羅技 (LOGI) 2019 Q4 法說會逐字稿

Good day, and welcome to the Logitech Fourth Quarter Fiscal 2019 Financial Results Conference Call.

(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'd now like to introduce your host for today's call, Ben Lu, Head of Investor Relations.

Please go ahead.

Thank you, James.

Welcome to the Logitech conference call to discuss the company's financial results for the fourth quarter of fiscal year 2019.

The press release and prepared remarks and slides as well as a live webcast of this call are available online at the Investor Relations page of our website, ir.logitech.com.

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

The forward-looking statements involve risks and uncertainties, and actual results could differ materially as noted in our quarterly and other filings with the SEC.

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 a non-GAAP basis, except as otherwise noted.

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 and slides provide a reconciliation between GAAP and non-GAAP numbers and are posted on our IR website.

We encourage listeners to review these items.

Unless noted otherwise, comparisons between periods are year-over-year and in constant currency.

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

Joining us today from California are Bracken Darrell, President and CEO; and Vincent Pilette, CFO.

I will now turn the call over to Bracken.

Thank you, Ben, and thanks all of you for joining us.

Logitech delivered another great year with fiscal year 2019 sales and profits up double digits for the third year in a row.

Sales were up 10%, and profits were up 23%.

Our 3 growth businesses, and it's kind of fun to call this first one a growth business, Creativity & Productivity, Video Collaboration and Gaming, all performed well and will continue to drive growth through this year as well.

I'm excited about the secular trends underpinning growth in these large categories.

There are 3 major global trends driving these businesses, and they're just a few of the many reasons why we're so excited and why we -- about being the world's leading cloud peripherals player.

First, the first trend.

If you're under 30 or have kids who are, you know that there are only 2 kinds of calls you make: audio calls when you're moving and video calls when you're stationary.

But when you look at your offices, you will probably see that most rooms are not video-enabled.

The cloud is changing this by making it accessible, affordable and easy.

And we're in the very, very early stages as today only a low single-digit percentage of the room -- those rooms are video-equipped.

I believe in the not-so-distant future every single closed space will be designed for video.

And that's why we're so excited about the growth opportunities ahead of us in our Video Collaboration business.

Just look at the recent successful IPO of our cloud video partner, Zoom.

We're ready to outfit all those cloud video-enabled rooms with our best-in-class solutions.

The second trend is one that you've heard me talk about time and time again.

PC gameplay is destined to become one of the biggest, if not the biggest, sport or pastime, if you prefer to call it that, in the world.

It's not just a fad.

It's a full-blown secular tidal wave.

And like VC, the roots of this second massive trend are fueled by the cloud and the social experiences it creates.

And the social nature not only drives viral adoption by gamers, it also drives viral viewership in casual gamers.

Today, more people are watching others play video games than almost any other sporting event, and that viewership is concentrated, concentrated under 30.

Imagine as this generation grows up.

With leading technology and a broad portfolio of peripherals that deliver a fantastic gaming experience, we've delivered 6 consecutive years of double-digit gaming sales growth.

And we're not expecting that secular momentum to slow any time soon.

The third trend is the explosion of content creators.

Today, more people are watching content created by other people than any time in human history, and it's hard to imagine this trend slowing.

While we all watch and love big-budget movies like Avengers: Endgame or shows on Netflix, there's an ever-growing library of content that people are creating and that audiences are watching.

The democratization and instant availability of this content is surging, thanks to Instagram, YouTube, Twitch, Facebook, LinkedIn and others.

Content is being created by someone in a bedroom, in a living room, in a dorm room, in an open office, in a Starbucks or outdoors right now, all the time, all over the world.

An employee recently told me his 5-year-old niece is infatuated with watching this 7-year-old boy named Ryan unbox and play with toys.

Here's a little known fact: that 7-year-old boy, YouTube Ryan's show is called ToysReview and was the highest worldwide earner on YouTube last year, pulling in $22 million according to Forbes.

No, I'm not kidding.

Content creators edit, stage and format at a desk using PC, using a keyboard, a mouse, a web cam and sometimes a microphone.

And this is one of the reasons why our PC peripherals business has consistently been growing ever since fiscal year 2015.

