羅技 (LOGI) 2017 Q3 法說會逐字稿

Good day, and welcome to the Logitech's Third Quarter Fiscal Year 2017 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. (Operator Instructions) 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, Mr. Ben Lu, Vice President of Investor Relations.

Thank you, [Sharon]. Welcome to the Logitech conference call to discuss the Company's financial results for the third quarter of fiscal year 2017. The press release, our prepared remarks and slides, as well as a live webcast of this call are available online at the Investor Relations page of our website, 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. 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 quarterly report on 10-Q filed with the SEC on December 31, 2016 and subsequent filings. 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 from, 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 figures and a reconciliation to GAAP. This information is also posted on our Investor Relations website. The slides that accompany this call are also available on our Investor Relations website. We encourage listeners to review these items. Unless noted otherwise, comparisons between periods are year-over-year and in constant currency, and all reported results and updated outlook are focused on continuing operations and do not include the performance of Lifesize, which is reported under discontinued operations. This call is being recorded and will be available for replay on the Investor Relations page on the Logitech website.

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

Thanks, Ben and thanks all of you for joining us. We just ended our seasonally biggest quarter of the year. And I'm excited to say that in retail sales, it was also our biggest quarter in Company history. We grew retail sales 13% in constant currency. And our non-GAAP operating income or operating profit grew 34%. We have very strong momentum across our business. And that growth was again broad based with all regions and virtually all categories growing. And as if to explain how we're delivering this growth, we were pleasantly surprised to be able to announce yesterday that we won the most ever Good Design Awards, 15, with awards across every business area.

Now let's look at each of our key categories. PC peripherals grew 5% in Q3, about the same as the first nine months of the fiscal year6. That's good momentum resulting from good innovation and execution. Keyboards and combo sales rose 9%, marking the 11th consecutive quarter of growth, and with consistent performance across all three regions.

Pointing devices remain stable at 2%. Our recently launched silent mice are quietly off to a good start and were a solid contributor, representing up to 10% of our pointing device business in certain markets.

PC webcams grew again at 4% as we saw a nice ramp from our latest C922 Pro Stream webcam. Our tablet and other accessories business declined 29% in line with trends in the broader tablet market. We will continue to innovate here to leverage our typing expertise and capabilities in this highly strategic space.

Video collaboration sales rose 38%. We started to sell our Smart Dock for Skype for business just at the very end of Q3. We have a terrific lineup across multiple price points in video collaboration. And are playing in a very robust market.

Our mobile speakers grew 25%. We're demonstrating that we can drive growth with innovation in this business, whether it's through our software capabilities, rise in PartyUp through the strength of our go-to-market strategy or through our product innovation itself. For the first time ever mobile speakers topped $100 million in a quarter.

Jaybird contributed about two percentage points to our Q3 sales. We haven't even scratched the surface of its potential. The reception in the market of our newest X3 wireless earbuds has been very strong. Wired Magazine recently called them the best wireless earbuds you can buy, BuzzFeed included them in their 24 of the best gifts you can give for Christmas for 2016.

Unfortunately, our supply didn't keep up with the excitement. We're normally quite good at executing on supply. So as you would guess, we have a plan to correct this situation. We could have had an even stronger quarter had we not had the shortfall. We're really excited about the future prospects for the wireless earbud category and our place in it. This is just the very beginning of our story here.

Onto gaming, in gaming, the business grew 39% and continues to have terrific momentum. This is the sixth consecutive quarter of double-digit growth. Our Logitech Pro gaming mouse and our industry-leading wireless G900 mouse were strong contributors to the performance. We expect demand for PC gaming around the world to remain healthy going forward. Our new prodigy lineup aimed at first time gamers are doing really well. And our premium gaming products should help us continue to grow against existing gaming product users. Now let me pass it over to Vincent.

Thanks, Bracken and hello, everyone. As the CFO, I'm just delighted by this quarter, the numbers speak for themselves. It is another proof point that the business model we are building combined with our strong execution is delivering sustainably long-term growth on both the sales and the profit lines with sales up 13% year-to-date and with another broad-based performance across our regions, across our portfolio, we are strategically, methodically pulling our operational levers to accelerate our momentum.

