Welcome to Logitech First Quarter Fiscal 2017 Financial Results Conference Call. [Operator Instructions]. I would now like to introduce to your host for today’s call, Mr. Benjamin Lu, Vice President of Investor Relations. Please go ahead.

Welcome to the Logitech conference call to discuss the company’s financial results for the first 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 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 made under the Safe Harbor and the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements. Factors that could cause actual results to differ materially include those set forth in Logitech’s Annual Report on Form 10-K filed with the SEC on May 23 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 numbers and a reconciliation to GAAP. This information along with the slides that accompanies the call are posted on our 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 our website. Joining us today from New York is Bracken Darrell, President and Chief Executive Officer, and Vincent Pilette, Chief Financial Officer. I’ll now turn the call over to Bracken.

First thanks Ben and thanks all of you for joining us, first I will say it's rare for Vincent and me to be separated during this call. I had knee surgery last Wednesday so I decided to stay here instead of going to [indiscernible]. Q1 was a broad based powerful start to fiscal year 2017, our growth accelerated. In fact we grew 13% that’s faster than any quarter in over five years, virtually all of our product categories grew. All of our regions also grew with EMEA and Asia Pacific both posting strong double digit gains. For those of you who attended our Analyst and Investor Day this past March, you will remember that we outlined our broad market opportunities and there were five of them. Creativity and productivity, think PC, Intel peripherals. Music, gaming, video collaboration and smart home. And as we said in those growth our market opportunities we simply had three different ways to grow, general market growth in most of those categories the ones we’re already in. Market share growth in every category, an entry into adjacent categories. Three ways to grow, while we’re taking advantage of all three dimensions of our strong growth opportunities and that approach is working. We’re more than just growing our top line, we’re also improving our profit model. As we promised this quarter we improved our gross margin substantially [Technical Difficulty] believe there are unique opportunities available now that weren’t visible few years ago. More and more people use our best of breed webcams to live stream various activities from gamers on Twitch to video bloggers on various sites. We plan to capture these exciting opportunities by leveraging our technology capability and brand leadership in this category. In Q1, our tablet and other accessories were the only category where sales…

Thanks. As Bracken said we’re excited about our start to the year. Q1 results exceeded our expectations significantly with retail sales growth of 13% non-GAAP operating profit of $38 million and non-GAAP EPS of $0.20. JayBird contributed approximately 3 points to our growth this quarter but even without JayBird we grew double digits and across the Boards. We had previously said that we expected to recover all of the currency impact to our gross margins that we saw in fiscal year 2015 by the second half of this fiscal year. I'm very pleased that we delivered on that target earlier than expected thanks to discipline cost management, higher volume and improved product mix including the exit of the OEM business. Our Q1 non-GAAP gross margin came in at 35.6% up 20 basis points over the prior year and up 250 basis points versus the prior quarter. We remain committed to the long term business model of non-GAAP gross margin of approximately 35% or higher. In Q1 our non-GAAP operating expenses reached a $133 million up 9%, half of the increase in our packs [ph] came from the onboarding of JayBird. We have also said that as our gross margins improved we look to reinvest some of those profits to capture the tremendous opportunities in all of our product categories, but at the same time we will remain disciplined and prudent with how we spend our resources to more efficiently deliver topline growth. As such R&D and sales and marketing was 14% and 9% respectively while we kept G&A flat. The long term plan is to drive OpEx leverage and see operating expenses less than gross profit as we March towards our long term target of non-GAAP OpEx to sales ratio of 25% and non-GAAP profit margin of 10% to 12%…

