LOGI

**Nate Melihercik:**  
Good afternoon and good evening. Welcome to Logitech's video call to discuss our financial results for this quarter and fiscal year-end. Joining us today are Hanneke Faber, our CEO; and Matteo Anversa, our CFO. 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 GAAP and non-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. These materials as well as the shareholder letter and a webcast of this call are all available at the Investor Relations page of our website. We encourage you to review these materials carefully. Unless noted otherwise, references to net sales growth are in constant currency and comparisons between periods are year-over-year. This call is being recorded and will be available for a replay on our website. I'll now turn the call over to Hanneke.

**Johanna Faber:**  
Thank you, Nate, and welcome, everyone. It's great to be here in Switzerland in Lausanne tonight. As I reflect on my second full year as Logitech's CEO, I'm grateful for the progress we've made and also energized by the opportunities still ahead. Fiscal year '26 proved what our model is capable of in any environment, successful innovation, best-in-class execution and real earnings expansion. Before we look ahead, let's review our fiscal year '26 and our Q4 performance. As we do so, it's worth returning to the operating principles we declared last April. At the start of our fiscal, we faced a rapidly shifting global landscape. At the time, we set out to lean into opportunities with an offensive mindset to apply rigorous cost discipline and to leverage our global manufacturing footprint for real-time agility. I'm pleased to share that we delivered on all 3 of those objectives last year. First and foremost, we played offense. As a result, we captured significant new market share in key segments and geographies, and we delivered 6% net sales growth in U.S. dollars and 4% in constant currency through a balanced mix of volume and price. Simultaneously, we kept a very firm hand on cost and operating expenses, and we strategically diversified our global manufacturing base. And as a result of that, we delivered exceptional profitability with non-GAAP gross margins of 43.6% and an operating margin of 18.8%, ahead of our long-term model and a record high outside of the COVID years. Operating income grew 18% to $911 million. We then translated this structural profitability into outstanding cash generation. Cash flow from operations exceeded $1 billion for the fiscal year, well above 100% of operating income. And we were pleased to be able to return $768 million of cash back to shareholders in the form of share repurchases and dividends. Looking back at just the fourth quarter, we closed out the fiscal year strong. In Q4, we again drove significant global market share growth with a 140 basis point increase in personal workspace, a highlight. We returned the Americas to solid growth, led by the United States. We accelerated global gaming to high single-digit growth, and we delivered superb margins and a 25% increase in non-GAAP operating income versus last year. I am proud of our teams for balancing bold action with deep operational rigor in fiscal year '26. Now as we transition into fiscal '27, we're amplifying our focus on future growth. We can do so because we are starting the year from a position of outstanding financial strength. And we should do so because the rapid advancements in AI will make the next 12 to 18 months a unique period for a technology company like ours to innovate and invest for a future in which both work and play will look very different. Thus, in the year ahead, we will up the tempo on the offense. With structurally strong gross margins and a pristine balance sheet, we'll invest in the business to accelerate future growth. At the same time, we will continue to apply our signature cost discipline and agility with a focus on maintaining operating margins at the high end of our long-term targets and driving healthy operating cash flow. Our investments will be focused on 3 strategic areas of growth. First, R&D and product innovation. We will leverage AI as a catalyst for innovation. We'll do so by enhancing superiority in existing categories and our new Rally AI video conferencing cameras, which are shipping this summer, are a great example. We will also innovate into new spaces with products designed to help people be more productive and perform better with AI across work and play. And we'll leverage AI for speed. AI is already helping us deliver our annual suite of new products faster than ever. The PRO X SUPERSTRIKE gaming mouse, which shipped in February and went from prototype to a hugely successful launch in under a year is a great example. Second, we'll invest in Logitech for Business. We're deepening our presence in B2B markets by building enterprise-grade commercial capabilities and penetrating new verticals, prioritizing education, government and health care. We are in the early innings of this plan, but the investments are working. In fiscal year '26, B2B demand outpaced B2C demand and video collaboration net sales were up 10% in U.S. dollars and 8% in constant currency. We believe Logitech for Business still holds significant untapped potential. And third, we'll invest in building an iconic brand. We will use proven high ROAS marketing to generate more trial and awareness of Logitech, especially of our premium offerings. The high-end MX Master 4, which was supported by strong global marketing campaigns in fiscal '26 is a great example. At $120 price tag, it generated nearly $100 million in net sales within its first 6 months, making it one of the fastest adopted products in Logitech's history. All in all, these targeted investments are designed to capture market share, expand addressable markets and support organic top line growth. I'm super excited about the plans for the year ahead. We believe fiscal '27 will keep us tracking towards our long-term model of mid- to high single-digit organic top line growth while maintaining operating margins at the high end of that model. Let me close by extending my sincere gratitude to the Logitech team around the world for their dedication and their fabulous work throughout fiscal '26. And with that, over to Matteo to cover the financials in more detail.

