2014 and subsequent filings, which are available online on the SEC EDGAR database, and in the final paragraphs of the press release and prepared remarks from Logitech reporting third quarter financial results for fiscal 2015.

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 statements as a result of new developments or otherwise.

Please note that today's call 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 or as a 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 press release includes a table detailing the non-GAAP measures together with the corresponding GAAP numbers and a reconciliation to GAAP. This information is also posted on our Investor Relations website. The slides that accompany this call include both GAAP and non-GAAP measures and are also available on our Investor Relations website. We encourage listeners to review these items.

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

Joining us today are Bracken Darrell, President and Chief Executive Officer, and Vincent Pilette, Chief Financial Officer. I'd now like to turn the call over to Bracken.

Thanks, Joe, and thanks to all of you for joining us. I?m very pleased with our Q3 performance. Despite much more significant currency headwinds than expected, we grew our sales ahead of expectations. We're grown retail sales for seven consecutive quarters.

More important is our growth in retail excluding categories we exited last year. That's how I assess our real growth power for the future. If you look at our sales this quarter in those terms in constant currency, we grew 7% overall and a full 11% in the Americas.

Our profitability continues to improve, creating more capacity to invest and drive more growth ahead. And our cash generation is excellent, with cash flow from operations up by 86% for the last 12 months compared to the prior year.

Vincent and I will look a little deeper into our Q3 performance, then I'll come back to discuss our outlook. Let me start by looking at the categories within our growth portfolio.

Our PC gaming category delivered a strong quarter, with sales up by 21%, but our growth was constrained by a decline in sales of legacy steering wheels. Our sales of gaming headsets, mice, and keyboards all grew faster than the overall PC gaming category.

In fact, our PC gaming sales excluding wheels and gamepads grew 40% in constant currency. Our gaming portfolio has never been stronger, and we continue to design great products.

As one indication of the strength of our innovation in the category, earlier this month we were honored to receive 2015 CES Innovation Awards for three of our newest gaming products, the Proteus Core tunable gaming mouse, the Hyperion Fury ultrafast gaming mouse, and the Orion Spark RGB mechanical keyboard. All three of those products made strong contributions to our growth in Q3.

In mobile speakers, we delivered another quarter of very strong growth. Our success in this category continues to be led by UE BOOM. Building on the momentum we've created with UE BOOM, we're further strengthening our portfolio to take advantage of the growing opportunity in mobile speakers.

Earlier this month, we announced the UE MEGABOOM, our next generation mobile wireless speaker that delivers more power, more 360-degree sound, and more bass and a waterproof acoustic skin. It's simply awesome.

Our innovation in this category goes beyond hardware, though, and as we've designed our UE products to receive updates for new features via the app. The most recent example is our announcement of the world's first multi speaker pairing of more than 10 speakers. We're building an innovative and flexible platform with our UE speakers that enables easy delivery of exciting new features to our growing user community.

Our tablet and other accessories category was weak. As we've seen throughout fiscal 2015, sales continue to be negatively impacted by the market for the new iPad platform. We also had business impact as we have phased in our new products for the new iPad.

Let's move to the profit maximization category, which is primarily composed of PC peripherals. Excluding our video collaboration offerings, which I'll get to shortly, our sales in the profit maximization category declined by 1%, similar to the declines we've seen reported for new PC global shipments.

Within our product max category, sales in our PC keyboards and desktops grew by 5%, outpacing the market for PC shipments. One of the key contributors to this growth was our new Bluetooth multi device keyboard, K480, the first desktop keyboard designed for use with up to three devices on any major operating system and, by the way, my keyboard right now, and a winner of a 2015 CES Innovation Award. We are pleased so far with this new innovation.

We delivered 22% sales growth in our retail video category, driven primarily by sales of our video collaboration offerings, which doubled compared to the prior year. The video collaboration product growth, born originally out of our consumer webcams, demonstrates clearly how we continue to innovate inside our profit maximization category to create segments that can outgrow the PC platform.

Before handing over to Vincent, I want to say that our ability to improve our profitability despite the impact of currency headwinds illustrates our improved operational execution. Vincent now has further detail on the quarter.

