Okay. Good morning, and good afternoon, everyone. Welcome to Logitech's video call to discuss our Financial Results for the Third Quarter of Fiscal 2023. Joining us today are Bracken Darrell, our President and CEO; and Nate Olmstead, our CFO. As a reminder, 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're 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 in our filings with the SEC, including our most recent Annual Report and subsequent filings. These materials as well as our prepared remarks and slides and a webcast of this call will all be available at the Investor Relations page of our website. We encourage you to review these materials carefully. And unless otherwise noted, comparisons between periods are year-over-year and in constant currency and sales are net sales. And finally, this call is being recorded and will be available for replay on our website. And with that, I will now turn the call over to Bracken. Good morning, Bracken.

Good morning, Nate, and thanks, Nate, and thanks to all of you for joining us. As you saw in our preannouncement, our third quarter results were disappointing. Enterprise demand deteriorated versus last quarter, and consumer purchases were soft and more concentrated during promotional weeks than is typical. Those factors compressed our net sales and gross margins and resulted in a revised fiscal year 2023 outlook. I've discussed for the past few quarters the ongoing macroeconomic and geopolitical challenges impacting Logitech and the world. A strong dollar, global inflation and low consumer confidence continue. In the midst of these, we focused on what we can control: product innovation, a strong go-to-market strategy and disciplined P&L management. So what changed during Q3 that pressured our results? First, our enterprise demand declined. Our VC business had delivered consecutive quarters of 7% growth and fell 16% this quarter. You all have read the headlines. Google, Amazon, Microsoft, banks and other businesses have announced layoffs and cost containment actions. Initially resilient in the face of pressured macro conditions, businesses are increasingly cautious in their spending, given the economic volatility and uncertainty. And of course, that is impacting our enterprise business, too. The second change in this quarter was a shift in our consumer’s purchasing patterns. Consumer sales remained weak. And importantly, of those consumers that did buy, these purchases were concentrated in time with higher promotional intensity, resulting in lower sales and pressured margins. While current macroeconomic conditions and even the variables that changed in the third quarter aren't going away this quarter, they don't impact our view of the long-term potential of this business. We remain committed to the long-term growth trends, strong market strategy, the markets and the business models we have in place over time. I fully expect us to return to…

Thanks, Bracken. Hello, everyone. Let me walk you through the quarter in more detail. Our Q3 results were impacted by a challenging macro environment. Net sales were down 17% to $1.27 billion. This reflects consumer purchasing concentrated in promotional weeks throughout the quarter and lower enterprise and consumer spending. Gross margins decreased versus last year to 37.9%. Versus the prior year, currency was unfavorable three points. Promotions were also unfavorable three points, and cost inflation was unfavorable two points. These eight points of headwinds were partially offset through our pricing actions and by driving down our use of expedited shipping. Operating profit was $204 million, reflecting lower demand and gross margin pressure, partially offset by reductions in operating expense. Cash flow from operations was $280 million in Q3, and cash flow is up $118 million year-to-date versus last year. Turning to results across our product categories. Gaming was down 10%. Growth in our simulation products was essentially flat and more than offset by declines in PC and console gaming. Asia Pacific was down only modestly, while Americas and Europe remain pressured. Despite these declines, we gained market share in nearly all Gaming categories. The largest negative swing in our portfolio versus last quarter was in Video Collaboration, which was down 16% after posting consecutive quarters of 7% growth. Video conference room cameras and peripherals declined single digits, but we gained share. And business-oriented webcams were down more than 40%. Pointing Devices were down 8% driven by pressure in the low end of our portfolio, but we grew market share in total Pointing Devices. Keyboards & Combos net sales declined 17% with gains in the high end of the market, offset by losses in the low end of the market, and consumer webcams were down nearly 50% year-over-year. Turning to expenses.…

Great. Thanks, Bracken. Thanks, Nate. [Operator Instructions] Our first question is from George Brown at Deutsche Bank. Good morning, good afternoon, George.