**Matteo Anversa:**  
Thank you, Hanneke. Thank you all for joining us on the call today. The team delivered a very strong close to the year, characterized by solid demand, exceptional profitability and cash generation. The detailed financial results can be found in the press release and shareholder letter, but let me briefly share with you some of the key financial highlights. So starting with the fourth quarter, net sales were $1.086 billion, an increase of 7% in U.S. dollars and 3% in constant currency. It is important to note that the impact of the war in the Middle East in the fourth quarter was approximately $5 million or 50 basis points. Overall, we saw excellent demand across both our B2B and B2C channels and across all regions. Looking at our net sales performance in constant currency, we grew across most of our key product categories. Gaming net sales increased by 7% with year-over-year growth in all 3 regions, including double-digit growth in EMEA and in Asia Pacific. Video Collaboration net sales increased by 8%, driven by continued strong growth in EMEA and AMR. And Personal Workspace net sales increased by 1% with double-digit growth in Tablet Accessories and mid-single-digit growth in Pointing Devices. Moving to our regional performance. In the Americas, net sales increased 3%. This represents the second consecutive quarter of year-over-year growth following the price increase that we implemented last April. Growth was broad-based across all our product categories, most notably Video Collaboration, which grew double digits. In Asia Pacific, net sales increased 8%, marking our ninth consecutive quarter of solid year-over-year growth, driven by double-digit growth in Gaming and Personal Workspace. Net sales declined 1% in EMEA, primarily due to the impact of the Middle East conflict. And if we exclude this impact, net sales would have been slightly positive. And it is also important to note that EMEA still delivered solid growth for the full fiscal year despite an uneven macroeconomic backdrop, underscoring the strong and resilient execution of our teams. Now turning to profitability. Our non-GAAP gross margin rate was exceptionally strong at 44.8%, up 130 basis points year-over-year. The positive impact of the U.S. price actions and favorable foreign exchange more than offset the impact of tariffs and higher promotions. Total non-GAAP operating expenses for the quarter were $320 million, corresponding to 29.5% of net sales, down 80 basis points year-over-year. We invested in sales and marketing and R&D, while reducing G&A by more than 10% year-over-year. This gross margin resilience, combined with our disciplined cost management drove an outstanding operating leverage. And as a result, fourth quarter non-GAAP operating income reached $167 million, up 25% year-over-year with our non-GAAP operating margin rate expanding 210 basis points to 15.3%. Now let me briefly touch on the full fiscal year '26, where we delivered $4.8 billion in net sales, an increase of 6% year-over-year or 4% in constant currency. Non-GAAP gross margin rate closed at 43.6%, slightly higher year-over-year as the impact of our manufacturing diversification actions, combined with the price increase in the U.S. more than offset the negative impact of tariffs. Total non-GAAP operating expenses as a percentage of revenue were 24.8%, down 170 basis points compared to the prior year, primarily driven by disciplined spending underscored by a 10% reduction in G&A. This resulted in an 18% year-over-year increase in our full year non-GAAP operating income to $911 million, and an increase in non-GAAP operating income rate of 180 basis points to 18.8%. This is the highest level of profitability in the history of the company outside of the COVID peak. The profitability level achieved is also well ahead of the top end of our long-term margin target range of 15% to 18%. Our structural profitability continues to translate in very strong cash generation, coming in above 100% of our operating income. Cash flow from operations exceeded $1 billion in fiscal year 2026, and we ended the year with a cash balance of approximately $1.7 billion, while returning over $765 million of cash back to shareholders in the form of share repurchases and dividends. Now looking ahead to the first quarter of fiscal year '27, we have provided our financial outlook in today's shareholder letter, which calls for continued top line growth and strong operating income. We are expecting net sales to grow 2% to 4% in constant currency, and this amount includes approximately 150 basis points of negative impact from the Middle East conflict. Non-GAAP operating income is expected to be between $195 million and $215 million. Our recent results confirm that we are a company for all seasons. We successfully navigated a dynamic environment last year to deliver high-quality earnings and cash flow, and we enter next year with a foundational strength to do it again. Once again, I would like to thank our teams for an exceptional fiscal year 2026. And with that, let's turn it to Q&A.

