Welcome to Logitech’s video call to discuss our Financial Results for the Second Quarter of Fiscal Year 2021. Joining us today, are Bracken Darrell, our President and CEO; and Nate Olmstead, our CFO. During this call, we may make forward-looking statements, including with respect to future operating results that are based on the views only as of today. Our actual results could differ materially and we undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results. You can find a reconciliation between non-GAAP and GAAP measures and information about our use of non-GAAP measures and factors that could impact our financial results in our press release and our filings with the SEC including our most recent annual report and subsequent filings. These materials as well as our prepared remarks and slides and a webcast of this call are available at the Investor Relations page of our website. Unless noted otherwise, comparisons between periods are year-over-year and in constant currency, and sales are net sales. This call is being recorded and will be available for replay on our website. I will now turn the call over to Bracken. Bracken, you are mute.

I couldn’t see because I had my scope [ph] over. I should be unmuted now, correct?

Yes.

All right. Okay. Before I start, every economies performance starts and ends with its people. Our people are working longer hours. Their work from home is overlapping with their personal life at home and that stretching work earlier in the morning and later at night. So our team is not only working more hours in a day, but those hours are being stretched up longer in the day. Some are working with a child nearby needing attention, while others are there where’s there’s no one at all and it’s lonely. But we are all overcoming many challenges including those. And Sam Harnett, for example, our General Counsel started in June and has become one of my most trusted partners and advisors as she has for many other teams. She is on this call today. Jason Bayon, who probably isn't on is running our new and exciting influencer offense, as we call it and I am deeply aligned with his values we discovered that even deeply as after he started work. You know I’ve never seen Sam or Jason outside of this video screen. Somehow this is working. It will work even better as we learn how to work within these constraints we’re in overtime. In fact our team is doing an amazing job inspite of it all. New products were flowing, new ideas are sparking. Our capacity is growing, our supply chain is humming. We are building capabilities and we are building new growth engines for the future and our morale is strong. I couldn’t be more proud of everyone at Logitech. I joined the call on Friday with one of our teams who have got 90 people. As I entered the call, I found myself completely unaddressed or should I say inappropriately addressed. I discovered rosing the riveter, the…

Thanks, Bracken. I want to start by repeating Bracken’s thank you to our people for delivering the strong results in such challenging times. We are on pace to grow our revenues by more than $1 billion this year. And the operating profits we achieved in the single quarter were more than what we did in all of fiscal 2019. To accomplish these feats in a year, which began with factories shutdown and employees abruptly working from home is a testament to our team's resilience and their talent. One of the most impressive highlights of this quarter was the expansion of gross margin by over seven percentage points to 45.7%. The strength in gross margin was largely due to three factors; significantly higher sales volume, considerably lower levels of sales, promotions, and favorable product mix. In the second half, we expect gross margins to return to the high end of our target range of 36% to 40%. As supply demand conditions normalize, we increase investment in retail store marketing, and we move into the more promotion heavy months of the year. And as we noted last quarter, we anticipate that education iPad tablet keyboard sales will remain strong given the demand for remote and hybrid learning solutions which Bracken mentioned. These products carry lower than corporate average gross margins, and therefore a higher mix of these tablet keyboards will also put some downward pressure on gross margin. Non-GAAP operating expenses increased 18% to $221 million and were 17.6% of sales down from 26% in Q2 last year. While we ramped up the pace of investments in sales and marketing and R&D versus Q1, it was not nearly at the same level as the sales upside we delivered in the quarter. So with strong first half profits and confidence in the strengthening…

Thank you, Nate. So like we can get my personal guidance I’m not going to give company guidance. This morning, we announced an increase in our fiscal year 20 month sales growth outlook to 35% to 40%. And our non-GAAP operating income outlook to $700 million to $725 million, an increase of more than 80% versus the prior year. This of course is up from our prior outlook of 10% to 13%, and sales growth in the range of $402,000 to $420,000 in our non-GAAP operating income. I'm certain many of you are wondering what will we do next year, next fiscal year. It's still way too early for us to commit to target the next fiscal year, fiscal year. We will provide that guidance as you know next March in our Analyst Investor Day. What I would say is the underlying trends driving their business are not going away. Video calling will continue to expand. We'll continue to work from home and for most of us also in the office. Gaming will continue to expand its reach in our lives, and in our culture. And more and more and more people will create content for us, for all of us. We have such an exciting future ahead of us. Till today, we're worth more than 13 times more than we were when I started eight years ago. And yet today we have so many new opportunities and so much more momentum. There's so many opportunities to unlock, enormous growth in existing and in new areas. It's going to be an exciting, really exciting next few years. Thanks so much. And with that, Nate and I are ready to take your questions.

