Good day and welcome to the Logitech's Second Quarter Fiscal 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. We will be conducting a question-and-answer session and instructions will follow at that time. [Operator Instructions] This call is being recorded for replay purposes and may not be reproduced in full or in part without written authorization from Logitech. I would like to introduce your host for today's call Mr. Benjamin Lu, Head of Investor Relations.

Hi, thank you. Welcome to the Logitech conference call to discuss the company's financial results for the second 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 being 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 calls will include results reported on a non-GAAP basis, except as otherwise noted. Non-GAAP operating 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 our IR website. Joining us today from California are Bracken Darrell, President and Chief Executive Officer and Vincent Pilette, Chief Financial Officer. I’ll now turn the call over to Bracken.

Thanks Ben and thanks all of you for joining us. Over the past few years we've built our business as a portfolio of categories across a steadily increasing number of brands. That's the way we've talked about it with you. So today I want to shine the light on a slightly different aspect of our portfolio. Category leadership. Everyone knows category leadership is an advantage. But some might think that category leadership is almost automatic as an advantage. But we know better. If you don't put in place a powerhouse innovation engine your strength is wasted. We know that very well. When Vince and I started here Logitech was a perfect example. We were the leader in about five categories but our innovation was failing us. Over the past six years we've not only gained share in all of those categories we led before but we've about doubled the number of category leading franchises we have to 11. Today those leadership categories represent nearly 70% of our net sales. We did that by deeply understanding consumers and using design as our central approach. This unlocked the power we always had in engineering. And for those where we are not a clear leader we view them all as works in progress. We're working to either innovate and grow toward leadership like we are in Bluetooth speakers or redefine the category to create a new subcategory where we believe we can satisfy true consumer need and lead like Jaybird. Will we always attain leadership? Maybe not but you can see by our record we're having some strong success so far and we will serially enter new categories that we believe we can lead. Our ambition is to be a vibrant portfolio of category leading product groups combined with a strategic set of…

Thanks and good morning everyone. As Bracken said, our strong momentum continued this past quarter with sales up 10% in constant currency. We had strong growth momentum in Asia-Pacific, up 26%, solid growth in the Americas up 9% and a stabilizing business in Europe. It was just over a year ago when we acquired ASTRO Gaming since then the ASTRO business more than tripled in size. As we leveraged a strong market growth, reached into new channels and regions and expanded the product portfolio through the launch of new handsets into lower price points. ASTRO is a great example of how we can take an acquired asset and build value by leveraging our core capabilities. This quarter we closed the acquisition of Blue Microphones, which added roughly one percentage point to our overall growth. And we're very optimistic about its future. Also on an accounting note with regard to revenue, I mentioned last quarter that we implemented the new 606 revenue recognition standard. This quarter our sales were impacted negatively by about one percentage point compared to Q2 last year, which was reported under the old standards. For the full year, we expect an immaterial impact from 606. In Q2, our non-GAAP gross margin improved by 110 basis points to 37.6% due to our continued cost reduction efforts, favorable mix and currency tailwinds partially offset by investments in customer sales programs to support our growth. It is worth noting that we also benefited from a one-time $7 million tax duty refund which favorably impacted our gross margin. The net impact of the two one-timers this quarter, the headwind of the 606 accounting standard and the tailwind from the duty refund is a favorable half a point benefit on gross margin. Nonetheless, it was just great execution from our operations team…

Thanks, Vincent. It's great to start the year – it's a great start to the year but there's still so much more to come. I really love this time of year. In most of our categories those who are looking for gifts and probably like most of you, for their loved ones or maybe just for themselves. I have more to give – we have more to give this year than ever. ASTRO headsets, Blue Microphones, Jaybird Tarah earphones, MEGABOOM 3, MX Vertical and I could go on and on. But they're really for everyone, whether you're a player at home or at work, but anyone who wants to stay connected, and maybe you can even give a video collaboration equipment with AI built-in to your loved one, might be an odd gift but we're promoting that. And I'm even more excited about the other new things that we're working on right now, they won't be available for this Christmas but maybe for the next. Now tariffs as Vincent said are on everyone's mind. But we view it as another reality. You should just expect us to adjust to and we are. We’re confirming our outlook for fiscal year 2019 for both net sales growth of 9% to 11% and for non-GAAP operating income of $325 million to $335 million. And with that, Vincent and I are ready to take your questions.

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

Thanks for taking my questions and hi.

Hey, Joern.

