Nate Melihercik: Our next question is from Ananda Baruah at Loop.
Ananda Baruah: So, I guess just real quick on the — Chuck, on the long-term growth model, you mentioned, I think you said high-single digits. I guess the question is and you mentioned M&A as being a meaningful contributor to that. So, I guess the question is, is that high-single digits organic? Can you talk to that yet over time? Or is that high-single digits with the M&A and sort of in the organic TBD? And then I have a quick follow-up.
Chuck Boynton: Yes, thank you. That — the 8% to 10% is — basically that number is derived from the historical growth rates pre-pandemic. Obviously, the pandemic if you — it’s 70-ish percent growth. So you got to kind of take those years out. But that’s really the average growth rate for the 10 years pre-pandemic. Some years, it was 4%, some years it was 14%, but it averaged in that 8% to 10% range. That included, importantly, many key acquisitions. We’re very good at M&A. We find the right companies. We exploit that technology. And if you look at what we’re great at, we have these global distribution channels at scale. So we can go buy companies, plug them into our work and exploit that technology. We have an operations team that can drive product costs down and do a really good job.
And as Hanneke mentioned, this iconic brand. So, I think we have this great machine that can plug companies in. So the 8% to 10% is accounts M&A, that’s part of the formula for sure. But there’s nothing planned in the short-term horizon. Hanneke is brand new. We’re working on the strategy. So I wouldn’t expect any big announcements anytime soon. But it’s an important part of the long-term growth rate, nor are we predicting to get back to that rate anytime soon. This is a long-term financial model. The part that we are executing on today is the gross margins of 39% to 44%, keeping OpEx at roughly 25% and generating a very healthy operating income. That is right now, that’s today, we feel very good about that. A couple of quarters ago, we said that was six or eight quarters out, we’re very excited about executing on that part of the long-term financial model today.
But overall, growth is the focus. We just want to be cautious going into next year, and then we’ll talk at Analyst Day more about the model and our thoughts on M&A and whatnot. But yes, 8% to 10% is not organic. It’s organic plus M&A and M&A is a key part of that.
Ananda Baruah: Got it. That sounds super helpful. And I have just a clarification quickly, and then I have a quick follow-up question. When you say next year, we’re talking fiscal ’25 or calendar ’24?
Chuck Boynton: Yes, fiscal ’25 starting April 1 of next year, that’s right — this year, yes.
Ananda Baruah: Got it. And you guys had mentioned in the prepared remarks, I think it may have been Hanneke who mentioned this AI as an opportunity for the company. Any context you can give there? And I guess really what I’m wondering is, are there things that sort of you would consider to be incrementally new to the company in terms of value-add for market share opportunities, new categories, which you could go in that you’re thinking about that sort of behind the close doors it classically fit into the ecosystem of products that the company has historically offered?
Hanneke Faber : Yes, I’m happy to take that because it’s one of the other areas where I see a lot of opportunity. Really two ways that we’re leveraging AI at Logitech today. One, of course, is internally on productivity, like every other company and that’s table stakes, but it’s well underway here, whether that’s in supply chain and marketing, using Copilot, ChatGPT and our own large language models. So that’s well underway. The area I’m more excited about is in our products and in our innovation. And again, there’s — I’ll mention three things that I’m excited about and that are already out there, but they’re — they can tell you a little bit about what’s to come as well. So, on the video conferencing side of the business, we have a new product out called Sight, which is a panoramic video conferencing camera that you sit right in the middle of your conferencing table.
That one is like having a TV producer in your meeting and you get perfectly framed, your audio is perfect, your video is perfect. So I love that. And that leverage is AI to get that done. So that’s on the video conferencing. Then on headsets, the zone to wireless headsets just out again, also leverages AI technology. And here, the consumer insight is, and I hate this myself. You’re talking to someone, you have a headset on that other person is at an airport or is outside and there’s a ton of ambient noise on the other side. Leveraging AI, this new headset cancels ambient noise on both sides, which is super cool. So really great product. So those are two product examples. The last one is on our software. So, if you have any of our products whether it’s Samsara keyboard, you can download a software that goes with that.
One of the features is called Smart Actions where you automate some of your repetitive tasks. What we’ve seen in the last four or five months is that, by far, the number 1 repetitive tasks that our users are simplifying is something called reply with ChatGPT, 9x as much as any other smart action. So again, it shows how we can help both through our hardware and our software, delight consumers more with AI. Sorry, it’s a bit of a lengthy answer, but I’m excited about the opportunities for innovation that we can leverage in our products and the growth we could get from that.
Ananda Baruah: Yes. No, that’s helpful. And so that taking the three you just mentioned right there, like to me, that would be more suggestive of potential market share gain opportunities or product stickiness opportunities, something along those lines.
Nate Melihercik: Our next question is from Joern Iffert at UBS.
