Good morning and good afternoon. Welcome to Logitech’s Video Call to discuss our Financial Results for the First Quarter of Fiscal Year 2024. Joining us today are Guy Gecht, our Interim CEO; and Chuck Boynton, our CFO. During this call, we will make forward-looking statements, including with respect to future operating results under the Safe Harbor of the Private Securities Litigation Reform Act of 1995. We are making these statements based on our views only as of today. Our actual results could differ materially. We undertake no obligation to update or revise any of these statements. We will also discuss non-GAAP financial results and you can find a reconciliation between non-GAAP and GAAP results and information about our use of non-GAAP measures and factors that could impact our financial results and forward-looking statements in our press release and our filings with the SEC. These materials, as well as the slides and a webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, comparisons between periods are year-over-year and in constant currency and net sales. This call is being recorded and will be available for a replay on our website. I will now turn the call over to Guy.

Thanks, Nate, and thank you all for joining us. It is a pleasure to speak with you today. Before we jump into our first quarter achievements, let me provide some context regarding my role and the Board’s search process for Logitech’s next CEO. I am both honored and excited to guide this iconic brand company in the near-term. During my four years on the Board of Logitech, I have gotten very familiar with the company as I had the opportunity to serve as the Chair of Logitech Technology and Innovation Committee of the Board and to serve as a member of the Audit Committee. I view my role as an Interim CEO is to provide the consistent and steady hand to the many wonderful experienced teams working hard across Logitech. I am singularly focused on making progress and ensuring we do not lose any time in our ongoing execution. Our strategy remains unchanged as do the business plans that are in place. All teams are focused on executing their proven playbook and my focus is to remove obstacles, facilitate decision-making and ensure we lose no time. Now a few words on the search. As we previously announced, the Board is in conducting a global CEO search, including internal and external candidates. It is progressing well. There has been a lot of interest in the opportunity and we are pleased with the strong caliber of the candidates we are seeing. Needless to say, the Board views this decision with the utmost seriousness it deserves and it’s working diligently reviewing and interviewing candidates. Given the confidential nature of the search, I will not be able to add more color today, but rest assured that we will update you when we have news to show. Before I turn it over to Chuck to…

Thank you, Guy. I also appreciate everyone joining us on the call today. First and foremost, I want to thank all of our employees for the strong execution and teamwork in the quarter. It really shows in our results, especially our strong operating cash flows. Before we get into the details on our financial performance, let me spend a minute on some reporting changes we have made to our product category classifications. Our slide presentation and quarterly fact sheet provide additional information, as well as a five-year set of comparables. Many of you have asked for these updates over the last several quarters, so we hope that changes provide a simpler and clearer view of our business. These reclassifications do not impact our previously reported financial statements. Moving on to the business results for the first quarter. Net sales in constant currency declined by 15% to $974 million. Sales out was quite strong, particularly for Headsets, Tablet Accessories and Gaming. As we discussed at the Analyst Day and on the last earnings call, we believe in the benefits of lean on-hand and channel inventory. For the fifth consecutive quarter, we reduced on-hand inventory significantly with our inventory turns improving to 4.2. We remain committed to our goal of improving to 5 turns or better over the next year or two. Likewise, channel inventory was also reduced in the quarter and I am proud of the team for hitting the targets that we set. This has improved linearity and predictability. We plan to keep reducing channel inventory during the seasonally soft months of July and August, and then replenish the channel in September, October and November as part of a normal build for the December quarter. Net-net, we expect channel inventory to be roughly the same at the end of Q2…

Hello, everyone, and thank you for joining. [Operator Instructions]. I will start today with Asiya Merchant from Citi. Hey, Asiya.

Hey. Good morning, everyone. Hopefully, you can hear me.

We can hear you well.