And frankly, we've not been specifically designing for that user.

And while new PC shipments may lag or even decline, we expect continued low single-digit growth for this large business going forward.

Three big secular trends driving our business.

Now let's talk about the track record we've built driving into these trends.

We delivered another year of exciting growth in Gaming with fiscal '19 sales up 33%, gaining market share and improving profitability.

Our core PC gaming group grew double digits across all 3 regions while ASTRO Gaming expanded our presence in the console headset space and, most recently, into console controllers.

This offset an expected decline in our simulation group, mainly racing wheels, since most of the major racing titles were updated in fall of 2017.

Gaming, in particular the simulation part of the business, is seasonal and title-driven.

What's most impressive though is that our Gaming business still managed to grow double digits in Q4 despite being well into the tough Fortnite growth comparisons from last year.

That said, growth in ASTRO in fiscal year '20 will be tough to predict given the unprecedented growth we saw last year.

And that's why we expect 15% to 20% growth in total Gaming sales for fiscal year '20 versus the 33% we just posted.

While growth in Gaming will sometimes be more lumpy, especially by product line, we expect the eSports phenomenon to continue to fuel the long-term growth of our Gaming business for many years to come.

Sales in this category was practically 0 a mere 6 years ago.

Since then, our VC sales have put up a 6-year sales CAGR, compound average growth rate, of over 50%.

While we're looking for VC sales growth of 25% to 30% for this coming year, you can be sure that I'm pushing the team to outperform that.

As you've heard us say before, we're continuing to grow and invest in our direct sales force.

And on top of that, we're also innovating in our product portfolio.

Sales of our huddle room MeetUp product more than doubled year-over-year.

And we showed at our March Analyst Day our VC product portfolio can now address both small huddle rooms and all the way up to large conference rooms.

What's that mean?

It means that our previous average customer hardware price point of around $1,000 for MeetUp can now potentially go to $2,000 or $3,000 using our new Rally camera system, all the while expanding our addressable market in those larger rooms.

In fact, Rally has shown early signs of success after its initial launch this past quarter.

And one of our newest products, the universal meeting room's control panel, Tap, has already created a lot of excitement with customers and will be shipping shortly.

And I strongly encourage you to go see the commercial for that.

It's incredibly good and funny.

It's still early days for companies to adopt lower-cost cloud-based Video Collaboration solutions, and we see years of strong runway ahead of us.

PC peripherals sales increased 7% in fiscal year '19, representing the fourth consecutive year of growth, with all 3 product lines, pointing devices, keyboards and web cams, delivering growth.

We've demonstrated that as long as we keep innovating for all different use cases, whether you're a creative designer, a social content creator, a student, an investment analyst or somebody else, we can achieve consistent growth.

Our MX Vertical has become a hit, and it's not only taking share of the vertical mouse market, but it's also actually dramatically expanding the size of that market.

Our China team also developed a slim, inexpensive Pebble mouse that's strongly resonating with millennials in China and is off to a great start.

Staying close to users and using designs to unlock the power of our engineering has been one of our hallmark capabilities the last 5 or 6 years and we're not letting up.

Tablet & Other Accessories sales grew for the second straight year, up 20%.

While we saw a decline in Q4, this is due to the timing of our introduction of the new Slim Folio for the latest generation of the iPad Pro, which just launched this month.

As long as the iPad market remains healthy, we'll continue to introduce new products and drive growth.

Mobile Speakers were down 26% for the full year with Q4 sales up 81%.

Don't get too excited about our strong Q4 growth.

We had a very weak fourth quarter for Mobile Speakers last year so I wouldn't view this Q4 performance as a trend.

And as we have stated before, the overall mobile speaker market remains soft.

And so we've taken measures to better align our investments, our resources and our channel inventory, but we'll continue to innovate and come out with new products and experiences.

Audio & Wearables sales were up 11% for the year due largely to our recent acquisition of Blue.

It's contributed roughly 2 percentage points to our overall growth for -- in 2019.

We love Blue and we love the Blue team, which delivered another strong double-digit quarter.

Excluding Blue, Audio & Wearables was down single digits.

We remain excited about the opportunities in the wireless earbud market.