Thank you, Bracken, and good morning, everyone. In Q3, we delivered better than expected results despite the significant headwinds from the stronger US dollar. It was our seventh consecutive quarter of sales growth for our strategic retail business and our seventh consecutive quarter of double digit operating profit growth.

Let me start by focusing on how the recent volatility in currency exchange rates is impacting our business. In October, we confirmed our fiscal 2015 sales outlook of $2.16 billion, assuming a euro to US dollar exchange rate of about 1.3 for the second half of the fiscal year.

The rapid depreciation of the euro as well as other currencies has shaved close to $50 million from our second half revenue outlook in US dollars. For Q3 specifically, the year-over-year US dollar appreciation created about $20 million negative sales impact in US dollars, or the equivalent of 3 percentage points of growth.

We look at constant currency sales growth as one of the key indicators of our performance, and that is why we have provided you with more constant currency information today.

While the US dollar appreciation impacts our gross margin, our cost reduction initiatives have enabled us to deliver strong gross margin improvement, up 210 basis points year-over-year in Q3, with great improvement in almost all of our profit maximization categories as well as our music category as it scales up.

Disciplined cost management and operational execution will continue to play a key role in our transformation. However, we are not planning on sustaining this level of gross margin improvement over an extended period of time should the euro continue to weaken.

Consistent with the plans we shared with you during the last earnings cycle, Q3 was the first quarter in the last seven quarters that we have allowed our non-GAAP operating expenses to increase compared to the prior year. The 4% increase reflects investments in sales, marketing, and product marketing to drive short term and long term sales growth in mobile speakers, PC gaming, and the rollout of Lifesize Cloud.

Those investments, as well as other seed investments for which we have virtually no revenue today, were partially offset by continued savings in our infrastructure. We will continue to demonstrate disciplined spend management while investing selectively to drive future growth.

Q3 was another quarter of strong cash generation, driven by the improvement we have made to managing our working capital. Our cash flow from operations for the quarter was $76 million, driven by a cash conversion cycle of just 20 days, the second best in our history.

Over the last 12 months, we generated cash flow from operations of $232 million, up by 86% compared to the prior 12 month period. Our strong cash position enables us to drive a healthy capital allocation strategy, focused on business investments and small acquisition as a priority, annual dividends, and opportunistic share buybacks.

Finally, I received questions from many of you about the impact on our business from last week's rapid and steep dip appreciation of the Swiss franc. Let me share with you three data points to put this in perspective.

First, our sales in Sweden represent about 2% of our total sales. Second, our operating expenses for our headquarters in Switzerland represent about 10% of our total operating expense. And third, we hold very little of our cash in Swiss francs.

While extreme volatility like we saw last week can always present some near term challenges, the appreciation of the Swiss franc should not have any material impact on our long term financial model.

And on that note, I'll turn it back to Bracken.

Thanks, Vincent. Looking at the remainder of the year, despite significant currency headwinds, we are increasing our outlook for non-GAAP operating income for fiscal 2015 by $15 million to approximately $185 million.

This is the second time this fiscal year that we've increased our profit outlook. And that's in spite of the fact that we're adjusting our outlook for fiscal 2015 sales from $2.16 billion to approximately $2.11 billion to reflect the US dollar's appreciation versus various currencies.

I'm very pleased with our progress and momentum in the business. We're building the foundation to deliver more and more great products. While we now have, I believe, a powerful product portfolio, you can expect us to launch more unique, beautifully designed products in the coming quarters.

We're gaining share in most of our categories. Sales of our PC peripherals are stable and margins are improving due to our cost reduction initiatives. We're positioned for continued growth in our growth businesses, and we're quietly developing additional engines for new growth.

We look forward to sharing more on our opportunities and growth plans during our upcoming Analyst and Investor Day, which will be held on March 11th in Zurich.

And with that, Vincent and I are available now to take your questions. Please follow the instructions of the operator.

Thank you. (Operator instructions.) Felix Remmers, Credit Suisse.

Yes. Hi, everyone. Two questions from my side. First, are you now allowed to buy back shares? That will be the first question.