Thank you for the color, Chuck and Guy. Great view on video, Guy. Chuck, if you think and Chuck and Guy, actually this is for both of you. Can you all talk a little bit about seasonality. It seems like at least in the implied guide the September quarter or the calendar third quarter was typically up at least in the low double-digit seems to be kind of guided flattish, maybe slightly higher. Maybe you could talk about that and as you kind of look into the December quarter, if you can kind of talk to us about the visibility that you are seeing and which product segment we feel very strongly about. And then on gross margins, I think, Chuck, you mentioned there were some one-time benefits. Clearly, gross margins came in better than what we are expecting and in terms of hitting your 40% target, you can talk about some puts and takes to get there as the year progresses pretty fast? Thank you.

Yeah. Sounds great, Asiya. Thank you so much for the question. So first, on seasonality, we outlined last quarter as you will recall, that if you looked at the last kind of four years on average, the quarters were roughly 24% Q1, 24% Q2, 30% Q3, 22% Q4. And I am not sure that that’s going to be this year, our Q1 was better than we had expected. We performed better than our internal expectations. It was a strong quarter compared to where we expected, both topline and bottomline and we are cautiously optimistic on the back half of the year, but there are still uncertainties, foreign exchange, the various uncertainties in the environment. Last year, the December quarter had some margin pressure because of promotions. We don’t know what’s going to yet happen with our December quarter this year, a single biggest quarter. The read-through though, the June 18 holiday in China was quite strong. We don’t have the final results back from Prime Day, but it looks like it performed reasonably well. So I’d say, we are cautiously optimistic, but we don’t want the first quarter here providing estimates for the full year. We want to make sure that we are appropriately providing an outlook that is manageable. The second question on margins. It was a great quarter, 39% is the low end of our long-term operating model. We feel good about that. However, there were some benefits, specifically when we brought our on-hand inventory levels down by over $100 million, that had a benefit to the overall inventory reserves that provided really a strong uplift for the quarter and we see a little bit of pressure going into Q2 on margins. For the back half of the year, we are again cautiously optimistic that we will be in that kind of that range that’s probably a little below 39% or in that range, but we are optimistic there are tailwinds. Freight costs have come down significantly, cost pressures on components, our operations team has done a great job doing cost reduction and improvement. What we don’t know is how the mix will impact. Now we have a couple of new products that are coming out that are going to provide we think a nice tailwind and could help on the margin side, but there is still uncertainty in the back half of the year.

Thank you. I appreciate the color.

Thank you so much.

Great. Next up we will go to Adam Angelov at Bank of America. He, Adam.

Thanks for taking the question. Just -- so, firstly, on the inventory decline, sounded like that was a bit of a surprise. Maybe you could dig into that and why?

Inventory, I would say it was not a surprise. Our operations team, we have targets. Our operating model, our goal is to operate with on an inventory at about 5 turns. We hit 4.2, which is great progress considering where we have been. But it was not a surprise. It was strong execution. It was deliberate. And the great news is that not only was on-hand inventory reduced, but channel inventory came down as well, significantly high single-digit decline in channel inventory. So if you couple that on inventory and channel inventory are down, we have leaned out the supply chain and that is great news for us and our channel partners. With lower inventory levels, we make more money, our channel makes more money and it’s good for everyone.

Okay. Got it. That makes sense. Thanks. And then just a quick one on Video Collaboration. So I think declined again in the quarter. Maybe you could just touch on how you are feeling about that market in H2. Are you seeing sort of some stabilization from the enterprise customers or is it still a lot of uncertainty?

Yeah. First of all, not the numbers we want to see on the business side, but business -- B2B Video Conferencing side. I would say in the last 30 days, I talk to customers and every region met face-to-face in Asia and North America going to Europe this afternoon. Our brand is strong and the wins are significant. What we are seeing is actually big companies decided to standardize on Logitech and they just deploy at some pace where budget get opened, they deploy as a conference room. So that should play definitely better for the future. The second thing is if you look at the market, there is the high- to the mid-range. We are actually doing quite well. We grew double-digit at that category. Where we have some pressure is kind of the lower mid-range to the bottom to the lower end, where we didn’t have a product for some time and we are about to launch a product the Rally Bar Huddle. That’s a great product. It will play really well in this category, energize ourselves supposed to go in. So between this and the Sight that I talked about, this is going to be a really good way for us to come back to customers, try to push deployment, win some more big accounts, I feel very positive about the future of this business after talking to channel, after talking to customers. I think the opportunity there is significant and it’s, of course, the -- talking to the margin, this is the best margin category we have, so that will help a lot.

