Benjamin Lu - VP, IR Bracken Darrell - President and CEO Vincent Pilette - CFO

Tavis McCourt - Raymond James Felix Remmers - Credit Suisse Jurgen Wagner - Mainfirst Bank Ananda Baruah - Brean Capital Andrew Humphrey - Morgan Stanley Michael Foeth - Bank Vontobel Paul Coster - JPMorgan Andreas Mueller - ZKB Shannon Cross - Cross Research Richard Kugele - Needham & Company

Good day and welcome to Logitech Second Quarter Fiscal 2017 Financial Results Conference Call. [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 now like to introduce to your host for today’s call, Mr. Benjamin Lu, Vice President of Investor Relations. Please go ahead.

Thank you. Welcome to the Logitech conference call to discuss the company’s financial results for the second quarter of fiscal year 2017. The press release, our prepared remarks, and slides as well as a live webcast of this call are available online at the Investor Relations page of our website 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 Quarterly Report on Form 10-Q filed with the SEC on July 29, 2016 and subsequent filings. 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 from 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 are also available on our Investor Relations website. We encourage listeners to review these items. Unless noted otherwise, comparisons between periods are year-over-year and in constant currency and all reported results and updated outlook are focused on continuing operations and do not include the performance of Lifesize, which is reported under discontinued operations. This call is being recorded and will be available for replay on the Investor Relations page of the Logitech website. Joining us today are Bracken Darrell, President and Chief Executive Officer; and Vincent Pilette, Chief Financial Officer. I’ll now turn the call over to Bracken.

Thanks, Ben and thanks to all of you for joining us. Our Q2 sales were record, our growth of 14% was the highest in over five years, our margins of 37% are touching the top end of our targets. One of my friends called last night to say, boy that was a dream quarter. But I don’t dream about quarters. Our team doesn’t dream about quarters. Our dream is to create an amazing company and what’s exciting to me is that we are making good progress, building the foundation of that amazing company we aim to be one day in the future. And that’s the most important thing happening at Logitech. Let’s talk about the progress in each of the product categories. Our PC peripherals categories grew 6% in Q2 that still surprises some people. As we have said before, our mice and keyboard sales are correlated to the PC installed base rather than new PC shipments. That installed base remains stable and we will continue to innovate in this space to capitalize even more on the extended PC purchase cycle. In Q2 keyboards and combos grew 15%, pointing device sales were relatively flat down 1% and PC webcams grew 4%. We have good momentum and we will continue to innovate across PC peripherals. In July we released our newest and first high-end multi device keyboard the K780, designed for the workspace, this is our first full-size keyboard with multi-device capability. Like all our multi-device keyboards with a touch of a button you can switch between and type on any three connected devices and I do mean any. Be it your PC, your smartphone or your tablet using any OS. I love the K780 and I have been using it for months at my deck, it’s my current favorite keyboard. In mice, we just launched our first silent mice and they have been strongly received by the press. We launched globally and even in our own offices, which are completely open. I’ve had request to put them out for entire work groups. At the end of September we introduced our latest PC webcam the C922 Pro Stream, this allows for full HD streaming and dynamic background replacement. Building on the success we’ve had with our webcams [ph] for video communication and live streaming. We’re not letting up in this space either. In Q2, our tablet and other accessory sales increased 9%, we launched our create keyboard case for the 9.7 inch iPad Pro in Q2. It’s the only keyboard cover for that iPad out there that has everything, a keyboard, a place to store your pencil and uses the instant on smart connector. Video collaboration sales grew 43%. We just announced our newest product in this space the Logitech SmartDock a solution that was designed in close partnership with Microsoft. With the SmartDock users can easily and seamlessly manage, start and join video collaboration calls using Skype for business. The long-term growth prospects for video collaboration are really exciting. This business started out as a seed and in Q2 video collaborations annual sales run rate topped $100 million with the good momentum ahead. Our mobile speaker sales came in better than we expected, with revenue up 20%. Earlier this month we released our latest Over The Ear software update known as PartyUp. This new feature allows you to wirelessly connect more than 50 UE Speakers. In our Silicon Valley campus we celebrated our 35th Anniversary a few weeks ago with more than 150 speakers connected at once. Not only was it outrageously loud and fun, but it no doubt set a world record since no other Bluetooth speakers can do even a fraction of this. Jaybird continued to perform well in the second quarter. Similar to the first quarter of fiscal year '17 Jaybird contributed about 3 percentage points to our growth in Q2. In August we launched two new colors of Jaybird Freedom into the Apple store. Gaming grew 17%; our gaming business has grown double-digits in 12 of the last 14 quarters. We grew almost everywhere with Americas particularly strong. We expect to be ahead for PC gaming around the world to remain robust and we aim to increase consumer adoption of PC gaming products. At the one end of the market the pro-gamers themselves we launched our Logitech Pro gaming mouse designed in collaboration with and designed for E-Sports Professionals. On the other end of the market we introduced the Protégée Series a family of gaming gear for user who play games, but might never have bought a gaming peripheral before. The Protégée line includes a wired and wireless mouse and mechanical keyboard and the headset. In the quarter we acquired the Saitek Line a fight and space simulation game controller assets. This represents a small tuck-in acquisition that extends our portfolio into the simulation controller market. Now I’ll pass this over to Vincent for some financial performance details.

