Joe Greenhalgh - VP, IR & Corporate Treasurer Bracken Darrell - President & CEO Vincent Pilette - CFO

Alexander Peterc - BNP Paribas Tavis McCourt - Raymond James Paul Chang - JPMorgan Youssef Essaegh - Barclays Andreas Muller - ZKB Felix Remmers - Credit Suisse Joern Iffert - UBS Michael Foeth - Bank of Vontobel

Good day and welcome to the Logitech First Quarter Financial Results Conference Call. At this time all participants are in a listen-only mode. We will be conducting a question-and-answer session and instructions will follow at that time. [Operator Instructions]. This call is being recorded for replay purposes and may not be reproduced in whole or in part without written authorization from Logitech. I would like to introduce your host for today's call, Mr. Joe Greenhalgh, Vice President of Investor Relations and Corporate Treasurer at Logitech.

Welcome to the Logitech conference call to discuss the company's financial results for the first quarter ended June 30, 2015. The press release, our prepared remarks and slides as well as a live webcast of this call are available online at logitech.com. As noted in our press release, we published our prepared remarks on our website in advance of this call. Those remarks are intended to serve in place of extended formal comments today and they will not be read on this call. During the course of this call we may make forward-looking statements, including forward-looking statements with respect to future operating results that are being made under the Safe Harbor of the Securities Litigation Reform Act of 1995. The forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those anticipated in the statements. Factors that could cause actual results to differ materially include those set forth in Logitech's Annual Report on Form 10-K dated June 5, 2015, and subsequent filings, which are available online on the SEC EDGAR database and in the final paragraphs of the press release and prepared remarks from Logitech reporting first quarter financial results for fiscal 2016. The forward-looking statements made during this call represent management's outlook only as of today and the company undertakes no obligation to update or revise any forward-looking statements as a result of new developments or otherwise. Please note that today's call will include results reported on both a GAAP and a non-GAAP basis. Non-GAAP reporting is provided to help you better understand our business. However, non-GAAP financial results are not meant to be considered in isolation or as a substitute for or superior to GAAP results. Non-GAAP measures have inherent limitations and should be used only in conjunction with Logitech's consolidated financial statements prepared in accordance with GAAP. Our press release includes a table detailing the non-GAAP measures, together with the corresponding GAAP numbers and a reconciliation to GAAP. This information is also posted on our Investor Relations website. The slides that accompany this call include both GAAP and non-GAAP measures and are also available on our Investor Relations website. We encourage listeners to review these items. This call is being recorded and will be available for replay on the Logitech website. Joining us today from Lausanne are Bracken Darrell, President and Chief Executive Officer; and Vincent Pilette, Chief Financial Officer. I would now like to turn the call over to Bracken.