Jaybird is taking a disciplined approach to carving out its own unique niche, building out great products targeted to athletes.

Now let me talk about the news we announced regarding Vincent Pilette, our CFO and my partner.

He and I are actually, much to your surprise, both wearing our jackets today in honor of his last earnings call at Logitech.

I can't end this call without thanking Vincent for the last 6 years he's dedicated to Logitech as our CFO and as one of my closest partners.

He was here in the early stages of Logitech's turnaround, as were many of you, and played a critical role driving the company's transformation, which is the Logitech you know today, a multi-category, multi-brand design company, a growth company.

But more important than the work Vincent did in helping us get back to a growth company is the team he built and the rigor he's brought to the way we work.

We now have a strong, seasoned finance team across every area, and that's the most important legacy he'll leave.

We've named Nate Olmstead, who is sitting down the table from me, as our interim CFO while we search for the new CFO.

Nate joined us earlier this year from Hewlett Packard Enterprise and brings over 16 years of deep financial management expertise, most recently as the Vice President of Finance for Global Operations at HP.

Vincent and Nate will spend the coming weeks together working on a transition plan and meeting with each of you.

Now let me turn the call over to Vincent who will walk you through our financial metrics.

Thanks, Bracken.

For the record, I'm wearing a jacket but no tie.

Me too.

As Bracken mentioned, we delivered another year of strong financial performance, the sixth one to be exact.

Fiscal year 2019 sales reached $2.8 billion, up 10% in constant currency, while our non-GAAP operating profit rose 23% to $352 million, better than we expected.

Non-GAAP EPS was $2.01, a significant milestone for us because 2 years ago, we had laid out the road map towards doubling EPS to $2, and we did it a year earlier.

From here, we will focus on driving continued top line growth, diversifying the portfolio and delivering operating leverage as we recently raised our long-term operating margin target to 14%, on the high end of our range, versus 12.6% in fiscal '19.

Our fiscal '19 gross margin reached 37.8%, up 190 basis points, at the midpoint of our recently raised long-term range of 36% to 40%.

As you'll recall from our recent Analyst Day in Zurich, we took up the high end of our gross margin target range to 40%, and that is due to 3 factors.

One is normal cost structure improvements, which we will continue to drive for.

And as you can tell from our margin increases in the past few years, we have a pretty good track record of reducing cost faster than natural product price decline.

The second factor is better product mix as we shift more into Video Collaboration, Gaming and PC peripherals, which all generally have better gross margin than the other categories.

Finally, the third factor is our desire to transition the business model to more branding and marketing-led activities from more promo-led demand generation that we have mainly used in the past.

In that sense, we will be balancing how much we spend in gross-to-net promotions versus what we will spend on marketing OpEx.

As we continue to build our multi-brand, multi-category portfolio, you can be sure that we will look to expand our capabilities around marketing and branding.

Our non-GAAP operating expenses increased 10% in fiscal '19 to just over $700 million or up about 8% excluding Blue.

This demonstrates our continued discipline in driving operating leverage through balancing our spend with both top line growth and gross margin expansion while continuing to invest to capture our best growth opportunities.

Our approach is pretty simple.

We continuously look to optimize infrastructure spend to invest more in building and selling great products.

Our sales and marketing and R&D spend were both up 12% for the year to support the strong top line growth while we kept our G&A spending flat for the year at a record low 2.9% of sales.

And as a result, we delivered better-than-expected profits for both Q4 and fiscal '19.

Now let me talk briefly about our cash flows.

Cash flow from operations was $305 million for the full year, down from $346 million in fiscal '18.

Also, cash flow continues to be very strong for the company.

The decline in cash flows year-over-year was mainly a result of the strategic pull-in of inventory ahead of tariff and more back-end-loaded sales in Q4.

Overall though, we continue to expect our cash flow from operations to generally approximate onetime non-GAAP operating income as shown by the average of the last 5 years.

In summary, we feel very good about this past year, and the business is well positioned to deliver another great year in fiscal year 2020.

Finally, as Bracken mentioned, I've decided to leave Logitech, full of mixed emotions, of course, but with tremendous optimism for Logitech and its future.

We have just delivered our sixth year of growth.

The company is well positioned to deliver on the long-term model we laid out in March.