Thanks Bracken. We’ll take the first question from Joern from UBS. Joern?

Yes, thank you. Hi, Bracken, hi Nate, hi Ben thanks for taking my questions. And the first one would be pleased. Is it fair to assume that pricing and mix is supporting your sales growth by roughly around a quarter? And in fiscal year 21, and also what is your pricing strategy going forward? Second question would be please, on your R&D allocation. I mean, now when cash flows are much stronger, versus you anticipated maybe three to six months ago? And are you willing to experiment it more on R&D trying to develop new categories, also looking to healthcare, for example? And the last question is, I mean, understand that you are saying you will step up your SG&A investments in the second half, and you are guiding for non-GAAP EBIT in the second half, only up 5% year-over-year despite your sales in the second half should drop around 30% according to your guidance. I mean, what kind of SG&A investments are giving you the return on invested capital you need, and to really justify this investment as COVID-19 is quite nice marketing tool for you? Many thanks.

Nate, I’ll let you answer the first one on prices and mix, and I'll jump in and figure out – next year.

Okay, thanks. Joern, let's make sure I captured your first question. You asked how much impact has pricing had on our revenue growth for the year? Was there a second factor you mentioned?

Correct. What do you roughly expect? And there a benefit from price mix? If it's fair to assume that is around maybe 10% or so, 10 percentage points for fiscal year 20 minus, is it a fair assumption?

Yes, I think it's in that ballpark. I think in the second quarter, we had some restocking in the channel, bringing some products. We were pretty short on, really across the portfolio at the end of the first quarter. So there were some products we were able to restock. But if you look over the first half growth being 50%, that sort of washes out. So yes, we had some benefit in this quarter from both the restocking the channel in some areas, we're still light in some areas like web cameras. And then we also got some benefit from the reduced promotions as well.

Good. I’m going to…

I’m going to say Bracken, if you want to get started maybe on the SG&A or R&D, or I can…

Sure I mean, they're really, they're related questions. On the R&D side, you're asking if we would be given more, we are willing to experiment with new categories, which one in particular? The answer is we've always experiment with new categories, and we're going to keep doing it. We keep it about between 5 and 10, new categories and development at a time we call seeds. And we're certainly going to keep doing that aggressively. And -- many of them don't make it to market, but they're super interesting and exciting. And we're getting better and better at this. I think. So yes, you can, you can count on it. We're working on new categories in development, both from an engineering standpoint, and from a business model standpoint. On the SG&A side, not only are we going to keep investing in those kinds of things, I think and probably increasing it certainly in the areas of video collaboration, and others. But we're also looking into the back half and playing spend more on marketing. We're trying to move our business over time for me, what's traditionally been kind of a push model in the vernacular marketing to a more of a pull model. And we're going to spend a significant amount of money in the bank, calculate trying to drive that further. And we're also going to increase our spending and infrastructure because with this increase and demand, obviously, it's stretching some of the infrastructure as we you all customer or consumer experience teams, some of the other. So yes, we will be spending more in SG&A and I think it's going to be a good investment. You want to add anything to that Nate?

Well, I think just a little bit more on the R&D side. I think, you've seen us pretty strategically increase investments in R&D. The first half of the year R&D is up $17 million on a non-GAAP basis, year-over-year already it was up $10 million, this quarter 25%. So, I think as Bracken has said, I think about investments maybe the same way a lot of you or the investors would as we're investing in a portfolio. And, as we see things that have great market potential, like VC and gaming and creativity and streamers, we're investing aggressively those areas, and we have other areas where we've pruned back the investments a little bit and reallocate our resources. So well, even while you see that 17 million increase in R&D for the first half, some areas are getting more than 100% of that, and other areas are getting less. So we're pretty actively managing that investment portfolio.