### Q&A Section

**Operator:**  
[Operator Instructions] Our first question will come from Alicia Reese with Wedbush.

**Alicia Reese:**  
Congrats on the results today. I'm wondering if you could dig into Gaming a little bit. The results from China for China have been strong for some time now, and I assume that, that's a positive margin profile relative to the other regions. As that strength shifts back to the U.S. domestically over the coming year, presumably, how will that impact? And to what degree, whether you say quantitatively or qualitatively, how do you expect that to impact gross margin over the coming year?

**Johanna Faber:**  
I think the impact on the gross margin will actually be quite minimal because the difference in the Chinese versus the U.S. margins are not material. What's been driving -- and thanks for asking about Gaming because we're -- I'm super excited actually about the results in Gaming in the last quarter, much stronger end to the fiscal year is where we went in 7% up in Q4. And you'll remember in Q3, we were only at plus 2%. So a real acceleration there. And the interesting thing is the drivers are broad-based across the world. So the real driver was the SUPERSTRIKE, our latest new mouse, $180, really unique technology called HITS, Haptic Inductive Trigger System. This one is for competitive gamers. And you know this well, Alicia, because you know the space so well. But competitive gamers do not change their gear. It's like when you're going to run the Olympic Marathon, you're not going to change your shoes the day before the race. That's -- the same is true for competitive gamers. But with this mouse, almost immediately after we started shipping in February, it started being adopted in tournaments, and that then led to enormous demand from non-pro gamers as well. So that's been a big driver in the quarter. We're super excited about that. Honestly, we couldn't make enough of it. So that should be -- that momentum should continue. And then separately, premium gaming in general has really been outperforming the rest of our business. So both PRO and SIM, the whole PRO range and the SIM range were up very comfortably in double digits. And again, that is true around the world. So those dynamics have not been specific to one region or another, but really good to see around the world. Matteo?

**Matteo Anversa:**  
I agree with the margin comment.

**Alicia Reese:**  
And as a follow-up, the SUPERSTRIKE, did that do well globally? Or were there certain regions that did particularly well with that?

**Johanna Faber:**  
No, no. Absolutely. So that has done well everywhere. And I think it's kudos to our team. It was developed with pro-gaming teams from every region. So with Korean teams, Japanese teams, Chinese teams, American teams, European teams. And after launch, again, it has really been a huge hit everywhere.

**Alicia Reese:**  
Great. And what products do you expect to lean into as you head into the new season with GTA this coming year?

**Johanna Faber:**  
Whenever that comes.

**Alicia Reese:**  
November, hopefully.

**Johanna Faber:**  
Yes. Certainly, we've got great momentum in Gaming on both the PRO line, not just on the SUPERSTRIKE, but across the entire PRO line, including keyboards and headsets. Also great momentum on SIM racing. And again, those happen to be the most premium parts of our portfolio. We also have great innovation coming actually in the new year on our 3 and 5 series, which are more affordable, which also, I think, is important so that we serve every piece of the gaming market. But if I -- the first penny goes to the premium side of the business.