It is our highest ever sales and combined with a continued focus on execution, we drove Q3 non-GAAP gross margin up 380 basis points to a better-than-expected 37.4%, a record. As you know, typically second half gross margin falls seasonally versus the first half due to holiday promotions. Our successful cost savings efforts including the integration of cost management into our design framework as we discussed last year in March more than offset the increase in promotion. As a result, gross margin for the full year will trend slightly above 36%, one full point better than we expected at the beginning of the year.

We are now in a great position to reinvest some of the extra gross profit dollars into our core capabilities, R&D, design, go-to-market, marketing, to deliver a model that can drive sustainable sales growth and capture the vast market opportunities in front of us. That is our focus. That is our priority.

Non-GAAP operating expenses were up 11% to $150 million in Q3. If you exclude the additional OpEx from Jaybird, our non-GAAP OpEx would have increased 6%, a great operating leverage.

We invest in R&D, it was up 10% in Q3. We invest in sales and marketing up 16% in Q3. But, we also continue to take down our infrastructure spend as demonstrated by the 3% decline in our G&A spending. In fact, our G&A reached a record low level of 3.2% of retail sales, and that was for you Daniel. Our total non-GAAP OpEx to sales ratio was 22.5% in Q3, driven by these consistent efforts to drive greater cost discipline.

On the cash side, we continue to deliver strong cash flow with cash flow from operations of $147 million in Q3. I read a few reports this morning indicating that cash flow from operations was down this quarter. In reality, we drove much to move the working capital through the year. If you look at the first nine months of fiscal year 2017, our cash flow from operations was $234 million compared with $151 million in the same period last year, a 55% increase and that's the right metric. Our Q3 cash conversion cycle remains very, very healthy at 14 days.

On the cash return side, we repurchased $21 million of stock in the quarter. That is in line with our capital allocation strategy, which as you know focuses on acquisitions, dividends and then stock buyback.

And with that, Bracken, I'll turn it back to you.

Thanks, Vincent. I told at the end of Q2 that we would wait to revisit our guidance until we finished our biggest quarter of the year. So with Q3 coming in better than expected, we're of course raising our guidance. And we now expect fiscal year 2017 retail sales growth of 12% to 13% on a constant currency basis, up from 8% to 10% in our prior target. We expect our full year 2017 non-GAAP operating profit to be $225 million to $230 million, up from the previous target of $195 million to $205 million.

Vincent and I and the whole team are building a special company. A company that can deliver consistently strong growth over the long term. And it's built on five pillars. Operational excellence, R&D, design, go-to-market and marketing. We'll give you more details around our outlook and our strategy in our upcoming Analyst and Investor Day that I hope many of you will be at on March 7th in New York City. And with that, Vincent and I are open to take questions.

Ananda Baruah, Brean Capital. Your line is open.

Hey, guys, congratulations and good morning. Hey, just a couple if I could. Just going back to the game -- really to start out, want to get a sense of how you guys are thinking about the growth drivers entering the year. And if you could, I guess maybe kind of peel back what drove the strength in Gaming this quarter, and in mobile speakers as well, it seems like from a growth perspective those are the ones that really -- kind of, really drove the growth this quarter. And I have a follow-up or two. Thanks.

Okay. I'll just jump right into those two categories. Actually, I'll add a third one, which is video collaboration. All three of those businesses grew very strongly almost 40%, 25% and almost 40%. So you had three very strong performances. The truth is all three of those are really built on just great product experience. And we continue to innovate in -- gaming is a great example where our mouse business, we've done a great job of coming in with very strong products. We've also introduced a product line that is really aimed at trying to get first-time buyers into the gaming business because we know they're out there. It's a big population of people who are ready to come in. When the 12-year-old, 13-year-old, 14-year-old, 15-year-old boy or girl wants to play gaming today, they're using an existing mouse and they're going to start migrating into these. So that's been a good story for us and then the overall story of high-priced, premium-priced innovation in the gaming category has been good too.

Video collaboration, it's really terrific. The best thing about that story is we hadn't even really gotten any substantial knowledge out of the Smart Dock for the Skype for business that we just launched at the very, very end of the quarter. So we're really optimistic about that going forward.

And then in music, the trend just continues. We kept innovating. We innovated with PartyUp. As many of you know, it's probably the best job of innovation we've done in terms of really promoting it and marketing it. And we believe it helped drive sales during the quarter as people wanted to have more than one because they could connect not just 2; but 3, 4, 5 up to 200 or 150.

So I'd say across the board, we really felt good about the innovation and the go-to-market.