All right, many thanks.

Joern, thank you.

Thanks.

Ananda. Your line is now open, please state your question.

Hi, Ananda

Hey, guys, appreciate it. Hey, so for both of you Bracken and Nate. As we think about sort of what the model looks like longer term, and Bracken you made a couple of comments and one was for all things video, you use the term multi-year cycle. You talked about some of the structural changes. I'm not asking for a forecast here. But clearly it sounds like all COVID catalysts aside, there's been a pull forward and a leveling up of some of these trends into sort of being more structural. What would be the reasons, you could see that the long -- your long term, kind of growth funnel, which is kind of been that five. I don't know, like, it's actually been more like recently, like a 7% to a 12%. One, structurally the level up to something hot air, what would be the reasons that that wouldn't take place or shouldn't take place? And then I have just a quick follow up as well?

Well, first I do not use the word cycle when I talk with any of our businesses, because I don't really see us in a cycle or see us in the long term secular trends. And as you said, I think there's two ways to look at those long term secular trends in the context of COVID-19. What does it say, oh gosh we've got all this short term businesses going to take -- away from the rest of the longer term. The other way to look at it is they actually we've increased the overall install base of workspaces, for example, it's actually been accelerating long term. We're not really looking at our long term guidance right now we're not really talking about guidance for the next year at all. But I'm super optimistic about what's happening here. I mean, it's basically leveled up the entire world in terms of the devices that we support. And that is an incredibly exciting thing.

Yes, the install base is the other thing. So okay, totally got it. And then just a quick follow up is, with regards to the investments that you're making in video collaboration on the sales side, can you just talk to us structurally, what you see is needed to be done not even from a spend perspective, but from an initiative perspective. So we can sort of help fill out our map about sort of, like how much how much there is still, too. So there, how you guys are thinking about that?

Yes, I don't want to be too specific there just for all the reasons you would imagine. But what I would say is we -- we've increased the absolute number of salespeople and customer support people dramatically, that it serves around that number to keep doing that systematically over time, not proportional to not the same proportion that we've done before. We're going to keep adding, because we want to this is a lot of what we've done to salesforce. We've separated our business salesforce. It's really a high touch business, and especially for the larger customers. And so we're going to make sure that we have the right people on the ground, face to face with the buyers, and the decision makers, and then supporting them once they bring in these big deals that we're increasingly seeing. So I think without being too much more specific in that, that's going to require continued investment, and we're going to make it but the margin certainly support that.

And then if I add just a little on the VC side. I think it’s – would emphasize what Bracken mentioned on the customer support side, and the customer experience, things around how you do pricing, and the supply chain, and it's a little bit different motion and customer expectation than what you have on consumer. And so, there's some areas, I think as we continue to grow, we're going to want to invest in that and really be able to do something that's differentiated and really pleases the customers.

And you guys, just to wrap that real quick. You guys have been investing in that get to market for a while now. So should we think of this as being just part and parcel sort of on-going with what you've been doing that sort that set of initiatives? Or should we think of this as something that's been you meaningfully incremental to what you've been doing from an initiative perspective?

Yes, no, this is absolutely a continuation of what we're already doing. And we're, we're really hitting our stride here. So we're, this has just continued to double down on the growth, we already have to drive further growth using the same mechanism which has expanded salesforce and customer support.

Yes. Got it. Great. Thanks, guys.

Thank you. Thanks, Amanda.

Paul, Your line is now open.

Hi, Paul.

Hey guys, how's it going? Thanks for taking my question. So congratulations on the quarter. Just first up on APAC, you saw a really robust growth in that market. You know, suggesting the hybrid work from home kind of go to, go-to-offices, has some staying power, at least in the near term. Can help us break down where you saw the best relative performance in Asia and can this region kind of serve as a leading indicator for other regions in Europe? And then I have a follow up.

Yes I mean, we excuse me. We just had strong growth around the world. I mean, it's really hard to find a country where we didn't have strong growth, including China, which which kind of went into the COVID COVID phenomenon, the earliest and came out, came out the earliest or started to come out the earliest. It’s a little difficult to give any specifics on that, we don't normally give you details of by country of growth. But China continues to grow very well. I mean, it's reflected in our guidance, and we feel really good about the long term growth potential of this business. And as long as we keep investing, and then keep upping our game, and that's what we talked about marketing and moving from push to pull, pause and keep investing and upping our game. I'm really optimistic about the long term growth of this business in every place, including COVID-19.