Thanks, Bracken. Our September quarter results demonstrate that we are sustaining the momentum we saw in Q1. Q2 retail sales rose 14% to $564 million, which is a record for September quarter, while non-GAAP operating income and EPS grew approximately 40% to $65 million and $0.35 respectively. At our Analyst and Investor Day this past March we had laid out our long-term business model that call for sales growth of high single-digit in constant currency and operating margin of 10% to 12%. We are making very strong progress towards our targeted annual business models. Our Q2 non-GAAP gross margin rose 360 basis points year-over-year to 37%. Our team continued to execute very well on all of our cost savings initiated, which were the biggest lever of gross margin improvement. And we're driving towards our long-term financial model that delivers annual non-GAAP gross margins in the range of 35% to 37%. While this past quarter clearly illustrated our ability to achieve those long-term targets for the quarter and earlier than expected. I would point out that historically our gross margins tend to decline in the second half due to seasonality. For the year we are forecasting gross margins at around 36%. Also for our operating model we will look to strategically reinvest our gross profit dollar upside into R&D and sales and marketing to maintain and drive the momentum in the business. In Q2, our non-GAAP operating expenses reached $144 million, up 14% driven by Jaybird, investments in new growth initiatives and increase in variable compensation due to our strong performance in the first half. Excluding the additional OpEx from Jaybird, which we didn't have last year, OpEx would have increased around 9%. And while R&D and sales and marketing expenses were up year-over-year, we continued to drive efficiencies with our G&A representing 3.8% of sales versus 4.2% in the same quarter last year. Our total non-GAAP OpEx to sales ratio was 25.5% in Q2 compared to our long-term annual target of 25%. We are generating healthy levels of free cash flow supporting our capital return strategy. This was demonstrated in our Q2 results with cash flow from operations of $74 million, the highest September quarter cash flow generation since 2007. This also compares to $11 million of cash flow last Q2. The robust year-over-year improvement comes from our focus on improving our working capital efficiencies; in fact our Q2 cash conversion cycle was 22 days versus 35 days a year ago, as we continue to drive our business to a sustainable level of 20 days to 25 days on an annual basis. And with the robust cash flow generation in the quarter we spent $13 million on the Saitek acquisition and returned $112 million of cash to shareholders in the form of $93 million in dividend and $18 million in stock repurchases. And with that I’ll turn it back to Bracken.