Good morning.

The first one would be please on the tariffs. Can you – you stated that there will be negative impact on the gross profit margin of 50 basis points in the second half. Can you help me to reengineer the math and what percentage of revenues is impacted by this? So how many products are on the list? And second question would be please again to clarify the gross profit margin and you stated there is a net 50 basis point benefit from the duty refund and accounting changes can you also please highlight what was the benefit of the FX? And as a third question please. I mean, your supply chain set up. I mean, how are you reacting to the tariff risk, are you already considering to diversify your whole supply chain in the next two to three years. And if yes, what do you think will be the cost on the P&L and in the CapEx? Thanks.

Great, Joern, let me take first the number of question out of the way and then Bracken will address some of the risk and how we see the diversification of our risk here. So in term of overall tariff I would say that for the second half we're going to have about half a point of mitigated impact. Obviously over the long-term, we have mitigation plan but some take a little bit longer to implement than others. We do not quantify per – each product. There's a bunch of codes that are impacted, some that are not. As you know, it goes below the category, it’s not the one full category that's impacted and half a point you can easily, if you want, play a reverse engineer. But I will focus on that. I would just say that for the second half building to our guidance we have half a point build from tariff. And that will continue to go down as we progress with our mitigation effort. So that's number one. Secondly on the gross margin impact from the one-timer this quarter as you mentioned. And I’ll repeat we have about half a point of mix of unfavorable and favorable. This quarter if you take the euro we trended for which is the main exchange rate, we traded at about where it was last year. It's a little bit of a tailwind still. As you know, we commit to a growth in constant currency that's how we focus developing the business. But everything below into our P&L, we’re managing U.S. dollars and when we have a little bit of favorable tailwind from currency then we may use it in various ways as long as we meet our profit commitment which is in U.S. dollars. That currency effect as you know, if it stays at 115 for the euro exchange rate as one example, may move into a tailwind by Q4, but one quarter at the time.

Vincent already talked about some of the short-term impact which you also asked about the longer term impact for the next two or three years of the effective of a new world with where there are tariffs coming from China. We have a manufacturing strategy in place and we're always updating that. And as far as we view tariffs as just another impact on our manufacturing strategy. So certainly we are looking at the supply chain changes in the context of where we are today or where we might be tomorrow. Do I expect that to have big impacts on OpEx? No.

All right, thanks very much.

Thank you.

And Vincent, just a follow-up, yes, I mean sorry, to follow-up on the gross profit margin 50 basis points, was this including the FX benefits or was it excluding the FX benefits, the plus 50 basis points you were saying for Q2?

Yes, for Q2 excluding the currency benefit we do not isolate or report the specific currency benefit on the gross margin. As you know, we manage differently and some of that benefit may be capitalizing our inventory, there’s hedging, there's many different dimensions if you want that will lead us to drive the gross margin on U.S. dollars. So that – to answer your question, it was excluding the currency benefit.

But then, shall we think about gross profit margin as you also indicate this to be one of the key KPIs? So do we expect this to fall back to the midpoint of your guidance between 35% to 37% for the second half or can it stay around 37% for the next two quarters? How should we think about it?

Joern, it's a very good question. So we manage the business in the long-term, still in the long-term range of 35% to 37%, operationally in the first half we've been on the high end of that range. And as you know, normally in Q3 and Q4 your margin tends historically little bit lower, so it would be prudent if you model at the midpoint of that gross margin. Now of course we don't guide the gross margin per se we managed a business on the bottom line and top line perspective.

All right, thank you.

Thank you.

Your next question comes from the line of Alexander Duval from Goldman Sachs. Please go ahead. Your line is open.

Yes. Hi everyone, many thanks for the question. I’m Alex from Goldman Sachs. Just a couple of quick ones. First of all on the music side of things, it seemed in sort of the recent or the last quarter's if there'd been potential need to reset the channel a bit given some lower price offerings from digital assistance players. But you actually stated today that you're seeing some underlying improvements in trend. So I wondered if you could give a bit more color on what you're seeing and how confident you are that growth could return? And secondly just on the China tariffs point, you did obviously mention that you were able to manage these impacts within your prior full year guidance range. I wondered if you could just clarify to what extent you're confident that you're baking in all the potential impacts. Obviously, there's a lot of complex moving parts. So just trying to understand to what degree you’re being conservative on that? Many thanks.