Okay, thanks for that. And then just a follow-up on retail and direct-to-consumer, can you kind of give us a sense for how much of that business in the quarter went through those channels? How you expect that mix two to evolve kind of near term? And then can you quantify any lift you get from DTC, and if this shift is accelerating? Do you think you are in a position to kind of structurally raise your long term gross margin target soon? Thank you.

Well, I'll punt on that last question, because, because the answer of the first question makes it clear. It’s still a relatively small part of our business. We're not, we're not with these companies with 30% of our business going through DTC now. We look much, much farther than that. So we're in the single digits, mid-single digits, even low single digits, but we're growing very rapidly. And it is better margin for us. It wasn't better margin for us, but it's becoming better margin, because we're getting better at it. And we're going to keep investing. We don't want to compete with the rest of our distribution. So we're making sure that we offer is the opportunity for a customer to buy anywhere they want, including directly from us. And then where we can we are offering something extra special. And so we're going to keep doing that, I suspect, the DTC will grow faster than the rest of our business. But it's still relatively small. So I wouldn't expect it to have a really big margin mix in the capital in the company.

I would agree with that, Paul. And I think, just as we're diversified in other areas, I think that that route to market retail, traditional retail DTC, I really like having a diversified approach across all those. And one of the things that's happened in the first half of the year, as a lot of business has shifted to retail, some of that may stick, some of it will move back in traditional retail. We're increasing our investments in traditional retail marketing and point of sale displays in the second half of the year. And that is one of the reasons I called out for why I believe gross margins will come down sequentially. Because we've -- we're going to reinvest into that channel, which is, which has been a little bit slower in the first half of stores, as stores have been shut down. But we'll always want to keep a really nice balanced approach there.

Then I'd add the other great thing about that channel is that it just gives you a chance to learn better, how to deal with everybody, all the other channels we work through because we're skins with the customer, and that makes better everywhere.

Thanks guys.

Thanks, Paul.

Asiya, you are next.

Hi, Asiya.

Great. Hopefully, everybody can hear me here. Can you guys talk a little bit about seasonality and how we should think about seasonality in the second half? I know you guys were initially talking about March being negative year-over-year now with this, growth year that we've seen in fiscal 2Q, how we should think about the March quarter or/and what are some of the, maybe the indicators that you're seeing that would suggest that March could be very, very negative from a year-on-year growth perspective. If you guys can kind of talk a little bit about that. And then, on the gross margin side, I know you guys talked about heavy retail investments, which benefited you guys here in fiscal 2Q and you have some mix shift towards tablet accessories. I get that, but you also have the budget flush coming typically in the December quarter. And I don't know if enterprises and SMBs and even consumers because we have nowhere else to go actually use the wallet to go out and buy some more peripherals, whether it's you know, video conferencing, blue, all these categories that are offsets to just very heavy tablet, accessories. And so again, if you could talk a little bit about gross margins from that perspective, that would be great. And then lastly, Bracken, I know you talked about high single digit, your long term CAGR going up because the installed base has gone up. One of the other questions is also what about replacement cycles? I mean, are you seeing because of more content creation etcetera are replacement cycles for some of the peripherals shortening, or are they kind of hovering around the same? Thank you.

Let me answer that one first. I didn't actually - I certainly have committed to increasing our long-term growth rates. But I do think there's an exciting increase in our install base that's coming right now, which certainly bodes well for long term growth. And so - but it's too early for us to revisit the long-term growth rate. We'll talk about our entire business in this fall at the Analyst and Investor Day. In terms of going through the back half year, if we gave you the impression, we're super pessimistic about March, we probably --maybe we were in the beginning. I'm not pessimistic about March. I think March is -- if you look at the relative growth rate of March this year versus the rest of March to fiscal year 2020, relative to the rest of the year, it wasn't that different. So I don't think you got some something they're really worried about there. I think when we look out the rest of the year we don't guide by quarter. We certainly don't guide by month. But we - I think there's a biggest uncertainty that I have personally, as we look out at the rest of the years, what's going to happen during holiday? Is it going to be a normal holiday. We just have a lot of people around the world who have never been in a shelter, in place environment like this and never gone through a holiday or they really -- will they really give the same kind of guess. Well, the same kind of thing happened. We just don't know. We do a pretty big CECL SKU in a normal holiday period. We're a little more reticent to count on that this year. And so we'll see. We also have a Bluetooth speaker business that is super seasonal. They've really pulled out of the mix, because we're intentionally dampening that business and bringing it down. So that's certainly not going to have any count of holidays spike. So that's reflected in the way we look at the back half year. Do you want to add anything to that, Nate.

