SOURCE: Polycom

Polycom

April 21, 2010 16:05 ET

Polycom Reports First Quarter 2010 Earnings

Q1 Revenue Growth of 23 Percent Year-Over-Year to a Record $276 Million

PLEASANTON, CA--(Marketwire - April 21, 2010) - Polycom, Inc. (NASDAQ: PLCM), the global leader in telepresence, video and voice communications solutions, today reported its earnings for the first quarter ended March 31, 2010.

First quarter 2010 consolidated net revenues were a record $276 million, compared to $225 million for the first quarter of 2009. GAAP net income for the first quarter of 2010 was $5 million, or 6 cents per diluted share, compared to $8 million, or 10 cents per diluted share, for the same period last year. Non-GAAP net income for the first quarter of 2010 was $25 million, or 29 cents per diluted share. This compares to Non-GAAP net income of $23 million, or 27 cents per diluted share, for the first quarter of 2009.

The reconciliation between GAAP net income and Non-GAAP net income is provided in the tables at the end of this release.

On a product line basis, consolidated net revenues for the first quarter of 2010 were comprised of:

--  69 percent video solutions, or $189 million (53 percent video
    communications, or $146 million, and 16 percent network systems,
    or $43 million); and
--  31 percent voice communications, or $87 million.

On a product line basis, consolidated net revenues for the first quarter of 2009 were comprised of:

--  69 percent video solutions, or $156 million (55 percent video
    communications, or $124 million, and 14 percent network systems,
    or $32 million); and
--  31 percent voice communications, or $69 million.

"We believe Polycom's improving growth trajectory, particularly over the past two quarters, validates the key thesis points of our strategic investment plan. Specifically, Polycom generated record revenues in the first quarter of 2010, the Company's fourth consecutive quarter of sequential growth and second consecutive quarter of growth on a year-over-year basis," said Robert Hagerty, Polycom chairman and CEO. "In particular, we have already gained significant traction with our go-to-market initiative, recruiting top talent and increasing productivity at higher than anticipated rates. Also, although early in the cycle, we are beginning to see positive results from our new strategic partnerships. We also announced a new relationship with HP that promises to yield significant customer wins over the coming quarters. In fact, we see the Polycom Open Collaboration Network as a key mechanism to galvanize the growth of our integrated and unparalleled solution."

"Product innovation also continued at a fast pace in the first quarter of 2010. For instance, we announced breakthroughs in both the user experience of our HD video solutions and in reducing the total cost of ownership (TCO). With our new H.264 High Profile software, we have cut the bandwidth requirements for 1080p HD video approximately in half, dramatically improving TCO for our customers and further enhancing the already robust return on investment of our solutions. Finally, we gained US government UC APL certification for our RMX network platform and we launched our CMA Desktop video solution for the Apple Mac. Bottom line, we have an extraordinary team, our execution against the strategic investment plan is on-target, and we believe we are positioned well to seize the tremendous market opportunity in the unified collaboration space over time," concluded Hagerty.

"In the first quarter, strong customer demand drove sharp year-over-year growth in revenues, backlog and deferred revenues," said Michael Kourey, Polycom senior vice president, finance and administration, and CFO. "As a result of this strong operating performance and working capital management, we generated positive operating cash flow of $21 million, representing Polycom's 49th consecutive quarter of positive operating cash flow. We exited Q1 with $470 million in cash and investments and no debt."

About Polycom

Polycom, Inc. (NASDAQ: PLCM) is the global leader in telepresence, video, and voice solutions and a visionary in communications that empower people to connect and collaborate everywhere. Please visit www.polycom.com for more information.

This release contains forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding future events, future demand for our products, and the future performance of the Company, including statements regarding the validation of and future execution against the Company's strategic investment plan and new strategic partnerships, expected customer wins from our new strategic partnerships, including the recently-announced HP relationship, the Polycom Open Collaboration Network as a means of stimulating future growth of our solution, and the Company as being well positioned to capture the market opportunity in the Unified Collaboration space. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the fact that the Company's strategic investment plan may not yield the intended results or may take longer than originally anticipated to achieve such results, the impact of competition on our product sales and for our customers and partners, the impact of increased competition due to consolidation in our industry or competition from companies that are larger or that have greater resources than we do, potential fluctuations in results and future growth rates, risks associated with general economic conditions, the market acceptance of Polycom's products and changing market demands, including demands for differing technologies or product and services offerings, possible delays in the development, availability and shipment of new products, increasing costs and differing uses of capital, changes in key personnel and our sales organization that may cause disruption to the business, the impact of recent restructuring actions, and the impact of global conflicts such as those in the Middle East that may adversely impact our business. Many of these risks and uncertainties are discussed in the Company's Annual Report on Form 10-K for the year ended Dec. 31, 2009, and in other reports filed by Polycom with the SEC. Polycom disclaims any intent or obligations to update these forward-looking statements.