And so there was no better timing for me to pass the CFO's responsibilities to Nate and pursue a new challenge.

I was a shareholder before I joined, and I will stay a passionate shareholder and a big supporter of the team moving forward.

And before I get emotional, let me pass it back to Bracken.

If you believe Vincent never gets emotional, you don't know him well enough.

Fiscal year '19 marks another great year for us.

We're well positioned to drive continued growth in fiscal year '20 as we continue down our path of being the largest cloud peripherals player.

I'm energized by our plan, and I'm energized by our people.

We just gave our outlook for fiscal year 2020 in March, and today, we're confirming that outlook: sales of mid- to high single digits in constant currency and non-GAAP operating income of $375 million to $385 million.

And with that, Vincent and I are ready to take your questions.

Ben, why don't you queue them up?

(Operator Instructions) Your first question comes from the line of Ananda Baruah from Loop Capital.

Vincent, yes, so we'll miss working with you, and congrats on a job well done.

We look forward to seeing where you land.

And maybe with any luck, we can make it 3 for 3. So -- we'd love to.

Yes.

So just with regards to the business -- so congrats on solid top line, solid results.

So look, this was a solid margin beat.

And so just sort of philosophically, are you guys starting fiscal year '20 from perhaps a little bit of a higher -- sort of higher floor than you thought you might be at the Analyst Day?

And how should we think about that cadence in the context of the fiscal year '20 guide?

And I have a couple of follow-ups.

Yes, Ananda.

In terms of guidance at this point, I mean, it's way too early to change our guidance.

I think the business overall is performing well.

And as we always said, we're operating a little bit higher in our gross margin.

We would like to have the capability to reinvest and continue to invest for the future, so I would say it's all built in.

Going into fiscal '20, we still have many variables like either tariffs or currency that we don't control.

And so we'd like to have a lot of variability in our P&L to be able to always deliver on our commitment.

Okay.

Great.

And then, Bracken, on Gaming, can you -- could you just point out if there's any specific catalysts for the year?

Fortnite has been a really tremendous catalyst for a while now.

So what do you see as being catalyst post Fortnite?

And maybe that's not the right way to think about it, but whatever those dynamics are, yes.

And then secondarily, is Fortnite -- to what extent, if any, do you consider Fortnite to still be a catalyst?

And then I have one more after that.

Okay.

Yes.

Fortnite, well, first of all, I think the primary catalyst is the -- and catalyst is maybe an interesting word to use for it, but it is the underlying secular trend that's just happening, the growth of eSports, the excitement around eSports.

And then, as you said, the launch of new games is always going to be a big deal.

But remember, the underlying continued growth of the existing games is still and continues to be really exciting.

So I'm not sure I -- you could point at this point of the year to a single catalyst that will drive the short term, but the long-term secular trend is -- seems kind of almost inevitable to me.

And so new games are coming out all the time.

The game publishers don't sit on their hands.

When Fortnite came out and created such a wave, Activision Blizzard and Electronic Arts and so many others have been doubling down on creating new games, and you're starting to see them come out.

So I think we'll have all kinds of surprises in the gaming business, but even if we don't, the secular trend will just continue.

Okay.

Great.

And just is it -- as we see more gaming services enter the market, and some of them are also now sort of not surprisingly targeting increasingly sort of some of the larger phones and from a couple different service providers, is there an opportunity long term or even in the medium term for you guys to come out with products that might serve as an interesting alternative to just sort of the normal earbuds for folks for that market?

Well, we try not to comment about specific categories that we might not be playing in.

But what I would say is you referenced something else that I do want to jump on, which is the creation of new services like cloud-based services that enable you to essentially have a mega PC experience without the PC on your desk, are another growth enabler for us because you continue to need a headset, a keyboard and a mouse.

So this is a super exciting thing for us.

So we have seen this coming.

It started with some start-ups, and now it's gone to Microsoft and Apple and others.

So I think that can be exciting.

In terms of mobile gaming in general, mobile gaming continues to be huge and growing, and we certainly think there are interesting places to play in there.

And obviously, headsets is more part of this.

Some of our products are probably already used for some of the mobile gaming, but we haven't directly targeted that yet, and it is an interesting area.