Thanks, Vincent. Since I became CEO three years ago we've been reinventing Logitech. Our product, our portfolio and our capabilities, we reignited our product design, we rationalized our portfolio including the exit of OEM and the divestiture of Lifesize and we're actively expanding our capabilities well beyond hardware. We aren't finished yet. Our mission is a Logictech that enters categories and becomes a leader in them over time. A company whose products people trust and love. Now let me talk about our revised outlook for fiscal year 2017 for a minute. Those of you who have got to know us over the past few years know that we rarely change our guidance in the first half of the year. This year we're already raising our outlook based on the strength of our base business performance and our assessment of the underlying strength of our portfolio. We started the year targeting mid-single digit retail sales growth in constant currency and non-GAAP operating income of $185 million to $200 million. With a better than expected Q1 performance we’re raising our fiscal 2017 retail sales growth outlook to 8% to 10% in constant currency and we're increasing our non-GAAP operating income outlook to a 195 million to 205 million for fiscal year 2017. The funny thing about today is that as I sit here right now the list of opportunities we had to make this quarter even better are almost as long as the list of our Q1 accomplishments. We've come so far and yet we have so much more that we can do to be faster, smarter and better and imagine the kind of performance we can deliver as we keep improving. I'm proud of our team and I'm so excited about all the fantastic market opportunities that lie ahead. We're confident we can become an exciting growth company in the opportunity expanding world and believe me when I say we are just getting started. And with that Vincent and I are ready to take your questions. Operator, please queue up the questions.

[Operator Instructions]. Your first question comes from the line of Joern Iffert with UBS. Please go ahead.

First would be can you please tell us what was the negative FX impact from the revaluation of the inventory on the gross profit margins Q1? And what is the underlying assumption for the full year, are we approaching 36% here? This would be number one. Number two, on JayBird can you tell us what you are assuming in terms of revenue contribution for the full year and third question on the wireless speaker side with your voice capabilities is there a close cooperation on Amazon or Google or are you and continue to act independently? Thank you.

Yes let me start with the gross margin Joern, so as you remember last year we had a big benefit from hedging when the euro dropped and that raised the gross margin a year ago pretty significantly so creating an unfavorable year-over-year comparison as discussed. In term of reevaluating the current inventory for the euro that sit at around 113 for the quarter versus 110 last quarter, it's less than half a point. In terms of gross margin moving forward if you look at our guidance, we don't guide by gross margin versus OpEx but we had always said that in FY ‘17 we will deliver a gross margin at or above 35% and that’s how we'll manage it. If we see gross margin upside keep in mind that we will either invest the portion in absolute in accelerating the growth either in the field which may impact the negatively the gross margin or in OpEx for long term R&D development. So that's also something on how we managed gross margin between investments and benefit from lower cost product line.

Okay. And on the other two questions you question on JayBird as we said it was under 3 point this quarter and I think we’re expecting [indiscernible] couple of points for the rest of the year, total impact on growth. And on your question of wireless speakers you know we launched earlier our last quarter we launched the ability to use Google Now and Siri to activate through the app here, Bluetooth speaker and you asked about the level of corporation with either Google or Apple or Amazon which we will never comment on in an effort to make sure that all of our relations of the other companies are kept relatively private.

Maybe if I may ask a last one of around 10% economic growth in Q1, can you just help me to better understand the contributions here? How much like [indiscernible] is coming that you’re really selling more in the BestBuy channels and how much is coming for example you’ve new distribution channels via telecom shops for example.

We don't give details, we normally don’t give growth details by channel or by customer but I would say the growth was very broad based. We’re expanding our distribution to some telco especially in Europe. So that's certainly part of the impact but I wouldn't overstate I mean I think our overall growth across all of our channels has been very, very strong.

Your next question comes from Andrew Humphrey with Morgan Stanley. Please go ahead.

Just a couple of if I may, maybe kind of drilling down into a bit more detail on speakers, could you talk a bit more about how the comps look for the rest of this year. Obviously you’ve performed significantly better than your sort of full year estimate for the market this year, so just kind of interested how that plays out over the remainder of the year with as much of a difference in geographies or if you see competitors responding in any way and then on a balance sheet question really, you have a buyback in place and also authorized for March 2014 for $250 million. I know the intention of the time was to complete that within three years but there have been complications with regards of not being able to execute that for some of the time. I just wondered does that buyback expiry, I guess it would be March 17, how should we be thinking about your intentions? I know you’ve said you'll be opportunistic but kind of what we should be modeling there?