Hi, George.

Hi, guys. Good afternoon. Thanks for taking my questions. I have two, if I may. Firstly, in terms of product launches, you released quite a few products in Q2 out of the holiday season. Can you provide some detail on how they performed and in particular, I'm interested in how Logitech G CLOUD has performed and whether that's met your expectations or not. And I'll leave it at that.

Okay. Yes. I would say overall, we announced 20 new products that we're launching in Q3 or sometime in the next six to -- three to four months after that. And I would say, overall, our launches are pretty well on track. The G CLOUD, in particular, is a very narrow launch. So we launched it only in the US. We're so far, so good. We're now expanding it into Europe and Japan. So, I would say, so far, it's on track. It's a new category for us. We're always very conservative on new categories, George, because we don't want to get kind of over the tips of our skis as we’d say here, but so far, so good. And generally speaking, I feel really good about our innovation in total. I mean, we continue to have just a really, really good insight-driven innovation with -- and I would say, our performance in all of our new products is pretty well on track.

Perfect. And then just a second question. Just in terms of the level of discounting going forward, after there was clearly some pull forward of demand during the Black Friday and Cyber Monday period. What could we expect going forward into Q4 and beyond from a promotional perspective, given inventory stands at quite a high level?

Yes. I don't think -- we're not in a position where I would say we're going to have it at a discount, because of the inventory levels. Our channel looks fine, and our internal inventories came down quarter-over-quarter, again, as you probably saw. But we're going to make sure we're responsive to the environment. So I wouldn't commit to you exactly where the overall promotion levels will be. I think they were particularly high as a percentage of our business this quarter, though, and I wouldn't expect that again.

Yes, George, just TWO quick comments on your questions. First, I think from an NPI standpoint, I agree with Bracken, off to a good start. I wouldn't say there was anything in there that was financially really that significant in the quarter. So still ramping up there. And then on the discounting, as Bracken said, we definitely saw consumer preference towards more promoted products this quarter. I think there's some of that assumed going forward here in Q4. Too early to say what that looks like out into next year, I would say. But that seems to be the environment that we saw during the holiday with certainly the weeks with the higher promotions had the higher percentage of sales.

Perfect. Thanks, guys.

Thanks, George. Next up, good morning, Asiya Merchant from Citi. Good to see you, Asiya.

Hey, Asiya.

Hey, Asiya.

Hey. Good to see you guys, too. Couple of questions. First on the VC side of things, where -- if you can give us any anecdotes about how your discussions with customers are going now? Clearly, the environment is still pretty gloomy out there as far as layoffs, but has there been any change since their reported quarter in terms of these conversations with these customers around demand for VC? And then secondly, I know in the press release, and Nate mentioned that as well, there were some supply concerns for your March quarter that you discussed in the press release with the pre-announcement. Can you tell us how much of that's really affecting the March quarter? And when do you expect those to kind of play out, or are you still expecting supply issues post the March quarter? Thank you.

Okay. I'll take the first, and Nate, I'll let you take the second one. Yeah, I would say, overall, we just came back from CES. And I would say, generally speaking, the tone was about the same. Everybody seems very committed to the long-term, making sure they've got the right setups, and that I wouldn't say, there's any real change in the secular term from what I see. But I do feel – I do sense the conservatism. I think you could hear it in some of our salespeople, who were saying March, March, March. And I'm not sure that was the right date, but they were saying a lot of the companies are really pushing out spending into future quarters. So I think that's probably still out there. And we're certainly assuming that as we go into Q4, and it's reflected in our guidance. Nate, do you want to take the China question or I'm happy to?

Yeah. No, I think – listen, I think the thing that we probably all learned over the last few years with COVID is it's a little hard to predict. So I've made some assumptions that, there could be some disruptions on supply in the quarter. We're working hard on those things. We may have opportunities through expedited freight, and so forth to recover some of that. But still a fluid situation, Asiya. So there's not really a specific number, I would say, we called out. We just tried to factor in a range of possibilities in the outlook. And so that was one of the things that caused us to adjust the full year outlook.

