Plantronics Announces First Quarter Fiscal Year 2014 Results

Plantronics Announces First Quarter Fiscal Year 2014 Results

Revenue and Earnings per Share Meet Guidance; Unified Communications Net Revenues Grow 51% Year-over-Year

SANTA CRUZ, Calif.--(BUSINESS WIRE)-- Plantronics, Inc. (NYS: PLT) today announced first quarter fiscal year 2014 results. Highlights of the quarter include the following (comparisons are against the first quarter of fiscal year 2013):

  • Net revenues were $202.8 million, an increase of 12% compared with $181.4 million.

  • GAAP gross margin was 52.1% compared with 53.9%; non-GAAP gross margin was 52.6% compared with 54.3%.

  • GAAP operating income was $35.9 million compared with $32.1 million; non-GAAP operating income was $42.4 million compared with $36.9 million.

  • GAAP diluted earnings per share ("EPS") was $0.62, an increase of $0.07, or 13%, compared with $0.55, and within our guidance of $0.56 to $0.62.

  • Non-GAAP diluted EPS was $0.70, an increase of $0.07, or 11% compared with $0.63, and within our guidance of $0.68 to $0.74.

Q1 GAAP Results

Q1 2014

Q1 2013

Change (%)

Net revenues

$202.8 million

$181.4 million

11.8%

Operating income

$35.9 million

$32.1 million

11.8%

Operating Margin

17.7%

17.7%

Diluted EPS

$0.62

$0.55

12.7%

Q1 Non-GAAP Results

Q1 2014

Q1 2013

Change (%)

Operating income

$42.4 million

$36.9 million

14.9%

Operating Margin

20.9%

20.3%

Diluted EPS

$0.70

$0.63

11.1%


A reconciliation between our GAAP and non-GAAP results is provided in the tables at the end of this press release.

"We achieved record Office & Contact Center ("OCC") revenues on strong Unified Communications ("UC") revenue growth," said Ken Kannappan, President & CEO (currently on a temporary medical leave). "Strength in the U.S. was the principal driver of our top line growth."

"We generated approximately $34 million in cash flow from operations in the first quarter of fiscal year 2014, and grew our cash, cash equivalents and short and long term investments position to approximately $444 million," said Pam Strayer, Acting Chief Executive Officer, Senior Vice President and Chief Financial Officer.

OCC net revenues increased 13% to $151.2 million compared with $134.0 million in the first quarter of fiscal year 2013 driven by the strength of our UC revenues, a subset of OCC. Net revenues from UC products grew by 51% to $42.1 million in the first quarter of fiscal year 2014 compared with $27.8 million in the first quarter of fiscal year 2013.

Mobile net revenues were $41.6 million in the first quarter of fiscal year 2014, an increase of 15% compared with $36.2 million in the first quarter of fiscal year 2013, with growth in all geographies.

Dividend Announcement

We also announced that our Board of Directors declared a quarterly dividend of $0.10 per share. The dividend will be payable on September 10, 2013 to stockholders of record at the close of business on August 20, 2013.

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.

We have a "book and ship" business model whereby we fulfill the majority of orders received within 48 hours of receipt of those orders. However, our backlog is occasionally subject to cancellation or rescheduling by our customers on short notice with little or no penalty. Therefore, there is a lack of meaningful correlation between backlog at the end of a fiscal period and net revenues in a succeeding fiscal period.

Our business is inherently difficult to forecast, particularly with continuing uncertainty in regional economic conditions, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize.

Subject to the foregoing, we currently expect the following range of financial results for the second quarter of fiscal year 2014:

  • Net revenues of $192 million to $200 million;

  • GAAP operating income of $29 million to $33 million;

  • Non-GAAP operating income of $36 million to $40 million, excluding the impact of $7 million from stock-based compensation, accelerated depreciation, and early lease exit termination charges from GAAP operating income;

  • Assuming approximately 44 million diluted average weighted shares outstanding:

    • GAAP diluted EPS of $0.51 to $0.57;

    • Non-GAAP diluted EPS of $0.62 to $0.68; and

    • Cost of stock-based compensation, accelerated depreciation and early lease exit termination charges to be approximately $0.11 per diluted share.

"Mr. Kannappan's doctors have affirmed that his treatments and recovery are going well, and he continues to be actively involved in the management of Plantronics as he is able to do so. We hope to have more information once the results of diagnostic tests become available by the end of September," said Strayer.

Please see our updated Investor Relations Presentation available on our corporate website at www.plantronics.com/ir.

Conference Call Scheduled to Discuss Financial Results

We have scheduled a conference call to discuss first quarter fiscal year 2014 results. The conference call will take place today, August 6, 2013, at 2:00 PM (Pacific Time). All interested investors and potential investors in our 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 # 86902672 will be available until September 6, 2013 at (855) 859-2056 or (800) 585-8367 for callers from North America and at (404) 537-3406 for all other callers. The conference call will also be simultaneously webcast in the Investor Relations section of our corporate website at www.plantronics.com/ir, and the webcast of the conference call will remain available on our website for one month.