I would just add, we gained a couple of points of share in the quarter. So we feel good about our -- the strength of our position. Sequentially, the video category was down $5 million, so relatively modest quarter-over-quarter. And then with these new products that Guy just mentioned, being launched, we are again cautiously optimistic about our execution in the back half of the year.

Got it. That’s right. Thank you.

Thank you.

Thanks, Adam.

Next question will be from George Wang at Barclays. Hey, George.

Hey, guys. Thanks again for the question. So, firstly, can you talk about Gaming in terms of our checks, we picked up some incremental improvement, especially kind of on the downstream, just not sure whether necessarily flow into the gaming peripherals. Just based on your guide for below seasonal sort of imply the Gaming to be down again on a year-over-year basis for the 4Q. Just curious whether you think that’s conservative or how much visibility you have on the Gaming side?

Well, we haven’t provided specific estimates for Gaming for the back half of the year, but clearly, the December quarter is the biggest quarter Gaming. Our Gaming team has been operating incredibly well. We have got some new products coming out that we think will help. Overall, it was a really good quarter for Gaming. The China team executed flawlessly for the June 18 promo, which is a really important event for us in that market, and overall, we have got strength in Japan and elsewhere. But I’d say, the real test will be the December quarter for us. That’s the biggest quarter for Gaming.

Great. Great. Thank you. Just if I can squeeze in a follow-up. I guess, you guys are always looking to expand the new categories, right, just the adjacencies, that’s one of the kind of growth pillars. So in a high level thought on, if largely to -- entering into any sort of brand new category, which area or which vertical do you think will be most likely in the next few years?

George, great question. I found great plans in the company to expand the TAM, expand into new use cases where we are going after a higher value application and use cases. It is too early for us to talk about it, but you will see in the coming quarters more discussion about this expansion.

Okay. Great. Thank you. I will go back to the queue.

Thank you, George.

Thanks, George. Our next question will be from Alexander Duval at Goldman Sachs.

Yes. Hi, everyone. Many thanks for the question. Just a couple. Firstly, on OpEx, it looks like you have made some good strides on cost control in the quarter. I wonder if you could talk a bit about how much further headroom there is for cost control going forward in the remaining quarters? And then I have a quick follow-up on FX, can you just remind us how much support we should expect to be seeing from FX in coming quarters? Many thanks.

Certainly. First, on the FX side, this quarter, we still have headwinds in the year-over-year comps, that starts to change. Next quarter, it’s more balanced with where rates currently are. So I think we should be back into kind of a year-over-year balance starting in Q2 and beyond. First question was the -- can you remind us -- it’s early here, sorry.

Cost control.

Cost control…

Cost control.

Thank you. My favorite topic. So we have done a phenomenal job lowering cost. OpEx for Q1 was a little higher than our internal targets. There was a couple of one-time administrative charges. So I think you will see sequential improvement on OpEx. Our long-term operating model is to have OpEx below 25% of revenue. We may or may not get to that level this year, but we will have to wait and see. But we are on that trajectory and we believe that by the end of the year, roughly, we should be kind of at a $1 billion run rate approximately, but the real long-term target is to be below 25% of revenue.

Thank you very much.

Thank you.

Thanks, Alex. Our next question is from Ananda at Loop Capital. Good morning, Ananda.

Hey, guys. Thanks for taking, sorry. No video, got it, Nate. Cool. Thanks for taking the question. Yes. So just two quick ones, if I could. Guy and Chuck as well, the decision to give the second half guide today and -- as opposed to 90 days from now. Can you tell us just -- I mean just give some context around sort of visibility that gives you guys confidence in the ability to do that in the thought process around doing it? And then I just have a quick follow-up as well.

Well, on the guide, we deliberated it in what we had outlined last quarter that we would either provide it this quarter or next quarter and given the strong first quarter we had relative to expectations with one quarter behind us, we felt now was the right time. And is visibility better, in some areas, yes, inflation in the U.S. has come down a little bit. It’s higher in the U.K. and other markets, but the U.S. inflation has come down a little bit. FX is starting to stabilize a bit. But we just felt that with one quarter behind us that it was the right time to update our estimates for the full year and we are pleased to have done that one quarter kind of ahead of expectations.