Yeah, I would just add to that. I think we're in the – we're probably in the middle of the most uncertain period right now, because it's – the New Year just started. All of our factory people went back to their homes. And it's anybody's guess on what that's going to do to COVID rates, and whether we'll have a problem getting people back or some of our suppliers. So we're in this kind of uncertain period now. But I think, it will settle out over the next few months. It's not an unlimited risk. So we bracketed it pretty well, I think, in our outlook.

I think the other thing that we've done certainly over the last couple of years through investment has been increasing the amount of automation in the factory. So, we can't fully offset the risk of labor disruptions and things like that. But we have improved the company's ability to do that versus a couple of years ago by driving up that automation in the factory, which has somewhat reduced the reliance on labor, but still something that we've got to really manage tightly.

Great. And then just in terms of growth outlook beyond the March quarter, you guys obviously have a target model out there. Any indication on when we should expect that growth? Are we at a point where post the March quarter, we can return to kind of the growth rates that you guys have outlined just given the macro trends that you're so confident on will continue?

Certainly, we're planning Analyst and Investor Day. We'll have the date out there shortly. I think, it's too early for us to tell you what next year is going to look like and – but hopefully, we'll have a clear picture of that when we come into March. I don't think – I can't imagine that, we're going to see a snapback in the macroeconomic picture in a quarter. So I wouldn't expect it to, our fiscal year to end and then things suddenly get better. But I think – I'm pretty optimistic about somewhere out there in the next – over the next year or so that you'll see the market come back, but I think everybody on this call has an opinion on how long this is going to last.

Okay. Thank you.

Thank you.

Thanks, Asiya.

Great. Next up will be Paul Chung from JPMorgan. Good morning, Paul.

Hello, Paul.

Hey, Paul.

Thanks for taking my questions. Just on gross margins, as we kind of think about a couple of quarters down the line, how do we think about pricing increases you've done kind of lapping some FX headwinds, lapping some component inflation and lower shipping costs. Can we rebound comfortably into your kind of target of 39% to 44% in a couple of quarters?

I'll go ahead and take that one, Bracken. Yes, I mean, Paul, this quarter, we had eight points of headwinds year-over-year, very similar factors in the sense that we had currency was the largest. We also did have some headwind this quarter from the increased promotional mix, and then we also had the inflation. As I mentioned last quarter, I mean, I think we feel good about some of the trends on the inflation side, start to see some of the costs come down. Ocean freight, we continue to make some progress on the rates there. And currency looks a little bit more favorable than it did last quarter. So good trends, but we didn't really see any of that really flow through yet this quarter. And I think next quarter, I really don't expect to see a lot of that favorability yet. It takes a little bit of time with the inventory being a little bit higher. We've got to work that down to start seeing some of those benefits come through as well. But yes, I think into next year, I think some of these tailwinds could probably become -- excuse me, some of these headwinds could probably become tailwinds. I think I misspoke earlier. Those are obviously headwinds. Some of those headwinds could become tailwinds. And I think in terms of the pricing, I think it's good that we took action early this year to increase prices across a number of categories. That's helped offset some of these pressures. And we'll see with the promo environment, what kind of promo environment unfolds over the next few quarters and whether we can hold those or not. So lots of moving pieces, Paul. But I do think that we've been absorbing a lot of those headwinds this year, and I do expect some of those to begin to reverse into next year.

Maybe, Paul, I'll add one more piece of perspective. I think the thing that makes me feel the best about this year is the incredible amount of headwind we're facing from a gross margin standpoint. Exactly when that reverses is a little unclear. I mean clearly, currency is on its way now. We're not seeing it yet, but it's caught on hedges and natural hedges and technical hedges, et cetera. But I'm super excited that we have 800 basis points of a headwind because that's going to come back out. Again, we're not going to see 800 basis points of improvement. But getting out of range again, I would sure hope we do it next year.