And the second question is regarding tablet accessories. Here it seems to me that you are underperforming your peers, if I look at comments from Zack, for example. And I was wondering what do you plan to do to put this category back into growth mode here?

Yes, I'll go ahead and answer both. Yes, we are in a position now to do a share buyback. And I'll let Vincent add anything he wants to on that one first.

No. Buyback is open and, as we mentioned, we will buy back on an opportunistic basis.

And as for our performance in tablet accessories, we certainly had an extremely strong year last year. And we hit some market share points as we exited the quarter in Q3 last year. I think we actually hit a 60 share in the US.

This year at least one of our competitors has actually put themselves back in position by getting a key merchandising improvement that really put them on more of an equal footing.

So, I would say we're back to more kind of where we ought to be from a market share standpoint, our natural point. That said, I think we can do a lot better going forward, and I'm optimistic about how we can perform in this category.

Anything else, Felix?

Maybe one follow up looking a bit more forward. So, you are comfortable that this category will at some point, let's say next year, next fiscal year, grow again?

That's really hard to say. This is a category very dependent on the core iPad platform and the Samsung tablet platform. What I would say is we're in a great position to grow at least with or above the category.

If the category grows, I suspect we'll have a really good performance. If the category is flat or down, we'll have less of a good performance. We're not reliant on this category to drive our growth initiative and to turn this company back into a growth business.

Okay, thanks. That's from my side.

Thank you, Felix.

Tavis McCourt, Raymond James.

Great. Thanks for taking my questions, and nice quarter with a tough FX headwind. Vincent, you gave us the foreign currency impact on fiscal Q3. I was wondering if you could give us an estimate of what it may be on a year-over-year basis in fiscal Q4.

And then, Bracken, on the UE BOOM, which continues to impress, wonder if you had any market share data you can share with us. This is a category, it seems like there's a lot of different brands doing well right now. At some point there'll be some consolidation. So, I think in the past you mentioned you'd like to get this to be a top three brand in a number of geographies to be sustainable. And just kind of an update on that progress would be great. Thanks.

I'll make it very simple. For Q4, the year-over-year impact on our sales due to the US dollar appreciation is about $30 million, Tavis.

Thank you.

Yes. And Tavis, I'll give you a few facts on our music business in general. If you look in the US, the final market share data I don't think is out yet. But, I believe we'll end up back in about the top four, up versus year ago by at least a half a point.

If you look around the world, I think I've got this right, I think we're the number one Bluetooth speaker brand in Australia. We're the number one brand in New Zealand. We're probably -- although we don't have market share data on it, probably the number one brand in Switzerland. And we're seeing market share improvements in most of our geographies around the world.

So, we're making very good progress. And I'm optimistic ahead for the Bluetooth speaker business.

Great. Thanks very much.

Thank you.

Alexander Peterc, Exane.

Yes. Hi and good morning to you. Thanks for taking my question. I'd just like to clarify a little bit further on FX, first on gross margins. Would your gross margin have been better under the old exchange rate, i.e., do you have any headwind there? And what is the impact on OpEx from, say, a 10% move of the euro versus dollar?

And then, the second question would be on tablets. I'd just like to understand, you had -- last year, I distinctly remember that you had a fiscal Q4 which was particularly weak because you were transitioning the Ultrathin, it would seem. Correct me if I'm wrong.

So, you have -- at last you have an easy comps base going into fiscal Q4 this year. So, should we assume from that that the steep declines we've seen in this category over the past four quarters would be softening at least, if not going back into growth in the current quarter? I just want to understand the comps here, not exactly a guidance.

And then finally, are we getting anything on smartphones yet? There's no Case Plus for the iPhone 6 or 6 Plus as far as I understand. So, are you looking at this category still, or are you trying to approach the smartphone category in a different way? Thanks.

Hey, Alex. Let me just take currency first and then I'll pass it to Bracken. So, on currency, when we have short term volatility, we do have some natural protection. We may have bought inventory a while ago. We have some hedging in place.

And so, in the very short term, like Q3, the flow through from a top line impact is somewhat minimal. It's not zero, but it's somewhat minimal and manageable.

