SANTA CRUZ, Calif., - February 5, 2019 - Plantronics, Inc. (NYSE: PLT) today announced third quarter results for the period ending December 31, 2018. On July 2, 2018, Plantronics completed the acquisition of Polycom, which is reflected in these results. Highlights of the third quarter include the following (in millions, except percent and per share data, comparisons are against Plantronics' third quarter Fiscal Year 2018):
“We continue to make progress on our ongoing product roadmap, integration plans, and financial goals, meeting or exceeding our guidance targets, with operating income and EBITDA more than doubling as result of the acquisition,” said Joe Burton, President and Chief Executive Officer. “The launch of Polycom Studio, the first in a family of multi-media video solutions designed specifically for the Huddle Room, is just one example of how we are leveraging our innovative engineering and design to address specific customer needs in this fast-growing segment of the UC&C market.”
“We remain on track to deliver on our cost synergy targets and are pleased by the $45M of run-rate annualized cost synergies achieved to date as we continue to execute on our integration plans,” said Pam Strayer, Executive Vice President and Chief Financial Officer. “Revenue growth in desktop phones, audio conferencing, and headsets, coupled with expense reductions drove strong profitability for the third quarter.”
Highlights for the Third Quarter of Fiscal Year 2019
- Double-digit revenue growth in Desktop Phones, Audio Conferencing, UC Headsets, and Consumer Headsets. The rapid adoption of recently introduced products, such as the VVX x50 family of Open SIP desktop phones, were strong contributors to revenue growth.
- The Company announced Polycom Studio, the first in a family of video solutions designed specifically for huddle rooms and smaller conference rooms. This plug-and-play USB video bar delivers board-room quality to smaller meeting spaces with robust features, plug-and-play simplicity, and great value. The Company expects to announce new additions to this portfolio in the next several months.
- Tom Puorro has joined the Company as Executive Vice President, General Manager, Group Systems. In this role, Puorro will have responsibility for all aspects of voice and video group solutions. Puorro joins Plantronics from Cisco, where he most recently served as VP & GM of Cisco's Unified Communications Technology Group.
- In January 2019, the Company made a debt repayment of $50 million on its outstanding Term Loan B and expects to make an additional $50 million repayment by the end of the current March quarter. In addition, as of yesterday's close of market, the Company has repurchased 347 thousand shares of common stock at a total cost of $12.6 million since re-initiating the share repurchase program in November.
- As of December 31, 2018, the Company had achieved a total of $26 million in annual run-rate synergy capture. Through subsequent actions in January, the Company has captured an additional $19 million as of today's date, for a total of $45 million since the close of the Polycom acquisition. With over half of the first-year cost synergies completed to date, the Company is on track to achieve its first-year cost synergy commitment of $85M on-time and on-target. As of the most recent quarter-end, the Company's trailing twelve month EBITDA was approximately $400 million on a combined comparative basis.
Plantronics Announces Quarterly Dividend of $0.15
The Plantronics Board of Directors has declared a quarterly cash dividend of $0.15 per common share, to be paid on March 8, 2019, to all shareholders of record as of the close of market on February 20, 2019.
Business Outlook
The following statements are based on the Company's 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 the Company's expectations.
Plantronics currently expects the following range of financial results for the fourth quarter of Fiscal Year 2019 (all amounts assuming currency rates remain stable):
With respect to Plantronics operating income and diluted EPS guidance, the Company has determined that it is unable to provide quantitative reconciliations of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures with a reasonable degree of confidence in their accuracy without unreasonable effort, as items including stock based compensation, acquisition and integration costs, litigation gains and losses, and impacts from discrete tax adjustments and tax laws are inherently uncertain and depend on various factors, many of which are beyond the Company's control.
The Company's business is inherently difficult to forecast, particularly with continuing uncertainty in regional economic conditions, currency fluctuations, customer cancellations and rescheduling, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize.
Conference Call and Prepared Remarks
Plantronics is providing an earnings presentation in combination with its press release. The presentation is offered to provide shareholders and analysts with additional detail for analyzing results in advance of the quarterly conference call. The presentation will be available in the Investor Relations section of our corporate website at investor.plantronics.com along with this press release. A reconciliation of our GAAP to non-GAAP and historical combined comparative results is provided at the end of this press release.