Yes. I mean, I think if you just look at what we guided last quarter for the full year, and what we've guided this quarter, obviously, we delivered a lot of upside in Q2, but the back half of the year, we took up significantly as well, right? We were guiding sort of -- we were really cautious, I think about what the second half might look like three months ago. We were guiding sort of flat to maybe up 5% revenue in the back half. We've taken that up to 20% to 30% growth on the back half. And as Bracken said, it's pretty well balanced we think across the quarters. We don't know if this holiday is going to -- we're going to see the normal spike that we see in Q3. Whether you're going to see the type of volumes that Black Friday or some of the other big promotion days have. So it's hard to say that this is a normal year when it comes to seasonality for some of these things. But certainly, if you look past the pass on the guidance, we took the revenue up significantly, and we took up our investments significantly in the second half, which is an indication of confidence, confidence this year and confidence in the long term.

Okay. And just the margins on the -- margins with tablets versus gaming and VCs because there's going to be some kind of budget flush, I hope, I expect for enterprises and SMBs?

Nate, I'll let you take that one.

Yes. I mean, normally in the enterprise, calendar Q4 is a strong quarter, as you said for sort of budget flush reasons. I think with video right now, though, I think people are investing. I don't think it's -- we're going to wait till the end of the year. I think they're investing now to make their teams productive to get their offices ready for today and for the future. So I'm not sure that we'll see a spike as you mentioned, which is often common in enterprise type businesses. I think people are investing right now. And then, as far as tablets goes, yes, I mean, as Bracken said, we had very strong demand for tablet keyboards this quarter. And they are lower than average gross margin. So I think while we -- while we have a lot of mixed things that are favorable to us, that's one that is certainly a headwind. But it's a good business for us. So a headwind to us from a gross margin standpoint. But it's still a very nice business for us. And, we've got some new products that have come out both in retail -- on the tablet side and retail as well that have done well.

Great. And then gaming and VC, did you guys gain share you think relative to your peers?

I mean, it's really hard to say. In areas where we were short of product, we certainly didn't. So we've lost some share in some of the categories in gaming. And we were really fighting to get back in the game. I think we're back in the game now. So we're ready to play competitively. In VC, I don't know the answer to that. There's so much growth there. There's certainly a lot of opportunity for everybody. We have a great market position. We still have a great market position. I don't think it has changed. Do you want to add anything to that, Nate?

No, I think that's accurate. I think as supply has improved on the gaming side, we believe we've gained some share that we probably did lose early in the quarter, at the end of last quarter.

Great. Thank you.

Thank you.

Hey, Alex, your call is your next.

Hi, Alex.

Hi, there, everyone. Just a couple of quick questions, if I may. Just firstly, following on from your early answers, you talked about, obviously confidence this year, and clear your guidance rays, implies 27% growth in the second half, even on top comps, if I'm not mistaken. So that would seem to suggest you see sustainability of growth in the next couple of quarters. I wondered if you could just give a bit more color to explain for the various business segments. Which are the ones that you're having more or less competence on sustainable demand trends? Obviously, given concerns around pull-forward, and so forth? And then just my second question is on video conferencing. You've obviously talked about how you see a very long-term story there. But I wondered if you could just put numbers around, where we were on penetration of connectable rooms with your VC solutions in the lower end, before COVID. And where we are now, just so we can think about where that could go to in the next two to three years?