Okay. That’s helpful context, Chuck. And I guess, just bigger picture question, any thoughts and maybe you guys haven’t sort of reached this conclusion yet, but would love any context thoughts on sort of when you kind of renormalize the revenue base. I have just done some quick analysis. It seems like exiting fiscal 2024, you could be there, but just would love your thoughts on that, that would be helpful.

Well, I will start, Guy and you can add color. But as we look at the year-over-year and sequential change, things are starting to stabilize. Like we are -- the year-over-year comps are getting -- they are still not where we want them to be, we are not happy, they are still declining, but the rate of change is getting more favorable. Now I can’t tell you when we are going to hit bottom for an [inaudible], but it feels like things are starting to stabilize and that’s reflective in our cautiously optimistic estimates for the year.

I would say the last 42 days here as an Interim CEO, just reaffirm my conviction this is a growth company in a growth market with a growth trajectory, this will come. But let me tell you another thing, we are not just wait for the market to improve. The team here is working really hard to push whatever we can, new products, obviously, going to help, win some share and get to this point where we start to be plus in front of our number again. And just a matter of time, there is a clock in our head, we want to get there, obviously, it will take some time, but we will get there.

And Guy, is the right way to think about -- I mean, I guess, like, sort of as we sit currently, does the company want sort of the financial community to think about normalized growth go forward the same as we have kind of pre-COVID or different, whether positive or negative?

Look, we -- and you know me from prior life, we always want more, we always want to be a higher growth and we will continue to plan, look at the right acquisition that can accelerate that, look at the right product. There’s a lot of potential here. And a lot to build on, this company is super strong, the muscles and innovation in design super strong. The leadership team is super strong. We have a lot to build on. So you know how ambitious are and as we go forward, you will hear more, but we certainly like to do better.

Awesome. Thanks a lot, guys. Appreciate it.

Thank you, Ananda.

Our next question will be from Erik Woodring at Morgan Stanley. Good morning, Erik.

Hey. Good morning, guys. Thank you for taking the question and Guy good to see you again.

Thanks.

I just wanted to kind of double click on Asiya’s seasonality question, because I understand there are uncertainties today, but you are guiding to the worst seasonality in at least a decade, but also telling us the channel is normalized. And so that would -- I guess, would imply demand would be worsening, but I don’t really hear that from your comments actually. So I was just wondering if you could kind of help me square that circle and understand really why we were expecting such a below seasonal September quarter? And then I have a follow-up. Thanks.

Well, I think, overall, we have provided updated seasonality or targets for December or the March quarter. I would say if the December quarter is really strong, then we would be above the estimates. If the December quarter and the state of the consumer is difficult because of rising interest rates and inflation and global conflicts, et cetera, then that’s a different situation. But I feel like we feel coming into the year, we started off strong relative to expectations in Q1, we feel like we have got a plan that we can manage to and that we are in a pretty good place and we will have to just wait and see how the December quarter happens and what happens in the March quarter. March is typically our seasonally worst quarter of the year. So if you look at the outline what I mentioned earlier, generally, March is -- March quarter is 22% of the year, could be lower, we don’t know. But so we are -- I think, I’d say, we are balanced and that would be my view. Guy, do you have a different point of view?

I agree with you. Chuck and I were part of a very extensive review -- operational review that we have done last week and informed us and decision to issue the guidance for the full year. I would say, Erik, you are spot on, we are not anticipating demand to be worsening. That’s definitely not what we are seeing or hearing or planning on.

Awesome. Thank you for that color then. Maybe, Chuck, just a question for you to follow-up on one of your comments there. In terms of OpEx below 25% of revenue. I think last quarter we kind of talked about Logitech exiting the year at maybe like a $250 million quarterly run rate for OpEx. If you did do below 25%, you would get, call it, $8 million to $10 million below that. So just wondering if you are thinking you can cut OpEx beyond your prior expectations? And then secondarily, if you are growing next year, would you expect to keep cutting OpEx or would you kind of then lean into reinvestment and try to grow OpEx base alongside your revenue base? And that’s it for me. Thank you so much.