And Bracken, I guess in that context, is there anything sort of in each of those categories that you would consider was -- whether it's an initiative or sort of upgrade cycle, new products introduced -- that you would consider kind of net-net incremental to the product category that number one, had a material impact sort of to not just to the category, but to the selling experience?

And then I guess secondarily in those categories is there anything that you can talk about sort of in the marketing context, the go-to-market context or a new product or feature context in 2017 that will continue to drive growth in those categories. I think we're just trying to get our arms around all the dynamics because there is a lot of them that you -- you have a lot of stuff going on.

Yeah, I could go through each one of them, and talk about what features or benefits that we saw during the year that really helped propel the business in Q3, but a lot of those are also true in Q2, Q1 and Q4 of the prior year. So we're innovating all the way through the year, as you know, and this is our game plan. We are always going to be doing this.

In terms of looking forward, we obviously -- we don't introduce products on the analyst call but what I can tell you is, I feel very, very good about our innovation pipeline coming into next year. I'm as excited or more excited than I've ever been about it. So I think we're in a really good position.

And Ananda, this is Vincent, if I can add, when we look at the growth across three drivers, right, the market growth itself, our new products and then the expanded distribution, we grew across all those three and that's the dynamic that we expect to continue in FY18 and then for more details, I'm sure I'll see you in March at the Analyst Day.

Absolutely, guys. Just one quick one from me and then I'll get off of here. So just the keyboards and desktop category grew 8%. So it's sort of been double-digit-ish, let's call it, but also off like a 2% compare. So, it's been holding this like high single, double-digit level for the last couple of quarters. The compares start to get a little bit more tough, but could you just sort of talk to the dynamics that are driving that double-digit-ish kind of growth and -- because it's such a big part and a high-margin part of the portfolio, can you just sort of level set what our expectations should be for calendar 2017 on that? Thanks.

Yeah, I mean, it all starts with the installed base. There's a lot of -- the number of PCs out there is relatively flat and has been for years. So the installed base is in its aging. So you've got a lot of people who can upgrade their PC with a keyboard and we've innovated there and we're going to keep innovating there, so the latest innovation we did, we started really a year, a little over a year ago, a year-and-a-half ago, was to bring multi-device, so meaning you could connect to multiple products at once. It's also just really easy to connect those keyboards. So that's helped drive the innovation. And we've got more in store coming up in the next few years.

So, I think the keyboard is alive and well. And I don't think there's anything that's really replaced it yet for productivity. And I expect it to stay that way for as far as I can see into the future.

Okay. Great, thanks a lot.

Joern Iffert, UBS.

Hi, gentlemen. Thanks for taking my questions. The first one would be on the medium-term model, you are guiding for 35% to 37% gross profit margin. But given the progress you're making given the better scale in audio and gaming and other categories, don't you think this is a (inaudible) and you can expect an adjustment in March for these targets?

Second question would be, if you look at your categories, do you see the risk of any slowdown or [majoring] end markets like in wireless speakers or on gaming for the next 12 months to 24 months just to get your view where are we exactly in these categories?

And the last question would be if you must split your growth for Q3, what was generated with the new customers and what was generated in existing channels? Thanks very much.

Okay. Let me before -- I'll let Vincent answer the gross margin question, I'll jump in on the second one first. Do we see anything in the end-user markets of just a slowdown in either Bluetooth speakers or in gaming, I think first of all, as we said, I think in the gaming business, we see very robust dynamic underneath that; I don't see anything changing. I think in the Bluetooth speaker business, there's been a lot of discussion around Amazon Echo and its effect. And I think the truth is the markets already slowed down. We continue to perform within it. And we will have, I'm sure we'll have categories that will change their trajectory and the whole point of the equation we're building here, the strategy that we're building here is we're going to be in more and more categories, and we are going to manage the ups with the downs. I have no expectation that Bluetooth speakers is going to go down. I think we continue to have good growth in the next year. But if it did, we'd be fine; we're going to grow in other categories. You want to talk about the margin point, Vincent?

Yes. As you were asking the question, I was thinking, nine months ago when we raised our gross margin target from 35% to 37%, I would not have expected someone to say that, hey, that's a conservative range, but we are where we are with great results in our cost savings. 100% of the margin improvement is coming from cost savings and we expect that to be sustained.