Use of Non-GAAP Financial Information

To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, which are adjusted to exclude certain non-cash expenses and charges from non-GAAP operating income, non-GAAP operating margin and non-GAAP diluted EPS, including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization and accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing adjustments, and the impact of the retroactive reinstatement of the U.S. federal R&D tax credit. We exclude these expenses from our non-GAAP measures primarily because Plantronics' management does not believe they are part of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our long-term target operating model goals. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation or as a substitute for, or superior to, gross margin, 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 estimates of GAAP and non-GAAP financial results for the second quarter of fiscal year 2014, including net revenues, operating income and diluted EPS; (ii) our estimates of stock-based compensation, accelerated depreciation, restructuring and other related charges, as well as the impact of these non-cash expenses on Non-GAAP operating income and diluted EPS; and (iii) our estimate of weighted average shares outstanding for the second quarter of fiscal year 2014, 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 our UC plans and to achieve the financial results projected to arise from UC adoption could be adversely affected by a variety of factors including the following: (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 and strategic partners such as Microsoft Corporation, Cisco Systems, Inc., Avaya, Inc., Alcatel-Lucent, and IBM, and we have a limited ability to influence 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, and our support expenditures may substantially increase over time due to the complex nature of the platforms and product offerings developed by the major UC providers as these platforms and product offerings continue to evolve and become more commonly adopted; (iii) the development of UC solutions is technically complex and this may delay or limit 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 on a timely basis; (iv) our development of UC solutions is dependent on our ability to implement and execute new and different processes in connection with the design, development and manufacturing of complex electronic systems comprised of hardware, firmware and software that must work in a wide variety of environments and multiple variations, which may in some instances increase the risk of development delays or errors and require the hiring of new personnel and/or fourth party contractors which increases our costs; (v) because UC offerings involve complex integration of hardware and software with UC infrastructure, our sales model and expertise will need to continue to evolve; (vi) 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; (vii) UC solutions may not be adopted with the breadth and speed in the marketplace that we currently anticipate; and, (viii) UC may evolve rapidly and unpredictably and our inability to timely and cost-effectively adapt to those changes and future requirements may impact our profitability in this market and our overall margins;

  • 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;

  • 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, the inherent risks of our substantial foreign operations, and problems that might affect our manufacturing facility in Mexico; and

  • seasonality in one or more of our business segments.

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 24, 2013 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 http://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

  • Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and Other Unaudited GAAP Data

About Plantronics

Plantronics is a global leader in audio communications for businesses and consumers. We have pioneered new trends in audio technology for over 50 years, creating innovative products that allow people to simply communicate. From Unified Communication solutions to Bluetooth headsets, we deliver uncompromising quality, an ideal experience, and extraordinary service. Plantronics is used by every company in the Fortune 100, as well as 911 dispatch, air traffic control and the New York Stock Exchange. For more information, please visit www.plantronics.com or call (800) 544-4660.

Plantronics and the logo design 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.

PLANTRONICS, INC.

SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended

June 30,

2013

2012

Net revenues

$

202,818

$

181,365

Cost of revenues

97,186

83,669

Gross profit

105,632

97,696

Gross profit %

52.1

%

53.9

%

Research, development and engineering

20,863

19,696

Selling, general and administrative

48,097

45,904

Restructuring and other related charges

723

-

Total operating expenses

69,683

65,600

Operating income

35,949

32,096

Operating income %

17.7

%

17.7

%

Interest and other income (expense), net

(486

)

12

Income before income taxes

35,463

32,108

Income tax expense

8,510

8,545

Net income

$

26,953

$

23,563

% of net revenues

13.3

%

13.0

%

Earnings per common share:

Basic

$

0.63

$

0.57

Diluted

$

0.62

$

0.55

Shares used in computing earnings per common share:

Basic

42,692

41,660

Diluted

43,650

42,570

Effective tax rate

24.0

%

26.6

%

PLANTRONICS, INC.

SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED BALANCE SHEETS

June 30,

March 31,

2013

2013

ASSETS

Cash and cash equivalents

$

256,343

$

228,776

Short-term investments

101,610

116,581

Total cash, cash equivalents and short-term investments

357,953

345,357

Accounts receivable, net

120,903

128,209

Inventory, net

65,314

67,435

Deferred tax asset

10,193

10,120

Other current assets

13,909

15,369

Total current assets

568,272

566,490

Long-term investments

85,904

80,261

Property, plant and equipment, net

107,814

99,111

Goodwill and purchased intangibles, net

16,349

16,440

Other assets

2,181

2,303

Total assets

$

780,520

$

764,605

LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable

$

32,727

$

37,067

Accrued liabilities

57,394

66,419

Total current liabilities

90,121

103,486

Deferred tax liability

3,861

1,742

Long-term income taxes payable

12,145

12,005

Other long-term liabilities

824

925

Total liabilities

106,951

118,158

Stockholders' equity

673,569

646,447

Total liabilities and stockholders' equity

$

780,520

$

764,605

PLANTRONICS, INC.

UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES

($ in thousands, except per share data)

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA

Three Months Ended

June 30,

2013

2012

GAAP Gross profit

$

105,632

$

97,696

Stock-based compensation

535

596

Accelerated depreciation

220

124

Lease termination charges

262

-

Non-GAAP Gross profit

$

106,649

$

98,416

Non-GAAP Gross profit %

52.6

%

54.3

%

GAAP Research, development and engineering

20,863

19,696

Stock-based compensation

(1,368

)

(1,124

)

Accelerated depreciation

(151

)

(57

)

Purchase accounting amortization

(50

)

-

Non-GAAP Research, development and engineering

$

19,294

$

18,515

GAAP Selling, general and administrative

$

48,097

$

45,904

Stock-based compensation

(3,084

)

(2,900

)

Purchase accounting amortization

(71

)

-

Non-GAAP Selling, general and administrative

$

44,942

$

43,004

GAAP Operating expenses

$

69,683

$

65,600

Stock-based compensation

(4,452

)

(4,024

)

Accelerated depreciation

(151

)

(57

)

Purchase accounting amortization

(121

)

-

Restructuring and other related charges

(723

)

-

Non-GAAP Operating expenses

$

64,236

$

61,519