Fourth Quarter Revenue and Earnings Exceed Guidance; Fiscal 2008 Operating Income Grows 38%
Plantronics, Inc., (NYSE: PLT) today announced fourth quarter net
revenues of $208.7 million compared with $194.7 million in the fourth
quarter of fiscal 2007. Plantronics’ GAAP earnings per share on a fully
diluted basis were $0.36 for the fourth quarter compared with $0.21 in
the fourth quarter of fiscal 2007. Non-GAAP earnings per share for the
fourth quarter were $0.43 on a fully diluted basis. Our results exceeded
our previously provided guidance for the fourth quarter which was for
revenues of $195 to $205 million, GAAP earnings per share of $0.17 to
$0.24 and non-GAAP earnings per share of $0.24 to $0.32. The difference
between GAAP and non-GAAP earnings per share is primarily the cost of
equity-based compensation.
Net revenues for fiscal year 2008 were $856.3 million, an increase of 7%
compared with $800.2 million for fiscal year 2007. GAAP operating income
grew to $79.4 million from $57.4 million. Non-GAAP operating income grew
to $99.5 million from $72.5 million, an increase of 37%. GAAP diluted
earnings per share were $1.39 for fiscal year 2008 compared with $1.04
in the prior fiscal year. Non-GAAP diluted earnings per share were $1.69
for fiscal year 2008 compared with $1.26 in the prior fiscal year.
“Our revenue, profitability and competitive position improved in fiscal
2008 as the result of a strong product portfolio and our focus on
corporate efficiency,” stated Ken Kannappan, President & CEO of
Plantronics. “Our improving results reflect the focus we’ve had on
increasing profitability across the organization and that our concerns
of economic weakness were not as great as we had anticipated in the
fourth quarter. We ended the fiscal year on a strong note due to healthy
demand from international markets, which offset the challenging economic
conditions in the financial services sector in North America. We believe
that we have the right products under development to continue to improve
prospects for growth and profitability. In addition, we believe Unified
Communications technologies are gaining momentum and will act as a
catalyst to increase headset adoption,” he continued. “We expect
profitability to improve modestly in fiscal 2009 despite a weak business
climate. The markets we serve provide excellent prospects for growth
especially when the US economy is stronger and our long term business
model remains intact.”
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Computer, Clarity)
Net revenues for our ACG segment of $185.4 million for the fourth
quarter were up 7% compared with $173.2 million in the fourth quarter of
2007. For fiscal year 2008, revenues were up by 11% from $676.5 million
to $747.9 million. This growth was driven by strong demand for Bluetooth
headsets for the mobile market and increases in sales of office
wireless, computer and gaming headsets, and the Clarity line of
products. The growth in these products was partially offset by a decline
in revenues from corded products for the Office & Contact Center and
mobile markets.
Revenue from office wireless products was up 3% compared to the fourth
quarter of 2007 and down slightly sequentially, while revenue from
professional grade corded headset revenues was down 5% compared with the
fourth quarter of 2007 and down 8% sequentially. Bluetooth headset sales
for the fourth quarter were up by 40% from a year ago.
Gross margin in the fourth quarter was 45.5% compared with 45.1% in the
fourth quarter of 2007. Among the factors driving gross margin higher
from the fourth quarter of 2007 was the positive impact of reducing
costs on our Bluetooth mobile and office wireless products. Fourth
quarter operating margin was 15.8% compared with 14.5% in the fourth
quarter of 2007 due to the higher gross margin and slower growth rate of
expenses.
Audio Entertainment Group (AEG) Non-GAAP Results
(Altec Lansing)
Fourth quarter net revenues of $23.4 million were up 8.8% from $21.5
million in the year ago quarter, primarily as a result of new product
introductions driving an improvement in the docking audio segment,
offset by a decline in PC audio sales. Fiscal year 2008 revenues were
$108.4 million, down from $123.6 million in the prior year.
Gross margin was 15.6% compared with -5.4% in the year-ago quarter and
the segment’s operating loss for the fourth quarter of 2008 was $5.5
million compared with $10.5 million for the fourth quarter of 2007.
We believe we are on track to meet the milestones for the launch of new
products in the third quarter of fiscal year 2009. The introduction of
new products is a key component for AEG to at least reach break-even in
the third quarter and for AEG to be on the path to return to
profitability and ultimately achieve its target business model.
Balance Sheet and Cash Flow
Our balance sheet is strong with $163.1 million in cash and cash
equivalents as of the end of the fiscal year compared with $103.4
million at the end of last year.