We have scheduled a conference call to discuss third quarter of Fiscal Year 2019 financial results. The conference call will take place today, February 5, 2019, at 2:00 PM (Pacific Time). 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.” The dial-in from North America is (888) 301-8736 and the international dial-in is (706) 634-7260.
The conference call will also be simultaneously webcast and can be accessed from the Investor Relations section of our website. A replay of the call with the conference ID #55437194 will be available until April 4, 2019 at (855) 859-2056 for callers from North America and at (404) 537-3406 for all other callers.
Use of Non-GAAP and Combined Comparative Financial Information
To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP, and where applicable, combined comparative measures of operating results, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS, which exclude certain unusual or non-cash expenses and charges that are included in the most directly comparable GAAP measure. These unusual or non-cash expenses and charges include the effect, where applicable, of purchase accounting on deferred revenue and inventory, stock-based compensation, acquisition related expenses, purchase accounting amortization and adjustments, restructuring and other related charges and credits, asset impairments, executive transition charges, and the impact of participating securities, all net of any associated tax impact. We also exclude tax benefits from the release of tax reserves, discrete tax adjustments including transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We exclude these amounts from our non-GAAP and combined comparative measures primarily because management does not believe they are consistent with the development of our target operating model. Combined comparative results refer to the results for periods prior to the Plantronics and Polycom combination, which were prepared by combining the non-GAAP results of as if they had been combined during that period. These prior period results are presented on a non-GAAP as-reported basis, with immaterial adjustments to align the treatment of non-GAAP adjustments for comparative purposes. We believe that the use of non-GAAP and combined comparative financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our historical and long-term target operating model goals as well as our performance as a combined company. We believe presenting non-GAAP net revenue provides meaningful supplemental information regarding how management views the performance of the business and underlying performance of our individual product categories. We believe that both management and investors benefit from referring to these non-GAAP and combined comparative financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP and combined comparative financial measures are not meant to be considered in isolation of, or as a substitute for, or superior to, net revenues, gross margin, operating expenses, operating income, operating margin, net income or EPS prepared in accordance with GAAP.
Safe Harbor
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to: (i) our expectations regarding our ability to successfully achieve anticipated integration synergies; (ii) our expectations for product announcements and releases; (iii) our estimates concerning debt reduction actions and timing; (iv) estimates of GAAP and non-GAAP financial results for the fourth quarter of Fiscal Year 2019, including net revenues, purchase accounting adjustments, operating income, tax rates, the impact of foreign exchange rates on revenues, and diluted weighted average shares outstanding and diluted EPS, in addition to other matters discussed in this press release that are not purely historical data. We do 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:
- Micro and macro-economic conditions in our domestic and international markets;
- our ability to realize and achieve positive financial results projected to arise in the Enterprise market from UC&C adoption could be adversely affected by a variety of factors including the following: (i) as UC&C becomes more widely adopted, the risk that competitors will offer solutions that will effectively commoditize our products which, in turn, will reduce the sales prices for those products; (ii) our plans are dependent upon adoption of our UC&C solution by major platform providers and strategic partners such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc., Alcatel-Lucent, and Huawei, and our influence over such providers with respect to the functionality of their platforms or their product offerings, their rate of deployment, and their willingness to integrate their platforms and product offerings with our solutions is limited; (iii) delays or limitations on our ability to timely introduce solutions that are cost effective, feature-rich, stable, and attractive to our customers within forecasted development budgets; (iv) our successful implementation and execution of new and different processes involving the design, development, and manufacturing of complex electronic systems composed of hardware, firmware, and software that works seamlessly and continuously in a wide variety of environments and with multiple devices; (v) failure of UC&C solutions generally, or our solutions in particular, to be adopted with the breadth and speed we anticipate; (vi) our sales model and expertise must successfully evolve to support complex integration of hardware, software, and services with UC&C infrastructure consistent with changing customer purchasing expectations; (vii) as UC&C becomes more widely adopted we anticipate that competition for market share will increase, particularly given that some competitors may have superior technical and economic resources; (viii) sales cycles for more complex UC&C deployments are longer as compared to our traditional Enterprise products; (ix) our inability to timely and cost-effectively adapt to changing business requirements may impact our profitability in this market and our overall margins; and (x) our failure to expand our technical support capabilities to support the complex and proprietary platforms in which our UC&C products are and will be integrated;