If you look at the full year, gross margin slightly above 36%. Before we change any long-term guidance, we want to be sustainably and demonstrate we can sustain the margin in that range. And then from a modeling perspective, I would invite to really look at two key drivers. One is, and it is the number one in term of priority is the growth, right? Growth of our sales. When we look at all of our opportunities, that's our focus.

And the second one is the bottom line operating margin, we raised it last year from 10% to 12%. This year guidance would imply 10.5% of operating performance and we'll continue to move towards the high end of that range. When it comes to gross margin, it is our objective to try to hold gross margin as high as possible, because that creates investment capacity to investing to more categories as Bracken mentioned into addressing all of the market opportunities we have. There are many drivers, as you know, including currency and others that will have some fluctuations on that margin, but our focus is on the top line first and then the bottom line margin second.

I love your question on new users and I'll try to answer in a couple ways. First of all if you step back from the picture we are gaining market share in most of our categories. So that's a good story, but it doesn't answer your question. Now let's go -- I'll just pick out two categories. Video collaboration. We just keep building new users and big company names, small company names, medium-sized company names, all of them going into the array of small and medium sized rooms that are going to become video enabled and we're -- you talk about being early in a story. This is a very early story for video collaboration. So yes, we are absolutely, that is all about new users, new users, new users and we haven't, and we've got a lot of -- we've just scratched the surface of how many are out there.

In gaming, you know I mentioned it in the script, but we introduced a product that's really targeted at bringing in new users who play video games, but don't yet use gaming products, which are higher performance products and that new prodigy line up we are selling is doing very well, which implies that we're bringing in new users there. I think it's probably safe to say across the board except perhaps in some of the core categories that we started, that we're bringing in a good mix of new users. Probably a disproportionate mix of new users into this growth.

All right, thanks for this -- just one follow-up and Bracken, for you -- (inaudible) what is your largest concern for the next 12 months.

Seems like everywhere you go, when you're in my job, you always get that question. First of all, I sleep very well at night -- I'm sure you don't care, but I do, and I don't have a large concern on anything. I'm generally paranoid about everything. And so I never relax on any single point but if you ask me what's my biggest concern, it's we've been performing very well. We just need to make sure we keep the entire company super hungry because the world's changing very fast. And we have so many opportunities that there is no excuse for us not to get them.

Juergen Wagner, MainFirst Bank.

Hi. Thank you for taking my question. And you touched on the gross margin, can you walk us through the dynamics in Q3, how much of the increase year-over-year or quarter-over-quarter was driven by volume mix, price or FX? And then I would have a follow-up.

Yes, that's a very little from mix. And actually it's a very simple dynamics in Q3 on the year-over-year gross margin improvement is cost savings improved gross margin more than what we've reported, and that is partially offset by increased promotion as we were very active in the market, pushing our sales and addressing the opportunities. So that's the dynamics. Within the cost savings, obviously there are a few different things. One is higher volume, right, enables you to do many different things, amortize your overhead costs on the higher volume, better negotiate with your providers.

And then the second dynamic within those cost savings is, as we discussed last year, integrating cost management as part of the design framework and having new product being introduced at a higher gross margin that we used to have in the past, and those led to the dynamics you see on the gross margin side.

Yes, I'll just hit that point one more time. Integrating design into the creation of a product is something that -- it's actually a big deal because we used to -- think about we used to really -- one team would launch the product and another team would run in and try to take the cost out. And we did a pretty good job of that. And we're still doing that. But we have a big opportunity to push that upstream and have both those teams working together hand in hand to take -- to launch at a lower cost in the same or better experience. That's really what Vincent is talking about when he's talking about moving into the design cycle for cost.

And thanks for that. And in some countries, they are quite strong; you saw the FX movements. So the question here is have you raised prices in those countries that were the most affected by FX moves?

So, just a little bit of history. Right, in 2015, when the US dollar is appreciated, we did raise price and took about 4 to 5 months to fully recover from a currency impact. At the time, we had said we would do another price increase if the euro goes to parody. We put that at the time in 2015 on the shelves. And we always be ready to look at opportunities to raise price, where it make sense when it's currency driven. So that's what we keep working and we'll have that as a lever in place as we go into FY18.

Okay. But you haven't done so in Q3. Okay, thank you.

No.

Paul Coster, JP Morgan.

