Plantronics Announces Second Quarter Fiscal 2015 Financial

SANTA CRUZ, CA --(Marketwired - October 28, 2014) - Plantronics, Inc. ( NYSE : PLT ) today announced second quarter fiscal year 2015 results. Highlights of the quarter include the following (comparisons are against the second quarter of fiscal year 2014):

• Net revenues were $215.8 million compared with $194.0 million.
• GAAP gross margin was 54.6% compared with 51.4%
  • Non-GAAP gross margin was 54.9% compared with 52.3%.
• GAAP operating income was $37.9 million compared with $30.8 million
  •  Non-GAAP operating income was $45.3 million compared with $38.0 million
• GAAP diluted earnings per share ("EPS") was $0.65 compared with $0.53, and within our guidance of $0.60 to $0.68.
  • Non-GAAP diluted EPS was $0.77 compared with $0.64, and within our guidance of $0.72 to $0.80.

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

"Strength in our Enterprise portfolio, including both Core and Unified Communications product groups contributed to solid revenue growth and stronger earnings per share growth," stated Ken Kannappan, President & CEO. "We believe new products are positioning us well for continued leadership in all of our major markets. We're especially pleased with industry reception to our first significant product introduction for the Contact Center category in 10 years."

"We are managing the company with a focus on improving our operating margins and are pleased with the improvement year over year. While our gross margins were very strong this quarter, we continue to expect long-term Non-GAAP gross margins to be in the 50% to 52% range as UC grows to represent a larger portion of the revenue mix," said Pam Strayer, Senior Vice President and Chief Financial Officer. "We're also pleased with our improved inventory levels and collections results." 

Enterprise net revenues increased 12% to $156.7 million in the second quarter of fiscal year 2015 compared with $139.9 million in the second quarter of fiscal year 2014 driven by the strength of Enterprise Core and UC revenues. Net revenues from UC products, a subset of Enterprise, grew by 30% to $47.8 million in the second quarter of fiscal year 2015 compared with $36.9 million in the second quarter of fiscal year 2014. 

Consumer net revenues were $59.1 million in the second quarter of fiscal year 2015, up 9% from $54.0 million in the second quarter of fiscal year 2014, driven by both the mono and stereo  Bluetooth  product categories.

Dividend Announcement We are also announcing that we have declared a quarterly dividend of $0.15 per common share, to be paid on December 10, 2014 to all shareholders of record as of the close of business on November 20, 2014. 

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 third quarter of fiscal year 2015:

• Net revenues of $220 million to $230 million; 
• GAAP operating income of $37 million to $42 million;
• Non-GAAP operating income of $45 million to $50 million, excluding the impact of $8 million from stock-based compensation and purchase accounting amortization from GAAP operating income;
• Assuming approximately 42.5 million diluted average weighted shares outstanding:
  • GAAP diluted EPS of $0.64 to $0.72; 
  • Non-GAAP diluted EPS of $0.77 to $0.85; and
  • Cost of stock-based compensation and purchase accounting amortization to be approximately $0.13 per diluted share.

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 second quarter fiscal year 2015 results. The conference call will take place today, October 28, 2014, 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 #10462931 will be available until November 28, 2014 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.

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

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 including stock-based compensation related to stock options, restricted stock and employee stock purchases made under our employee stock purchase plan, purchase accounting amortization, accelerated depreciation, and early lease termination charges, all net of the associated tax impact, tax benefits from the release of tax reserves, transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes from non-GAAP operating income, non-GAAP gross margin and non-GAAP diluted EPS,. 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 leadership position in our markets (ii) our long-term gross margins (iii) UC and our revenue mix (iv) our expectations regarding earnings and revenue growth, (v) our estimates of GAAP and non-GAAP financial results for the second quarter of fiscal year 2015, including net revenues, operating income and diluted EPS; (vi) our estimates of stock-based compensation and purchase accounting amortization and other related charges, as well as the impact of these non-cash expenses on Non-GAAP operating income and diluted EPS for the second quarter of fiscal year 2015; and (vii) our estimate of weighted average shares outstanding for the second quarter of fiscal year 2015, 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:

• Adverse or uncertain economic conditions;
• The volume and timing of orders we receive during each quarter;
• Competition;
• New product introductions and product transitions;
• Changes in product mix and geographic sales mix
• 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., and Alcatel-Lucent, 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 second 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;
• fluctuations in customer demand and 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;
• the impact of accounting changes, including changes in revenue recognition as a result of incorporating software features and functionality in 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, the inherent risks of our substantial foreign operations, litigation or other contingencies and fluctuations in our corporate tax rate; 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 16, 2014, 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.