As you move forward and if the US dollar appreciation is maintained, you're going to have an impact on the gross margin. In our Analysts' Day in March, we're going to quantify what it means for FY 2016.

When it comes OpEx, about 10% of our OpEx is in euro. About 10% is in Swiss franc. When the Swiss franc was pegged to the euro, there was 20% of our pegs that was helping with a natural hedge. We're going to lose that with now the Swiss franc floating or disconnected from the euro. And again, we're going to assess and adjust to see what it means for FY 2016.

Okay. And Alex, on your two questions on categories. So, on tablets, yes, we do have a weaker comp versus a year ago in Q4. It's hard for me to say whether that's going to result in a better trend line.

The tablet category has been down all year. The tablet accessory category has been down all year too, and we have no reason to think that's going to stop.

On smartphones, we have -- I think I've told you all before. We have several seeds, I think we've said six or seven right now, that were in development in the backroom. This was one of those that earlier -- I mean it would have been included in what we'd have earlier called a seed. We're still experimenting there.

We've got a lot of smartphone initiatives though, including our music business, which is really a smartphone business. It's a connected business. And we have others that are in development.

So, without getting too much more specific on what we're working on ahead, I would just say, yes, you can certainly expect more from us in the future connecting -- or taking advantage of the huge smartphone market.

Great. Thanks a lot.

Thanks, Alex.

Youssef Essaegh, Barclays

Hi. Thanks for letting me ask questions. So, FX was clearly a hit. But overall, if you look at the growth categories and you compare them to the kind of growth that we have in the profit max categories, even without the FX impact in reality you're still a little bit behind. And it's not necessarily your fault, right? I mean, the tablet market outlook has changed significantly since you started working on this kind of product.

So, I was wondering -- and that's probably more a question for the Capital Markets Day. But, in parallel, you can maybe help us understand how you see OpEx supporting eventually a little bit more of a change of product strategy that will help you be back on track on the kind of growth that you've been guiding for recently.

Yes. Thanks, Youssef. We'll certainly answer that in our Markets Day that I hope you'll all be at in Zurich. But, let me just give you a couple of ways I think about that right now.

First, if you looked at our growth businesses excluding tablet accessories, we'd be up about 40%. So, it's a pretty good story. And if you -- and of course, as you said, tablet accessories has gone through a change. And I don't know whether it's a permanent change, a temporary change. We're optimistic about it, but you never know.

The great news is that we have more growth businesses than you see on the surface, because if you look back in what we call PC peripherals, we've actually got growth stories within there including video collaboration, which doubled year-over-year.

So, we have plenty of growth -- I think we have plenty of growth engines out there with or without the tablet accessories business. As to the investment of OpEx to drive those growth categories, we -- and I don't want to disclose too much ahead of our Capital Markets Day, as you called it, or our Analyst and Investor Day, as we do.

But, we've certainly been very aggressive about moving especially R&D resources out of PC peripherals and into the growth businesses. And I'll dimensionalize that when we're together, but it's been significant and it will continue to be.

Thank you. So, can I ask another quick one on the balance sheet? So, as you pointed out, you have now a record level of cash and you describe your share buyback as being opportunistic. So, I'm just wondering what's your plan? Are you thinking about holding the balance sheet like it is today, or are you thinking about maybe restructuring it somehow and do a special dividend, anything of that kind? Thanks.

So, at this point in time, the capital allocation strategy, it's pretty clear. Our priority and where we spend most of our time is really looking at business investment opportunities, including small acquisition, as you know.

We have an annual dividend in place, and we grew it 25% this year. As we continue to increase our performance, you are going to continue to see growth in that dividend.

And then, on the buyback, it will all depend on how big the opportunity is when I mention buyback opportunity.

Thank you.

Thanks, Youssef.

Andreas Mueller, Zurcher Kantonalbank.

Yes, thank you very much for taking my question. Good afternoon. I would like to know, could you please dissect the 2% gross margin increase into firstly cost reduction and economies of scale, and secondly the exiting of the nonstrategic products?

Sure.