Okay.

Great.

That's helpful.

And then last one from me.

Video Collaboration, did I hear you accurately, Bracken, that you said you guys are targeting 25% to 30% growth for the year?

And is this the first time you've disclosed that, if I heard that right, the fiscal year '20?

Or was that actually -- the target, was it actually from the -- at the Analyst Day as well?

No, we -- yes, we disclosed it at the Analyst Investor Day, so that's not a new number.

But we -- but the real point I was making there was it's really -- at this point of the year, it's a little hard to get too specific on it, but we're excited about Video Collaboration, yes.

It's just -- and we think we're the only building I ever go into that's as video-enabled as the future will be in every building.

By the way, Ananda, before we move on, I went to this really cool company whose average age is probably 28 that has a lot of employees not too long ago, and I won't mention who it was.

And it blew my mind that I walked through that building and there were so many enclosed spaces, I mean they look like ours in that regard, it was an open office, and so few -- in fact, I didn't see any video-enabled spaces except the boardroom, which is -- or maybe 1 or 2 other large rooms, so the opportunity is so big.

And your next question comes from the line of Asiya Merchant from Citigroup.

Vincent, we'll miss you as well, but good luck on your next venture.

Quick question.

Now with probably the CFO search underway, and I know you have an interim CFO here, how should we think about acquisitions?

I mean in the past couple of years, you guys have done smaller acquisitions, and they've obviously contributed to the top line.

So should we assume there's a little bit of a step back from these little acquisitions that you might have considered prior to Vincent's departure?

No, I wouldn't assume that at all.

We're going to -- we're always looking, and we'll keep looking.

I think it'd be crazy for us to stop doing what we do well.

Vincent is leaving, but Vincent's left a great team behind him, and Nate's going to be terrific.

And we're not letting up on anything at all.

And if I can add.

Especially in acquisitions but it's actually true in every discipline, it's really a teamwork, right, between the business development team, the strategic team, Bracken's involvement, mine, the general managers.

And so especially in M&A, it's really a broad effort.

The CFO is definitely part of that but not the only player.

What I would say, we -- while we've done acquisitions and they get more focus for all the right reasons, we're really an organic growth company.

And we've -- we're, first and foremost, an organic growth company.

If you look at VC and Gaming and PC peripherals, really underneath all that is an innovation engine that is the key to this business, but we're going to continue to do acquisitions.

Okay.

And then just a couple of follow-ups.

Intra-quarter -- there was some commentary in the prepared remarks that there was some linearity in the intra-quarter that suggests it was back-end loaded.

So what is the surprise there?

And then as a follow-up to that, at your Analyst Day, you talked about mid- to high single digits.

Keeping in mind some of the macro factors that were out there, perhaps the Fortnite factor as well.

Has anything evolved from that time?

Anything that has surprised you to the upside or to the downside?

Just quickly on linearity.

No, it was not a surprise since we talked last.

We just had the AID.

If you'll remember, back in the last calendar quarter, Q4 or Christmas quarter, there was a lot of volatility.

And in January, the business or the quarter started slow and then ramped up faster than last year and finished strongly in March.

And I think that caused some of the AR and cash collection to be delayed into the next quarter.

That's what we were referencing to.

Yes.

In terms of is there anything we've seen since then, it's so early in the year.

It's really hard -- it's really too early for us to comment on the economic environment or any of that stuff.

So it's just too early.

We have 11 months to go.

Okay.

Great.

And cash conversion cycle, as we revert back to perhaps more linear quarters and -- should we expect that to revert back to what has been a historic norm ex the ASC 606 impact?

Yes.

Absolutely, yes.

Your next question comes from the line of Andreas Müller from ZKB.

Good luck to Vincent.

We miss -- going to miss you.

Question on the inventories.

How do you see the progression of the inventories in the next quarter?

So are we on the level now that is good enough to protect from the tariffs?

Yes.

I think, as you know, we mentioned in our prepared remarks that we pulled in some inventories to protect against tariffs.

It's not clear yet what tariffs will be in the future, but under current assumptions, I think we are stabilized, if you want, and we'll burn all of that inventory that we pulled in, in advance.

It was the right economic decision using our balance sheet strength for that.