Okay. Let me do that first and then, may Nate, take the first one. I don't think there's a huge difference in the share of connected, penetration of connected rooms yet. We're still in the very, very early days of this. I think, we're -- I don't know what the exact number was. Let's say, maybe it was 10% of the rooms available for. And I don't think we've made a huge difference in that yet as an industry. So there are lot of room. And in fact, I wouldn't be surprised there even more connected groups coming now, because as I mentioned in the opening, the -- I sort of view this is like a scaling impact. Now that everybody has gotten super comfortable with video like we are now, it's really hard to imagine going back into also not to doing a video call. So I think you're going to have just more and more rooms. So this is super. It's very elastic, that, to me, I think that's a very elastic market and continues to grow the number of rooms available. So I don't think we've made a big dent in the rooms of the penetration. In terms of giving a little bit of color as we go through the rest of the year on what categories is it likely to grow. I think, we expect all of them to continue to do well, that have been doing well. I think VC will continue to be strong for all the reasons we talked about. I think desktops -- the desktop businesses will continue to be strong. Streaming will be strong. So I think you're just -- we're in for more of the same. Do you want to add anything to that, Nate?

I think on the VC room penetration side, I would say, nothing has really changed there. I think it's still in the single digits. We've had a couple quarters here where the growth is accelerated a little bit. But as Bracken said, it doesn't really make a dent in the total number.

A lot of people go back in the office broadly around the world, so…

Yes. And then, as mentioned in Bracken's remarks earlier, we've seen really strong growth in business quality or centric webcams, I would say, as people are -- especially companies are purchasing in bulk for their employees to make them productive at home. It's not just we need something at home, you've got to be fully productive. You're working from home. You're not just dropping in and doing a little bit of email. You're working from home. And so, some of that growth that we've seen in Q2 has come from some of these nice wins that we've had with business customers, buying a lot of equipment for their employees to be productive.

Thanks. That's super helpful. And maybe just to squeeze another very quick one. Just in terms of your sell-through, I noticed he had very strong sell-through from a regional perspective in China. Its actually the strongest area and actually improved. And that's just interesting, given they've probably come out of lockdown sooner than other region. So I wondered if you could explain what's going on there? And does that mean that potentially sell-through could actually improve in some of these other regions when locked down ease?

I don't know about that. I don't know about -- say its likely to improve as we come out of the lockdown, but I think we expect another thing. We're super optimistic, especially for the long-term on the growth potential of all the categories that we've talked about. An China is both an example of the future and it nominally at the same time. So I wouldn't over conclude that from China, but also I would say, yes, we look at it as a bit of a bellwether for the rest of the world. But it's a little different. It's -- they're faster, they're farther ahead in some areas. And so we'll see. It's hard to use that as an direct predictive, but it certainly is good that they continue to have a good business as they've come through the worst of the COVID-19 period.

Alex, maybe just to clarify. The data that we have in the slides, which I think you're referring to is actually for Asia Pacific overall and not in China. And I think as Bracken mentioned too, there really weren't significant differences in sort of the strength of demand across countries. It was pretty strong everywhere. And I do think there are some important differences about how each country is really attacking these problems related to COVID, whether how much the government's involved, and things like education or in different ways that they're trying to support their economies, and culturally, the way that people are adapting to these changes. In general, all the big trends, obviously, are consistently accelerating across all countries. But there can be small differences in nuances. And so, obviously, we have operations in each of those locations and we try to learn from all of them. But China is as Bracken said, is certainly one that's went into this early and has come out of it early. But they've attacked the problem differently than other countries have. So we can't use them as the basis for all of our decisions.

Very helpful. Thanks. Thank you, Bracken.

Thank you.

Thanks. Tom, your line is now open.

Hi, Tom

Great. Thanks. So first up Bracken. Nate. Ben, congratulations on an amazing quarter. I had one question and one follow up. So can you talk about the changes you're making that improve your ability to manage demand surges? I think you're doing a really good job. But I'm curious to see the adjustments you're making that are positioning you to manage future demand surges?