Thank you, Vincent. I’m really proud of the strong growth and the progress we’re making. I am even more excited though about the company we’re working to be. As we’ve articulated before, we’ll deliver growth in three different ways. We’ll participate in growing markets, as most of our markets are now. We’ll grow market share by leveraging our design centric innovation engine. And we’ll entered new adjacent categories, just as we did a few years ago in video collaboration. And most recently in home cameras, wireless ear buds and gaming simulation. And with that Vincent and I are ready to take your questions. Operator, please queue up the questions.

[Operator Instructions] Your first question comes from the line of Tavis McCourt with Raymond James. Your line is open.

Hey guys, thanks for taking my -- hey, Bracken, thanks for taking my questions. I’ve got two or three, I’ll just spell them out here and let you guys answer which relevant for.

Okay.

I guess first on the Saitek acquisition, I am not familiar with the technology there, is that something that’s relevant for VR and also was that an IT acquisition or do you acquire people kind of what exactly was that? Secondly probably for Vincent, obviously we’re only half-way through the year, but first two quarters very good. Yeah and I know, you mentioned gross margins typically down in the second half of the year, any reason why we should expect a material step down in year-over-year growth other than just traditional conservatism? And then now that we’re kind of approaching the 10% margin target, operating margins looks like for this year, how do we think about your willingness to continue to expand margins versus reinvesting in the business? Are there longer-term margin targets you should focus on, do you think you can manage this business given its quarterly volatility to continue to consistently raise operating margins? Any comments around that would be helpful. Thanks.

Okay. Tavis I’ll let Vincent take the last two. On the first one, on Saitek acquisition, yeah we think there is potentially a play there in the virtual reality and augment reality space but it’s way too early to really talk about that as a substantive opportunity near-term and the acquisition so it did involve people, IP and an existing business, but we know that business already because we used in this business. So this is what we’re pretty familiar with.

Let me start with your third question, which was around operating margins versus investment and my guess is we’ll do both. So we put last margin operating profit margin guidance of 10% to 12% we’ve raised the range to 10% to 12%. And I think, our first objective is to drive the business in that range. As you know last year we were slightly under 9% and if you take our guidance at this point of time for the year we’ll be slightly under 10%. So let’s move into the range first and foremost, secondly we will definitely invest in the business to drive top-line growth and capture the market opportunities, the investment will be in the gross to net the point of sales investment in seeds and in overall R&D product marketing areas if you want. So you will see that spread across the different investment opportunities that should lead to growth once we are in the operating profit target that we’ve set, and we’re not there yet our focus in on growth. So that’s for your third question. The second one was around the guidance so we’re very pleased about the first half definitely slightly better than our expectations. Last Q1 in July, we raised our guidance from mid-single-digit to 8% to 10% top-line growth. We’re not going touch the guidance every quarter, while we set annual target and drive for that we have the biggest ahead of us, which is the Christmas quarter and we’ll reassess after Christmas. At this point in time that’s where we are. But we’re very pleased about the momentum that exists in Q2.

Okay, thanks very much.

Thank you.

Your next question comes from Felix Remmers of Credit Suisse. Your line is open.

Hi Felix.

Yes, hi, thanks for taking my question. I would have actually three. One being no Jaybird, can you share a bit your thoughts on the how the market is involving, I think it’s quite a new market. Could you also say or really tell if you would need to pay the earn-out component on that acquisition so some thoughts around that market here? And then on gross margin, a bit more I mean it’s quite impressive the gross margin improvement year-over-year, I mean what was driving that there was a more or like pricing, sourcing so some more color here? And finally on the euro-dollar seems to moving a bit again, on which levels would you get a bit more nervous?

Okay. Let me take the first one or two and then I’ll hand off and let Vincent take two and three, so we’ll repeat a little bit on two. On Jaybird, we got into this Bluetooth earphone market because we are big believers that the wire will maybe it won’t eventually completely go away but wireless earphones are going to be the future. So -- and the market continues to grow like that. So we expect to be a part of that. In terms of the earn out it’s too early to say I’ll let Vincent talk about that too, but I think so far so good we feel good about the business there. On the gross margin I just quickly say and Vincent mentioned it we’re having very good year on cost both on design or redesigning the parts and components and on pricing of those components, but we still have lots of opportunity ahead of us.