**Operator:**  
Your next question will come from Jörn Iffert with UBS.

**Joern Iffert:**  
It's two, please, which are related to each other. The first one is just also for modeling purposes, your statement focus on growth makes a lot of sense. You're already above your midterm margin target. But what does it mean really? I mean, does it mean you're targeting the mid- to high single-digit organic growth for fiscal year '27 and margins, I mean, coming down 50 basis points to 100 basis points? This would be my first question. And then the second question is related to this one. You said there's -- I mean, AI world is changing rapidly. You want to adjust. You want to invest. Where exactly you want to place your investments? What are you doing in R&D? What are you doing in marketing? What is different here versus the last 12 to 18 months?

**Johanna Faber:**  
Do you want to take the first?

**Matteo Anversa:**  
Yes, I'll take the first one. So in terms of outlook for fiscal year '27, I would just -- I think if you look at what we outlined in the shareholder letter, I think on the back of the strong momentum that we had in the fourth quarter, we will continue to see growth in the first, and that's why we outlined the net sales growth in constant currency between 2% to 4%. I think making statements right now beyond the first quarter due to the visibility of -- in the current world conditions that we live in, I would say it's a bit premature, but we are happy with the growth, particularly back to Hanneke's point that we are seeing in Gaming, AMR actually clearly picking up the pace in the fourth quarter compared to the beginning of the year of fiscal year '26. So these are all positive. In terms of profitability, the way I would kind of describe our thinking is the -- you will see that we will invest a bit more to Hanneke's point in sales and marketing and R&D. But overall, OpEx will remain within the framework that we have been talking now for quite some time of 24% to 26%. So no big change in that. You can count on us to continue to be meticulously careful in how we spend our money in G&A, but really invest more in R&D and sales and marketing compared to what we have done in fiscal year '26. But notwithstanding all of this, including these investments that Hanneke mentioned, we still feel very comfortable that we will be comfortably on the high end of the range of OI percentage that we provided at Investor Day.

**Johanna Faber:**  
Yes. Thanks. And thanks, Jörn, for hanging in there with us late at night here in Switzerland. So we feel your pain. AI, AI in product and AI in marketing, it's a great question. So in products, we are well beyond proof of concept and experiments when it comes to AI-enabled products. And we're shipping them globally. We're shipping them at scale. So examples, some have been in market for a while now, but very successful, the Sight video conferencing camera, the Zone 2 wireless headsets, devices like the Spot sensor for room management and then shipping this summer, which we're very excited about in video collaboration, the Rally AI camera, which is really another level of superiority in video conferencing. And then we're also innovating into new spaces, new categories that don't exist yet today. And I can tell you, but I'd have to kill you, but it's exciting what's going on. The last thing I'll say on product is, of course, we make software-enabled hardware. So even sometimes with the same hardware, there's software upgrades that we're implementing almost monthly, sometimes weekly, things like the digital cocoon in video conferencing, AI noise suppression in headphones, smart switching and smart framing in our webcams and VC products. All of those were not possible the way they're possible now, even 6 months ago. So things are moving fast, and it's critical that we stay ahead because AI just gives so many more new opportunities, and that's exciting. In marketing, too, we've learned a lot from our China team. So our China team really modernized marketing for us. They needed to and they have, and that's part of our China for China success. But what we're seeing in China and around the world is marketing is search and social. That's where you start your marketing today. In social, we have thousands of creators that we work with around the world. They create every month, hundreds of thousands of pieces of content that come by your feed on TikTok and on Instagram. It is not possible for a human to keep track of that content and to put more money behind content that works and no money behind content that doesn't work and shift that money into the right retail partners, platforms, et cetera. That's just not possible. What we've learned in China is to build an AI-enabled marketing ops model to really get the most bang for the buck on that whole new marketing platform framework, I don't know what to call it. And that's doing very well in China. We just had a digital marketing summit for our top 120 or so marketeers around the world in Shanghai last week so that we can take those learnings from China and implement them back into the rest of the world. And I think that will be a big advantage for us versus some others.