So by next year, you mean next fiscal year, I assume? So maybe by 2Q…?

That's right.

Okay. And then just a follow-up on OpEx, pretty material cuts. Where do you kind of see it normalizing? I assume more aggressive cuts maybe in the near term. Do we get back to that 25% of sales, or where are you seeing further opportunities to kind of right-size cost while top line is challenged? Thank you.

Paul on that -- real quick on that one, I think on a full year basis, you'll probably see the OpEx be around 25%, which is where it has been. And come back to your earlier comment on gross margin, those things go hand-in-hand. So if we get good confidence in line of sight to gross margin expansion that creates more room for investment if we see good returns available to us to drive growth. So that strategy remains unchanged. Moving away from promotion-driven strategy to one that's more full driven through increased marketing investments. Certainly, we're committed to the investment in product innovation, and we think that, that's key. Bracken, something you'd like to add to that?

No, you got everything. Perfect.

Both thank you.

Thanks, Paul.

Thanks.

Thanks, Paul. Next up from Morgan Stanley, Erik Woodring. Good morning, Erik.

Hey, guys. Good morning. Thank you for taking my questions. I guess, maybe, first, if we take a step back and think about kind of your four major end markets, where do you think some of those are furthest along in terms of kind of facing the brunt of the challenges the world faces today? Meaning, we saw PCs correct earlier perhaps than consumer electronics, which perhaps is corrected earlier than enterprise. And so, just curious where you think you could perhaps see maybe a rebound first relative to other of your end markets? And then I have a follow-up.

Well, that is a really good question. I'm going to hesitate to give you a definitive answer, but I'll give you kind of a feel. I think it could be that we see it first in Gaming. But it kind of depends, because the Gaming market has also seemed pretty sensitive to promotion this quarter. So that made me a little less -- it makes me a little more tentative to say that. I think the enterprise spending kind of comes in later and starts out later. And, I mean, it hangs in longer and then comes out a little later when you go into a softening of the economy, that's generally the view. And then our personal workspace business, its just somewhere in between. I reserve the right to completely reverse though, because to be honest, the visibility is not what we'd like. It's really hard for us to see. But I think, the good news on all three is I really feel good about the long term. I do think those secular trends are super solid.

Okay. No, that's helpful. And then, just because you mentioned it, Bracken, I'd love to just maybe get some color from you guys on, maybe, why visibility is different than historically? Is it different purchasing patterns? I know you mentioned the purchasing during promotional-heavy periods in the December quarter. But maybe just taking a step back, are enterprises purchasing at a different cadence than they used to or consumer preferences for purchasing changing? Would just love some more color on just maybe how that visibility has changed and/or when it could improve, and why it might improve? And that’s it for me. Thank you, so much.

Absolutely. Thanks, Erik. I'll just put those two pieces. On the consumer side, I think you said it all. The consumer demand has been weaker. And in this quarter, we saw it really concentrated in promotion. Now, I hope that -- Nate was saying, we're assuming it could be more promotional as we go through the rest of the year. I hope that that starts to fade at some point soon, because normally, promotion is heaviest during a holiday quarter. Now we may see that in Q4, but we'll see. But we're prepared for that, but I hope that it will start to get better from a promotional standpoint. And that is not -- that would not be normal to have heavy promotion go on all the way through outside the holiday quarters all the way through the year. So we'll see. On the B2B side, it really just comes down to -- I think, there's such a -- turmoil may be too strong a term, but there's a lot of settling that's happening. And I can't remember since I've been in this job anyway when we've had the kind of layoff announcements that we've had in just the last 90 days. I think there's just a lot of construction of spending happening, and I think that automatically drops your visibility. What you think you have in visibility, suddenly, it's -- seems like it's been pushed out a quarter or two or something. So I think that's reduced it. I think I like the fact that it's actually a sharp reduction right now from a business standpoint, because I think that means it might be a faster exit back out again. And maybe that's my optimism booking its head up. But I would rather see that and see people kind of gradually easing into something. So I'm sort of feeling good that there's all this discussion around construction. I don't feel good about our business, don't get me wrong, but I feel good about the restriction. I think that suggests that people are making the right steps, and then the clarity will come as we go into next year.

