Nate Melihercik: Okay. So thank you, George, for the quick math and we wanted to provide the seasonality because it’s a little different than historical. The primary driver is we have done a really good job of leaning out channel inventory and so now when you compare to history, it’s going to look a little different. Going forward, this should be the more normalized profile. And what that means is there’s going to be a little more sell in in Q1 at the quarter we’re in right now, the June quarter. Then you’ll see a little more sell in in Q2, followed by more sale out in Q3 and Q4 and so the real kind of way to think about this is the right operating model is weeks on hand. How much channel inventory should we have for weeks on hand?
And when you compare that to last year, where we were still leaning out the channel throughout the year, the year-on-year growth is going to look really strong for Q1. So when you do the math, we’re going to have a really strong Q1 compared to prior year, but it’s based on the right target operating model. Now, what does that mean for the full year? Could Q3 and Q4 be higher? Of course, that’s a long ways off. The December quarter is our biggest quarter, but you’re going to see a pretty strong Q1, a pretty strong Q2. We have really done a good job of having the business be more linear. What we sell in each month now is more similar then that should translate into better margins and in a new kind of seasonal model based on weeks on hand. So don’t read into a lot with that seasonality other than we’re running a leaner supply chain and this is reflective of putting the right product in the channel for the weeks on hand on a forward-looking basis.
Hanneke Faber: Yeah, super. And I’m glad, George, that you’re asking the question on 8% to 10% because that’s obviously a really important one. What we’re doing here is clarifying the organic growth piece of that, which is what we can control and I think we owe that to you guys to be a little more specific on organic. So what you’ve seen is our outlook for next year on organic is low single digit. Beyond that, we will accelerate as soon as we humanly can to mid-single digits and why do I believe that is true? We believe our markets, thanks to those tailwinds of new ways of working, gaming and AI, we believe our markets will be GDP. GDP if you combine that with modest share growth, you get to those mid-single digit rates. That’s also what the company did pre-COVID.
So if you look at the seven-year pre-COVID CAGR, it was 5%. If you look at the five years pre-COVID CAGR, it was 7%. So again, mid-single digits, it’s what our track record was and we believe we can do that going forward. Any M&A would come on top of that, but it’s harder to predict and I would say, it can be huge, it can be small, it can be a mountain or a molehill and I would hate to artificially cap the size of M&A. I would also hate to over promise on the size of M&A. We’ll be thoughtful. We’ll be deliberate and strategic on M&A, but I think it’s important that we provide that clarity on the organic growth rates, which is what is our priority right now.
George-Samuel Brown: Perfect. Thank you, guys.
Nate Melihercik: Next up, let’s go to Bank of America, Didier Scemama. Didier, are you there?
Didier Scemama: Yes. Obviously tech analysts do not know how to unmute. Apologies. Good morning, everyone. A question for Hanneke, I’m a bit surprised you have lowered your long term growth target. Not because I don’t understand it, but because effectively you just told us that you’re going to invest a bit more to increase your TAM by about $1 billion. So I would have expected, at the very least, the organic growth to have been the same as it was. But now you’re telling us that effectively, some of your core categories are going to decelerate, if not shrink. Is that the right way to understand it and I’ve got to follow up.
Hanneke Faber: I wouldn’t say so, Didier. I think, well, I know the previous 8% to 10%, which has been around for a long time, always included M&A, which made it rather obtuse, because, again, M&A can be huge, it can be small. It’s hard to predict when it will come. So I think it’s important that we give you some guidance on what we think this business can do organically. For next year, that’s low single digits and then from there, we’ll take that to mid-single digits. That’s by no means a deceleration of where we’ve been. That’s where we were pre-COVID. In the last two years, obviously, we were down across our categories. So we look forward to accelerating that business, and I’m very optimistic about our ability to do that.
Didier Scemama: Excellent. And I think your long term gross margin model hasn’t changed. But should we understand from your commentary that you expect to operate towards, let’s say, the upper end of that range and that you’re going to invest effectively what’s on top of that in R&D to accelerate your top line, maybe in the longer term?
Hanneke Faber: Yeah. So within the OpEx, definitely what I would like to do is shift more to the S rather than the G&A, which is marketing and R&D, because that’s what drives in the end, our gross margins and our ability to premium price our products. So, yes, on that. On gross margins, I wouldn’t — we’re guiding a range 39% to 44% for the longer term. For next year, we think we can be around 41%, which is great. Should that change going forward? We’ll let you know, but a broad range, given the uncertainties in the environment, I think it’s prudent for now.
Chuck Boynton: I would just also add Didier that, it’s an important philosophy that Logitech has, and this is broader than Hanneke and I. This is in the business groups and the go-to-market is we are not going to give up share in the mainstream and lower end. We will fight the margin game at the low end. Why? We make our money in mid-tier to high end and so you will see periods where we’re more aggressively promoting to defend our share of shelf at broad scale e.com and retail. And so there will be periods where we’re fighting more to maintain share or grow share. The long term model, 39% to 44%, makes perfect sense. This year as we see it today, 41% is a really good planning number, but understand that I wouldn’t encourage you to go to the high end of the model permanently because competition can be fierce and we will defend our turf.
Nate Melihercik: Great. Let’s go to George Wang at Barclays. Q – George Wang Oh, hey, guys. Thanks for taking my question. Just two quick ones. In the prepared remark, you talked about some AI tailwind. Most people don’t associate, necessarily, Logitech with AI at least in the intern. Maybe you can pass out some of the drivers kind of — and when do you think we could possibly see some tailwind on the P&L side?