So, let me quickly tackle the earn out piece, so as you know it’s an earn out split over two years and per purchase accounting you have an overall valuation based on forecast and different modeling that force you to consider what you’re going to put on your balance sheet, I want to be clear for investor that model of the business here we have about $18 million of the earn out on the balance sheet today. As Bracken mentioned it’s too early to say exactly what we will pay, we feel good about the momentum, but again the biggest quarter is ahead of us and if we end up being more than $18 million that will flow through the P&L as you know. But at this point in time on the balance sheet there is call for about $18 million. On the gross margin side, year-over-year the number one driver as we mentioned is cost reduction and then the number two driver and important is actually the exit of the OEM business that improve the margin on a year-over-year basis not on a quarter-over-quarter basis since we existed that business last year already. On the cost savings we shared in March right that we are changing our approach in cost saving and incorporate cost into our overall design framework and I think what you see here is the early signs of those initiatives and very pleased about the results. We do intend to continue try to drive gross margin up to then reinvest that in many different ways, it could be in OpEx or it could be other point of sales either in promotional others that would then of course counter balance the improvement in that gross margin itself. And then finally on the euro-dollar’s perspective, right to stabilize everybody last year euro to dollar was around 1/12, it was the same for last two quarters. Right now it moves about 3 percentage point down that would hurt us a little bit. We are not concerned at all, but of course that’s also factored into our overall annual assessment of what we will deliver and in our guidance if you want. To that kind of volatility we definitely can absorb, we always told investors if the dollar-euro goes to parity, we would reassess and apply the learnings we have had a year ago when we raise price.

Okay, thank you very much.

Thanks Felix.

Thanks.

Your next question comes from Jurgen Wagner with Mainfirst. Your line is open.

Hi, Jurgen.

Yeah, good afternoon. I have a question on the OpEx increase it was up quite a bit especially sales and marketing. What was organic and what is driven by Jaybrid? I mean there is a mismatch between marketing and sales and R&D we do not have the same jump. And what should we model at least for the remainder of this year?

So, overall OpEx up 14%, G&A flats on a dollar basis and improving as a percent of sales. Sales and marketing up 18%, R&D up 13%, so that gone to everybody on the numbers that you were looking at. The Jaybird contribution is about 5 points of our overall OpEx and Jaybird a ratio of sales and marketing versus R&D expenses is about the same then an overall consumer business and most of our businesses we have, which has sales and marketing of about three times higher than new R&D and then from there I think you can model. We did invest also as you know in our regional point of sales for all of our businesses as we saw the room that we created with expanded gross margin that’s one comment. And then the second comment I would say that there is a portion of the growth that comes from increased variable compensation, we are running ahead of our plan for the first half and that has caused some of our compensation plan to play in excess of what you normally see into our normal OpEx that has impacted sales and marketing a little bit more than R&D.

Thanks, Jurgen.

Okay, thank you.

Your nest question comes from Ananda Baruah, from Brean Capital. Your line is open.

Hi, Ananda

Hey guys, how are you guys. Thanks for taking the question, congrats on a pretty solid quarter here and ongoing momentum. A couple if I could, Vincent I just like to go back start to your comments with regard to an earlier question, really more of a clarification about I think you said expanding both operating margin and accelerating growth and I wanted to see if I heard that accurately given that this year you’ve tracked pretty well above what you say a long-term kind of growth rates are for the company and you’re essentially at the margin target now. So appreciate the comments about wanting to sort of drop through the incremental margin into the growth of the business. But did I hear you accurately that you think you can expand the margins from here, while also continue to grow the business at a rate that seemingly is above what the long-term growth rate is? And then I have a follow-up. Thanks.

