First Quarter Revenue and EPS Exceed Guidance; Significant Improvement in Gross and Operating Margins
Plantronics, Inc. (NYSE: PLT) today announced first quarter fiscal 2010
net revenues of $160.1 million compared with $219.2 million in the first
quarter of fiscal 2009. Net revenues were above the previously provided
guidance of $145 to $150 million. Plantronics’ GAAP diluted earnings per
share was $0.22 in the first quarter of fiscal 2010 compared with $0.42
in the same quarter of the prior year. Non-GAAP diluted earnings per
share for the first quarter of fiscal 2010 was $0.36 compared with $0.47
in the first quarter of fiscal 2009, but were greater than the
previously provided non-GAAP guidance of $0.08 to $0.12. The difference
between GAAP and non-GAAP operating income and earnings per share for
the first quarter of fiscal 2010 includes restructuring and other
related costs, purchase accounting amortization and the cost of
stock-based compensation.
“We are encouraged that net revenues for all major product groups were
stronger than we had forecasted, particularly in our Office and Contact
Center business. Demand appears to have stabilized and is greater than
the level we anticipated when we implemented company-wide cost
reductions in the last fiscal year. With our streamlined cost structure,
we were able to achieve higher gross and operating margins on a lower
revenue base in comparison to the same quarter a year ago,” stated Ken
Kannappan, President & CEO. “Unified Communications (”UC”) deployments
continue at a healthy rate and we are experiencing increased levels of
trialing and deployment activity for our headsets and other UC
solutions.”
“The combination of our good profitability and successful efforts to
reduce inventory led to the generation of nearly $38 million in cash
flow from operations. As a result, our cash, cash equivalents and
short-term investment balance grew to over $250 million,” added Barbara
Scherer, SVP Finance and Administration & CFO.
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Gaming and Computer & Clarity)
Comparisons are to the Same Quarter in the Prior Year
First quarter fiscal 2010 net revenues of $141.1 million decreased 29%
compared with $198.5 million in the prior year quarter, but increased
10% from the fourth quarter of fiscal 2009. General economic weakness
led to declines in net revenues in all major geographies and most
product groups compared with the prior year quarter; however, most major
product groups and geographies improved sequentially.
Office and Contact Center net revenues were $95.9 million, a decrease of
22% from $122.8 million in the first quarter of fiscal 2009. However,
net revenues for the current quarter increased 12% sequentially from the
fourth quarter of fiscal 2009. Bluetooth headset net revenues were $30.3
million, a decrease of 45% from the year ago quarter of $55.2 million,
and a sequential increase of 6% from $28.7 million in the prior quarter.
The decline from the prior year quarter is attributable to a stronger
first quarter in the prior year which was driven in part by hands-free
legislation in California and Washington. The recently introduced
Voyager Pro Bluetooth headset continued to receive positive editorial
and consumer reviews and is now available through a number of top
consumer electronics retailers.
Gross margin in the first quarter of fiscal 2010 was 49.0% compared with
45.4% in the first quarter last year. The improvement was primarily due
to a greater mix of higher margin Office and Contact Center revenue in
addition to higher Bluetooth product margins.
Operating expenses declined by 22% from $56.6 million in the prior year
quarter to $43.9 million in the current quarter and were lower in all
functions. Operating income decreased to $25.2 million from $33.5
million; however, the operating margin increased to 17.9% compared with
16.9% in the prior year quarter.
The Company continues to believe that the implementation of UC
technologies by large corporations will be a significant long-term
driver of office headset adoption, and, as a result, a key long-term
driver of revenue and profit growth. Our first products designed
specifically for UC, the Savi Office and Savi Go headsets, enjoyed
strong customer and partner reception and began shipping in the first
quarter. The Company believes that revenue from headset sales related to
UC will be material to the Company beginning in fiscal 2011.
“In addition to winning important enterprise customers in UC, we
continue to see growing adoption and deployment of UC in general, which
we expect will be advantageous for headset sales,” stated Kannappan.
“Most Fortune 500 accounts that we are working with are in some stage of
test, trial, or evaluation of UC.”
Audio Entertainment Group (AEG) Non-GAAP Results
(Docking Audio, PC Audio, Other)
Comparisons are to the Same Quarter in the Prior Year
First quarter fiscal 2010 net revenues of $19.0 million decreased 8%
from $20.6 million in the prior year quarter driven by lower PC Audio
product sales in the United States and Asia. PC Audio product net
revenues were lower primarily as a result of an older product portfolio
which was being phased out during the first quarter of fiscal 2010 and
replaced with a more competitive offering. The Docking Audio product
line revenue held up well compared to the year ago quarter on the
strength of the refreshed product portfolio.
Gross profit remained consistent between the periods at $2.6 million
while gross margin increased slightly from 12.7% in the prior year
quarter to 13.8% in the current quarter. The increase was due to
material cost reductions and lower freight costs partially offset by
higher promotional activities due to customer mix.
Operating expenses declined by 26% from $7.1 million in the prior year
quarter to $5.2 million in the current quarter, and the operating loss
decreased from $4.4 million in the prior year quarter to $2.6 million in
the current quarter.
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.
Plantronics has a “book and ship” business model whereby it ships most
orders to customers within 48 hours of our receipt of those orders, and,
therefore, the level of backlog does not provide reliable visibility
into potential future revenues. The business is inherently difficult to
forecast, and there can be no assurance that the incoming orders the
Company expects to receive over the balance of the quarter will
materialize. With continuing economic uncertainty, the Company’s
business remains more difficult to forecast than it was historically.