Andrew, I'm going to let Vincent take that second question. On your first one, I think our outlook for the year, as you know we don’t guide for categories but we did have a very strong Q1 in music after a very low Q we’re really adjusting our sales rates in Q4 of last year. I think at the end of the day that this category is slowing down and you can expect and I wouldn’t expect the kind of growth rates we saw in Q1 the rest of the year. We do think we will grow double digits, 10% to 15% but I will be stretching it if I said I can guide that really well. I think it's really difficult to say. I feel really good about our portfolio, we have been gaining share pretty consistently. You can never guarantee because you don't know what our competitors are doing, you asked about the competition. It's extremely strong in this particular category. It certainly made us better and keeps us right on the very tips of our toes and you can bet we are going to keep innovating through this year and into next year because of that.

I just wanted to remind you, Andrew that of course the timing of new product introduction is a very important in terms of the compares. Last year in Q2 we introduce the UE ROLL, we introduced the BOOM 2 and so on the quarter by quarter basis you will see some fluctuations but we feel very confident in the guidance we had given during the March update of 10%to 15%. Last year music grew plus 78% and obviously that will different compare as we continue in the year. In term of the buyback as you mentioned, right, the Board approved the buyback 250 million opportunistic approach to that buyback. We got about a one year period during which we couldn't buy because of the SEC investigation that is now closed. So we are a little bit behind n that to be fair. We will continue to buy, we still believe when we look at the short term and the long term opportunity that the potential is here to really create a lot more value for the company. How technically we will approach it we don't know yet and we will review that with the Board at the right time.

Your next question comes from Felix Remmers with Credit Suisse. Please go ahead.

I actually have two smaller ones, one on the guidance upgrade especially on the top line, I was wondering if that includes any sales coming from new product launches meaning like from the seeds [ph] investments you have or is that really with existing products portfolio you have. And then the second one would be on video calibration, I mean in the statement you mentioned that this is a 20 billion to 40 billion opportunity, I would like to understand a bit better what needs to be done in order to make that category even bigger? So we have a bit more visibility on growth in that category.

On your own question -- see that includes everything we're doing. So our upgrade guidance includes everything we're planning for the year including the seeds we've launched and the seeds we might launch. Your second question of video collaboration, we've talked a lot about if you go back and start with what we said last year at Analyst Investor Day you know the what's happening there as you know is there is just more and more rooms that are available to be video enable and in a video world if the 20th Century was an audio world, the 21st Century is a video world and so in a video world you’re going to have more and more companies enabling more and more rooms and the nice situation for us is we offer a low cost solution to connect to all those cloud based video conferencing companies out there and so that's our game plan. In terms of what we need to do to get a large share of that growth that's out there for the equipment going into those rooms, it's all about innovation in and right now we've I think we've innovated well so far. We're certainly just beginning on a path to continue to innovate down that the various dimensions that will enable us to be a great hardware partner for video conferencing -- cloud based video conferencing companies, all cloud based video conferencing companies in all those rooms that will be video enable. So without going too much further into it I think if you go back into that presentation we did I think there's a lot in it and I'm really optimistic about we're doing they're excited. Thanks

One quick follow up on the [indiscernible] so you would expect growth to be more gradual, so you wouldn't expect this growth to really accelerate at some point because of any strategic measure you do. I don't know I'm thinking about having new distributers or something like that?

We’re always reviewing distribution in our [indiscernible] and we're certainly going to be doing that. Our whole go to market is a continuous work in process I would say because we're trying to adapt to a world that's changing pretty quickly but I would -- but generally speaking as in most of our categories, this is all about the products and so we’re really -- it's really about continuing to roll our products that make sense for this space and that enable consumers sitting in rooms like we are right now to have a great video experience especially when leveraging those cloud based video conferencing options that are out there. So it's a lot more about that than any single distribution play. So Felix really quickly, your question about how much growth you expect to have, I think we talked about kind of 40% growth, 45% somewhere for the year. I think it's absolutely where we think we're going to be but it's a little hard to call it right now. We certainly think that the opportunity is big out there.

[Operator Instructions]. Your next question comes from Tavis McCourt with Raymond James. Please go ahead.