Okay, let me take the music question and Vincent will take tariff question. Yes, I would say, you've seen I think we're pretty clear over the last two quarters we've been pretty aggressively selling out the old product out of the channel to make sure it's very clean or as clean as we can make it as we bring in the new product and that's traditional for us. And we did that. And as we've done that now we’ve started to ship in the new product. And it's a little too early to say exactly what that will do. But we're confident that the new products are very compelling, they are priced well, they're good value. And the feedback has been tremendous. So I think this is the big quarter – one of the big quarters for Bluetooth speakers. Q4 is also pretty big because we go into the summer season when the waterproof speakers are really valuable. So I’d say so far so good. I think certainly you'll see improvement versus last two quarters and we'll go back to growth or strong growth. We don't know yet. We're not banking on that but we certainly expect a significant improvement.

Good. So on tariffs, we started very early actually, Alex, we've been working on it since May and working on the first of this and the second one. At this point in time, we know all of the SKUs that are being impacted in our portfolio. We also know the tariff increase in September 24 is by about 10% moving generally first at 25%. All of that is known, for that we have our forecast at this SKU level, I can say we have a certain degree of variability there that could impact the number. And then we have our mitigation plan that's pretty well-known. The two things that are less known is either forecast and secondly whether or not we are going to act on increased price. So we have a forecast that’s based on what we know and that always try to leave room for the unknown. We have a good track record of meeting our forecast, it doesn't mean that it's 100% guaranteed but we feel pretty good about the model and all of the moving parts in that. The last point I would want to add, you may have heard at times that politicians say that may be the all imports from China into the U.S. would be under tariff. Of course that is not currently our working assumption. We work on what we know from an overall scope perspective.

Very helpful, many thanks.

Thanks Alex.

Your next question comes from the line of Asiya Merchant from Citigroup. Please go ahead. Your line is open.

Hi everyone.

Hi Asiya.

Hi, congratulations on the results. Quick question as you think about seasonality into the back half of your fiscal year or into even the holiday season ahead. How do you think about that relative to seasonal norms that you've had? And then secondly, EMEA still seems like it's stabilizing but not really growing. When should we expect that region to also post growth? And then lastly related to the seasonal question macro within China, lots of demand indicators coming through, clearly you had a very strong sell through in Asia-Pac. But then as you look ahead into the quarter and into the back half of the second – the fiscal 2019, how are you thinking about that demand indicators in China? Thank you.

Yes, let me first take the modeling linear IT, kind of question out of the way and then Bracken will take the second two questions. In terms of sequential seasonality, which I’m assuming is what you're looking at right now, historically we've been growing about 20% up from Q2 going into our Q3, right at calendar Q4. And when you look at our forecast for the rest of the year, we are somewhat in line with that seasonality. The two things you need to keep in mind is last year in Q2 we had bought ASTRO, this time in Q2 again we bought Blue Microphone, those two may SKU your historical seasonality. So historical seasonality plus the acquisition of Blue this time is what make our guidance going forward.

And the two regional question, as you mentioned EMEA is stabilizing and I feel really good about the moves we're making there. We've made a lot of changes structurally and we're changing some process. And we're also really moving to a lower promotion, higher marketing spending environment which is – which we are super excited about, very similar to what we’ve done in Asia-Pacific. It will probably take a year or two to really fully implement but I feel very good about it. I think you'll see improvement there and I wouldn't want to – we don't guide on the quarter so I wouldn't want to say. But yes, I think you'll certainly see improvement there and we’re excited about it. China, everybody is talking about the macro environment in China and we have a great China business, we have a great China business this quarter. We're very excited about the team we have there, the approach we're executing there, our indicators in China continue to be good. But I would say, it's true that the overall the currency has weakened in China that we all know that, and we read the same thing as you do. But I guess I would just say I'm super excited about the team and the operating excellence that we have in China. So I think we're going to get the most out of China you could possibly get and so far so good. We don't see any doom and gloom on the horizon.

And for those of you who are modeling here listening to Bracken, that China sales is about 10% of our overall sales, so that gives you also a magnitude of…

I would just say, one of the things that you asked regional question, just like we're a portfolio of categories with different categories that performing at different levels, different times. Same thing for the regions and we are very aware of that. So we actually like that, because as resetting EMEA, we've got a really strong AP, AMR is doing fine and I think you'll see the mix does change from time to time. I imagine we'll have a period where EMEA will come back stronger and Asia-Pacific will be a little softer than it is, although it's probably still very strong.