The September quarter tends to be characterized by a slowdown in
incoming purchase orders during July which intensifies in August, but
historically picks up strongly at the beginning of September. This
pattern tends to be particularly true in our higher margin Office and
Contact Center business. This historical trend is included in our model
for forecasting the second quarter net revenues; however, if this trend
does not reoccur in the current year, we may not be able to achieve our
forecasted net revenue levels.
Net revenues in the second quarter of fiscal year 2010 are expected to
be flat to slightly below first quarter of fiscal year 2010 primarily
based on the fact that the September quarter has tended to be a bit
weaker than the June quarter for ACG.
Subject to the foregoing, we are currently expecting the following range
of financial results for the second quarter of fiscal year 2010:
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Net revenues of $155 - $160 million;
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Non-GAAP earnings per share of $0.27 - $0.32;
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Non-GAAP consolidated tax rate to be approximately 27%;
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The EPS cost of purchase accounting amortization of approximately
$0.01;
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The EPS cost of restructuring of approximately $0.04;
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The EPS cost of stock-based compensation pursuant to FAS 123(R) to be
approximately $0.05; and
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GAAP earnings per share of $0.17 to $0.21.
Plantronics does not intend to update these targets during the quarter
or to report on its progress toward these targets. Plantronics will not
comment on these targets to analysts or investors except by its next
press release announcing its second quarter fiscal year 2010 results or
by other public disclosure. Any statements by persons outside
Plantronics speculating on the progress of the second quarter fiscal
year 2010 will not be based on internal Company information and should
be assessed accordingly by investors.
Conference Call Scheduled to Discuss Actual Financial Results
Plantronics has scheduled a conference call to discuss first quarter
fiscal 2010 results. The conference call will take place Tuesday, July
28 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 #12172987 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 website for thirty days.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses
and charges such as restructuring and other related charges, certain tax
credits and the release of certain tax reserves, stock-based
compensation expenses related to stock options, awards and employee
stock purchases, purchase accounting amortization and impairment of
goodwill and long-lived assets from non-GAAP net income, non-GAAP
earnings per diluted share, non-GAAP operating income, non-GAAP gross
margin, 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 considered as 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,
including statements relating to (i) implementation of UC technologies
by large enterprises as a significant driver of headset adoption, and,
its effect on our revenue and profit growth; (ii) our products,
including the Voyager Pro and the Savi Office and Savi Go headsets;
(iii) revenue from headset sales related to UC and its materiality to
the Company beginning in fiscal 2011; (iv) growing adoption and
deployment of UC in general and our expectation that this will be
advantageous for headset sales; (v) seasonality during the September
quarter and its effect on our financial results; (vi) our estimates of
GAAP and non-GAAP financial results for the second quarter of fiscal
year 2010, including revenue and earnings per share; (vii) our estimated
tax rate; (viii) our estimated stock-based compensation expense; (ix)
our estimated purchase accounting amortization, as well as other matters
discussed in this press release that are not purely historical data.
Plantronics does not assume any obligation to update or revise any such
forward-looking statements, whether as the result of new developments or
otherwise.
Forward-looking statements involve risks and uncertainties that may
cause actual results to differ materially from those contemplated by
such statements. Among the factors that could cause actual results to
differ materially from those contemplated are:
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economic conditions in both the domestic and international markets;
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fluctuations in foreign exchange rates;
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the bankruptcy or financial weakness of distributors or key customers,
or the bankruptcy of or reduction in capacity of our key suppliers;
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the effect of restructuring actions on GAAP results;
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our ability to realize our UC plans and to achieve the financial
results projected to arise from UC adoption could be adversely
affected by the following factors: (i) as UC becomes more widely
adopted, the risk that competitors will offer solutions that will
effectively commoditize our headsets which, in turn, will reduce the
sales prices for our headsets; (ii) our plans are dependent upon
adoption of our UC solution by major platform providers such as
Microsoft, Avaya, IBM and Cisco, and we have a limited ability to
influence such providers with respect to the functionality of their
platforms, their rate of deployment, and their willingness to
integrate their platforms with our solutions; (iii) the development of
UC solutions is technically complex and this may delay or obstruct our
ability to introduce solutions to the market on a timely basis and
that are cost effective, feature rich, stable and attractive to our
customers; (iv) as UC becomes more widely adopted we anticipate that
competition for market share will increase, and some competitors may
have superior technical and economic resources, and (v) UC solutions
may not be adopted with the breadth and speed in the marketplace that
we currently anticipate;
-
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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further impairment losses on the carrying value of our intangible
assets and goodwill could be recognized if it is determined the value
is not recoverable which would adversely affect our financial results;
-
volatility in prices from our suppliers, including our manufacturers
located in China, have and could negatively affect our profitability
and/or market share; and
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additional risk factors including: interruption in the supply of
sole-sourced critical components, continuity of component supply at
costs consistent with our plans, the inherent risks of our substantial
foreign operations, and problems which might affect our manufacturing
facilities in Mexico, and unexpected delays and uncertainties
affecting our ability to realize targeted expense reductions and
annualized savings through implementation of our plan to outsource the
manufacturing of our Bluetooth products in China to GoerTek, Inc.
For more information concerning these and other possible risks, please
refer to the Company’s Annual Report on Form 10-K filed May 26, 2009,
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, the logo design, Savi, Sound
Innovation, Volume Logic and AudioIQ are trademarks or registered
trademarks of Plantronics, Inc. The Bluetooth name and the Bluetooth
trademarks are owned by Bluetooth SIG, Inc. and are used by Plantronics,
Inc. under license. All other trademarks are the property of their
respective owners.
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