**Operator:**  
Our next question will come from Asiya Merchant with Citi.

**Asiya Merchant:**  
Sorry, I'm in a hotel, so my video doesn't work here with this broadband here. But just wanted to ask, there's been obviously a lot of concern, there's pull forward in demand here, maybe more on the consumer device side, especially as it relates to PCs. How are you looking at -- I know you guys are only guiding here for fiscal 1Q, but seem pretty confident in that growth rate. What's your view on pull forward here? And then if I can squeeze in just a little bit on structural gross margins. I think I heard Hanneke talk about that as well as Matteo on structurally gross margins being higher here. Can you just help us understand like the upside that you guys have relative to your guidance here for both fiscal 4Q and you expect that goodness to continue, sort of how we should think about the various factors that drive those gross margins? And what are some puts and takes to that as you progress through fiscal '27?

**Johanna Faber:**  
Yes. Thanks, Asiya, and I'll let Matteo go deep on the gross margin. I think in terms of your first question on pull forwards, we certainly didn't see that on our businesses, neither on the consumer side nor on the B2B side in Q4. Our global markets, so if you take the total categories that we play in globally, the market was pretty resilient, low single-digit growth. And that was certainly resilient with enterprise customers. Businesses in general, are doing well. We've gone through earnings season, and we've seen it. But businesses are performing. So they're investing in technology. They're investing in new offices, and we're gaining share, both in video conferencing and in PWS. So that's been good and not dependent on pull forward of any kind. And on the consumer, I would say we're seeing kind of what we have been seeing, which is the consumer is resilient, but choiceful. He is looking for quality and recognizes when there's great innovation, but maybe a bit more choiceful when there isn't. And again, in that context, our share performance has been very, very strong. So that's why we guided the way we guided for Q1. But as Matteo said, we also believe quarterly guides are appropriate in this environment. It's just challenging to get longer-term visibility on the state of the consumer or the customer.

**Matteo Anversa:**  
So on the gross margin question, so let me maybe start by unpacking for you the fourth quarter. We are obviously very pleased with the work that the team has done. This is a record quarter for us if you exclude the COVID peak here. So we improved the gross margin rate in the fourth quarter by about 130 basis points year-over-year. It's a combination of the positive impact of the pricing actions that we executed in April of 2025. It's -- obviously, FX was a bit of a tailwind with where the euro traded during the quarter. And this more than offset tariffs and promotions. They came in, in line with what we were expecting. So basically, if you dissect the 130 basis points, the way -- the easy way to think about it, you have 150 basis points of price, 150 positive of FX, offset by about 70 basis points negative of tariffs and then 100 basis points higher promo for the quarter. But overall, very, very strong performance by the team in the way we closed the year. So now to the second part of your question, if you look back now to the last few quarters and also what we outlined for the first quarter of 2027, structurally, we are a 43% to 44% gross margin rate company with -- at the current FX rates. So then when we look at longer term, obviously, there are different items that impact the gross margin rate to the positive, to the negatives, right? So on the positive side, as we continue to focus on doubling down on B2B, video collaboration portfolio is positive, it's accretive to the margin rate of the company. So as we continue to focus on that, that definitely will continue to help the gross margin rate. The premiumization of our portfolio now for several quarters, including the fourth one, all the high premium lines, so the MX, the ERGO, the PRO, Simulation have been growing tremendously well for us, double-digit growth. Some of them more than 20% in terms of demand growth. So that's also a positive, a tailwind. The continuous work that we always do around product cost reduction through value engineering is now really thanks to Sree's teamwork is becoming the way the company operates every day. And this helps us to mitigate some of the pressures that we are seeing -- the inflationary pressure that we are seeing in some of the material we purchase. So these are all the positive. And then obviously, there is the promotional aspect, which is really a function of the competitive landscape that can change quarter-over-quarter. But overall, at the current FX rates, I think we are a 43% to 44% rate company. And the idea is really to leverage back to Hanneke's point earlier, the strength that we have on the gross margin rate and reinvest some of this money into the future growth of the company in sales and marketing and R&D, as Hanneke outlined in the earlier question.