Fourth quarter cash flow from operations was over $28 million and fiscal
2008 cash flow from operations was over $102 million with key metrics
such as inventory turns flat at 3.8 compared with 3.8 in the fourth
quarter of fiscal year 2007 and days sales outstanding at 57 days for
the fourth quarter compared to 53 days in the fourth quarter of fiscal
year 2007.
Business Outlook
The following statements are based on current expectations. As described
in “Safe Harbor” below, many of these statements are forward-looking.
Actual results are subject to a variety of risks and uncertainties and
may differ materially from the forward-looking statements.
We have a “book and ship” business model whereby we ship most orders to
our customers within 48 hours of our receipt of those orders, and we
thus cannot rely on the level of backlog to provide visibility into
potential future revenues. Our business is inherently difficult to
forecast, and there can be no assurance that the incoming orders we
expect to receive over the balance of the quarter will materialize. With
increasing economic uncertainty, our business is even more difficult to
forecast than usual. We are currently expecting revenues for ACG to be
somewhat flat and AEG to decrease sequentially in the first quarter.
Subject to the foregoing, we are currently expecting the following
financial results for the first quarter of fiscal 2009:
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Net revenues for the first quarter of fiscal 2009 to be in the range
of $205 - $210 million;
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Non-GAAP consolidated tax rate to be approximately 23%;
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Non-GAAP earnings per share for the first quarter of fiscal 2009 to be
in the range of $0.33 - $0.36; and
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The EPS cost of equity compensation pursuant to FAS 123(R) to be
approximately $0.06, resulting in
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GAAP earnings per share of $0.26 to $0.30.
Longer-term Business Model
During fiscal 2008, Plantronics achieved a non-GAAP operating margin of
11.6%, compared with an operating margin target range of 15 to 18%. The
target non-GAAP operating margin range for ACG is 18 to 20% and for AEG
is 5 to 10%. By reducing the losses in AEG, we expect to increase our
overall operating margin in fiscal 2009 compared to fiscal 2008, but we
do not expect to reach the target range. We do believe the business
model remains intact and is achievable and that we can reach this range
by fiscal 2011.
In fiscal 2009, we expect the economic environment in North America will
be a challenge for our ACG segment, but we intend to continue to lower
costs and work to improve our gross profit margin. We also intend to
hold operating expenses fairly flat so that we can achieve some increase
in operating profit even if revenue growth is weak.
In AEG, we expect to reduce our losses in fiscal 2009 from fiscal 2008.
While we continue to believe that the right long-term target model is 5
to 10% operating margin for consumer audio businesses such as AEG, we do
not expect to be within that range for fiscal 2009 and we do not expect
to be profitable for the entire year. We aim to achieve the target range
for AEG in fiscal 2011.
We believe the key drivers to achieve the longer-term business model
include volume growth particularly as it relates to AEG, lower
transformation costs, effective supply chain re-engineering and the
utilization of common product platforms.
Conference Call Scheduled to Discuss Financial Results
Plantronics has scheduled a conference call to discuss the contents of
this release. The conference call will take place today, Tuesday, April
29 at 2:00 PM (PDT). All interested investors and potential investors in
Plantronics stock are invited to participate. To listen to the call,
please dial in five to ten minutes prior to the scheduled starting time
and refer to the “Plantronics Conference Call.” Participants from North
America should call (888) 301-8736 and other participants should call
(706) 634-7260.
A replay of the call with the conference ID # 20285343 will be available
for 72 hours at (800) 642-1687 for callers from North America and at
(706) 645-9291 for all other callers. The conference call will also be
simultaneously web cast at www.plantronics.com under Investor Relations,
and the web cast of the conference call will remain available at the
Plantronics Web site for thirty days.
A new corporate presentation is available on the investor relations
section of the corporate website www.plantronics.com.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses
such as stock-based compensation related to stock options, awards and
employee stock purchases from non-GAAP net income, non-GAAP earnings per
diluted share, non-GAAP operating income, non-GAAP operating margin and
non-GAAP effective tax rate. Plantronics excludes these expenses from
its non-GAAP measures primarily because Plantronics does not believe
they are reflective of ongoing operating results and are not part of its
target operating model. Plantronics believes that the use of non-GAAP
financial measures provides meaningful supplemental information
regarding its performance and liquidity, and helps investors compare
actual results to its long-term target operating model goals.
Plantronics believes that both management and investors benefit from
referring to these non-GAAP financial measures in assessing its
performance and when planning, forecasting and analyzing future periods.