Yeah. Yeah. Good questions and maybe I wasn’t super clear. So our target by the end of the year is to have OpEx at a run rate of roughly $1 billion, which should imply an approximate $250 million Q4, maybe a little higher, maybe a little lower, but in that range. We have taken a lot of costs out of the company. We do not have a cost reduction plan in place right now to reduce headcount or OpEx further, that’s not our plan. We are focused on the topline and getting back to a year that has a $4 billion in front of it. And so if you -- if we are at $4 billion in revenue, $1 billion OpEx run rate is 25%. So we are -- if we are below the $4 billion, we are still going to stay at approximately $1 billion in OpEx a run rate. So the Q4 plan is, think of that as approximately $250 million if we are below $4 billion. And as we start to grow again, then we would have OpEx be below that 25% of total revenue number. That is the long-term operating model.

Right. So just to be [indiscernible] Erik, when we come back to growth we like the 25% and we take the extra investment in growth areas. There’s plenty opportunities to invest in. But 25% is we like it as a long-term focus for us.

Super. Thank you so much, guys.

Thank you, Erik.

Our next question is from Joern Iffert at UBS. Hello, Joern.

Thank you. Good morning, everybody. And two to three questions please from my side. I will take them one by one, if it’s okay. The first one is, can you please be kind and clarify again on gross profit margins? What exactly was the one-off benefit in Q1 and where you see gross profit margins trending to in Q2?

Okay. So if you look year-over-year, gross margins were 39%, down from 40% a year ago. The primary difference there is going to be FX. There’s other puts and takes. But if you broadly -- it says, roughly 100 basis points. The quarter though was quite strong, because of significantly reduced on-hand inventory. So as we look forward into Q2, there will be some pressure, because we don’t think we can reduce inventory by another $110 million. So, of course, there’s a lot of dynamics with mix and FX and all those things, but generally, all things being equal, we see a strong gross margin trend here, but there’s a bit of a one-time benefit in Q1 that will put a little bit of pressure on the results for Q1 and in four quarters to six quarters, we see that trend improving structurally to a 40%-ish gross margin as a company. Our long-term model for gross margins, 39% to 44%. Now to get to the high end, mix shift, more video things that can happen, but in four quarters to six quarters, we see structurally 40%-ish gross margins. Next question there. You said you had three. That’s the of first of three.

Yes. Exactly. So it means in four quarters to six quarters, you will reach the 40% gross profit margin run rate, not in the next four quarters to six quarters, just to be clear.

Well, we may have quarters where it’s above 40%. We may have quarters where it’s below. But I think structurally in four quarters to six quarters, we see the business on average being 40% and growing, because we said the long-term model is 39% to 44%, but there’s a lot of puts and takes that can happen with gross margins, primarily mix being one of the biggest impacts. Now Guy mentioned earlier, we have got some new products coming out, those could be really helpful and be a tailwind. But there’s -- that’s uncertain as to what’s going to happen in the short-term. We are just -- we have got more conviction in the intermediate term that we can hit our long-term operating model.

Okay. Thanks. The second question would be please on Q2 on the revenue guide. I mean, usually, Q2 is significantly higher versus Q1 due to normal seasonality. What have you seen in July so far, I mean in the first weeks of July. Do you see a stable flattish development year-over-year, we actually started with some growth quarter-on-quarter, sorry, I was speaking about quarter-on-quarter not year-over-year, just to double check is what you see in the first weeks of July?

Yeah. The data that we have so far is the first couple of weeks, and I would say, we are cautiously optimistic about the results so far. We don’t have the final analysis in yet from Prime Day. So we still have a lot of wood to chop for the quarter and I think we feel like we are in a good position for the second quarter.

Okay. Thanks. And the last question then please on Video Conferencing, you said it’s around $5 million down. So we can assume it’s bottoming out here that Q2 in Video Conferencing and also Gaming should be up quarter-on-quarter, is this a fair assumption?