**Asiya Merchant:**  
Okay. Just on the promo rates, promotional aspect, it seems like some of the traditional PC companies just dealing with component inflation here and trying to pass through the pricing. I mean, are you seeing an environment which is more promotional or probably less promotional here for some time?

**Matteo Anversa:**  
Look, in the last couple of quarters, promotion, if you look at every time I describe the gross margin rate, we have about generally a 50 to 100 basis points of gross margin rate pressure year-over-year on promotions. So it's a little higher. Even in the outlook that we provided for the first quarter, we are always -- the bogey, the range is really dependent on how much promotion we have to implement during the quarter. I think it varies by region. Remember, we had a sizable price increase in the United States, and we had to promote a little bit earlier in the year. But that's what I would say. There's nothing concerning. Things are coming in pretty much as expected. And as you can see from the gross margin rates that we have been printing now for the last few quarters.

**Johanna Faber:**  
Yes. I think the key thing with promo is you guys just be all over it every day and then know what's happening in the market and use them intentionally and strategically. And that's what we're doing. That's the reason our gross margins have been so strong. And in Q4, which we -- I expect kind of to continue, the extra investment in promotion really was focused on our very largest B2C customers, especially in Europe, where we continue to see some influx from Chinese brands. And we'll defend that with our lives while keeping the gross margin strong.

**Operator:**  
Your next question will come from Maya Neuman with Morgan Stanley.

**Maya Neuman:**  
I have two questions for you guys today. Maybe to start, could you just give us an update on channel inventory levels kind of across key regions and categories? And then really nice to see another quarter of gross margin outperformance. Looking forward, is there any degree of tariff refunds embedded? And if not, how should we think about the potential magnitude and timing of that?

**Matteo Anversa:**  
Good question, particularly the second portion. So let me start with that, Maya. So in the fourth quarter, we have not factored in any collection of tariffs in our numbers. And we did not even include that in the outlook that we provided for the first quarter. We think right now, the process and the timing of the reimbursement is a bit too uncertain, and we decided to proceed this way. So I think we will have to keep all of you appraised on how things are going progressively during the year. But right now, nothing was recorded in the fourth quarter and nothing is considered in the outlook that we provided for the first. In terms of the first question on channel inventory, maybe let me start and I'll let Hanneke add anything that I missed. Overall, we are very happy where channel is. The weeks on hand across the channel globally is exactly where we want it to be, pretty much in line where they were last year. So I think we are entering the new fiscal year with a very healthy and healthy channel pretty much across all the regions. Obviously, what you have seen in the fourth quarter, which is pretty common in the quarter which follows the holiday season quarter, we tend to take the channel inventory down a little bit, and we have done that consistently with the prior years, maybe a little bit more in Europe compared to some of the other regions. And -- but overall, channel is healthy, and we are happy on how we enter the new fiscal.

**Johanna Faber:**  
Nothing to add.

**Operator:**  
Our next question will come from Michael Foeth with Vontobel.

**Michael Foeth:**  
Can you hear me?

**Matteo Anversa:**  
We can hear you.

**Michael Foeth:**  
Just two questions for me. The first one is on cash flow. Very strong cash flow performance. Can you maybe give a bit more color on how you managed to get there? And I think it's consistently above the 1x operating income level now. How should we think about cash flow going into 2027? That would be the first one. And the second one on the Middle East disruptions, where do we stand there? Is it from your logistics perspective? Is the situation derisked now? Or depending on how things drag out, could there be more effects in future quarters?

**Johanna Faber:**  
Yes. Maybe, shall I take the Middle East and then we come back to the cash flow question with Matteo. So we definitely saw in Q4 negative top line growth impact from the Middle East war. And that wasn't so much that there was no demand for our products, but we really had some challenges in reaching all of our distribution partners from our Dubai distribution center, and that was true in the Middle East, but also in Africa, which gets served from that distribution center. We expect that, that will continue. So in our guide for the first quarter, there is a top line impact there of about 150 basis points from that in the quarter. Hopefully, but who knows, this situation will be resolved in the near future, and that will go away. But again, this is one of the reasons why it's very hard to guide beyond the first quarter because it is a significant impact.