Thanks, Joe, and thanks all of you for joining us. Just an upfront note that the sales performance we refer to will be in constant currency. Q1 gives us a good start to the fiscal year. The growth momentum we saw accelerate through last year continued right into Q1. Our retail sales grew 7%. While our normal trend since we started down this strategic path has been negative growth in the Profit Maximization categories, and double-digit in our growth categories, this quarter we saw relative balance. Both the growth and the profit maximization categories grew upper single-digits. That's better than you'd expect for profit maximization and not as good a growth. Vincent and I will take you through this deeper now. First, I'll drill down into the categories within our growth portfolio. Our growth portfolio grew 9% in Q1 and overall it continues to have a strong and improving product lineup in growing categories. Our newest edition video collaboration continued to perform very strongly and was our fastest growing category in constant currency in Q1. One of the key growth drivers was the Logitech ConferenceCam Connect. That's a very well received $500 portable all-in-one video conferencing solution. We also continued to see strong sales from the $1,000 Logitech ConferenceCam CC3000E that launched well over a year ago. Our Mobile Speakers continued to grow very strongly. This time our new premium speaker UE MEGABOOM was the new star. In fact, this highest price speaker became the second best selling product in the whole company, less than six months after launch and with constrained supply. UE BOOM continues to be an outstanding performer and again was the top selling product in the company. That's worth repeating the number one and number two products in the company in sales this quarter were the BOOM and MEGABOOM, a real tribute to the strength of our product innovation driven off our design focus. But there is more in store, so to speak, in Mobile Speakers, as you probably know by now. Barely having to get in the numbers is another new Bluetooth speaker, UE ROLL. It's an amazing little powerhouse speaker that began shipping very late in the quarter. UE ROLL features a go-anywhere waterproof build that carries the essence of the original UE BOOM and is made to be part of today's ultra mobile lifestyle. With UE ROLL, BOOM, and MEGABOOM, our mobile speaker offering is excellent, and we're well-positioned to continue delivering strong sales growth and share gains. Gaming was flat this quarter. There were two primary factors that held gaming back. First, was a steep sales decline of our legacy steering wheels. This was expected and a result of transition to the newer wheels we announced last month. New wheels for the PC, XBOX, and PlayStation, will begin shipping in the next few months. The second driver of the slower growth in overall gaming was lower PC Gaming sales in the Americas, particularly in mice where we've had such a strong growth trajectory in the past year. Lower category growth in the quarter was we believe temporary, but we are watching closely. Generally speaking, regardless of what happened to the Gaming Mouse category in the U.S., we have new gaming products on the way, particularly in the second half that should generate robust growth for fiscal year '16 in total. Our Tablet and other accessories category continue to perform poorly, while the decline in the Tablet market is no longer news, as a result, neither is our decline in Tablet Accessories. We have begun the process to simply our lineups and pace our innovation to a slower moving and smaller market. But you know us by now, and I assure you we have innovation to head there too. Our profit maximization category looked like a growth category this quarter, with sales of PC peripherals up by 8%, even though PC shipments declined almost 10%. We believe we appeal to the enormous installed base of PC users with simply great innovation. The best example of this innovation can be seen in Pointing Devices, which grew by 10%. This growth was driven largely by the success of our flagship mouse, the MX Master, which sells for $99. Both consumers and the trade press gives us a huge -- well, gave us a huge welcome and its reception has been much, much stronger than any of its processors. It's perhaps gotten the best press for mouse we've ever seen and there I'd say was deserved. Building on that momentum, at the end of the quarter we began shipping an equally innovative mouse, the MX Anywhere 2 mobile mouse. Another example of meaningful innovation is our Wireless Touch Keyboard K400 plus. This living room keyboard again targeted the installed base. The K400 Plus makes it easy to control your computer screen on your TV. Continued high caliber innovation in keyboards helps drive 7% growth in keyboards and desktops in Q1. Stepping back from the categories to the regions in which we play, it's really good to see the regional growth symmetry this quarter. The Americas delivered 10% growth, Asia-Pacific delivered double-digit growth, and EMEA, if you exclude emerging markets, which were dragged down by the continuing story of a week Russia and Ukraine, EMEA grew by 11%. So all three regions, excluding emerging markets and EMEA grew double-digits. We've grown double-digits for three of the last four quarters in AMR, consecutive quarters in Asia. And while this is the first quarter we've broken through the double-digit barrier in EMEA, excluding Russia and Ukraine, we've had consecutive quarters of growth overall there as well. Now, Vincent, will go into more details on our performance.