Hi, Bracken; hi, Vincent, congratulations. I'd like to turn the subject to the exciting matter of taxation. Can you just give us a quick update on what's happening in your domestic market and since corporate tax and whether that's something we should be factoring into things longer term. You're welcome to comment on the US kind of border tax and border adjustment and what your strategic response might be where that's to proceed as well.

Okay. We will let Vincent take the tax -- first taxation, I'll take the second one.

So, so quick, quick for everyone. So tax rate currently for the year between 9% and 10% at this level of profit and current mix assumption. We are a Swiss company, we are subject to the tax [we slows] and then the normal international transfer pricing rules. There is a tax reform that is, in the kitchen, if you want, of being worked in Switzerland for 2019. It's too early yet to speak it exactly what it will mean. But for the short-term and for FY18 we don't expect any change from that perspective.

And then I'll refrain myself from speculating on other tax speculations. Have seen many, we read a lot. I would just point to the fact that we have a global supply chain. We're distributing in every countries. We continue to automate and make our supply chain more flexible and will monitor the macro level and react appropriately focusing on shareholder value.

Perfectly said, I wouldn't add a thing to that.

Okay, thank you. And then, Bracken, we're seeing a lot of interactive speakers being introduced into the market, obviously, Google Harmony and Amazon Echo being the most prominent. Is this is a strategic threat, is it a tactical opportunity? Perhaps you could just give us some color around that segment of your market and whether it impacts your speaker business.

I think it's a really interesting moment. I mean I think there are different ways to look at those new personal systems that are coming into the home, but I think generally speaking, you would expect me to say I view that as an opportunity. I think they're generating opportunities for us around them and through them. So you may have seen that -- in the speaker business itself, you saw we had a very strong quarter in Bluetooth speakers and we've got a lot of innovation planned ahead. So we're excited about our business in that category, but we're also excited about what those platforms can enable in other parts of our business, which you'll see in the future if you haven't already.

So, one of them you have seen is in Harmony, we paired that with Alexa and the result of that is -- we really saw good strong sales growth coming in Q3 on hub-based products, and it was sustained all the way through the quarter and beyond. So I think these are just great opportunities for us.

Remember where we come from, Paul. We're a mouse company. We were built off of Windows and the MAC and those operating systems. When we look at everything -- our orientation is to look at anything as a new platform that we can build things around. And absolutely that's the way I feel about personal assistants.

Andrew Humphrey, Morgan Stanley.

Just one left from me, I think. That warning is going to preempt anything from March. Clearly, you've seen pretty strong progress on gross margins and some organic OpEx growth this year. You've talked about using that strength in gross margin to reinvest in R&D. Can you give us an idea of what sort of ballpark OpEx growth we could expect for FY18, assuming I guess the midpoint of your long-term revenue growth plans?

Yeah, so let me take that, right. So the exact guidance for 2018, we're not giving it, right, we'll give it in March. We are obviously discussing, planning and working inside the company to get ready for March. We have a long-term model, a high single digits growth rate there in place, a gross margin target of 35% to 37%, and OpEx down to 25% of sales, and an operating profit 10% to 12%. As I mentioned priority one is gross rate, priority two is improving the bottom line profit margin 10% to 12%, we are now at 10.5%.

From an OpEx perspective, we'll continue to improve the expense to sales ratio marching towards that 25%. So you should expect overall OpEx to grow slightly less than revenue. Now by line, while obviously we will invest in R&D, I think we are right there. So keeping R&D in line with revenue growth seems to make sense. And then we'll have other movement in that investment. More in March, but this give you some data to model your projections.

Tavis McCourt, Raymond James.

Great quarter. I think most of the meaningful questions have been asked. A couple of follow-ups or minutia here, Vincent. On your slide on the guidance for the rest of the fiscal year, you're still holding to a $50 million CapEx. That would obviously imply a pretty big ramp in Q4. Is there some specific project that's related to or should we expect CapEx to probably come in below the guidance for the year?

And then secondly, as we look towards March, I know almost every day currencies are changing; good, bad and otherwise. As far as you can tell right now, what should the delta be between reported retail sales growth and constant currency retail sales growth for the March quarter specifically? Thanks.

Yeah, so let me take both and CapEx quickly as we, as you pointed out, right, we guided for an annual spend on average of about $50 million. The range frankly when you look at history is between $45 million and $55 million, around that range. Last quarter, we say will be trending towards the bottom of that range. Year-to-date, you see on our cash flow statement $23 million spend of one quarter to go. So it's fair to assume that we will be below the lowest point of that range, so below $45 million.