Yeah let me quickly address that one. I think it’s an important one for everybody to understand how we pilot the business and where are we going. Last March we explained our long-term business model, shooting for high single-digit growth rate for the top-line, expanding gross margin to 35% to 37%. Last year FY16 was at 33.9% and then expanding operating profit margin to 10% to 12% and last year it was 8.9%. If you look at our current guidance for the year, we’re at around 8% to 10% top-line, which is would be at that high end of the range of the long-term model. Gross margin for the year around 36%, so as you can see we still have more room compared to our long-term model to expand that gross margin. And operating profit margin if the guidance -- using the high-end of the guidance it would be at around 9.5% of operating profit margin. So we still have work to do to get into our long-term range, some will come from efficiency, some will come from growth. Once we are in our range our objective is definitely to continue to improve the profit margin to then reinvest back into the business to accelerate the growth. So that’s how we work the overall business model if you want.

That’s helpful. And I guess as you guys look out the next couple of years like it seem that you sort of get sustainably into the long-term business model, at that point would you prioritize growth while staying in the margin range or would you look to see what you could do to expand the margin range, while continuing to drive the growth?

No I think, if that hypothetical case happen we would go for growth.

And we’re already going for growth to be honest with you and I could be today in the long-term operating model, but that’s not how we look at the business, we doesn’t want to just do it that one year and that’s it when to build as Bracken said, an amazing company and in a CFO mind it means like a sustainable high performance. And so that’s how we’re driving the business.

To be clear, we think there are just more and more new category opportunities or existing category opportunities to really reinvent with the technology that’s out there today and we intend to be part of more and more of that.

Well Bracken to that end, that leads me just into my second question, which is for you. Can you -- you went through sort of in the beginning of the prepared remarks a handful of what it’s been, at least for this quarter I think some of the more impactful areas of growth in your new products. Could you just kind of that out for us as we look over the next 12 months what are the punches kind of in a specific way one of your key products or just sort of key product categories on a more granular basis that would be really helpful? Thanks.

It's kind of like asking me, which of my children do I like the most right now. Because I think we've got a lot of growth opportunities across the board. We've talked quite a bit about video collaboration, I mentioned that we now topped $100 million run rate mark and we're excited about that business, we got -- I think we got a good strong portfolio up there right now and now really just trying to build our distribution and the number of places that are trying those products out because they're really terrific and low cost way to really bring video to almost any room or space. So that's one, gaming continues to be super exciting PC gaming is going nowhere, but up so far and we don't see any near-term into that, even as virtual reality and augment reality come into play professional gamers and gaming enthusiast and even casual gamers are getting in the act of using hardware for PC gaming. So it's really exciting, Bluetooth speakers continue to go well and we've got good things in store like party up so that's exciting. And even PC peripherals, which a lot of people would have looked at and said gosh that can’t be a good business. As I said in my opening remarks and we've said in the ID [ph] and other places it's a -- as the PCs or something that's on your desk and ages the experience you can create with a new mouse and new keyboard, a new webcam can really enhance that experience and we all spent so much time or so many of us spend so much time working that it's a small price to pay for a great experience. So I'm excited across the board and the new categories of in home cameras and Bluetooth earphones and these are all new spaces for us that we're also very excited about. So there are a lot of opportunities here Ananda.

And a few tuck-in and Ananda if you look we really manage the company like a portfolio of different businesses with different lifecycle. And we feel really good about the spread of the business since we have across that lifecycle. So yeah we feel definitely good across all.

Very helpful, guys. Thanks a lot, congrats.

Thank you.

Your next question comes from Andrew Humphrey with Morgan Stanley. Your line is open

Hi, Andrew.