Great, thank you. And then one, if I may follow-up, like looking longer term into your fiscal 2020, I know you guys have a $2 EPS out there that you've put out at your Analyst Day earlier this year and things sounded really good. How do you guys think about – whether it's China, whether it's just tariffs, GDP growth forecasting lowered all that and yet you guys continue to execute really well, how do you think about all that as it relates to, kind of, like a guidance that you've provided for $2 in EPS for 2020? Any changes there?

No. I think there is no change, right. Every time we deliver a good quarter, and Q3 is another one. I'm having many of you asking, can we deliver $2 EPS a little bit earlier. And as you know, we're very conservative, we have an operating plan, we march towards that and we feel, after all the good quarters we've had, very strong in term of delivering the long-term value. There may be in and out that may change and some assumption will change, but that's part of the portfolio with so many levers that we have in that.

Yes, I would also add. We're – as we've talked about many times and we talked about in the opening today, we're a portfolio of businesses, portfolio of countries around the world, of course, and we have a lot of tools to play. And so I don't believe we are really hypersensitive to modest changes in the economic environments around the world. We're much more in control of our own destiny especially with our growth plan where we can serially enter new categories, and we have opportunities – and we do have opportunities to do that. So I don't think we're going to be – I mean, of course, if there's a massive slowdown around the world that will affect everybody. But generally speaking, we control our own destiny.

Great, thank you. Congratulations again.

Thank you.

Thank you.

Your next question comes from the line of Thomas Forte from D.A. Davidson. Please go ahead. Your line is open.

Hey, Thomas

Great, thanks. So I wanted to ask two questions, one on tariffs and one on eSports M&A. So on the tariffs front, given your leadership position in the categories that you operate in, we would imagine you'd have the ability to adjust price, if necessary, use that as one of the levers to offset potential pressure. And then on eSports, definitely seems like it's becoming more mainstream, you can see ninja on Samsung ads in Sunday Night Football. And you've made few – what we think, are excellent acquisitions with ASTRO and Blue Microphones. How should we think about your M&A strategy going forward for Gaming?

Okay. I'll answer, both of those. I think from – yes, you're right. I mean, when I opened with category leadership and if you're a category leader, you should have the opportunity to have some pricing leverage, and we think we do. Now we're not going to be responsible with that either. We're about creating value for consumers. So we're going to – we'll do that in the right way. And we have experience driving pricing around the world. We've priced many times, repriced, raised price in both Asia-Pacific and EMEA, not as often in the U.S. But yes, we should have pricing leverage where we need to. From an eSports standpoint, thank you for the comments on the two acquisitions, we're obviously super excited about both of those. And we completely believe in the rise of the eSports and feel it's really at the very beginning. Our M&A plans, we, of course, don't share anything, but we're looking – we're always looking at many things, and we're looking at many things right now.

Great, thank you for taking my questions.

Thank you.

Your next question comes from the line of Michael Foeth from Vontobel. Please go ahead your line is open.

Yes hi. Hi how are you? Just two questions on – Smart Home is obviously a small category but you've been talking about category leadership and I was wondering did the sharp decline there, what is the source of that. Possibly, possibly the Circle cameras and so how do you react to a situation where you are sort of are losing out and maybe not the leader in the category that would be the first question. And the second question is – the second question is regarding EMEA again. If you can be more specific what is really behind the relative weakness or which categories are behind relative weakness. That would be helpful. And if you're seeing any changes in consumer behavior in the large European countries. Thank you.

Okay. Well on the Smart Home. There are two different things going on there. You mentioned Circle camera it's tiny for us. And as I opened I said we only want to be either the – we want to be either the leader in the category at large or we want to be a leader in a thing that we think of as the category at small which is a subset of the category that we feel like we can really lead. And we're working on that and I can't disclose more than that except to say that we'll see. It's really small. So I wouldn't get too excited about what whatever Circle is. From a Harmony standpoint, which is the remote control business – that one is a good example of what you do in category leadership context when the category itself continues to go down. So what are we doing there? We're consolidating. So, we're really reducing the number of SKUs that we have. We're reducing our overall OpEx spend there so we can reallocate to where we think there's growth. And we'll have a good profitable business there for whatever it is and it will be resized by the time we get to the other end. You may remember when Vince and I first started working together we did this a couple of different times. And this is part of the deal here. It's part of our strategy. In EMEA, I wouldn’t point to a single category I think this is really across the board. We are really changing our approach to Europe. Looking ahead, looking ahead two or three years. And we're really taking a lot of the playbook that we took from Asia-Pacific which moved very strongly online. And is a good combination of great online marketing and good offline marketing and we're applying the same model into EMEA and I think it's going to take a few years to really see the benefits of that. But I think the growth will come back faster than that but the real benefits that will come later. But I'm excited about it, so I wouldn't point to a single category and I'm not concerned about Europe. I feel like we're really doing the right things. I feel very good about the steps we are taking, I think the results will come relatively soon.