Hey, Andreas. Good afternoon to you. So, on the gross margin, 210 basis points up on a year-over-year basis, a lot is driven by cost reductions, which are really meaning rate improvement within each of our categories. Almost all of our profit maximization are improving the gross margin rate. Consolidated components, working on the manufacturing side is important.

When you look at scale in the growth category, it's mainly music. With scaling, obviously you have an overhead now amortized on a much bigger number. But, we're also -- with the MEGABOOM, leveraging between BOOM and MEGABOOM, we're investing in automation in our manufacturing, which reduced labor cost. And that's about two-thirds of our gross margin improvement.

When it comes to product mix, so for example we discontinued products last year. We had about $11 million of revenue of discontinued products in our revenue last year. It's down to zero now. Last year it was sold at a negative gross margin to get rid of those discontinued products. And so, the mix also is giving about a third of margin boost, if you want.

Okay. Thank you. Second question on the PC market. How do you see the PC market in 2015? And do you see any opportunity out of Windows 10 on your PC gaming business?

On PC gaming. So, how do we see the PC market? We'll certainly give you our viewpoint on that in Zurich.

Overall, I would expect -- right now I would say our planning assumption is to continue to view the PC market down mid single digits, because that's a safe assumption for us. And we really want to put more focus on creating new growth engines.

So, we're continuing to plan that way. It could be better than that. Last quarter was down 2.6%. So, it's really difficult for me to guide better than the PC makers would. But, that would be -- our planning assumption will be that it'll be down mid single digits. We'll update that in Zurich.

On Windows 10, now I'll go beyond the PC. Every update that comes through Windows is an opportunity to see re-stimulation in our keyboard and mouse and the various things around the PC. And what I see of Windows 10 looks really good, so we'll see.

It's too early to say. There have been a lot of updates on Windows. And some have been very successful in attracting users back or new users and some have not. So, it's really hard for me to say, but everything I hear about Windows 10 sounds very good.

Okay. If I can do a follow up, how indicative is the year-on-year growth of 11% of the marketing and sales expense going forward? I mean, were there some seasonal impacts as well that you pushed a bit more or is that really sustainable, kind of the increase going forward?

I'll answer a couple different ways, Andreas. So, we invested this quarter. First quarter in seven quarters that we've increased our OpEx about 4% on a year-over-year basis. For those who have not looked at the breakdown, we really invested in sales and product marketing, while G&A is down 14% on a year-over-year basis.

So, as I mentioned, we continue to drive infrastructure savings and then redirect that into investments. About two-thirds of that S&M investment was field investment. So, helping the growth could be demo days at Best Buy for our music business, as an example.

And about a third is for longer term product marketing as we invest into categories that don't have revenue yet but will deliver the long term growth model. That's about the ratio.

When we move forward in Q4, as you see in profit guidance, we are very pleased to be able to raise our profit guidance for the year. But, it does continue to plan on a moderate increase in our OpEx.

And then, the second angle I will take is our long term business model calls for an OpEx of about 25% of revenue for a 10% operating profit margin. And while we made good progress, we are not there yet. So, you will continue to see some increase in OpEx in dollars to invest but an overall long term operating leverage as we continue to trend toward the long term business model.

Okay. Thank you very much.

(Operator instructions.) Paul Coster, JP Morgan.

Yes, thanks very much for taking my question. And by the way, I love the K480 keyboard. I?m using it as well.

That's good to hear.

Are there any channel expansion opportunities left to the company, either by region or by vertical?

Yes. And without getting into excruciating detail, I would say -- I'll give you one example. We continue to see telco expansion opportunities, especially in our music business, but beyond our music as well.

But, yes, I think we've got channel opportunity expansion across multiple categories. And we intend to get them over the next couple of years.

By geography, is there anything you can sort of call out as major trends that you're able to observe through sales of your products? I'm thinking in particular of the difference between perhaps the mobile and the PC platforms by region.

First of all, not all the data is in on PC performance, but I'll give you a few things of PC versus mobile versus overall the smartphone. As we all know, the smartphone continues to just grow unabated, which I'd say is very good for us because some of our growth categories are really connecting to PC, especially our music business.