Thank you, Bracken. Our Q1 results position us very well to deliver our full-year outlook. As Bracken mentioned, our retail business is achieving its sales growth target and we saw growth in all three regions for the second consecutive quarter. We continue to generate cost savings that helped offset some of the impact from the stronger U.S. dollar on our gross margin. We held our non-GAAP operating expenses flat, while freeing up capacity for investment in the business to drive future growth. As I come back on a few numbers, let's start with our gross margin, which was down by a 120 basis points. Currency headwinds, alone net of hedging, had an impact of 230 basis points in Q1, nearly double the year-over-year decline that we reported. We were able to offset some of these declines to our product and manufacturing cost reductions, product mix, as well as to a lesser extent the early impact from pricing increases. While we expect the currency headwinds to remain throughout the fiscal year, we will continue to drive initiatives to offset as much of the impact as fast as possible. As an example, we expect to save at least $10 million during FY'16 from our switch to more shipment via sea rather than air. Another initiative which we discussed last quarter is increasing the prices of most of our products in key currency impacted markets. We made those price changes over the course of Q1 and the affected products are now making their way into retail shops. We continue to demonstrate that disciplined spend management is now part of the company's G&A, with our non-GAAP operating expense is unchanged from the prior year. At the high level that may look like little has changed. When you look a little deeper, you see that we increased our R&D spending by about 9% to drive future long-term growth, and we funded that investment mostly through G&A and overall infrastructure cost reductions. Last quarter, we announced the strategic shift focusing Logitech on our growing profitable retail business, exiting OEM and refocusing Lifesize on its smaller cloud solutions. We booked a $13 million restructuring charge in Q1 as part of our $15 million to $20 million estimate for the full-year. The OEM exit plan has been now fully developed with our customers and partners, and we will be out of that business by the end of the calendar year. We continue to work the repositioning of Lifesize and are still evaluating all options for that business. Finally, we are taking actions to further reduce our infrastructure functions to fund new growth opportunities. And you should continue to see infrastructure cost trending down, offset by investments in growth initiatives. We still expect the restructuring charges to be $15 million to $20 million for the full-year, and we will give you regular updates on this important transaction to growth taking place in FY'16. Moving on to cash, our cash flow from operations was negative in Q1 and the main driver was the increase in our inventory. The increase was driven primarily by two key factors. The first one is the ramp up to launch several new products in preparation for the holiday season. We are excited by the portfolio we are building to support to our growth objective. Exiting Q1, we had over $20 million in inventory for new products now get launched. The second factor contributing to the inventory increase is linked to operational and strategic actions. For example, the change in our inventory strategy to utilize sea shipments rather than air means that in many cases we're building and then shipping products to our distribution centers sooner that would have happened last year. Other provisional shifts result from our strategy to build more products in our own factory in China. We are doing this to improve confidentiality, take on more complex projects, achieve more flexibility, and reduce cost through the increased use of automation. We are now targeting a long-term ratio of 60:40 as the new norm for the split between products in-house and those that we outsource. Looking at the inventory balances going forward, the incremental impact from the ramp of our new products we anticipate towards the end of the year as we ship to our customers. However, our overall inventory balance will be up year-over-year throughout the fiscal year due to the strategic and operational actions we're taking. As a result, we expect that cash from operations will be unbalanced during the year with a weak first half and a stronger second half. Our strong total net cash position continues to be the foundation for our capital allocation strategy focused on investing in the business and small acquisition as a priority. As an example of using our capital to invest in our business, we acquired earlier this year the exclusive right to use an automated ear scanner for our professional UV custom ear managers which will help continue to develop that business line. Annual dividends and opportunistic share buybacks compliment our overall capital allocation. As we announced earlier and confirming our preliminary proxy, we are requesting shareholder approval at our September AGM for a dividend in the amount of $85 million nearly doubling the payout in the prior fiscal year. Regarding buybacks, we have about $240 million remaining on our current program. And on that note, I'll turn it back to Bracken.

Thank you, Vincent. Now, I want to close with an overview of the brand transformation we announced a few weeks ago. We spent the last two years reinventing Logitech from the inside. We're back to creating great products. We're gaining market share in our legacy categories, while we're creating powerful products in new categories like music and video collaboration. We have dramatically improved our profitability so we can afford to invest more in growth. Within that lower cost envelope we've moved R&D resources out of legacy and into new categories, both our current growth areas and new seeds. We built a strong internal design team for the first time in the company's history placing design at the center of everything we do. This complements the long and powerful history of engineering on which Logitech was built. And we are transforming culturally. We're making progress on the path to make Logitech a great small company again, to shrink our behaviors, act humble, small, fast, and creatively to grow our top-line faster. We're shaping a small company culture that's based on increased collaboration, flatter hierarchy, and a faster moving fully empowered teams. It already feels different here now. So we are transforming our products, the categories in which we play and even our company culture. And now we'll start to transform our brand identity. Or as one of leaders said it, "Our brands will catch up with the change that's already happened inside the company." First, we'll change the Logitech logo. With simple geometry circles of lines, the new logo is more open, smarter, and approachable. It doesn't carry the "I" symbol that was with us decades but only a small percentage of consumers associated with the brand. Second, we announced another sub-brand, LOGI. Some of our most loyal consumers began to call us by this nickname years ago, and we believe that in today's world, but especially in the world we'll be part of in 5 to 10 years technology will be so pervasive that it will be in the clothes we wear, the tires in our cars, the chairs on which we're sitting. With that as a backdrop, we believe that the term tech in our brand name will make us sound like part of a past generation of tech companies rather than a leader of a new set of consumer companies using technology to improve people's lives. We'll continue to use the Logitech name for the company and brand in our PC-related categories. The rest will be LOGI or if it's mobile music UE. We began the process of gradually introducing Logi on our newest products and categories. Last week, we introduced our first family of products under the Logi label, the Logi block family of protective cases for the iPad. This lineup is both strong and beautiful. That brings me to our outlook for fiscal year '16. Our outlook for fiscal year '16 non-GAAP operating income remains $150 million. We're also confirming our outlook for 7% constant currency growth for our retail sales. Our first quarter results put us solidly on track to deliver our fiscal year 2016 goals. We're on the offensive. We're consistently growing the future of Logitech, our retail business. At the same time, we're decisively exiting OEM, and restructuring Lifesize for a new world. We look forward to sustaining our momentum through the remainder of the fiscal year as we begin to launch big, new products with strong growth prospects under our transformed brand. With that, Vincent and I are available now to take your questions, please follow the instructions of the operator as usual.