The only thing I would point out, as you model multiyear right, is that we spend a little bit more CapEx, but we also aligned the payment of some of those contracts to the deliverable. So two milestones, if you want. So while we may only report a $40 million spend in CapEx, you actually committed to $45 more for the year. That's currently the range; we normally don't guide, but that gives you enough indication of where we are trending.

And I wouldn't view that as a new normal. I think --.

No, I think, again, if you do multi-year trending, I would keep the $50 million is the right one and some year will be below like this year. Last year we had $55 million or $56 million until we're higher.

The second point on currency, right, we learned a lot in 2015 around the currency impact and the pricing environment and the different levers we have in our P&L and if currency continuing the trend with US dollar appreciation, we intend to use all of our levers to pull and address the situation. When it comes to Q4 itself, there is a lot of volatility. Right, a week ago, the dollar was in a different place than it is actually today. We've factored all of our hedging and currency at around 105 for the USD, euro translation for Q4 and that will be about the range. So, you should have one or two points delta in that quarter, if currency stays where it is today.

Great, thanks. That's very helpful.

You know, Tavis, we've had a couple questions on currency. I want to just go back to the comment that Vincent made earlier. The one good thing that -- we're in a better position now than we were two years ago, because we went through two years ago a big currency impact, so we had to adjust and we learned how to do pricing in places where we hadn't done it. So I think we're in a good position to manage this. It just depends on how quickly they flip, but I think over a reasonable timeframe, we can adjust whatever currencies hit us.

Michael Foeth, Vontobel.

Hi, gentlemen. I had one question regarding Jaybird. I just wanted to understand what supply chain issues specifically you had and whether they are already solved or not and what do you have to do to solve them. And the second question would be, in EMEA, the mobile speakers seem to have performed extremely well. You were mentioning I think a better penetration of distribution channels. Can you be more specific what did you change in EMEA, in the distribution channels, and what made for the success of mobile speakers there?

Yes, first of all, the Jaybird -- what was the nature of the supply chain issue. Frankly we just didn't get as much production as we needed.. We could have had significantly better sales than we did. So, and without getting into too much granular that detail on that, do we have a plan in place to address that? Absolutely. So I think we'll be in good shape as we get through Q4 and into next year. I think we'll be in good shape on Jaybird supply. And then we'll be back in the game of what we're really excited about, which is innovation. And we've got great stuff out there and great stuff coming.

On EMEA, Bluetooth speakers, it's really a story. I think we'll -- all the numbers aren't in yet,but I think we'll find we grew market share again in EMEA. We had a really strong quarter. It wasn't just a distribution gain story, it was really a performance within the distribution we're in. And I think that's a result of very strong innovation and we have very strong innovation ahead. So, I feel good about our Bluetooth speaker business. EMEA was a great performance again, and I have no reason to think that we won't continue to have good performances there and take whatever is out there to get.

Okay, great. Maybe just two short follow-ups on the Jaybird products. Do you produce them in-house or are they produced externally?

We do not. We do not produce them in-house.

Okay. And that won't change?

Well, we're not planning to change that. We don't plan to produce them in-house; we may at some point. But, as you know, we make about 60% to 65% of our products in-house. That's probably higher than we'd like. Somewhere between 50% and 60% is probably a good number, but we don't produce them in-house.

Okay. And then just on gaming, you mentioned the strong performance of your high-end products. How have ASPs in the gaming category changed over the last 12 months?

I don't have that in front of me. We could follow back up with that. I think overall the -- the good news in gaming in general has higher ASPs than the rest of the core businesses, the mouse, looks like a mouse or a keyboard. So I think in general, the thing I'd point to is really blowing it out and relatively speaking in the G900, which is a wireless gaming mouse, it sells for -- the MSRP is $149, which is the highest priced mouse you can buy. So I can go take a look at, but I would guess our overall mix, our overall ASP is on its way up.

Andreas Mueller, ZKB.

Hello everybody. Thank you very much for taking my question. I was wondering what is your view on the potential of integrating voice control also in the PC product categories. How significant would that drive growth in your P&L or is it significant or just and has each of them continued with these (inaudible) single-digit growth overall in the PC categories?