Thanks.

Okay, thanks.

Your next question comes from the line of Paul Chung from JP Morgan. Please go ahead your line is open.

Hey, how is it going. Thanks for taking my questions. So, first up on Keyboards you've been driving pretty impressive growth over the past three quarters. Can you just expand on what's driving the strength there it's in the MX lines are lifting overall ASPs somewhat but could you just talk about unit shipment trends, market share dynamics, channel strategy that would be helpful.

Sure. The Keyboards & Combo business for us has been a strength for years and it continues to be and we keep innovating there. We launched the new living room keyboard this quarter as you probably know. And that's a great product. The MX products continue to do well and then we've got the signature product at very high end, which is Craft. I would just say, generally across the board where our innovation is doing well there. We continue to do generally speaking hold or gain share in major markets. And we still have opportunities to gain share in all those PC categories. Believe it or not, when I look at some of our share trends in some places especially at the low-end here and there we should be doing better. Though – yeah, I mean I think our Keyboard & Combo business will continue to be good

Okay. And then second question is on Blue Microphone what triggered you to kind of take action in this market and any detail on margins, channel overlap that would be helpful as well.

Yes, like one of the things that we've talked about before is that when we – when we are always working on some categories and usually secretly, but we've got several categories in development all the time. One of those pretty, I was pretty overt about that I think in the last call, one of those was our microphone. So, we were very interested in this category. Now when we start to work in the category, we have teams working on products and in understanding the category and the category dynamics. At the same time we take a hard look from an M&A standpoint where we think we can either accelerate something we're doing or differentiate it or even replace it entirely. Blue Microphone was a wonderful example of being able to really completely replace what we're doing and take a big leap into the category. A category that we already felt like we started to understand well enough to play. So, that's the story there and as I said we’re really excited about it.

And we think the same levers that applied to ASTRO will be at play here from launching new product, expanding into internationally new regions, expanding into new distribution channels and building up the portfolio overall from a gross margin perspective. We don't talk about gross margin by category but it is accretive to our overall corporate gross margin.

We would have gone into this – I guess the point I was trying to make is we would have gone into this category regardless. Just like we went into video-conferencing or went into Bluetooth speakers. We would have gone into this category regardless. This acquisition enabled us to go faster, a lot faster.

Okay great. And then my last question is just wanted to hear your take on Google Project Stream. I seem Logi may benefit if this service does take off, if console gamers may migrate to PCs. So curious to hear your take and then what was ASTRO's contribution in the quarter. Thank you.

Well, first of all on Google's you could have expanded that to Google, Amazon really all the big players. Anybody who's out there providing a platform for streaming or a platform for gaming, and the answer is just streaming in general. It's good for us because that's our business. We really view ourselves as enabling these large platforms and the users who love them and want to try them. And so it's great for us. We're super excited about it. And Twitch has been fantastic for us and YouTube is actually fantastic for us too. So, I’d say it's just another good one.

On ASTRO's side, we don't split Gaming. ASTRO is fully – this is the fifth quarter fully in our overall baseline. The only quantifying number I said is we tripled the size of that business. It's a good contributor of the overall gaming growth that we’ve reported.

Thank you so much.

Thank you Paul.

Your next question comes from the line of Jürgen Wagner from Mainfirst Bank. Please go ahead your line is open. Jürgen Wagner: Yeah, hi thank you for letting me on. You mentioned that PC peripherals is a broad based strength and you also mentioned that – or explained us why Keyboard is doing so well. Do you see any impact from the current processor shortage? And in previous calls, you indicated PC peripherals segment as a whole to be flattish plus or minus, now you're well above. Should we then see somewhat leveling off until year end. Thank you.

I'll respond to the first part and I'll let Vincent respond the second since it's kind of a modeling question. The processor shortage has been talked about a lot and I'm just continually amazed by how well our team and operation has done to manage our business in the context of that. I do hear about other companies with big cost problems, and it is costing us more by the way, but with big cost problems coming out of these various shortages of these very small components that never seemed particularly impactful before and suddenly are. We just have a great operations teams that's managed that really well and hasn't been a big impact for us and I don't think it will be.