[Operator Instructions]. And our first question comes from Alexander Peterc from BNP Paribas. Your line is open.

I'd just like to ask you, you had a funny mix this quarter with as you said profit max looking more like growth. So I was wondering how much of the strengths we can extrapolate into the rest of the year. Would you expect the PC-related profit max categories to revert to the minus 5 to minus 10 that you used to guide to? And in Tablet, specifically, Tablet accessories, the decline there was sharper than that of the Tablets market release just by Apple's numbers that were published this week. Is this disconnect due to the production addition you have there?

Okay. I'll take both of those. On the PC peripherals market, as I keep saying, the term I use here is one robin, which is a small bird that comes out in the Spring time. One robin does not make a Spring. So it was a very strong quarter for PC peripherals. I do think it's built off of implementing or placing design and technology right back into the core business and it's driving -- it also gave us a very strong quarter. I would be very hesitant to extrapolate that for the rest of the year. So our assumption as we go through the rest of the year is we will continue to be in the negative 5, negative 10 range that we've given in the past, and only time will tell whether it's better than that. On the Tablet side, yes, our points was worse. Our sellout was better and we are transitioning in new products and transitioning to a tighter portfolio. So that's the difference you're seeing versus the iPad sales.

Our next question comes from the line of Tavis McCourt from Raymond James.

First, a follow-up on that last question, Bracken. So on the profit maximization categories; it looks like on average ASP increase was probably 5% if I take kind of your quantity increase of 2% and your constant currency sales of 7%. So how much of that is just the launch of new products that tend to have higher ASPs, so kind of mix versus active ASP increases? And then if you could talk about, at what point will you know whether the ASP increases you're taking and you're up in elsewhere will stick and have you seen anything on the competitive fronts to suggest that competitors will be raising prices as well?

Yes. On your first question Tavis, I think the -- we've seen too much of the pricing that would have flown through we've had some. I'll let Vincent comment on whether we can be more specific now, but it will be relatively limited so far. Because the implementation period for price increases especially in Europe where most of them are tend to be 60 days to 90 days. So you just haven't seen much yet. In terms -- so most of it -- most of the increases are exactly what you've been concluded, which is that we're selling really premium products, and MX Masters our highest selling productivity mouse. So pretty logical that you're seeing that kind of increase. Yes, on the Tablet side, what the question was?

The question was --

[Indiscernible].

Yes, so I think you actually answered there, Bracken. So let me move on to gross margin and may be this a good one for Vincent.

Okay.

They came in much better than -- I don't know if you've guided for gross margin, but certainly better than my model in June. And I'm wondering, talk about the sustainability of that, how much of that was mixed towards the profit maximization categories or other things that were going on in the quarter?

Yes, hey, Tavis. So we guided actually the number for the full-year at around 35% to 35.5%, gross margin non-GAAP. We delivered the first quarter 36.7%. We knew Q1 would be higher, because the full impact of currency has not totally flush through the P&L. We're still selling inventory that we bought at old currency rate. So we knew the full impact will not be materially safe yet. Now, we already took actions and to offset the currency impact the biggest gain was product cost savings. We do expect that to sustain through the year. We are slightly ahead of plan. That was also how this quarter as you know, by product mix, with profit max having better gross margin than our growth categories and that we don't see sustainable through the year. As Bracken mentioned we'll continue to plan for profit max to be aligned to the PC industry and you know last quarter, the PC shipment declined up to 10%. And then we would see if it's sustainable on that though. But we're not planning and not forecasting on that. And then the third element in terms of gross margin improvement is pricing actions. We've deployed all of our actions, but in term of impact on to the margin it's still very minimal in Q1. We know going into the distribution environment, we have acted on those project, we have nothing yet. The impact on sales are and whether or not all of those price increase will stick. So we probably need to be conservative on that side and keep gross margin at around 35% to 35.5% for the year.

