Michael Foeth: Yes. Hi, guys. Thank you. Thanks for taking the question. Starting with a clarification on the gross margin. You talked about lower costs driving the margin, and I was wondering, is that only lower input cost, lower material cost inflation, or is it something in the design of the products as well that is more structural that allows you to have lower product costs that will be …
Chuck Boynton: It’s both. Yes, Michael, it’s both. And it depends on the comparison year-over-year versus quarter-over-quarter. We have structural material cost reduction that our COO, Prakash, and his team have driven. It’s both designed for manufacturing, designed for cost, as well as procurement, negotiated cost reductions. And then certainly, everyone has been benefiting year-over-year from lower freight costs, inbound, outbound, air, water modal. All companies have benefited from – where we’ve done an especially good job as material cost reduction. Year-over-year, it’s about 50-50 cost reduction and expedite/logistics. And then quarter-over-quarter, it’s primarily material cost reductions, because freight has not changed a lot quarter-over-quarter.
Michael Foeth: Sure. A second one on the strength in the workplace solutions business, mice and keyboards, can you be a bit more granular? Does it – is it – you talked about strong consumer, but is it equally strong in enterprise? Is it – where does it come from? Is it a segmentation of your lineup? Is it more in the high end or the low end of the products? What’s driving the strengths there?
Guy Gecht: I would say across the board. Geography, we talked about Europe much better, leading Asia, China, a little trailing, selling to the enterprise and influencing enterprise. It’s something that’s relatively new to Logitech, but it’s working really well with partnering with enterprise, saying, hey, you want to expand. Would you do with Logitech? in general, companies like to do – to work with fewer vendors. So, that’s really worked well with that for us. The mobile type of solution is actually doing quite well too for us. And so, we’re seeing strength. We expect to be seeing strengths, but we’re seeing strength in all those personal workspace. I think now that some of the pull forward is starting to go away, we’re seeing it back to normal demand and normal growth. We see the path to normal growth.
Michael Foeth: Okay. Thank you. Then maybe just a very quick last one on financials. You have a pretty big cash pile and interest rates are up. So, I guess, you’re starting to earn some good money on that cash. I was just wondering, where is the cash parked and what sort of return are you expecting on the cash?
Chuck Boynton: We have a very conservative investment philosophy, so primarily in bank deposits and treasuries yields. It’s different in different countries, but the highest yields we’re earning are kind of just sub 5%-ish. So, we have an incredibly conservative model when it comes to managing our cash. We’re really pleased, this quarter we returned more cash to our shareholders than we generated. That gives us the confidence and strength in our business. We paid our annual dividend, executed buybacks, opened up a new $1 billion line for additional buybacks. And so, we feel like we’re – our capital allocation model is working. It’s executing. It’s consistent and the excess cash that we have is earning a decent return.
Michael Foeth: Thanks a lot. Well done.
Nate Melihercik: Our next question is from Joern Iffert at UBS.
Joern Iffert: Thanks gentlemen, and good morning and thanks for taking my questions. I would take them one by one if it’s okay. Just the first question. When you get all the pre-orders already for the Christmas season or a good chunk of the pre-order for the Christmas season, and if you exclude the B2B business, can we already assume that at least so far the revenues are trending flattish year-to-date for the quarter, considering this pre-order for the consumer business?
Chuck Boynton: So, the way we look at this Joern, is, our global business is different around the world, and the – many accounts plan very far in advance, and many accounts order every two weeks. We don’t disclose the level of detail of kind of book-to-bill or ordering. I will tell you that our operations team is working fast and furious, delivering amazing amounts of product right now, getting ready for the big holiday promo. We’re just super proud of the engagement with our key customers and partners, e-tail, retail, and we’re optimistic for a strong holiday season. B2B is trending nicely. There can be a budget flush. We don’t know what that’s going to look like at year-end. That’s kind of a wait-and-see. It tends to happen the last couple of weeks of the quarter. So, B2B and the business is trending as we would expect this time in the quarter. Of course, it’s week three, so it’s early.
Joern Iffert: Okay, thanks. So, the second question would be, please, on gaming. Can you remind us how much of the gaming sales is linked to consoles via the headsets and game controllers, for example? And it seems that some console sales are doubling these days and that you get a feeling to – yes, to what extent gaming was benefiting from the strong console exposure.
Chuck Boynton: We don’t break out gaming in that level of detail. Console has been a little more difficult for us because our product portfolio is aged. Our product team is launching, we believe, a revolutionary new product. It’s going to come out just at the tail end of the holiday buying season. So, we’re not going to get a huge amount of lift from it. It’s called the A50 and it is a killer, killer new product, but this will primarily be a benefit more into next year. PC gaming, as you know, is our hallmark. We have number one market share in gaming mice, and we just launched New NPIs to further build our lead from a technological advantage standpoint on the gaming side.
Joern Iffert: So, just to double check this, when we saw all the good console gaming data, and you said your product portfolio was with age, so you’re not yet fully benefiting from this strong growth which is happening on the street for console sales.
Chuck Boynton: That’s right.
Guy Gecht: We have more to benefit. There’s also – this is an area that had a significant pull forward during COVID from our perspective. So, people bought our accessories and still use it. So, the upgrade – the refresh upgrade is a little further than maybe the rest of the gaming categories. But as Chuck said, we are going to give – our team is very innovative. We’re going to give the user really good reasons to upgrade.
Joern Iffert: Thanks. And the last question, if I may, on Europe. Pretty good performance, absolutely, in the quarter. Can you give us some more color? Which regions and which products in particular, if you must name the top three reasons why Europe was so good, would be helpful if you can share it with us.
Guy Gecht: The number one reason is our team, and then I’ll let Chuck maybe take the next two reasons.
Chuck Boynton: Yes, we don’t break out that level of detail, but I would say our team in Europe led by Yalcin, is a really, really good team. We are unlocking value by reducing promotions, improving linearity, driving engagement with the end customers, with the tier two resellers, doing a masterful job with our e-tail partners there. And so, I think honestly, this is an execution story in Europe for us. It truly is. The market is good. We’re gaining share, but our team on the ground is just really executing across the board.