I got a couple of them, so I will rattle them off and then you guys can answer in whichever word you deem is appropriate. So in a lot of different consumer categories outside of consumer electronics it looks like the percentage of sales coming online is really accelerated for whatever reason the last six, nine months and I'm wondering are you seeing that in your business as well or is it still more of a steady trend and maybe an update on the percentage of your sales that happen at bricks and mortar retail versus online. Secondly, kind of an update on private company multiples. I mean obviously looks like JayBird was pretty decent one times revenue or something type acquisition. I don't know if that was possible a year or two ago and kind of an update on what the pipeline looks like for reasonably valued acquisitions out there and then on some of the more mature product categories where when you say you have made adjustments for FX, the euro collapsed last year. I suspect that it's kind of code word for kind of increasing prices in local currency terms and as you’ve done that what have you learned about the product categories. Have you seen competitors match or have you seen competitors stay or increase their price discount versus you, but it hasn’t had an effect on market share kind of maybe some color around that would be helpful. Thanks.

I will take all three of those and Vincent will add any color on top of that. So the percent online as you said we have seen just a continued strong trend towards more and more online, I'm sure some point there will be an equilibrium but it's not -- probably needs to have soon. We have a great online capability and great online business everywhere, almost everywhere we’re and we’re see -- we don’t normally talk about I can't disclose numbers but I will throw out a few, in China we have probably seen a shift from when I got here, 10% to 15% online to 55% to 65% online that’s the most dramatic but I think if you look anywhere in the world you would see a pretty strong shift over the last three or four years and as you said over the last couple of years it's getting stronger. The good thing is we really feel good about online capability although we still have things we can certainly improve but especially through partners and those partners are not just pure etail, retail combinations, everybody is getting in the game online. In terms of the acquisitions out there, I don’t know if I would even be able to say there is a steady state on this at all. We certainly did see first couple of years Vincent and I working together, lot of private companies just had you know we thought were really extraordinarily high multiples those did come down really quite a bit. Will they stay there? Does that open up more options for us to accelerate things we’re doing, we will see. I mean we’re working on new category opportunities and existing categories with or without acquisition, so but we obviously like the idea if we can accelerate something we’re already really interested in working on and if those multiples make sense then we will certainly take advantage of it and we’re in discussions U.S. that our pipeline, you know as we have been for four years we are in discussion in the lot of places all the time. Let me pass that over to Vincent for just a second and I will come back to you.

So what I wanted to say is as Bracken said, we have been working pretty actively on that space. We knew that tuck-in acquisition is part of our strategy. We also have a very rigorous framework and valuation is one dimension, the synergies we have explained them right adding technology or capabilities to our portfolio and then the culture of the team are all important factors and I can tell you today, I can find assets that have low valuation, unfortunately one meet the other two criteria and it's meeting all of the criteria that then make us pull the trigger and I think as you saw from the script is that we are very happy about the JayBird acquisition and will continue effort in this area to use our cash to build up our portfolio and grow the company.

And your last question, talks about mature categories and pricing and what we did last year whether what impacts we saw, what we learned from it and we did a big kind of review of that during last year. Overall I would say we didn’t see a lot of price matching especially in other front, some of those prices is probably adjusted overtime. In some places we did see quick price matching and other places we didn’t. The good news is we are in such a leadership position in many of our categories but we feel we are in a position where if we need to we will take pricing with or without our competitors and then we will innovative right around it and the best kind of price increase is innovative product and premium price and that’s our primary pricing strategy, always has been and certainly will be going forward. But if there were big change in currency again like there is in UK we will certainly have the opportunity to take a hard look at pricing and potentially rates.

Our last question comes from the line of Andreas Mueller with Zurcher KB. Please go ahead.

Coming to prices I was wondering what was the contributions on price increases this quarter?

It's pretty much, if you look at from a price increase perspective we started in Q1 of last year made and became effective through the end of the quarter, so it's fairly small on the top line and then on the gross margin side I really invite you to see the strong quarter over quarter gross margin increase for three quarters, we’re running at the wrong 33.5 with whole price increase baked in and so the improvement in FY ‘17 as we have said and earlier than we had planned is coming from a very cost discipline and then the mix.

Okay. So going forward you would rather think top line is kind of slightly improve through price increases the next couple of quarters?