Luckily, we did.

Right.

And then on the operating cash flow, can you give us the absolute size of the operating cash flow that was impacted by this back-end-loaded quarter?

Overall, about $40 million impact, and about half of it from inventory pull-in and half from early narrative.

Then my last question.

Can you dissect a bit the gross margin uplift of this 160 basis points into the effect of currency, product mix, cost savings, China tariffs?

And also, could you indicate how these single factors are going to progress into Q1?

Yes.

So no, Andreas, I'm not going to go into my long, very detailed spreadsheet analysis here on the call to give all of the drivers.

We've always said we have multiple drivers on the gross margin.

We have been trending above 37% for the full year, and Q4 is slightly above that but in line with everything we said there.

And all 3 factors were favorable to gross margin, which was cost reduction, mix overall and the reduction of promo and more marketing expenses.

Those trends will continue going into fiscal year '20.

You should expect the gross margin in the first quarter here to be a little bit weaker considering that there is more currency impact at this point in time with the euro being at around $1.12 in exchange rate.

So that -- but overall for the year, we'll be on a solid footing, and the 3 factors I've mentioned will continue to drive gross margin up.

Your next question comes from the line of Jürgen Wagner from MainFirst Bank.

Actually, I have 2. Sell-through weakness in Europe, is that going to reverse?

You had some volatility in the past.

Is it just normal fluctuation?

And the second question would be, yes, you talked a lot about video in your prepared remarks.

And now that the market is evolving and you are broadening your footprint, we hear from others that they might see growth there.

So how do you see your positioning and the competitive environment developing going forward?

Also, because it's a high gross margin business for you, is it staying amongst the highest gross margin product for you?

Yes.

Let me take the last one first.

I'll let Vincent take the first one last.

So yes, I think the video -- as I mentioned, I think the video opportunity is so big.

It's really -- we're going to see strong growth in spite of what happens from a competitive standpoint.

And from a gross margin standpoint, I don't think there's any reason to think that the gross margin will be impacted by the competitive environment, I think.

From what I can see, the gross margin profiles of the competitors we have look a lot like ours so -- or at least they're in the same vein.

So I doubt it.

I think the opportunity is really, really big for many companies, and competition is great.

Competition drives growth.

It will drive more awareness in the market, and I think you'll see those other 95% of rooms come into video faster.

So I will address the channel inventory, and thanks for your question because there's a few analysts writing about that based on the reports we had put on our website.

So overall, the sell-in growth rate or the net sales growth rate, as you know, is 5% in U.S. dollars.

The sell-through that you mentioned on a global basis is 4% excluding Blue and 6% including Blue.

Overall, the business channel inventory is well positioned, slightly less than revenue growth, so we feel good.

And weeks on hand, slightly down, so well positioned going into the first quarter of the next fiscal year.

As you have seen on the report, it's aligned in both Americas.

It's actually even more favorable in Asia Pacific.

And then in Europe, we have a little bit higher sales in than sell-through.

And the thing to consider is really this reduction of promotions into marketing OpEx that's impacting the net sales in but not reflecting in the sell-through.

On a constant currency basis, sell-through in Europe was around 6% to 7% growth, and we feel pretty good about where we are in the channel there.

Your next question comes from the line of Paul Chung from JPMorgan.

Thanks, Vincent.

You will be missed for sure.

So first up, on Video Collaboration, are you starting to see more competition on the huddle room side?

And then secondly, how's your progress been on kind of attacking the larger conference rooms?

Are you gaining share there?

And what's your kind of go-to-market strategy?

And then any sense of revenue potential there would be great.

Okay.

On the competition on the huddle room side, yes, absolutely, we're definitely seeing it.

It's been out there, and we've got several really good competitors in the huddle room space now.

And as I said as I responded to Jürgen's call, I think competition -- I don't want to sound too Pollyanna here, but competition is good.

I mean if you don't have competition, you don't have nearly the market growth potential because competition drives communication into the market of the opportunity and it will drive the market growth.

So I think the -- more players in there is a good thing overall.

And it puts pressure on us to innovate and do -- and innovate well, and that's what we're up to.

So I'd say, so far, we continue to be excited about the potential there in line with where we were before, but I think the market will be interesting to watch over time.