**Michael Foeth:**  
But you still utilize the warehouse there.

**Johanna Faber:**  
Yes, the DC is operational. It's -- we have many distributors in the regions, Tier 1s and then Tier 2s, and getting stuff out in full perfectly is more challenging than usual at this point.

**Matteo Anversa:**  
Michael, on your question on cash. So we are tremendously pleased with the performance of the team on cash flow. To your point, yes, we exceeded the operating income also this quarter. Operating cash flow was about $280 million in the quarter. The 2 key drivers here, this applies both for the fourth quarter, but also if you look at the total year. Number one, collections have been extremely strong. We have implemented very good operating mechanism on collections. We have a great collection team, and we have been performing very well. We have really record low level of past dues across the portfolio. So collection is one driver which drove the DSO lower throughout the year. And the other one, big one is inventory. Sree and the team have done a spectacular job in really controlling inventory in spite of the fact that you may recall, particularly in conjunction with tariffs, we actually did some pull-ins of product ahead of new tariffs being put in place. And notwithstanding that, the inventory turns of the company improved by almost 0.5 point during the year. And that's really the second driver on top of, obviously, the net income, which also was a good lift during the year. So we are very pleased. Can it continue? We'll do our best, but always don't expect this to be every quarter above 100%. One thing that I would highlight, we haven't spoken it yet on this call, but we talked in the past, memory, right? We are working to make sure that we get as much memory as possible to protect our video conference portfolio. So whatever we can get, we get it, and that may impact the inventory turns. So don't expect -- don't model greater than 100% every quarter in fiscal year '27. But I think the team did great.

**Operator:**  
Our next question will come from Didier Scemama with Bank of America.

**Didier Scemama:**  
Can you hear me? Yes, I think. I've got two. A quick one is first maybe to Hanneke. Can you just give us a sense of your perception of U.S. and European consumer behavior with the current Middle East conflict and impact to consumption, et cetera, from your gross margin and your mix, which is very premium, it feels like people are very much unbothered. Are you surprised by that? And how would you explain sort of this discrepancy?

**Johanna Faber:**  
Yes. As I said before, certainly on the consumer, we see that he is continuing and she is continuing to buy. So our markets were up low single digits and the consumer side demand was fine and even better than fine at the premium end. So in the U.S., we suspect there is some help there from the tax refunds that people are receiving. So that's helping a little bit at the moment. And in Europe, it also looks okay. But again, as I said earlier, this is why we really hesitated not to guide for the year because these things can change.

**Didier Scemama:**  
Yes. Sorry -- Matteo, do you want to add something?

**Matteo Anversa:**  
No, no, go ahead. I was saying.

**Didier Scemama:**  
Sorry. Now for my follow-up, I wanted to ask you about these investments in AI you've been talking about. How is that going to come through? Is it in the form of software? Is it in terms of new capabilities in the form of new products? And what's the sort of payback time for those investments?

**Matteo Anversa:**  
I think it's a mix of all, basically. I think you can already see some of the things that we are doing on problems, for example, right? We talked about in the past, site, the producer in the room is all AI software. The Rally Board 65 has been extremely successful. The digital cocoon, the cutoff, whoever is not in the conversation, that's AI software. The 2-way noise reduction system that we implemented on the new headsets, that's also AI. So for sure, there is a big component on the products that we launch.

**Johanna Faber:**  
Yes. Where does -- you're asking where does the cost sit? The cost sits in R&D. That's where we're spending. And you saw the spending there in R&D in our OpEx and our OpEx numbers are, I think, spectacular for the year. But in the second half, we were able to start spending back into R&D a bit more. Don't think of this as just incremental spend. These are agents that are doing -- humans with agents that are doing work that just humans were doing before, and they're doing more of it and they're doing it faster. So we're managing that as part of our R&D spend. Token usage is obviously increasing, and it's increasing every month. But I think what also sets us apart is that unlike some others, we are leveraging our own in-house build LogiQ platform, which is an enterprise agent orchestrator that works across systems and that works with our own data. That is significantly more cost effective than SaaS alternatives. So all in all, even if token usage were to double or triple during the year, it will still comfortably fit into the R&D pocket that we are planning for, for the year.

