Results Exceed Guidance; Company Achieves Targeted Gross & Operating Margins
Plantronics, Inc. (NYSE: PLT) today announced third quarter fiscal 2010
net revenues of $165.9 million compared with $152.6 million in the third
quarter of fiscal 2009. Net revenues were above the previously provided
guidance of $155 million to $160 million. Plantronics’ GAAP diluted
earnings per share from continuing operations were $0.47 in the third
quarter of fiscal 2010, compared with diluted earnings per share from
continuing operations of $0.13 in the same quarter of the prior year.
Non-GAAP diluted earnings per share from continuing operations for the
third quarter of fiscal 2010 were $0.50 compared with $0.14 in the third
quarter of fiscal 2009 and were greater than the previously provided
non-GAAP guidance of $0.38 to $0.42. The difference between GAAP and
non-GAAP earnings per share from continuing operations for the third
quarter of fiscal 2010 includes stock-based compensation charges,
purchase accounting amortization and restructuring and other related
charges, all net of associated tax benefits along with the release of
$1.2 million in tax reserves.
The Company completed the sale of Altec Lansing, its Audio Entertainment
Group (”AEG”) segment, effective as of December 1, 2009. All results of
operations related to AEG including the loss on the sale are classified
as discontinued operations for all periods presented.
Plantronics also announced that its Board of Directors declared a
quarterly dividend of $0.05 per share. The dividend is payable on March
10, 2010 to stockholders of record at the close of business on February
19, 2010.
“Revenues were above expectations as we experienced better than expected
demand in our Office & Contact Center product group, including Unified
Communications solutions,” stated Ken Kannappan, President & CEO. “Our
margins improved as the result of prior cost reduction efforts combined
with higher revenues.”
Business Results (Non-GAAP from Continuing Operations)
Comparisons are to the Same Quarter in the Prior Year
Third quarter fiscal 2010 net revenues of $165.9 million increased 9%
compared with $152.6 million in the prior year quarter. Improved
economic conditions led to increases in net revenues both year over year
and sequentially in Office and Contact Center, Mobile, and Gaming &
Computer Audio, while revenues from the Clarity group declined compared
with the same quarter of the prior year. Geographically, all regions
grew year over year and sequentially, except for EMEA which declined
year over year but grew by 34% from the previous quarter.
Office and Contact Center net revenues were $103.1 million, an increase
of 1% from $101.7 million in the third quarter of fiscal 2009 and a
sequential increase of 10% from $93.5 million in the second quarter of
fiscal 2010. Mobile headset net revenues were $47.0 million, an increase
of 30% from the year ago quarter of $36.0 million, and a sequential
increase of 35% from $34.7 million.
Gross margin in the third quarter of fiscal 2010 was 48.9% compared with
40.1% in the third quarter of the prior year and 48.7% in the second
quarter of fiscal 2010. The increase in the current quarter as compared
to the same period in the prior year is primarily driven by the improved
Bluetooth profitability as a result of outsourcing our manufacturing in
fiscal 2010. The sequential improvement was primarily driven by an
improved product mix.
Operating expenses declined by 6% from $52.2 million in the prior year
quarter to $49.2 million in the current quarter. Operating income in the
current quarter was $31.8 million compared with guidance of $26 million
to $29 million, resulting in an operating margin of 19.2% as compared to
operating income of $9.0 million and an operating margin of 5.9% in the
prior year quarter.
Business Outlook
The following statements are based on our current expectations and many
of these statements are forward-looking. Actual results are subject to a
variety of risks and uncertainties and may differ materially from our
expectations.
Plantronics has a “book and ship” business model whereby it ships most
orders to customers within 48 hours of its receipt of those orders and,
therefore, the level of backlog does not provide reliable visibility
into potential future revenues. The Company’s business is inherently
difficult to forecast, and there can be no assurance that the incoming
orders it expects to receive over the balance of the quarter will
materialize. With continuing uncertainty resulting from the global
economic conditions, the Company’s business remains difficult to
forecast. In addition, our incoming order rate tends to be low during
the last two weeks of December and the first half of January and then
rises significantly into February and March. This pattern may be
affected due to uncertainty of the strength of the economic recovery. We
have experienced a slow start to this quarter and we therefore must
realize an increased incoming order flow for the balance of the quarter
in order to achieve the revenue range we are projecting.
Net revenues in the fourth quarter of fiscal 2010 are expected to be
lower than the third quarter of fiscal 2010 and higher than the fourth
quarter of fiscal 2009.
Subject to the foregoing, we are currently expecting the following range
of financial results for continuing operations for the fourth quarter of
fiscal 2010:
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Net revenues of $150 million - $155 million;
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Non-GAAP operating income of $27 million to $30 million;
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Non-GAAP earnings per share of $0.40 - $0.44;
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Non-GAAP tax rate to be approximately 26%;
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GAAP earnings per share of $0.35 to $0.39.
If these results are achieved, the performance compared with fourth
quarter of fiscal 2009 would be revenue growth of approximately 17% to
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 fourth quarter fiscal 2010 results or by
other public disclosure. Any statements by persons outside Plantronics
speculating on the progress of the fourth quarter fiscal 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 third quarter
fiscal 2010 results. The conference call will take place Tuesday,
January 26th at 2:00 PM (PST). 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 #40971882 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, 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 income from continuing operations, non-GAAP earnings per
diluted share from continuing operations, non-GAAP operating income,
non-GAAP gross margin, non-GAAP operating margin and non-GAAP effective
tax rate on continuing operations. 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) our estimates of GAAP and non-GAAP
financial results for the fourth quarter of fiscal 2010, including
revenue and earnings per share; (ii) our estimated tax rate for the
fourth quarter of fiscal 2010; (iii) our estimated stock-based
compensation expense for the fourth quarter of fiscal 2010, 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 Unified Communications (”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; (v) UC
solutions may not be adopted with the breadth and speed in the
marketplace that we currently anticipate, and (vi) our support
expenditures may substantially increase over time due to the complex
nature of the platforms developed by the major UC providers as these
platforms continue to evolve and become more commonly adopted;
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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;
-
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;
-
the effects of the sale of AEG, including the level of cash flow and
the timing of the receipt of any cash flow resulting from such sale
are uncertain; and
-
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 by outsourcing 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:
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Summary Unaudited Condensed Consolidated Financial Statements
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Unaudited GAAP to Non-GAAP Statements of Operations Reconciliations
for the Three and Nine Months ended December 31, 2009 and December 31,
2008
-
Summary Unaudited Statements of Operations and Related Data on a
Non-GAAP Basis
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About Plantronics
Plantronics is a world leader in personal audio communications for
professionals and consumers. From unified communication solutions to
Bluetooth headsets, Plantronics delivers unparalleled audio experiences
and quality that reflect our nearly 50 years of innovation and customer
commitment. Plantronics is used by every company in the Fortune 100 and
is the headset of choice for air traffic control, 911 dispatch and the
New York Stock Exchange. For more information, please visit www.plantronics.com
or call (800) 544-4660.
Plantronics, the logo design, Clarity and Savi 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.