You know, I can't help or take you back on that and say we're starting to show a pretty resilient model and we'll see if we can repeat that overtime, but the -- if anybody on this call has been told that the PC would be down double-digits, the Tablet market would be down double-digits and we would grow 7%. I think most people would have said impossible. But I think it shows we're growing very strongly in music, very strong in video collaboration. We can turn it on and in the PC peripherals business to some extent for some period of time at least when needed. So I think it's a good show of really what we're doing in terms of building more balanced portfolio.

And final question is on mobile music. So that's been a big growth category for you guys for a couple of years. And the category itself has been growing quite nicely. How -- at what point does that category in your opinion become more of a market share gain? Are you still seeing very strong growth in the category itself or are you going to have to take a lot of share to keep these growth rates up here?

Well, the market share -- the growth is slowing from very high rate, so it's still growing very high. Globally it's kind of 40%, 50% plus in staying there. And our -- we love our portfolio. We think we've got a portfolio where we can grow market share for an extended period of time. So right now, for the foreseeable future we certainly see strong growth there.

.:

Hi, thanks. This is Paul Chang on for Paul Coster. Just a follow-up on Tavis's question on margin. Getting yourselves through these air shipment costs, is this mostly for your profit max categories or for your growth categories? And if it's more for the growth category should we expect them to move above the corporate average?

Hey, Paul, this is Vincent. So when we announced the margin and then confirmed in April our guidance for the year, we explained that currency in the short-term it's definitely a big headwind for our gross margin and announced a series of measures categorized between cost opportunities and then pricing opportunities as we discussed. On the cost side, we have a lot of different activities. We really mange supply chain savings, lighter sales process, with all the IVs of final qualifying those IVs, putting small budget into and then transforming that into savings. In terms of the specific action of volunteer shipment about $10 million savings for the full-year, which require a little bit more inventory, but it's across all of the category and it's really about through better planning, and as I mentioned, using some of our capital to put some safety stuff in different distribution centers. At this point in time, we're not planning the growth category to be above the corporate average in terms of gross margin. We still have the distinction, because we run the business on profit max for better profit. But we run the growth category for growth and market share gains. So our whole objective there is to develop big businesses as Bracken mentioned not to driving the short-term higher gross margin.

That said, I would add we have -- and we said this in our Analyst and Investor Day, this is I think every year we've had pretty much the same story. Our growth categories tend to either straddling or close to straddling the corporate average, so Video Collaboration is very strong.

Gaming.

Gaming is strong.

Music improving.

Musing improving, but not at the corporate average and Tablet is below that. So it's we've already got a story but that I think he's on the right track for that.

Got you. And also for the Mobile Speakers, can you give you us a sense of market share in U.S. Europe? Which countries you see the strongest opportunities? And finally, how is the UE ROLL performing, I think it's a great product, just wanted to hear your pick?

I love to hear that, make sure that's all podcast through that. Yes, I think it's a great product too. In terms of the market share it's -- I'll give you that, the rest of is little hard for me to talk about publicly. The -- in the U.S. we're somewhere in the 13%, 14% range so we continue to have a nice market share gains overtime. In Europe we're a little lower than that. Germany is about similar routine 10% and 12%. And then you go to the other countries you've got some extraordinary numbers in some parts of the world Australia, New Zealand. We've got a very strong position in Switzerland. But we've got great competitors out there. So I don't want to share too much about where we're prioritizing, where we're not. I think we're just trying to do the best we can in every market we're in and so far it's been quite good.

Our next question comes from the line of Youssef Essaegh from Barclays.

Hi. Thanks for letting me ask a question. Sorry I'd like to circle back if possible on the question of your PC category. You had outstanding results on the PC market, doesn't mean doing well. So just help us understand a little what had happened. Can you maybe just remind us, just like for instance, how long things live in your channel, especially now that you moved into freight rather than air? So may be the period of time between when you ship and when PC sales are happening you see disconnect of maybe a quarter or something. Like what have you seen for instance so far this quarter? Thank you.