Yes. That's a great question. So what we -- what we did, we put in places as we went into COVID-19. I'll give you one example. Just be reflective of what we've done. When we've learned that we need to have a super fast cycle on matching demand and supply. And then we also need to make sure that we're reaching into our normal systems and turning off the autopilot. And so, we learned that in the early days of COVID-19, when we made a supply back, that was well ahead of what our markets could see on day nine and serve others of us, made that knowing that we were going to take some inventory risk. And we did it. It paid off big time. Now, we're well beyond where that was now. But I think learning to having a leadership team that has the experience and the wisdom to be able to reach in sometimes turn off the other part of it, and not be afraid to if we weren't, and we aren't. And I think that's one. The second one is we've -- there's nothing like learning by doing. And we've increased our capacity, our operations leader has really stepped in for all of us and supply chain leaders, both have stepped and draws and systematically increased our capacity very aggressively working with component suppliers across the board. We have a great set of relationships to upstream into our supply chain. They're very long -- many of them are very long, long standing relationships. And that's really helped us, too. So we're -- I think we come on the -- I came out of this feeling really appreciative of that. And probably a little sensitive personally that we haven't recognized how valuable that is in the case where you do those demand surges. So we're going to take special care of those relationships in the future to make sure we're positioned well in the future. And then on the other side of it is, we're sometimes sole sourced. Sole source 48:36___ we're going to try to avoid that in the future. So that we have the flexibility to go up on certain components where we just -- the supplier just couldn't meet the demand.

Great. And then for my second question, one of many things I thought was interesting on the new iPhone launch and 5G was the mobile gaming opportunity. So can you talk about what the mobile gaming opportunity means for Logitech?

Yes. No, not too much. But I will say, mobile gaming is bigger than desktop gaming. And we don't do much of it. So it's an opportunity out there for us to figure out how to get a handle on and get some business out and help, create a better experience there. We haven't figured that out. We tried several things over time, but we've never really knocked it. We've never really got right. But most people followed us for a long time. We don't give up easily. So we're used to working things. So we're not going to give up now, but we’ll sooner or later figured this out.

Great. Thanks for taking my question.

Tom, I'd like to come back real quick to your in demand surge thing. Just to really emphasize or highlight one of the points Bracken made around how we've made this bet on inventory. And we've really leveraged our balance sheet, which I think is a very strong balance sheet and our strong cash collection. We're really passionate about making sure that we have strong cash conversion cycle. And whether its changes that we make to our collections processes, where we manage payment terms, where we think about inventory management, all these things help us squeeze a little bit more cash out. And I think our strong balance sheet, I think, is an important differentiator against some of our competitors, who may not have the flexibility to make the types of bets that we made in the first half of this year. So I think that has been a strength for us. And I think it will continue to be a strength for us. And I think it's important in these times, so that you're not held back by those types of financial constraints. So, we're going to manage that really tightly. And we're going to make sure that we're managing risk. But when we feel that we need to be aggressive and we need to go support potential business growth, we have the ability to do that.

I would add one last comment there. I agree [ph] to the point, Nate, and you're so right. And I'd say, we had a couple of categories. We probably should have been carrying that system for our room [ph]. And we should have been carrying more inventory for the -- as you call the demand service and we learnt. So we've learned. We make mistakes everyday. We try to learn from all of them and that's mistaken right. So we've learned.

Excellent. Thank you.

Thank you.

Michael, you are now open.

Hey, Michael?

Hi, Bracken, Nate. Thank you. Two questions from my side, starting with your guidance, you mentioned that you increased your guidance, because you're more confident or you gain more confidence. My question is really, what is your visibility to the second half? I mean, how did you come up with the actual gross range that you're giving? Why is it not just below that or above that? How good is your visibility, actually, with all the uncertainties that are still out there in terms of economic development, and the usual holiday season uncertainty? And the second question would be regarding your pointing devices and keyboards. You mentioned, in Bosch, you mentioned very good demand across the product range. So high end and entry level products. My question is, did you have the same availability of all products across the range as well? Or was the sort of demand driven by the fact that there were shortages at one end or the other?