We haven’t provided that level of specificity. Has video bottomed out, I hope so. But I can’t guarantee that. It was fairly in line with last quarter, down a little bit, and with new products coming, I think, we have got tailwinds in Video.

All right. thank you.

Thank you.

Thanks, Joern. Our next question is from Andreas Müller at ZKB. Andreas Müller: Yes. Hello. Thanks for taking my questions. I have got a question about the difference of growth rate between Keyboards & Combos and my standalone, what was there the reason?

So Keyboards & Combos was down a bit, but better than our expectations. It was quite a strong quarter relative to our internal expectations. Pointing Devices also performed quite well with share gains. I don’t have a lot more to offer in terms of color. But generally, I would say, both categories were a little better than expectations and Pointing Devices being a hallmark of our company. We are just thrilled to see additional share gains. Andreas Müller: Okay. And then the cash on the balance sheet, this is now really high, would you accelerate the buyback. I think it’s running a bit lower than $100 million, is there room to improve that?

Well, there is room to improve. First of all, in Q1, we pay our annual dividend, so that’s being paid this quarter and that will reduce the cash balance. We have put in place a new buyback plan, the old buyback plan of $1.5 billion. We were able to execute $1.1 billion of buybacks on the old plan that’s now expiring. The new plan will go to -- for shareholder approval with the AGM and we have announced an acquisition. So we are -- I would say we are executing on our capital allocation strategy of targeting M&A for growth. Now Loupedeck is a modest purchase price, but we are targeting M&A for growth. paying the dividend and growing the dividend and then excess cash returning back to shareholders. So I think we are following our playbook right down the middle. Andreas Müller: Okay. Understood. Then last question on the administrative cost is one-timer. What was that exactly?

We don’t disclose the individual details, but it was a kind of millions of dollars. So it’s not a huge number either, but that was sort of a one-timer, so you -- we should see a benefit in Q2. Andreas Müller: Okay. Perfect. Thanks a lot.

Thanks, Andreas. Our next question is from Michael Foeth at Vontobel.

Michael, I think you are still on mute.

Michael, we will circle back. Let’s go to Samik Chatterjee at J.P. Morgan. Hi, Samik

Hi. Can you hear me very well?

Good morning, Samik.

Yeah.

Yes.

Yeah. Okay. Great. So I jumped on a bit late. So I apologize if you have gone through this already. But in some of the PC companies we track, there are expectations for a second half seasonal improvement in PC volumes related to the first half. I am just wondering, as you look at your sort of momentum into the back half of the year, are you associating any improvement given the attach rate that you would typically expect to see with PC volumes into your model or are you largely sort of keeping that as more potential upside that comes -- if that comes through or otherwise you are sort of going to more track flattish half-over-half? And I have a quick follow-up. Thank you.

Yeah. We -- part of analysis and reviews, we are closely tracking PC ship and attach rate with that. So, obviously, those are good news from our perspective, the outlook we are seeing with some of the big PC providers. As Chuck said, we are trying to be cautious here. It’s just the first quarter. We are very pleased with the other achievement. Don’t get me wrong. But we are not going to build on other companies talking a little bit more bullish on the second half.

Great. Okay. And for my follow-up, it was an interesting acquisition, Loupedeck to see sort of what you are doing there. But maybe if you can sort of highlight how you are thinking about what addressable market does that have, and as you look at your portfolio, what are the other sort of niche opportunities that you are thinking of in relation to M&A?

Yeah. So on the Loupedeck, it’s a small -- relatively small team but very important IP that will allow us to add very sophisticated capabilities to Keyboard and Mice in the future. And we will use it first in for gamers and creators, but we are seeing the potential beyond that and I will leave it at that. We will talk about it when we get to this. As far as M&A, we review you the M&A funnel. We encourage the team to replenish it, look at that. We have the optionality. We are not desperate for M&A organically. I like our chances and the growth trajectory. But I think we can accelerate in certain areas, whether by small tuck-in or by something larger than that and we want to see -- we, obviously, have to bring it to the Board for approval. If we have targets, we want to see what else is out there that can allow us to accelerate the -- coming back to growth and growth beyond that.

