Erik Woodring: Hey, good morning, guys. Morning. Sorry, Nate, you’re going to have to unvideo me, but I’ll start my questions anyway. There we go. So, maybe to start, just one clarification question on the topline, Chuck, for you. And historically, again, we see revenue grow about 25% sequentially in the December quarter, and then decline about 25% sequentially in the March quarter. If we assume that, we do get to call it $4.3-ish billion of revenue for the year. So, clearly above the high end of your guidance range. I would love if you could maybe just double click on the comment that you just made to Asiya about December being more in line with seasonal, but 4Q being below seasonal. Is that how we should be thinking about seasonality and kind of why the guide would imply something below normal seasonality?
And why would that be after such a strong for second quarter? If you could just tease that out a little bit, that’d be helpful. And then I have a follow up. Thanks.
Chuck Boynton: Yes, Erik, yes, good question. I think ultimately, because we’re still in a year-over-year declining environment, that the seasonality needs to be adjusted for that slope of decline. And therefore, if you compare historical Q1 and Q2 to Q3 and Q4, if you adjust for that slope of decline, I think you’ll get back into the outlook that that we see. The other issue that we mentioned in the prepared remarks is that we intend to reduce channel inventory in Q4. And so, year-over-year, that will be down more than it was historically to bring channel inventory to the appropriate levels for Q4 and Q1 and Q2. Right now, we’re building channel inventory, obviously for the prime selling season. So, I think you’re a little high on the revenue numbers based on our outlook.
Historical seasonality, we did this at Analyst Day. We talked about it. If you looked at the last five years and you take out the peak COVID I years, it generally was -and sales in and sales out can be a little different, but demand typically was 24%, 24%, 30% in Q3, and 22% in Q4. That was kind of three out of the four or four out of the five years had been the kind of the average pacing. And if you layer on top of that the rate of decline, of course it’s slowing. We’re getting not quite back to neutral. We’re still in a declining environment, then it’ll bring down that back half of the year relative to the first half of the year. So, we’re kind of seeing the back half being somewhat similar to the first half of the year, maybe slightly better, but roughly in line with the first half of the year in total revenue.
Erik Woodring: Okay. That’s helpful. Thank you for that. And then, follow up again on a question that was kind of previously asked, because gross margins were so strong this quarter, really nice improvement. And Chuck, again, you talked about kind of sustainability to a degree and structurally you think you can attain this 39% to 44% range. Can you just tease that comment out a little bit, because I feel like it’s a bit of a shift from what we heard last quarter, which was, it’ll take four to six quarters before we get back to that 40% level. So, it took you less than one quarter to get back to that level. So, has something changed in your view structurally where you have a lower cost profile such that you’re more comfortable being kind of up towards that 40% range? I realize not for the second half, but overall, is that 40% plus level now more attainable in your view than it was three months ago? Thanks.
Chuck Boynton: It is a little bit. Now, there’s two key factors that give us a little more confidence now than a quarter ago. The first is scale and leverage. We overdelivered in the topline, and that was a positive surprise for us. That gives you leverage and scale. That was a real positive. The other two, maybe it’s combined, but better margins driven by lower cost and less promotion. And I think the – I’ll give credit to our teams. Quinn, our head of GCO, the Global Commercial Organization, and Prakash, our COO, have done a really, really good job driving lower promotions and lower material costs that have helped us. Now, we can’t really predict mix, and we know in Q3 we’re going to have more promotions, more consumer, and we know in Q4, we’re going to have a reduction in channel inventory, and that’s our low watermark quarter typically for the year.
So, I think there’s a little bit of headwind in Q3 and Q4 on the margin side, but structurally, I think we’re in that zone of 39% to 44%. Of course, a lot of things can happen, but as we sit here today, Guy and I are just really pleased with how the team has executed and where we sit and the read-through to the future is, I think, better now than it was a quarter ago. Guy, do you want to add to that?
Guy Gecht: I think perfectly said. I think the team kind of accelerate the arrival of the future business model, and they deserve tons of credit, and obviously, we’ll continue to work out to maintain and push harder on profitability.
Erik Woodring: Awesome. Thank you, guys. Congrats.
Nate Melihercik: Our next question will be from Juergen Wagner at Stifel.
Juergen Wagner: Yes. Good afternoon or good morning. Thank you for letting on. Question on your market positioning in your PC peripheral business. You mentioned you’re gaining share now. Dell had recently at CMD, they showed a slide that they want to go back into the peripheral business. Is that now a new trend or – so do you see that as a threat or maybe do you consider going back into the OEM business at some point? And then question video from today’s perspective, when would you see that reversing or turning into growth? Again, thank you.
Guy Gecht: Thank you. I would say what we’re finding it’s really reassuring is the strengths of the brand, and we’re seeing indication of pricing power. And you can see that – some of it in our P&L. We like to sell product with a larger brand that has definitely a promise of quality of innovation. People like that. We’re seeing – I mentioned the Logitech for business. We’re seeing more and more enterprise saying, you know what, we are going to buy that. We’re going to just – we know that that will work for our users both at home and in the office. Our IT tools will manage that as well, not just the video conferencing, but the peripherals. We are very comfortable where we are. We always had competition. We just need to continue on our game and what we did in the last many years. We need to continue to do faster, better, and I think we have great opportunity there.
Juergen Wagner: So, you wouldn’t see OEM business as an opportunity again for you?
Guy Gecht: Yes, we never say never. Again, we love partnerships. If something would make financial sense, obviously it would be up to the next CEO to decide, but I think we’re very comfortable with people picking a premium product with the Logitech brand and getting great return for it.
Juergen Wagner: Okay.
Chuck Boynton: And Dell can be a partner as well? I think …
Guy Gecht: Yes. Oh, they are a partner.
Chuck Boynton: We do sell some of our products on their website and they are a good partner and they’ll be a formable competitor, but I think with our quality engineering, design, brand, and number one market share, I like the position that we sit in.
Juergen Wagner: Okay. And on video, any thought when you – when this could turn again or any best guess or?
Guy Gecht: That’s like question of when, not whether. Talking to customer, the people that are dealing with the video conference in the enterprise, are often the same people that get the mandate, let’s bring the team back to the office. And right now, they have two conflicting kind of topic, not completely conflicting, but they try to get people to come back and then they try to arrange for them great environment, productive environment to work with the people who work from home or the customers and video conferencing. So, I have no doubt that we’re going to see more rooms being equipped with video conferencing. That’s what people tell me. They do their homework toward that. I see customers making a decision to essentially standardize on Logitech.