And in terms of tablets, we've talked a lot about those today. And in terms of the PC, obviously the PC market seems to have been a little stronger in the US, or weakened less in the US than other markets, but everywhere a little bit better.

So, beyond that, I can't give any more great insights. But, I would say I'm just -- overall I'm sort of optimistic in general about the industry of consumer electronics and where it's going. Having just come back from CES, it just feels like the whole industry ought to be headed for another growth trend. It's going to be pretty exciting, and we certainly intend to be a big part of that.

For my last question, Bracken, if you sort of step back from things a bit, you and Vincent have obviously sort of effected a very substantial transformation of this company already. Where do we stand in terms of the big process here? What have we done and what's next?

Well, first of all, it wasn't just me and Vincent. There are a lot of people who've really driven an enormous change in this company, and I'm really proud to represent them. But, we're just two of them.

In terms of where we stand, Vincent and I are -- and we'll talk about this in Zurich. Vincent and I kind of think of this as chapter one. And chapter one's finished and now we're on to chapter two.

And chapter one was getting our profitability right and setting the table for becoming a growth company again. Chapter two will be becoming a growth company. And so, I'd say that's a pretty good description of where we are.

We're really created a lot of the assets we need to generate growth long term now. And now it's about continuing to pour it on and execute.

Okay, thanks.

Thanks, Paul.

Andrew Humphrey, Morgan Stanley.

Hi. Thanks for taking my questions, just a couple from me. One is on OpEx, and I'm afraid it's another FX question. You mentioned that you have about 10% of OpEx in euro, 10% in the franc. If you were to mark-to-market, say, this quarter's OpEx at today's FX rates, what do you think the impact would be? I mean, is it broadly neutral given one has significantly weakened and one is significantly stronger, or should we see that move one way or the other?

And my second question is around the UE BOOM. Clearly in tablet accessories, you've seen a little disruption from product transitions. And I think we've seen that in other categories in the past. How do you anticipate things looking as far as the US MEGABOOM is concerned? How are you managing that with your distributors? Do you anticipate those two products to be sitting alongside? I'd just like you to talk me through that dynamic.

So, Andrew, let me quickly answer the OpEx. You actually provided the answer. So, because they are about the same size, moving forward, if you look at next quarter for example, the benefit on the euro will be cancelled by the cost of the Swiss franc.

In Q3, we obviously have the double benefit of having the Swiss franc following the euro. So, that's to answer.

Okay. And on MEGABOOM versus BOOM, the wonderful thing about the BOOM is that it has great sound, a 360 orientation, which means you can set it in the middle of the table and everybody hears the same thing. It's very, very rugged, and you can actually drop it in the water or take it in the shower.

The MEGABOOM is all those things squared. So, everything there is just bigger, deeper sound, still 360, completely waterproof. You can leave it in the water for 30 minutes and it's fine, and it's super rugged.

And so, the difference between the two is one is just a much bigger version of the first. We do expect them to be in distribution in most of the same places and to sit alongside each other.

Thanks very much. Actually, if I could sneak one more in as well --.

Sure.

I was just looking through the presentation. And clearly you had stronger sell-in than sell-through in a couple of markets, particularly Americas and Europe. I know you've had that at times in Q3 before, and it's clearly a better situation than having stock outs in your strongest quarter. But, are there any particular areas where you have concerns there?

Andrew, this is Vincent. So, no, not really. And what you refer to is the selling in US dollars was up 2% on retail, for sell-through about flat.

When you look at it on -- that's a growth rate perspective. When you look at the channel inventory dollars, on the year-over-year basis we're only up $3 million. So, I would call it roughly flat on a year-over-year basis and no particular concern from that perspective.

Okay. Thanks very much.

Thank you. It appears there are no further questions. At this time, I'll turn the call back over to Mr. Darrell for closing remarks.

Well, let me just first say I hope that we see many of you in Zurich, and thanks a lot for joining us today.

We're having a strong year, and we really appreciate your following us as we turn Logitech back into a growth company. Thanks again. Take care.

That concludes our conference call for today. You may all disconnect, and everyone have a great day.