If I could add just a little bit to that, Erik.

Yeah. Please, please. Yeah .Please, of course,.

You asked what causes it to be different. I think we're transitioning out of, obviously, a unique period globally from shutdowns. And so the diversification that we have, again, I'll come back to this in the portfolio by product, by category, by geography, are all things that I love having in a time like this, because that transition is obviously different in those categories and in those geographies. We still see places that are doing better, that are growing a little bit. They maybe went into the lockdown at a different time. They've come out of it differently. So that diversification continues to be, I think, a really, really important thing. Obviously, this quarter, we're disappointed with the volumes. But the shape of the P&L held up pretty well. And I think we continue to manage well in this environment. We continue to do well from a market share standpoint. We continue to invest in our long-term priorities and continue to manage OpEx, I think, very well and do a good job with cash generation. So lots of things haven't changed. And again, I think the diversification in our business is really key to us being able to deliver a good strong quarter in what's the challenging macro environment.

Okay. That's super helpful. I was just the last very quick follow-up was when you mentioned enterprise demand weakness, did it spill over into any other segments besides VC, or was it mostly concentrated in VC? Just wanted to touch that clarification. That's it for me.

Yeah. So we see it also in CNP, mice and keyboards, mice and keyboards and traditional mice and keyboards and Video Collaboration, our two biggest areas in B2B. VC is a good proxy for it, because it's pretty much all B2B, but we also see it in mice and keyboards.

Okay. Thank you.

By the way, I should say, it's not like people weren't buying any conference cams. They were. So we didn't suddenly go terribly negative. It was down mid-single digits. So – but that was after being up double digits before.

All right. Thank you, guys.

Thank you, Erik.

Thanks, Erik. Next up will be Adam Angelov from Bank of America.

Hey, Adam.

Hey, Adam.

Hi, there. So I just wanted to check on the channel inventory situation. So, maybe if we could go by division. I think Gaming was positive sell-through in the quarter. Is that a sign that the inventory levels there are kind of at reasonable levels, and perhaps the sell-in can match the sell-through going forward? And maybe, if there is any other specifics by different division, if you could add that, that would be great? And then second one, so on 2023, the calendar year, are you thinking about further price increases? And maybe if you could just share your thought process on price increases versus potentially prolonged promotion period as we – as you mentioned already? Thanks.

Nate, I'll let you take the first, and I'll take the second.

Yeah. I think channel is in good shape. It's down year-over-year, which should be consistent with the overall trends in the business. I mean, I think – we continue to see our customers, I think, being pretty cautious and conservative around restocking. Same sorts of visibility challenges that we were talking about a moment ago, I think probably applied to them as well. So being a little cautious on reordering, but the channel is in good shape. As Bracken mentioned, Gaming was one of those areas that was more – seemed to be more promotional this holiday period. And so we did make some progress in reducing some of the inventory levels there. I'll just quickly say on the pricing side, and then I'll let you jump in there, too, Bracken. It's really a function of a lot of things, Adam. What happens with currency, what happens with inflation? So lots of elements there for us to consider. But Bracken, something you'd want to add on that?

Yes, I'll be even more definitive. I mean, if something doesn't change, I can't imagine us raising price further. I think those 900 basis points or 800 basis points of headwinds that are going to eventually drop would suggest that we won't need to. Now, if something radically change again, who knows. But I don't think as long as currently keeps heading in the direction it is and inflation keeps heading in the direction we all think it's going to go, I don't think we would need to raise price again.