In terms of the larger rooms, it's still too early.

We just launched Rally.

We've had -- something that you could use in the large room.

But I'm sure we'll do better than we have been in those large rooms now that we have Rally out there.

And I wouldn't try to quantify exactly what that is.

I think there's just opportunity across the board.

Okay.

And then on the Zone Wireless headset, it seems like a nice cross-sell opportunity in the enterprise space.

So first, is this going to be classified in VC or Audio & Wearables?

And then second, what's your strategy to gain market share there and kind of potential you see as well?

Yes.

That's going to be in Audio & Wearables.

And it's a first really attempt to get some experience into that marketplace.

So I don't want to overstate its potential.

I think it's a terrific product, but it's a first and, I would say, a really small step into exploring what it's like to be in that space.

And we're going to see how it feels, like we did with video conferencing 6 years ago.

We got into the front door, it's all kind of warm inside and then we continued to walk inside.

And we're doing the same thing there.

Okay.

And then lastly, I just want to get your sense on keyboards and pointing devices.

It still remains $1 billion business itself.

So you continue to exceed expectations in this segment pretty consistently, so it's pretty nice low mid-single digits there.

Just can you expand on what's been driving your success there, whether it's ASPs, certain regions?

And kind of your longer-term view of the segment will be very helpful.

Yes.

It's really a global thing, just like the underlying secular driver of that is a global thing.

And that underlying secular driver is the fact that so many people are using their PC for more than they used to in the past, and they're using it for content creation.

So again, that might seem like a difficult path to explain how those 2 are connected.

But if you just think about the way a lot of people are creating content, if they're not doing it on their phones, they're doing it on a desk.

If they're doing it on a desk, they're doing it with a PC.

And therefore, it's an important part of their lives.

And I think that's really what's happening.

As long as we innovate -- and there are different innovation vectors that we can go after there, and we are.

So the vertical mouse we launched 2 quarters ago or the end of the quarter before last is another interesting one where people are using -- continue to use their PC so much that they get competitive-use injuries.

And healthy computing is a big deal.

And it's a really big deal in the Nordics, it's becoming a big deal in Europe and it's starting to pick up steam here.

So we've got different things that can drive and will drive and are driving that growth.

And I think we continue to see that.

As we said, I think we continue to see low single-digit growth for the foreseeable future.

(Operator Instructions) Your next question comes from the line of Jörn Iffert from UBS.

Vincent, we will for sure miss you.

Hopefully, Logitech is the one missing you at some point in time.

Quickly following up on Gaming, please.

Your competitor, Turtle Beach, I think, is guiding down their sales target by around 20% because they think there is lower demand on the headset side.

Are you also seeing similar trends?

Or if not, what is explaining the difference?

And Bracken, you said Gaming can be sometimes a bit lumpy.

Does it mean that, for example, Q4 with plus 30% is kind of lumpy?

Or can you also mention some point in time in a quarter Gaming is falling to flat from plus 5% growth in the next 1 or 2 years?

Well, I think you could see that in the quarter.

I think lumpy in terms of different categories grow at different rates.

Sometimes simulation will be down like it was this quarter, and sometimes others will offset it.

But yes, I think Gaming could be lumpy like that.

I think you could see it drop down and be flat or single digits or low double digits.

But I think the -- and what Turtle Beach I think guided about, I didn't look closely at it, but I would guess they're referencing the Fortnite effect.

Remember, they're completely in the Fortnite business in the headset business while we're in a lot of other categories as well.

So now will it decline 20%, will it be flat, will it grow 10%, the headset business especially related to -- who knows?

I mean at the end of the day, I think we've got enough tools in our arsenal that we're going to be able to drive good solid growth in spite of whatever that is.

But I think the reality is whatever happens with the Fortnite -- with the famous Fortnite effect, remember, there are new games coming on that look like they're on track to be as big as Fortnite.

So there's a lot of stuff coming.

I admire their conservatism, and I think they're -- they probably were right to do it because they're only in the headset business, but we're in mice and keyboards and headsets and simulations, a lot of categories.

All right.

Would you say -- the Gaming guide of 15% to 20%, is this back-end loaded in the fiscal year '20?