No I'm not sure I understand you quite bit, but the growth would be apple to apple from a price perspective.

Yes, so we don’t expect broad price increases going forward.

Then on mobile speakers I was wondering I mean with the integration Siri and Google Now, does the voice control allow you to go beyond just controlling music content for example can you already ask for the weather forecast and related to that was the inventory correction last quarter basically in speed because that were not upgradable to this functionality?

I didn’t quite pick up -- catch the last part of it, I think you said what about users that were non-upgradable to this functionality.

Okay, all right. I was just wondering if you can offer reduce the inventories in the channel or your channel partners with from the first generation which hasn’t [indiscernible] for example built in to do the--

No I don’t think that was -- that’s not a big impact on what we did last quarter or this quarter. We didn’t have a inventory adjustment to try to get ready for the voice capability we put in, that voice capability we put in was really put in through the app and we have done with the existing categories and it's really very much focused on future product by the way but is enabled in existing products and in many cases as you said. But it wasn’t a big driver of the inventory, did I answer your question?

The other question was you can control of course the music content with voice but can you go beyond that basically what Siri and Google Now can do, could you do it that also through your speakers?

First of all there is a lots of functionality that you can offer, you can get through Siri and Google now and today though, UE speakers are focused on music and music capability and down overtime as more options become available make sure we enable some of those other options but our products are very focused on music and music wherever you go.

And our last question comes from the line of Paul Coster with JPMorgan. Please go ahead.

This is Paul Chung on for Paul Coster. So wanted to touch on keyboards and PC webcams, I know you mentioned the strength of the install base but can you give us a sense of any other variable driving the strength whether it be market share gains, expanding channel and how is the channel selling in versus sell through? Just trying to get a sense sustainability, how we should think about the segments throughout the year?

Sure. Yes the -- I think generally speaking our sell-in and sell through we don’t usually talk too much about them, it was very balanced across the whole business including this part of the business. So yes I would say the drivers, the real drivers of the keyboard businesses, we just keep innovating against that space and we feel really good about it and in your -- categories growing, we’re big enough that we are probably driving the category through innovation and we certainly intend to keep investing in new innovation there. In the webcam spaces I mentioned in the opening, it's really an interesting place because you’ve got so many people now broadcasting live streaming, lot of them live streaming, some of them kind of filming themselves and put themselves up on to the various sites including Twitch and YouTube and others. So it's really an interesting moment there and yes that’s the driver of book sales in both those category.

And then the margins most likely benefited from that product mix shift, keyboard and desktop, how should we think about margin dynamics throughout the year should it be from those two categories driving close to 50% of sales?

So in term of margin, year-over-year there was a big mix, really mainly driven by the exit of OEM business that we have been driving through last year. When you look quarter over quarter the main contributor is cost savings across the Board not just in one specific category and almost all categories contributed to that improvement. Moving forward I would suggest that you continue [indiscernible] gross margin at 35% or slightly higher as we discussed.

Okay. And then last one for me, is the mobile speakers between the quarters, I know you mentioned 10% to 15% for the full year, should we expect similar sequential ramp in 2Q similar level in 3Q and then sequential drop just to trying to get a sense of how the quarter's play out? I know the--

I understand, I think Vincent kind of highlighted this, the next quarter for example we have a really strong compared to year-ago number. In Q4 we have a weaker comparison, I think it will kind of a bit of a lower coaster through the year but overall we feel good about where we’re, we feel really good about the innovation profile for this year and next year from what we can see so far and I think 10% to 15% number while it's really hard to pick a number like that, it's early in the year we feel good about our overall kind of position in that and I think we will expect those kinds of numbers.

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

Okay. Well as I really as we said a really strong start to the year, we feel it's really fun to be able to raise guidance looking after the first quarter and we wouldn’t do it if we weren’t really excited about the opportunities ahead of us, but I will just close by saying there are so many things we could have done better this quarter than we did and we still have a pretty strong quarter, and we’re really excited about the next quarter's ahead and this year and the number of opportunities just keeps growing. So thanks a lot, we look forward to talking to you guys after Q2.

And ladies and gentlemen that concludes our conference call for today. You may all now disconnect. Thank you.