Yes. Then on the inventory side, too, you asked about channel. Again, Bracken had mentioned it, I think, in his remarks. Third consecutive quarter where we've reduced our distribution center inventory sequentially. And we made good progress I think there this quarter. We'll be able to reduce that more into the fourth quarter and continue to normalize those levels. Not in a big hurry to do so. It's all good fresh inventory that I expect we'll sell, but it continues to be a focus for us.

Right. Thank you.

Thanks, Adam

Next on the line will be Joern from UBS. Good afternoon, Joern.

Hey, Joern

Hey, Joern

Yes. Hi. Good morning. Thanks for taking my questions. And the first one would be please on your implied Q4 outlook, which is targeting or guiding for sales being down around 25%. Can you really get us a rough indication, is one-third of this destocking, one-third consumer demand weakness and one-third China? Is this how we should think about it? Because it seems when you're saying sales-through for your key categories, ex Russia was only down mid single-digit in Q3. It seems a quite sharp deceleration. So if you can provide some more color here would be definitely appreciated. And the second question would be, please, just focusing on the freight costs, which they came down to pre-COVID levels for a couple of areas. Do you feel that this will be a very strong contributor to the scenario [ph] to your earnings growth in 2024? Maybe to start with these two questions. Thanks.

I’ll take the last question.

I take the first one. Yes, and then I can hit the second one, too. I mean, the outlook for Q4 really implies typical seasonality, Joern, Q3 to Q4. So Q3 was weaker than expected. And off of that, you would get sort of a normal mid-20% decline sequentially into Q4. So that's what is what the guidance really implies. We've got one quarter left, but the full year guidance basically implies that for the fourth quarter. And then on the freight cost, the benefit we got this quarter was that we didn't use air freight to the same level by long ways versus last year. We were chasing a lot of supply last year. It's not the case this year. So we were able to reduce our air freight. So we got some year-over-year benefit there. We're still -- and ocean rates are getting -- are coming down, but they're still higher than what they were pre-pandemic. They've come down month-on-month, starting to look more positive there, but still have a ways to go before we get back to pre-pandemic levels.

Okay. And then maybe the last question, if I may, on your OpEx. When we look in 2024, I mean, after you take -- take out $250 million OpEx in fiscal year 2023, is this now enough? Is this done? Are you lean enough, for example, to cope with a flattish 2024? Is this for you feel good about? Is there more to come now in the next couple of quarters regarding your plans?

I want to clarify real quick, Bracken. I'm not sure if you said 250, but I said 215, 1-5.

15, yes, yes. Thanks.

Okay. I wanted to make sure that you heard that clearly. Bracken, sorry, did you have a comment?

Yes, 215. And we're going to keep up with the OpEx, Joern. We're not letting up. When we look at the top line, we feel like we need to take -- we're going to continue to take more out. And so you can count on that we'll keep aggressively taking it out. We're going to respond to market conditions, and you see what they are. So you can imagine how we feel about our cost.

Okay. Thank you.

Thanks, Joern. Okay. Our next question is from Andreas Müller at ZKB. Hi, Andreas.

Hi, Andreas. Andreas Müller: Yes. Hi, everybody. Hope you are well. I have two questions. One is, really, can you say something about the Chinese sales in the quarter? And do you expect that the impact from the lifted restrictions going forward, is that the benefit or not? And then, probably, also the status. I mean, you mentioned something in your own production facility. Are you completely 100% operational right now? And what's there the status basically?

I’ll answer the first one. You wan to take the first one, Nate? Chinese sale.

Yes. On China sales, I mean, China, unfortunately, was negatively impacted this quarter from a sales standpoint due to the infections, the rising infections. I think we probably had about a 1 point headwind this quarter, Andreas, from sales in December that didn't occur. I think longer term, I mean, I think it's a positive. It's potentially a positive. But like I mentioned earlier, I mean, I think COVID is just unpredictable. And hopefully, this was sort of a one-time event, but I think that's not for me to know with certainty. So -- but I think it's a positive to see a more open position by the government. I do, but to -- way ahead in this quarter.