Hi there. Thanks for taking my question. Just one from me really, if I look at your long-term targets for high single-digit revenue growth, really you have -- you'll achieve that this year I think that's fairly clear. And that's been the result of very strong growth in a number of categories some of them quite surprising. If I look out beyond this year and you maybe indicate how many more years with the growth you think your current mix of product categories has or in other words what level of growth you can sustain on and three-five year view with your current product categories? And how much perhaps is baked into your longer term guidance for say FY18 and FY19 in terms of do you sit down at the start of the year and think well looking two years out I think we’ll made another $100 million of revenue from as we haven't launched yet to make a longer term target.

Yeah I'm going to start and then I am going to let Vincent finish this one. When I started the company and then when Vincent joined me and so many others who are already here and who came in later we said our goal is to be a design company. When I said design company, I really mean the company that can innovate well in existing businesses and then enter new categories with great innovation. And that's really what we've done if you look back over the last three or four years I mean that's been the model. And it's been a combination of existing categories and new categories. And that's our assumption going forward. And so we're I assume in the long-term model we're going to innovate in our existing categories and enter new ones. Giving you exactly a proportional mix of how much that will be over the next three to five years is not something we're prepared to do today.

I think you said it perfectly nothing to add.

Okay, thanks.

Thanks, Andrew.

Your next question comes from Michael Foeth with Bank Vontobel. Your line is open.

Welcome back.

Yes, hi guys. Actually just a two questions from my side. I was really happy to see the Jaybird Freedom being displaced so prominently in the Apple stores now, I haven’t checked all Apple stores, but can you maybe share in how many stores you are or is basically you generally in all the stores or in how many countries you are and also other major sales channels you’re selling Jaybird into other and online?

Yeah, I’ll just quickly go. We’re in mostly Apple stores and we’re not globally everywhere yet we’re mostly of the Apple stores and we’re excited about being in the Apple store and anything we go into it with including Jaybird, so that’s been good. In terms of other distribution, they are the ones you would expect certainly all the mass channels, it’s for the online channel. So we are not very, very broadly distributed yet, we still have opportunities to continue to expand distribution around the world, especially outside U.S., but we also need to build the brand outside the U.S. so there is more work to do there. But yeah I would say it’s still very early days on that business and the growth ahead will be dependent in our ability to execute that into other countries as well as here.

Okay, thanks a lot.

Thanks, Michael.

[Operator Instructions] Your next question comes from Paul Coster with J.P. Morgan. Your line is open.

Hi, Paul.

Hi, Bracken. Thank you so much for taking my question, I’ve got a couple quick ones. Market difference and the rate of growth of the pointing devices category versus keyboards [indiscernible] it would be obvious why that should be the case, what do you think the reason is?

I think, there are a couple of things, I think one is keyboards are -- first of all keyboards or both keyboards and combos, so combos there is a mouse in that box. So that’s certainly part of it. We also have a lot of keyboards that are -- we’re taking new used cases, so living room, multi-device is obviously a big one and that opens up new areas of growth for us. So and the third thing I’d say is what’s probably not as obvious is I don’t think we reported volume, is actually volume growth is up in mice. So the mix is lower this time and part of that is just the cycle of what we launched. So we launched you may remember last year we launched -- we redid really our most premium product our MX Master and MX Anywhere which are top of the line products top of the price points. And so, I think you’ve seen our overall mix go down some in the -- as we finished that year and now we’re comparing to last year when we had a really good high end mix. So that combination is the driver.

And Paul if you take the mouse and keyboard and combos when it’s combined plus the pointing device together we are mid-single-digit growth.

Right got it. And then you’ve made this point, which I think is what taken this what $500 million PCs that are more than four years old and that’s really present to you with this fantastic opportunity, obviously market is soft and Intel and others working hard to try and spur an upgrade cycle I guess after soon that’s going to happen, you and in the meantime have moved away from the OEM business when that upgrade cycle as you kicks in in earnest how do you participate at that point does a good story get better or is actually a little bit of an issue for you as the market kind of flips in that direction.