It's -- I think underneath that question is, is this going into the channel not making out to the retail and it is. Because this is where we are -- and our channel inventory look pretty healthy from what we can see. It's always a little difficult to call that exactly right, but it looks pretty good. On the sell-out side, we see strong sell-out, directly to consumers on the PC peripherals categories right now. So --

Hey, Youssef, can you help with some numbers, right so the move to shipment via sea has not really changed anything in term of setting into the distribution model. It's really between our manufacture all the way to our own distribution center, before you go to the distributor, so has no impact on the revenue. When you look at the channel, we've one slide that we posted in our website and you can see that the sell-in and the sales out, which is we expected as sell-through which is the best number we have, are exactly aligned for all three regions. So across the regions we've seen strong growth and equal growth between sales out and sell-in, so no change in our channel overall. With regard to the reason, I think Bracken mentioned it, great products has helped really offset the current declines in PC market, and we definitely not yet forecasting that for the future, we'll realign to the PC industry.

Okay, okay. And how is that moving to your forecast for the margin. So you started the year with a very strong margin and you still for the reasons you explained about the time that parts got into your inventory. So at the moment you got them at better pricing. How low do you expect it to go through the year?

Yes. Now that's the question. So really the full-year we guide 35% to 35.5% in term of gross margin. Q1 is way too early to start changing that. We still have a big operational plan in front of us. Full impact from currency will hit in Q2. We will also have a better estimate and read of the impact of pricing increase in Q2 versus the very natural impact in Q1. Those are two weak levers if you want before we can really conclude that that the margin as upside for the year. So we will stay conservative and really focus on operational plan the way we laid down in March and see what happens.

So the bottom is basically this quarter and then from there you're going to start to workout with the price increases if that's -- back towards a high level, isn't it?

Yes, so we're going to be able to read impact of our price increase probably in Q1.

Our next question comes from the line of Andreas Muller from ZKB.

I've got a question on the cash conversion factor and you guided long-term for below 30 days. Is that still a valid figure?

Andreas, this is Vincent. So last year same period we were down below 30 days all things being equal, we said we would be around 25 days to 30 days. Then in April we announced some of more strategic actions to offset the impact of currency, such as moving more to sea logistics we would put some more safety stock in some distribution center. To-date you have to estimate what midterm not a long-term, but a midterm cash conversion cycle, I would run more 30 days to 35 days which is 25 days to 30 days. But once we've made those strategic decisions then on the long-term we will continue to improve that model and get better in that model and be able to continue to reduce our working capital. So long-term may be I wouldn't change, midterm I would move from 30 days to 35 days.

Okay. Then on Lifesize, what was the revenue share of the legacy systems in this quarter and also could you elaborate the bit on the strategic check alternative beyond the sale of the business, what do you have there in mind?

Yes, so at a very high level we can go more into one-on-one discussions during the call, but at a very high level the business differ between the legacy infrastructure, the in-room hardware and the proprietary hardware for your network versus the cloud that we launch about a year ago and that's really more cloud-based solutions with an icon in the room. We've seen strong decline of our infrastructure revenue as we announced actually are we focused on the cloud. Over the first 12 months the cloud function has been very successful. We have very strong customer subscription and usage of the seed. So we're pretty optimistic on the cloud asset if you want and I will leave it as what we said which is we're exploring all strategic options, unless you speculate, but as soon as we know more we will let you know. Our objective here is to maximize the value for our shareholders.

Our next question comes from the line of Felix Remmers from Credit Suisse.

Yes, hi everyone, three questions from my side. On the EMEA region I was wondering how big is your exposure to Russia and Ukraine and when will that headwinds level off in terms of base. The second question will be on PC Gaming the weakness you were talking about in the Americas region on the mice, what was your initial assessment here. What was the reason? Is it really just seasonal or anything? And the last question would be on the seed -- seeds we were talking about the last couple of quarters you were working on during the quarter did you know, kill any of these projects or is there a high chance that we can see new products coming out of their Seaford holiday season I would appreciate an update here?