Yes. I would say -- I'll answer that one first. And then [Indiscernible]. I would say, in the case of keyboards and importantly [Indiscernible] to mice. Yes, our supply was pretty evenly spread across our product portfolio. So I think that's pretty reflective in the market. We have very broad. Now, I will say, I think, we didn't mark it. We really turned off our marketing, because the demand was so strong, we were really trying to keep up with it. So, what we market, we tend to try to market that put more premium mix. So I think that's an upgrade opportunity for us as we go forward. We haven't really touched yet. So we got another round of upgrades. All those people who hate to live it out and all whatever they could. Now there's nothing for us to upgrade to lot of those people, lot of you. And then the second part of the visibility, I'll let Nate come in there. But I would say, how much visibility we have? I would say, we had a normal level of visibility in some ways, and less in other ways, normal in that usually we can see, based on the current trends what's going to happen over the next couple quarters, because of tradition, because of the long history we have here, we really have a lot of data on that. On the other hand, as you pointed out, this unusual, really unusual dynamic code. So that led us to think harder, for example, about the holiday period. And we normally wouldn't say, gosh, holiday is going to be like a really holiday. We're going to see a certain increase over the over Q2. You can take the math, take the percentage, add to it, you've got the number. We didn't -- and so, I think that. So our visible is probably a little lower. It's reflected in the fact that we tried to intervene in a couple of places. Normally, we would have had better visibility than we did to try to adjust based on good judgment. Do you to add anything to that, Nate.

I think you covered most of it. I mean, the only place where we might see a little more visibility sometimes is if we have a direct relationship with a large enterprise customer with a education buyer or something like that, where they have a little bit more of a roadmap that they're building to, but that's still pretty small for us.

Well, it's improving. I would say, that is getting better visibility in hand, it is getting better and better.

Yes. And it's an area I think I forget who asked the question earlier, when we talked about the sort of structural types of investments we have to make around processes and tools to build up those capabilities. So that's one of those things that we've been investing in this year, but we’ll invest much more in second half.

I heard of the video call and some commercial organizations is a sellout for getting better visibility. So she is amazingly focused on this. I'm sure we will get better and better

Okay. Thank you and congratulations.

Thanks, Michael.

Thank you.

Hi, Serge. Your line is now open.

Hi, Serge.

You're on mute.

Hi, Serge, you are on mute. But it’s a nice headset. Oh, no, still on mute.

Nate, should we go to somebody else and come back to Serge?

Maybe we want to try to type it real quickly into the chat while we go somewhere else?

You're going and try to type it in. Why don't you take it into the chat?

Andreas, maybe if your line is open.

Hi, Andreas.

Hello. Hello, everybody. Thanks for taking my questions.

Hi, Andreas.

Hi. Two questions, if I may. One is actually what is currently your review about sell-through in the second half? I mean, is that going to be close to the guidance implied selling of roughly 27%? Or do you see there some divergence in this sell-through?

Okay. And is there a second question?

Yes. The second one is the promotion activity. I mean, how, how far do you need to go in the third quarter with promotion activity? Given demand has been so strong, also your to some degree supply constraint at least on two products, probably also in Q3, which is the largest quarter? Is it different than the usual promotions in the last couple of years or are the same?

I think on the first question you have, I would say we expect to kind of have a pretty balanced view of selling and sell-through in the second half. As you mentioned, there's a few products where we're still catching up, and Bracken mentioned, that we're increasing capacity. And we'll try to catch up in the second half there. But in general, I would think about a more balanced second half between sell-through and sell-in. And then on the promo activity, I think, while we're uncertain as to the magnitude of the holiday demand, it may not be as sharp of an increase, just because people have been buying so steadily throughout the year, I think we do expect the promotion to be similar to prior years. I mean, you have the typical promotion days around the world, and we're expected to participate in those. And as supply and demand getting more balanced, we think that those promotion levels will move in here in the second half to more typical levels. That's what we've assumed.

Okay. Thank you.

Thank you, Andreas.

Serge, do you want to try one more time or catch up later? Okay.

He said, he will use the one on one.

Now, we can't hear it. Sorry for the technical problem, but…

Why don't you want to type it into the chat? It certainly might be the best thing to do. We're not. Okay.

No. I think that is the end of it.

We're going give one more minute if he can get into chat. Serge.

He wants to wait. Okay. No problem.

Well, I will close off by saying, it was obviously a super strong quarter. We have tremendous momentum. It's an exciting place to be. And the most exciting thing about Logitech right now is our long term growth potential. We're really in the right places, and we're going to keep building more. And it's been so exciting so far, and I feel like a newcomer [ph]. We have a long way to go. Alright. Thanks so much. We'll see you guys next quarter.