You know, it’s an interesting question, I see opportunities in both directions, we stopped attaching to purchase new PCs for all both practical purposes couple of years ago, because people would buy a PC and two or three, five years ago, people would buy PC and they would often upgrade the mouse and the PC. Because to hit price points is really difficult to put a fully featured mouse or keyboard into a lot of PCs. So you could upgrade at relatively low cost and get a more fully featured product instead of using the one in the box and the one in the box is perfectly fine we are making that often. So if the PC upgrade cycle does really kick in and we start to see PC growth I think that will be an opportunity for us.

Okay, all right. Thanks very much.

Thanks so much, Paul.

Your next question comes from the line of Andreas Mueller with ZKB. Your line is open.

Hi, Andreas.

Yes, hello. Hi everybody. I missed the first couple of minutes, so maybe all of something which was answered before, but I was wondering if there is any particular reason behind the reacceleration of growth in video collaboration particularly in Europe? I mean, is Europe more underpenetrated in general than North America and should you expect more growth in general from Europe here?

Okay, nobody asked about that. Reacceleration of growth is probably a little deceiving because actually we -- our growth has looked very steady underneath the sell-in number our growth has been quite steady in Q1 and Q2 so we had launched in the prior year. I think we said that in last call. So, yeah actually growth looks very consistent, in terms of Europe versus the U.S. there are really good opportunities in both places I mean there. The number of rooms that are being video enabled around the world it’s happening everywhere. So, I think we got good opportunities both places lots of places in our hit list. So, no I don’t see any reason why it would be more or less in terms of growth we really should be growing in both places and Asia.

Alright, okay. And then in the home control area I mean the decline can you discriminate here between the product categories, remotes and [indiscernible] and maybe the reasoning behind this decline there?

Yeah circle is not in that category if you might remember, so it’s in the different category but I’ll let Vincent talk a little bit about where you could find. In terms of remotes, the remote business is stable I would say if you look at the first half it’s okay. We are working eventually on several things in that space and we are excited about what’s happening in the smart home. And at the end of the day the -- we continue to think our remote business is pretty interesting. In fact I don’t know if you saw yesterday that we announced that we are now integrating our Harmony Remote the hub with Alexa, which is as you know its Amazon’s personal assistant in the home. So you will now be able to operate home hub using Alexa so you will be able to manage your wishes, your entertainment, your living room, your family room whatever it is as well as other things. Using your voice using our hub and in fact you can order the hub right off of Alexa just say lots Alexa please order me a Harmony hub. So yeah we are excited about the potential there and I think into the first half the business did about what we thought.

Okay. And then my last question on the cash conversion 22 days that’s within the target range is there any ambition to go below the range at some point or to reduce the range or would you say the range provides you with the optimal networking capital also going forward the next couple of years?

Good question. So every day we come in the office, and we’re trying to do better than the day before. We now mid of that range right and we’ll try to continue to get to a lower range, we have many different strategies we’re exploring. But no specific plan that we would be already to share with you that will lead to the target.

Okay, thank you very much.

Thanks, Andrew.

Your next question comes from Rich Kugele with Needham & Company. Your line is open.

Thank you. Just one quick question more of an industry question, just given your smart home initiative and taking into account kind of what happened last week with the VNS [ph] attack seemingly coming from some of these connected devices. Can you just talk about how you approach security, your investments in that area and how you can protect your solutions; as they into the home so that we can all move to more smart home configurations. Thanks.

Sure, I’m pleased to be able to say that none of our cameras were involved in that attack, they were directly connected -- those were cameras that are directly connected to the internet. So they are vulnerable and ours were not. Generally speaking obviously security of all devices including those in the home is a very high priory for every company and especially for us. We talk about at the board level, we talk about at our leadership level and we’re staffing it. So, it’s a big deal, we are very focused on it, it’s going to be a bigger and bigger deal for us going forward and for everybody else. We are certainly working with outside experts and inside experts to make sure we are in a good position that’s a never ending battle to make sure that we stay ahead of the curve so that we are not vulnerable where we shouldn’t be. And so far so good, but there is always work to do.