Okay. I will try to answer generally the Russia, while Vincent is giving you the exact number. Russia, Ukraine, but it's relative limit about 15% of our total EMEA market and that real big drop in Russia, Ukraine started kind of Q3, Q4. So I think it will hit some base periods that are relatively low here before too low we hope. On the PC Gaming side the question about mouse weakness what's our theory on that. You know it's a little hard to say you know, this is a small enough market still, I think you do have these jumps and viabels based on promoted activity and new product launches et cetera. We did launch a lot of activity in the last 18 months we've launched a lot of new mice, hence so I don't think we need more mice right now to be competitive, we've got great products. We probably help drive that market to some extent. So I think you know -- I think for the next -- right now I think that's the -- that's probably the best answer I can give you. I think as we go into Q3 and Q4 we've got enough new product activity across the board and I feel very good about robust growth and backup as we said at the opening. Then probably on seed, I don't have a report I have to give you, expect to say I continue to be really excited about what we're working on and when we're ready to launch something I promise you will be one of the first to know.

[Operator Instructions]. Our next question comes from the line of Joern Iffert from UBS.

Thanks for taking my questions and I had to thank someone. And if I may quickly follow-up or try to follow-up on the seed investment collection of my colleague, and as you -- all right, as you don't want to share what is coming up near-term and I then discuss may be in your medium term version and your five-year budget. Can you may be help us what percentage of revenues should come from the seed investments, is it 10%, is it 20% just if we get a better feeling for the product turnover the next couple of years. And the last question would be in terms of momentum, sorry if this was already answered, I was kept out of the call and can you confirm that momentum is similar to Q1 when you're running into Q2 for the group. Thanks.

Hey, Joern, this is Vincent. Let me tell you the seed about the long-term financial budget model what I'm working actually on detailed budget. But look, when we took about the model, we had been very clear, right. We believe, we can return Logitech, Logitech retail that is into high single-digit growth and long-term around 10% operating bottom-line without really counting on the seeds and we don't want to put in our model revenue targets for our seeds. Now we do have operational targets, which is product development, milestones, understanding of the customer insights, and then of course a successful launch. But we're managing it much more as product bets, I'm trying to understand market opportunity which is really worrying about the P&L for those seeds in the short-term or midterm.

Well said. I don't have anything else. Now, on the momentum question, I think your question really is as we finished the last quarter going into -- last going into this quarter how is the momentum look? It's really early to say. We don't usually give any glimpse of that in this call, because it's just the nature of the kind of Easter [ph], and I say, I don't have any visibility with our momentum change dramatically, I wonder actually another. But I gave you my personal insight that I think the PC peripherals business really had great quarter, we're not going to count that for the year. We're going to count on delivering our commitment and we believe we will do that.

And our last question comes from the line of Michael Foeth from Bank of Vontobel.

Just two questions from my side. Just to be clear, on the branding strategy and in gaming are you intending to keep the branding unchanged or will there be changes as well? And in -- then the second question is on the financial side. You -- on top of the restructuring cost you also had some $4 million of other one-off item that I couldn't relate to, can you please specify what was that for? Thank you.

Michael, Vincent will come back and get that and I'll take the branding question. Yes. The -- our game plan is if it's a PC product it will stay Logitech and if it's not a PC product it will go to LOGI overtime or UE if it's in the most weaker since, since most of our gaming products today are predominantly PC-related that would be Logitech. We'll reserve the right to keep; we're looking at that, because we hope that over the next several years we will build a very strong LOGI brand. But I think that's the answer for. You want to answer the numbers.

Yes. So the full earnings from my non-GAAP are related to the accounting investigations from last year, which we closed last November and which items are described in Form-10K of 2015. This quarter, we proposed to the SEC to settle the case for $7.50 million and the $4 million to bring the approval to that level on our balance sheet. The SEC is now reviewing and going through their review and approval process. I do not want to speak it on the output. There is no guarantee that that will be the final amount, but that's where we stand at this point in time. There is more explanations in our slides posted on our website.

It appears there are no further questions. At this time, I'll turn the conference back over to Mr. Darrell for closing remarks.

Okay. I will be very quick. We feel good about the finish of the first quarter. Optimistic about the year and feel very good about the strategy we pursued. Thanks a lot. And we look forward to talking to you guys in Q2 or after Q2.

Thank you.

That concludes our conference for today. You may all now disconnect. Thank you.