And in fact, in companies, if you're reading about Intel shortages or other big shortages in terms of impacting the PC units being shipped into the market, I want to just remind you that we look at the installed base as really the addressable market for us, and I don't think those shortages in the short term will impact the installed base to impact the peripheral indirectly. So that's the main one. I don't remember if there was another question?

It was PC.

And then overall guidance. Absolutely, it's an important one. As you know, right, we've provided an outlook for our PC peripheral overall to be low single digit, I wouldn't change that. Obviously, every quarter, we'll try to drive better, we'll introduce new products, we'll optimize our sales performance and we've delivered the results that you've seen. We'll continue with the prudent and conservative approach of planning this and what we see, which is a low single digit and hopefully, we'll continue do better in that environment. Jürgen Wagner: Okay, thank you.

Thanks Jürgen. Operator Your next question comes from the line of Ananda Baruah from Loop Capital. Please go ahead, your line is open.

A couple for me, if I could. Just going back to tariffs, Bracken, it sounded like you were saying – communicating that you don't expect it to be, sort of, material based on, sort of, current news. Any further detail you can give on – and Vincent you mentioned, sort of, the plan you guys were looking at. Any detail you can give with regards to how much of that is related to just, sort of, utilizing current supply chain as it is versus introducing new things in the supply chain that may not exist today or previously existed? Just to get some sense of the structural nature of the impact. And then I have a follow-up on that too.

Ananda, so the quantified amount we said is manageable within our current outlook and then in the long term, I know you followed us at the time, right? It's like currency movement and other things. In the long term, the structural move will be built into the business model and we'll be able to absorb it. It does include moving some production location. We don't want to give too much detail. We're still working the plan. We started in May and we'll continue all the way into the next calendar year. We have multiple activities that would change structurally the supply chain and build actually a more diversified supply chain and therefore, making the company more robust. It does not call, at this point in time, any material change in CapEx in terms of investment. And that's the extent of the plan, I guess, we would like to.

One of the core capabilities of Logitech from a supply chain perspective has always been the ability to move our manufacturing in and out of our own factory. And that includes in and out of other people's factories if we happen to be contract manufacturing with other people in China. And that's exactly what this is about. If – when and if we need to move a product line out, in this case out of China entirely, we're more than capable of doing that. We've got the teams to do it, the staffing to do it and the – and we have lots of experience doing it. We do it, in fact, all the time.

Bracken this what I was, sort of, indirectly teasing it. Is this the advantage of having – I think when you had referred to in the past is a modularized manufacturing, kind of, structure, an interplant. Is that, sort of, at play here as well as a part of it?

But I do think it's an advantage to have both your own manufacturing and external manufacturing in your pass, so that you have a lot of experience moving. And so we do have a lot of experience moving. It even surprises me, and it surprised me the first couple of years I was here. How easily and how quickly we could move a manufacturing line out of our factory or out of somebody's factory and into another one without any glitch at all. So I think that is an advantage.

That is great. And then just quick follow-up. I may have missed this earlier. But the Gaming revenue, it seems like Gaming might be getting stronger. It's tough because the comparisons are big and they do move a bit. But I think you put up mid 40s growth or mid-40s compare or something like that, which is significantly higher than, kind of, run rate. So do you – just context around that. Are you – do feel like you're continuing to see the category strengthen? And if not the category strengthen, you think that you're continuing to see your fore-positioning within the category strengthen so that your, sort of, normalized growth is accelerating there.

Yeah, well I think the category continues to be superstrong. I think, we're doing well in those categories. But the nice thing about our story is, boy, we could be doing better. There are areas in our business and they're not small, two or three. That I think, gosh, we should be really outperforming where we are. And so we're really doubling down the innovation there to see if we can put ourselves in a place to do that. So I don't know whether I would say it's accelerating or not, it's certainly not decelerating, but I do think our opportunity there looks big and sustainable.

That’s great. Thanks a lot. Thanks guys.

Thanks Ananda.

There are no further questions at this time. I will now turn the call over to Bracken Darrell CEO for closing remarks.

Okay. Well, I want to thank all of you for joining us. Thanks for the call. Make sure to go out. The holidays are approaching. Buy lots of our stuff. And we'll see you – or we'll talk to you in January.

Thank you.

This concludes today's conference call you may now disconnect.