Yes, I'll add to that. I do think -- I think, opening -- China opening is positive. And I think you asked about our production facility related to that. Right now, our production is still exposed, because Lunar New Year. So that's one of the things that has given -- gave us a little pause was what happens during Lunar Year. Everybody comes home, how many come back. And I'd say, we'll see. I mean, I think we'll manage whatever it is. But that is what it is. But I'm actually -- I hear so many negative headlines about China. I feel like the optimist in the room on that for sure. I feel good about China. I think as China opens, it's going to be good for us. It's our second biggest market. It's always been a good market. As long as I've been here, it's been good. We've had very few times we had a long period of slow growth there. So I'm excited about China. We've got great market shares. We've got a great brand there, and we're really learning a lot about the Chinese consumer there. So I'm optimistic.

Thanks, Andreas. Andreas Müller: Okay. Then I have another question about your priorities. When you go through your portfolio, do you see a need for changing some priorities for some categories with the downturn, maybe to earmark also a category as non-strategic one more besides a mobile speaker and earnings buds, for example?

Yes. We've kind of done that, and we always redo it, and we do it on a very regular basis. So, as you mentioned, we picked out a couple of categories that we said were non-strategic, which means we're reducing our investment, and we've stayed true to that. I don't see any immediate changes in our current -- the last time we updated you, but we'll update you again at the Analyst Investor Day. I think our portfolio, I'm really excited about that kind of 80% of our portfolio that we've angled forward and put our investment into. We're gaining market share across those. We're investing aggressively from an engineering standpoint into them. And yet, we're managing costs really well across the company in the middle of this current economic kind of storm. And so I think that bodes well for the future. But we'll update you again regularly. We'll keep you updated on where we're deemphasizing categories. Andreas Müller: Okay. Thank you very much.

Thanks, Andreas

Thanks. Our next question is from George Wang at Barclays. Hey, George.

Hi, George.

Hey, Bracken. Yeah. First question is maybe you can give more color just in terms of the latest B2B consolidation in terms of the go-to-market kind of sales force? And how are you guys applying learning's from the consumer vertical kind of innovation there to apply to the B2B vertical?

Okay. Well, first, I would say, we're trying to unlearn our consumer vertical into the B2B because I think our strength in consumer is something that really doesn't lend itself too much to the B2B side right now. We've taken – we leverage as much of that as we possibly could have during the first five or six years in the business. And now we're building new muscle, which is how to be a B2B company. And I'm excited about our potential there. We have a long way to go to really be, I think, first class in that space, but I think that's the upside here is how do we become a great execution engine in B2B. So I think it's still early days in that path. We've got the right resources in place. We've got the right capacity. And we're putting step by step, process by process, compensation plans, everything into place to really become stronger in B2B. So keep asking us about that. I think it's more of the hot spots of our business and one of the areas where as we improve, I think we can improve our performance.

Maybe you can unpack a little bit in terms of the installed base refresh/kind of upgrade cycle kind of against the macro, if the economy will slow further, how do you think this installed base refresh going to play out? Do you think that it's going to be delayed, or do you think it's just a more temporal kind of headwind there?

You're talking about on the desktop side, the mice and keyboard?

Yeah. Just across the portfolio, mostly on the PC installed base and also on the gaming as well?

I think, if there's a dramatic slowdown that goes on for a long time, it's certainly – it is going to delay the installed base refresh across almost every category you can think of in the world, including probably ours. But I think ours are – if you look at our products, whether it's personal workspace or video, they kind of are required for the new world we're in. So I'm not sure that you can – on the – in the office, for example, Video Collaboration. While there may be a delay, it feels like there is short term, it's really hard to imagine that lasting a really long time, because in the hybrid world where you're doing so much video like we are all right now, it's really hard to imagine not to enable many rooms. So I think that's – I think, I'm pretty positive on that. Yeah, it could be – there could be some kind of a delay in that. It looks like there was this quarter, but I don't know how long that can go on. We'll see. On the workspace side, this is so central to what we do now. Everybody on this call is sitting in front of a desktop with some stuff in front of them. And I would guess 90% of you don't have really exactly what you need, even if you don't realize it quite yet. So I think that upgrade cycle is coming, and it's already started, and it will continue for a very long time. And maybe if you're really an optimist, then I'll stay away from going too far on this, but I think you can imagine it's become more central to our lives as part of our homes and things. So the upgrade cycle could even accelerate. But I think regardless, I think there's a good strong upgrade cycle ahead of us. And could it be slowed down a little bit? Yes. Will it be stopped? No.