No.

I mean it's pretty regular through the year.

And I just wanted to just add on Bracken's comment, right?

So the diversification of our entire portfolio has been definitely a strength for us, right?

And we've been growing double digit for 3 years at almost every quarter.

We had weakness in 1 specific category.

Within Gaming now, which became, as we discussed, like a pretty substantial business by itself with its own set of diversification.

And any quarter, a subcategory of the Gaming business we have could be in a weaker position.

And when Bracken mentioned choppiness or some volatility, maybe we could see one quarter 5%, he's really talking about a quarterly basis.

We're not managing on a quarterly basis.

We're looking at long-term trends.

And in the guidance we gave at the March AID, we definitely were cautious on the Fortnite effect and post-Fortnite effect.

I won't exactly say what cautious means, but we were prudent going into the fiscal year '20.

Yes.

I just want to echo a comment that Vince just made about our portfolio.

I think one of the -- it's really been such an event for us to be in so many different categories.

I think, by the way that I count them now, we're in either 26 or 27 different categories.

Some of those are gaming, some of those are video.

So I think, yes, it's a nice situation for us because -- and if you combine that with the fact that we're a super, super global company with lots of market participation too, it does buffer us from the short-term ups and downs of a single category like that.

Your next question comes from the line of Michael Foeth from Vontobel .

Yes.

Just one left for me actually.

I was just wondering the sort of relative weakness in comparison to past quarters that you reported in Asia.

And I think you pointed specifically to Australia.

If you can explain again what that is related to, if it's really general trend.

Or is it related to some particular product category?

And then I'm not sure I understood exactly the difference between the -- in EMEA between sell-through and the reported sell-in growth.

If you can just explain that promotional driver there once again.

Okay.

Let me take the first one.

I'll let Vince take the second one again.

The -- in Asia Pacific, yes, we referenced that Australia and New Zealand had a strong slowdown in Q4.

And I think that's -- they tend to get sort of a delayed effect than the rest of the world in some of the categories we're in.

They're also very, very large in music, so they're a big music business for us.

So I think you -- the combination of being a very large music business, and then the delay in the slowdown in the market of Bluetooth speakers, so they sort of saw it this quarter.

So that was the biggest driver.

But I do think Asia Pacific will be a slower growth than it's been in the past.

We have this portfolio of regions, too, where we've been growing 20% -- 19%, 20%, 21% in Asia Pacific.

I think you'll see that come down through this year.

But still, I think it will be strong double digits, but I think it will come down.

And I think that's sort of what we would expect.

And I -- but I -- so the Asia thing was this quarter's issue.

But -- and I think that will kind of flow through.

But I think Asia Pacific, in general, will be lower as Europe comes up and, hopefully, AMR comes up.

Michael, let me stay high level on sell-through and then we can always follow-up in a one-on-one.

So when you look at the sell-through report we posted on our website versus net sales, there are 3 factors you need to keep in mind.

The first one is the constant currency this year was down.

Sell-through that we reported that is reported to us is in U.S. dollars.

So you need to compare that to the right growth rate.

The second one is that sell-through does not include Blue yet as we have not fully integrated that business into that sell-through report, if you want, coming from a third party.

And then the third driver is this reduction of contra revenue of gross to net, and sell-through is on a gross level and net sales is all inclusive.

And then I'll be happy to follow on a more technical answer when we have our one-on-one.

And there are no further questions at this time.

I'd like to turn the call back over to our presenters.

Okay.

Well, I want to finish on 2 things.

One is we're -- we just finished a great year, and we're starting a new one.

And that's always really exciting, and we're excited about the year.

I want to congratulate Nate.

I think he's going to be terrific.

And he happens to be sitting catty-corner to me right now.

We didn't put him on the hook today, but we will next quarter.

And I want to again thank Vincent.

It's rare to find a partner who shares your ambition as completely as Vincent did with me.

And the good news is there are others here who do as well, and I don't think he's leaving anything but a company that's just so much stronger than when he arrived.

And we continue -- and we will continue to double down on what we've already built into the future.

So good luck, Vincent.

Thanks, everyone, for listening to the call.

This concludes today's conference.

You may now disconnect.