It's really hard for me to say, I mean that's probably a better question for the PC makers. I think voice seems like -- voice has really worked extremely well in the home, and it's early days there and I'm sure that with Cortana and other things there will be more and more voice in offices. So, I would expect you'll see more of that. It's a little tricky, but I would expect you'll see more of that. I don't think that will negate the need to be able to input what you're thinking or respond to what you're seeing in a way that is not voice-related because you're in an office, and increasingly an open office. So it's -- that's why I think the keyboard business will be healthy and the pointing device. Especially for people working on productivity and spreadsheets and things, you just need it.

But I don't know. I think time will tell. I think we're all very excited about voice ourselves and I don't think you'll see a revolution anytime soon in the office, but you never know and so we'll be ready for something.

Okay. And on Jaybird, does this change anything on the earnout payments or is that simply because it's out of your control, not really an issue on the earnout payments?

Hey Andreas, let me address that right. Fo first, let me tell you that it's our objective and desire to pay the entire earnout because it would be a fantastic growth rate. Every time, every quarter, we are forced by the accounting rules to reevaluate the probability and the value of that earnout in our balance sheet and because we had a forecast GAAP if you want that didn't deliver to the full potential in this quarter because of the supply chain issues, we had to reduce that forecast and that reduced the value on the earnout on the balance sheet. So you've seen a reduction of about $10 million that hit the GAAP P&L non-cash item that reduced that balance sheet item. That's the current view. Every quarter, we'll review that and you'll see some fluctuations in that earnout based on how the forecast evolves over the next remaining what now 15 months.

(Operator Instructions) Guenther Hollfelder, Baader Helvea.

Hi, thank you. Just two questions left on the sales performance. Can you provide some additional color on your strong performance in Europe from a country perspective?

Yeah, it was very broad based, that's the fun thing to talk about is, boy, really broad based. You can almost pick any country in Europe and you've got a good story to tell. So we're just performing very well in Europe.

Okay, great. And the second one on the sell-through from a product perspective, is there anything you want to highlight from a product perspective? Where there any delta compared to the whole group or regions?

No overall, if you look at by region, sellthrough was fair in line to -- aligned, sorry, to sell-in which is great. Actually, slightly higher, which is even better. We finished in a good position. There was one noticeable event of course is the sellthrough on Jaybird was extremely strong, but our sell-in was very poor because of the supply issues so that's created a disconnect in Americas.

There are always pockets of rebalancing, if you want, by category by region, but it's all factored into our raised guidance for Q4. We feel really good about our guidance as we finished the year. By category across Q4 you may have slight adjustments, but nothing noticeable at this point in time.

I'd just add, we have pretty good visibility into how much we have in the channel and where it sits and it's probably the best visibility we've had, certainly miles better from where we were five years ago. So, we feel, as Vincent said, we feel very good about the sell-out, it looks good, it looks very aligned with what we're reporting from a net sales perspective.

And you had quite a delta from a regional perspective from the Americas. You just mentioned one of the reasons was Jaybird. Any other product category you want to mention in the Americas context?

No. And I would also always caution that right that we report the gross rate. The gross rate on sales out or sales through versus the sell-in. Uou also have to factor the base which you don't have in, etc. So as long as it's in line within a few points, you should see it as a good indicator, but don't translate it one to one. The main driver in the US was Jaybird and then there are many other little factors here and there, but nothing isolated outside of Jaybird?

I think his question was a bigger picture question, which is the growth rate there is lower than the growth rate in other regions. Is there any story there that we want to talk about? I think the answer is not really. I mean, I think you have cycles where one region outperforms and one, and then fortunately because we have three regions, and a lot of countries within each region, you tend to have enough diversity that they end up to balance each other pretty well. So I would guess that over time, you'll see the Americas come up and others soften a little bit or everybody. So, no, nothing that I would really highlight.

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

Great. Thanks everybody for listening. It's been -- it was a strong quarter. We're very excited about the performance and we are excited about the momentum. We've been doing this now, those of you who've been here the whole time, most of you have, for almost five years and you've heard me say many times I was very excited about the road ahead. But I can tell you that never in my time here have I been more excited about Logitech's future than I am right now.

I hope many of you will make it to the Analyst and Investor Day. I think it'll be a great day in New York and we can share a little bit more about why like I have such enthusiasm in New York in March. So thank you guys very much. And we'll talk to you then.

That concludes our conference call for today. You may all now disconnect. Thank you.