**Operator:**  
Your next question will come from Joe Cardrosso with JPMorgan.

**Joseph Cardoso:**  
Maybe just two for me. First one is just on video collaboration. Obviously, you're exiting the year with strong momentum. Just wanted to touch on the sustainability of the trajectory here into fiscal '27, particularly just given this is one of the areas, I believe, on the last earnings call, you highlighted as potentially being exposed to kind of this memory phenomenon we're seeing in the broader market. And then maybe just on the latter part of that, are you actually seeing any issues on that front relative to the mitigation -- just given that you highlighted mitigation levers last quarter, are they largely working as intended? And are you expecting any impacts there just given kind of how things have trended since the last time we talked about it? And then I have a follow-up on the Gaming.

**Johanna Faber:**  
Yes. Maybe let me try and take VC on the market and feel free to add in, Matteo. I'd say the first thing on video conferencing is we're actually really pleased with the results, up 8% net sales constant currency for the year and for the quarter. So even though this business can be a little choppier quarter-by-quarter just because it's a B2B business, and there's a quarter with a huge deal and then that doesn't happen the next. It's actually been pretty consistent and pretty good. We're gaining share and the market is also growing 3%, 4%, 5%. So that then gives you that 8%. Memory, we mentioned video conferencing is the only place in our portfolio that's affected by the memory that's really in short supply. We now feel we're fine in terms of availability through the end of the calendar year. So that's another quarter versus where we were last year. So that's good in terms of availability. We do see an impact on price of what are we able to buy that memory at, but we'll offset that by pricing. And we have announced a price increase on video conferencing globally, and that went into effect actually earlier this week on May 1. So we're offsetting that incremental cost on video with price, and we think the supply will be there. So all of that said, while again, quarter-by-quarter, it may be a little bit like this. I think overall, we're quite bullish on video conferencing. Our premium solutions are doing very well, including those AI-enabled solutions. We're growing our services attach, which was something 2 years ago, we had almost nothing of. We're now, I would say, at competitive levels, and that's a super high gross margin part of the business. And we're continuing to build commercial go-to-market capabilities. We're adding top talent. We're adding systems and skills to sell better in B2B, which again was not our historical forte. But I would say every quarter, we get better. And that's one area where we'll continue to invest going forward.

**Joseph Cardoso:**  
Got it. Very useful. Maybe just on the follow-up is more on the Gaming side. And sorry if I missed this, but you talked about growing in all regions. Just curious, can you flesh that out a little bit in terms of how much the underlying markets improved across the Western regions just because I believe those were sluggish for past quarters? And how much was share gains? And then how are you thinking about that going forward, just given, I think this year, we're expecting somewhat of a recovery on the underlying markets in the Western regions? Just want to really touch on like how you guys thinking about your -- potentially Gaining share on top of that recovery?

**Johanna Faber:**  
Yes, it's a great question. And so even in Q4, that's the most obviously recent period, and we only have market and share numbers that are reliable through February. So it's a little bit old at this point. But the dynamic for the December through February period was not unlike what you just described. So China gaming, the market was still up quite a bit and the U.S. and Europe were down a little bit. Now I think the positive thing that I saw is that in February, the U.S. market actually was positive for the first time in a long time. So one swallow does not make summer, but that's better than what we've seen. And again, we're super pleased that we were able to grow 7% in the quarter, which is really outperforming the market. So things are looking like there's some more momentum certainly in our Gaming business.

**Operator:**  
This concludes the Q&A portion of the call. Back to you, Hanneke.

**Johanna Faber:**  
Great. Well, thanks, everyone, especially thanks to those in Switzerland who stayed with us really late. Excited to see you in the follow-ups to the call, and thanks for being here today. Have a great week.

**Operator:**  
Goodbye.