SAFE HARBOR
This release contains forward-looking statements within the meaning of
Section 27A of the Securities Exchange Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Specific
forward-looking statements include our profitability target of December
2008 for our AEG business, and our estimates of net revenues, margins,
operating expenses, tax rate and earnings for the first quarter of
fiscal 2009; and our belief in meeting our long-term target operating
model by fiscal year 2011. These forward-looking statements involve a
number of risks and uncertainties, and are based on current information
and management judgment. Plantronics does not assume any obligation to
update or revise any such forward-looking statements, whether as the
result of new developments or otherwise.
Among the factors that could cause actual results to differ materially
from those projected are:
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Our operating results are difficult to predict, particularly in light
of the current economic conditions in both the domestic and
international markets;
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We do not know how the market for office wireless headsets and
products from our other product groups may be affected in the event of
a recession in the United Statesor global economy;
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The ability to achieve the turnaround of AEG is uncertain because:
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it is dependent upon our ability to more effectively research and
implement features in our AEG products that consumers want and are
willing to purchase;
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we must be able to meet the market windows for these products;
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we must be able to retain or obtain the shelf space for these
products in our sales channel;
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we must retain or improve the brand recognition associated with
the Altec Lansing brand during the turnaround;
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our ability to successfully complete the restructuring and
consolidation activities and the financial impact that such
actions may have is difficult to predict;
-
there is a risk that the consolidation of the AEG Asian operations
may cost more than we currently expect. There is also a risk that
the savings that we currently predict may not materialize and that
the timing of costs and benefits may be different than what we
currently expect. If the cost of consolidation is more than we
currently anticipate or the savings that we currently anticipate
from these activities do not materialize, our future financial
results may be adversely affected;
-
Failure to achieve any of these objectives may adversely affect
our financial results;
-
We have significant intangible assets and goodwill recorded on our
balance sheet. If the carrying value of our intangible assets and
goodwill is not recoverable, an impairment loss must be recognized
which would adversely affect our financial results;
-
The market for our products is characterized by rapidly changing
technology, short product life cycles, and frequent new product
introductions, and we may not be able to develop, manufacture or
market new products in response to changing customer requirements and
new technologies;
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The actions of existing and/or new competitors, especially with regard
to pricing and promotional programs;
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Product mix is difficult to estimate and standard margin varies
considerably by product;
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Failure to match production to demand given long lead times and the
difficulty of forecasting unit volumes and acquiring the component
parts to meet demand without having excess inventory or incurring
cancellation charges;
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The inability to successfully develop, manufacture and market new
products and achieve volume shipment schedules to meet demand;
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A softening of the level of market demand for our products;
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Variations in sales and profits in higher tax, as compared to lower
tax, jurisdictions;
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Fluctuations in foreign exchange rates;
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Class action lawsuits are being brought against us and other Bluetooth
headset manufacturers claiming “noise induced hearing loss”. While we
believe these suits are without merit, the costs to defend against
them could be high and the results of litigation are not predictable
in any event;
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Changes in the regulatory environment either as to headsets directly
or as to the products, such as mobile phones, with which our products
are used; and
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Additional risk factors include: changes in the timing and size of
orders from our customers, price erosion, increased requirements from
retail customers for marketing and advertising funding, interruption
in the supply of sole-sourced critical components, continuity of
component supply at costs consistent with our plans, failure of our
distribution channels to operate as we expect, failure to develop
products that keep pace with technological changes, the inherent risks
of our substantial foreign operations, problems which might affect our
manufacturing facilities in Mexico or in China, and the loss of the
services of key executives and employees.
For more information concerning these and other possible risks, please
refer to the Company’s Annual Report on Form 10-K filed May 29, 2007,
quarterly reports filed on Form 10-Q and other filings with the
Securities and Exchange Commission as well as recent press releases.
These filings can be accessed over the Internet at http://www.sec.gov/edgar/searchedgar/companysearch.html
Financial Summaries
The following related charts are provided:
About Plantronics
In 1969, a Plantronics headset carried the historic first words from the
moon: “That’s one small step for man, one giant leap for mankind.” Since
then, Plantronics has become the headset of choice for mission-critical
applications such as air traffic control, 911 dispatch, and the New York
Stock Exchange. Today, this history of Sound Innovation® is the basis
for every product we build for the office, contact center, personal
mobile, entertainment and residential markets. The Plantronics family of
brands includes Plantronics, Altec Lansing, Clarity, and Volume Logic.
For more information, go to www.plantronics.com
or call (800) 544-4660.
Altec Lansing, Clarity, Plantronics, Sound Innovation, Volume Logic and
AudioIQ are trademarks or registered trademarks of Plantronics, Inc. All
other trademarks are the property of their respective owners.