- regarding the Polycom acquisition: (i) we may be unable to integrate Polycom's business within our own in a timely and cost-efficient manner or do so without adversely impacting operations, including new product launches; (ii) expected synergies or operating efficiencies may fail to materialize in whole or part or may not occur within expected time-frames; (iii) the acquisition may adversely impact ours or Polycom's relationships with respective customers, suppliers and strategic partners and their operating results and businesses generally (including the diversion of management time on transaction-related issues); (iv) each company may be unable to retain and hire all or a portion of their respective key personnel; (v) legal and regulatory enforcement matters that are pending at Polycom may adversely impact the results of the combined company; (vi) our increased leverage as a result of the transaction will be substantially greater than prior to the acquisition which may pose risks, including reduced flexibility to make changes in our operations in response to business or economic conditions, increased borrowing costs, as well as penalties or costs should we fail to comply with terms of the financial agreements such as debt ratios and financial and operation performance targets; (vii) negative effects on the market price of our common stock as a result of the transaction, particularly in light of the issuance of our stock in the transaction; (viii) our financial reporting including those resulting from the adoption of new accounting pronouncements and associated system implementations in the context of the transaction, our ability to forecast financial results of the combined company and that we may be unable to successfully integrate our reporting system causing an adverse impact to our ability to make timely and accurate filings with the SEC and other domestic and foreign governmental agencies; (ix) the potential impact of the transaction on our future tax rate and payments based on the consolidation global entity and our ability to quickly integrate foreign operations; (x) the challenges of integrating the supply chains of the two companies; and (xi) the potential that our due diligence did not uncover risks and potential liabilities of Polycom;
- failure to match production to demand given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges;
- volatility in prices from our suppliers, including our manufacturers located in China, have in the past and could in the future negatively affect our profitability and/or market share;
- fluctuations in foreign exchange rates;
- new or greater tariffs on our products;
- with respect to our stock repurchase program, prevailing stock market conditions generally, and the price of our stock specifically;
- the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers;
- additional risk factors including: interruption in the supply of sole-sourced critical components, continuity of component supply at costs consistent with our plans, and the inherent risks of our substantial foreign operations; and
- seasonality in one or more of our product categories.
For more information concerning these and other possible risks, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 9, 2018 and other filings with the Securities and Exchange Commission, as well as recent press releases. The Securities and Exchange Commission filings can be accessed over the Internet at https://www.sec.gov/edgar/searchedgar/companysearch.html.
Financial Summaries
The following related charts are provided:
- Summary Unaudited Condensed Consolidated Financial Statements
- Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures
- Unaudited Reconciliations of GAAP Measures to Trailing Twelve Months EBITDA
- Unaudited Reconciliations of GAAP Measures to Non-GAAP Combined Comparative Measures
About Plantronics
Plantronics is an audio pioneer and a leader in the communications industry. Plantronics technology creates rich, natural, people-first audio and collaboration experiences so good ideas can be shared and heard-wherever, whenever and however they happen. The company’s portfolio of integrated communications and collaboration solutions spans headsets, software, desk phones, audio and video conferencing, analytics and services. Our solutions are used worldwide by consumers and businesses alike and are the leading choice for every kind of workspace. For more information visit plantronics.com.
Plantronics and Polycom are 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.
PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95060
831-426-6060 / Fax 831-426-6098
1For further information on supplemental non-GAAP metrics refer to the Use of Non-GAAP and Comparative Information and Unaudited Reconciliations GAAP Measures to Non-GAAP Measures sections below.
2Non-GAAP guidance ranges shown here have been adjusted to exclude the $28.9 million impact of purchase accounting related to recording deferred revenue at fair value at the time of the acquisition.