Okay. Great. Thanks for taking my questions. Thank you.

Thank you, Samik.

Thank you. Michael, I believe you are back.

Yeah.

Michael Foeth from Vontobel. Hey, Michael.

Can you hear me now?

Yes.

Yes.

Perfect. Thank you. So just one, you changed your reporting structure for the some of the categories and I was wondering if the -- what’s another now, so the speakers, if you are planning to phase any of these products out and if that has any impact on your rather cautious guidance for the full year as well?

No. We are not phasing those products out. The challenge I gave to the General Manager of that group was grow it on its own standalone category. So we are just trying it for housekeeping. We don’t want a bunch of small cats and dog categories. And so the idea is, put those together, so it’s -- we are focused and then if they can outgrow, then we will create a separate line for them. And that’s the challenge to the General Manager and he’s accepted that challenge.

Okay. So if you can talk maybe just a few words about UE BOOM and if there is any plan to reposition that for growth going forward?

It’s a great question. We actually -- the company invested not much in this, but invested. We are actually expecting a couple of new products in the coming months to do, and I will remind you, we are here to ship, and hopefully, we will energize the category there, but it’s too early to say. And as Chuck just said, he told the GM wants to go out of other, we want to see good growth and we will get you out of other category. But this point, to give you the best transparency on our product categories, we feel like it’s better suited than the others.

Okay. Perfect. Good to hear. Thank you.

Thank you very much.

Our final question for today is from Serge Rotzer at Credit Suisse. Hey, Serge.

Yes. Good morning, everybody. And basically, I had some of the question like Michael because of this other. I am wondering that you want to see growing these product categories. As in the past, you always said that you take out research and development costs and that you squeeze them down and we know that this product group has the lowest margin. So it gives no sense for me that you want to grow now again in these product groups as it will dilute your margins. So for me, it sounds more that you want to close these product categories at least on your old strategy?

Well, so clearly, we -- our goal is to grow the company profitably and there’s a margin threshold. So the challenge for the team is to build great products and grow those with attractive margins that make sense for the company and if they don’t meet our thresholds, then we will not seek to grow those. What we have been doing historically in those categories is kind of profit max, not investing necessarily, but harvesting the profits and I believe there’s a strategy that they can execute to do both. Now we will see. That’s why it’s in the other category. It’s small. It’s not worth you focusing on as an investor today, but the challenge for the internal team is to build great products with attractive margins, and if they can get to the level that it’s worthy, then it will create some standalone category.

Rest assured, there is no product development here that is targeted at a lower margin category. We are -- our dollars -- R&D dollars are going after higher margin, higher growth products.

And that’s…

Guy and I are aligned. It’s really portfolio management.

Right.

How do you manage the portfolio for growth and profit, not either or?

Probably a follow-up here, is there a significant goodwill position linked to these products? So Speakers, Cable [ph], UE BOOM, can you give me any information here?

I don’t believe so. I think that any goodwill associated with those acquisitions would be fairly immaterial.

Okay. Good. And then the last one, you have increased slightly the CapEx from $90 million to $100 million. Is there any reason or do you start to capitalize some of the OpEx, although it’s a very small position I know?

Yeah. It’s tied to our new building here in Silicon Valley and we hope to have you all visit us here and host you, if you are in town, the Silicon Valley, we have got a really our -- a new office that we are just opening and that we are calling in from today using our great technology. So come visit us here and we will give you a tour of our new facility.

But still $10 million for a new building change quarter sequential change only three months, so?

Well, it’s -- the accounting rules for leases has changed now. You capitalize operating leases. So I wouldn’t read into it too much.

Okay. Got it. Many thanks. Move on Chuck for the next quarter.

Thank you.

Thank you.

Thanks, Serge. Guy, Chuck, that wraps up our Q&A for today.

Thank you, Nate. Thank you everybody for joining us. Pleasure to be on the call with everybody and I also want to extend many thanks to the very hardworking Logitech team that allow us to deliver this over achievement and build for a great future. Thank you.

Thanks all.

Thank you.