Excellent, thank you very much.

Thanks, Rich.

Your next question comes from Shannon Cross with Cross Research. Your line is open.

Hi [indiscernible].

Thank you very much. Hi, how are doing? Hopefully you can hear me I apologize I am in a car. My question is with regard to what’s going on in the PC space as oppose to the $500 million installed base, but I’m just curious the growth is really in the higher end the two in ones, the high-end notebooks especially for corporate obviously still a slowdown to some extend in consumer. So, I’m just curious as to how your products work with the higher end notebook sale? A good opportunity or anyway.

Yeah we do, we have always attached at all price points to products, people at the high end tend to take the more fully feature experience. Our multi-device keyboards for example a perfect component to a high-end notebook where you use it at your desk and you would also use it with other products. But we -- and we continue to work on, we love the high end of that, we obviously love the high end of the PC peripherals lineup. So we’re always aggressively working on what else we could do there and I think historically we’ve done well attaching to the high end and we expect during the future if that cycle continues.

So should we assume that it’s a higher out, just want to confirm it’s a higher attach rate -- is the higher attach rate and a higher ASPs that sort of tracks a higher notebook or higher PC sale?

I don’t know if I could say that, I don’t even know if I have that data. I think in general though we have done well attaching to all price points.

Okay. And then Vincent can you talk a little bit about what you’re seeing in terms of valuations for potential acquisitions are people more rational, has they gotten crazy again, I would more rationality since the private equity market a little bit tighter, but just any color you can give there? Thank you.

Yeah thanks, Shannon. We have been focusing on also looking at how to use our cash in as a priority look at small acquisitions to complement our portfolio right and we shared many times that we’re looking at a lot of companies on a weekly basis and constantly discussing with different potential targets two years ago valuation was extremely high and since then it came a little bit lower you have seen with close Jaybird in very reasonable valuation ratio we’ve Saitek equally good valuation ratio and we’ll continue to stay disciplined. While not everybody maybe crazy we still see crazy valuation out there and we’ll continue to manage this approach in a very disciplined way.

[Operator Instructions] Your next question comes from Tavis McCourt with Raymond James. Your line is open.

Hey guys. Just a quick follow-up on the audio market, so two distinct questions, first in the Bluetooth speaker category I think at the beginning of the year you had mentioned you expected that category growth to slow industry wide to something like 10%-15% and obviously you have done much better than out in the first half of the year and I guess maybe an update on do you think you are taking share or is there been a little more legs to this category than you would have thought? And maybe a comment on your market share there. And then secondly on Bluetooth headset because it’s a relatively new market for you if Jaybird is doing 3% let’s call the $60 million piece of business, how big is that market and how fast is it growing to give us a sense of opportunities there? Thanks.

Yeah so, a couple of things I guess, first on Bluetooth speakers, yeah that market has progressed about like we thought there is plus or minus something. We are gaining share in different places around the world and we will continue to innovate there. So and our expectations are about the same for the year that where we started. In the Bluetooth earphone space I think we said last quarter, the market is large I think we said it’s somewhere in the $1 billion range and growing. And we’ve got our relatively small piece of that globally. We’re much better in markets where Jaybird started then obvious the markets where they didn’t and our mission is to innovate in that space so that we can do what we do everywhere else which is try to carve off our slice of that market based on the kind of functionality, the experience and the brand that we have. So that’s our game plan.

Okay, thank you.

Thanks, Tavis.

Thank you. It appears there are no further questions. At this time I will turn the conference back over to Mr. Darrell for closing remarks.

Well in closing, we are very proud of the first half of fiscal year ‘17 and we are excited about the strong momentum heading into the back half. Our main focus right now is to execute against our plans for Q3 and continue to invest to support our long-term growth. And I am telling you right now, we are just getting started. Thank you very much.

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