Yeah, I'd like to squeeze in my last question, if I may. Can you kind of give more color and impact a little bit in terms of the recent market share gains across key categories? They're super encouraging. It seems that largely is outgrowing the industry. Is there any sort of levers and the kind of differentiation you guys have to -- for this to sustain the current market share gains?

We announced last quarter that we had launched 20 -- or announced 20 new products, and it's kind of a reflection. Numbers don't tell the whole story, of course. We're actually trying to do fewer bigger. But I think it's kind of a reflection of our investment. We started nine or 10 years ago really focusing on design, which means putting the user in the middle of the action. And we've really matured that approach. Meanwhile, we've kept investing in engineering over 50% in four years in our total spending on engineering. And certainly, the -- that's happening across all of our categories. So I feel very, very good about the innovation engine here, and it's the primary driver of growth, but it's not the only one. The go to market on the B2B side is a big opportunity, too, and we're going to keep investing there.

Bracken, thank you.

Maybe just one other. You started to mention the go-to-market. I think some of the things the teams have been doing around analytics and in e-tail or on Amazon, I think have also continued to be really impressive. In-house share numbers look really good at Amazon in across the categories. So I think it does start with the products, and you look at the ratings on the products, and you can see those are quite good, George. But I also think that you have to tip your hat to the go-to-market team with their -- what they're doing around analytics.

Really agree with that.

Great. Thank you.

Thanks, George.

Thanks, George. Our final question this morning is from Michael Foeth at Vontobel. Good morning, Michael.

Hi, Michael.

Yes. Good morning. Hi. Thank you.

Hi, Michael.

Two questions from my side. If you could give some more color on the appointment of Prakash to the CEO -- COO position, sorry. And sorry, what sort of gaps do you think you need to fill there? What improvements you're seeing on the operations side? And the second question would be regarding your thoughts on the creator economy. As we go into recession, do you see particular dynamics developing there and how you position yourselves to harness those opportunities?

That's a really interesting question. And on the -- on Prakash, Prakash has always been -- I mean, he's been here for seven years. We recruited him right out of a consulting firm, and he's just grown and grown. And a lot of what you see from a sustainability standpoint we're doing in this company, you can point right up to Prakash's leadership. He's got a tremendous team. And my entire staff right alongside and have been part of this drive to be better for the world from an environmental standpoint. But make no mistake, Prakash has led that from the heart and the hands and the head. But I think the next step for him and for us is to give him a larger role, not only in the overall operating execution of the company, but also in the structure and the cost of the company. And so this is another -- this is -- we're-- we've evolved very quickly structurally, very quietly behind the scenes. We've changed our structure, and we're going to keep evolving it going forward. It will just keep evolving. And he's going to be a real partner for me and for the CFO and for the whole team in helping think through that. So think of him as overseeing the overall operating cost of the company. He also has responsibility for the overall M&A strategy worked out. So he's got a big chunk of responsibility now. Now there are others who have huge chunks of responsibility. I don't want to only focus on Prakash, but we did announce this move today, so it's a big one. On the greater economy, a recession and had what are our prospects going forward, the creator economy is touching so many things. I think it's one of the…

Thank you.

Thanks, Michael

Thanks, very much, Michael.

Thanks, Michael, and thanks, everyone, for joining. I think that's a wrap, Nate and Bracken.

Great. Thank you. Thanks, everyone.

Great. Thank you.

Take care.