To supplement our consolidated financial statements presented on a GAAP basis, Polycom uses non-GAAP measures of operating results, net income and income per share, which are adjusted to exclude certain costs, expenses, gains and losses we believe appropriate to enhance an overall understanding of our past financial performance and also our prospects for the future. These adjustments to our current period GAAP results are made with the intent of providing both management and investors a more complete understanding of Polycom's underlying operational results and trends and our marketplace performance. For example, the non-GAAP results are an indication of our baseline performance before gains, losses or other charges that are considered by management to be outside of our core operating results. In addition, these adjusted non-GAAP results are among the primary indicators management uses as a basis for our planning and forecasting of future periods. The presentation of this additional information is not meant to be considered in isolation or as a substitute for net income or diluted net income per share prepared in accordance with generally accepted accounting principles in the United States.

As has been noted on the Company's web site since April 14, 2010, Polycom will hold a conference call today, April 21, 2010, at 5 p.m. EDT/2 p.m. PDT to discuss its first quarter earnings. Robert Hagerty, chairman, president and CEO, Michael Kourey, chief financial officer, and Andrew Miller, executive vice president of global field operations, will host the conference call. You may participate by viewing the webcast at www.polycom.com or, for callers in the US and Canada, by calling 800.897.4662; and for callers outside of the US and Canada, by calling 303.223.0120, with the passcode being Polycom. A replay of the call will also be available at www.polycom.com or, for callers in the US and Canada, at 800.633.8284; and for callers outside of the US and Canada, at 402.977.9140. The access number for the replay is 21465070. A replay of the call will also be maintained on our website for twelve months at www.polycom.com under Investor Relations - Earnings Calls-Archives.

Polycom reserves the right to modify future product plans at any time. Products and/or related specifications referenced in this press release are not guaranteed and will be delivered on a when and if available basis.

© 2010 Polycom, Inc. All rights reserved. POLYCOM®, the Polycom "Triangles" logo and the names and marks associated with Polycom's products are trademarks and/or service marks of Polycom, Inc. and are registered and/or common law marks in the United States and various other countries. All other trademarks are property of their respective owners.

                              POLYCOM, INC.
                      GAAP to Non-GAAP Reconciliation
                 (In thousands, except per share amounts)
                                (Unaudited)


                                               Three Months Ended
                                       -----------------------------------
                                                 March 31, 2010
                                       -----------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------  ---------      ---------

 Revenues:
         Product revenues              $ 228,057  $       -      $ 228,057
         Service revenues                 48,097          -         48,097
                                       ---------  ---------      ---------
                 Total revenues          276,154          -        276,154
                                       ---------  ---------      ---------

 Cost of revenues:
         Cost of product revenues         92,549      4,254  (a)    88,295
         Cost of service revenues         24,286      1,179  (b)    23,107
                                       ---------  ---------      ---------
                 Total cost of
                  revenues               116,835      5,433        111,402
                                       ---------  ---------      ---------

 Gross profit                            159,319     (5,433)       164,752
                                       ---------  ---------      ---------

 Operating expenses:
         Sales and marketing              90,916      6,291  (b)    84,625
         Research and development         33,905      3,082  (b)    30,823
         General and administrative       15,982      2,497  (b)    13,485
         Amortization of purchased
          intangibles                      1,440      1,440              -
         Restructuring costs               1,749      1,749              -
                                       ---------  ---------      ---------
                 Total operating
                  expenses               143,992     15,059        128,933
                                       ---------  ---------      ---------

 Operating income                         15,327    (20,492)        35,819

 Interest and other income (expense),
  net                                     (8,581)    (6,530) (c)    (2,051)
                                       ---------  ---------      ---------

Income before provision for income
 taxes                                     6,746    (27,022)        33,768
 Provision for income taxes                1,335     (7,103)         8,438
                                       ---------  ---------      ---------
 Net income                            $   5,411  $ (19,919)     $  25,330
                                       =========  =========      =========

 Basic net income per share            $    0.06  $   (0.24)     $    0.30
                                       =========  =========      ========= 

 Diluted net income per share          $    0.06  $   (0.23)     $    0.29
                                       =========  =========      =========

 Weighted average shares outstanding
  for basic net income per share          84,665                    84,665
                                       =========                 =========

 Weighted average shares outstanding
  for diluted net income per share        87,364                    87,364
                                       =========                 =========

(a) Excluded amount includes $3,364 related to the amortization of
purchased intangibles for core and existing technologies, $770 for
stock-based compensation expense recorded in accordance with SFAS 123R,
"Share-Based Payment," during the period and $120 related to the effect of
stock-based compensation on warranty expense rates.

(b) Excluded amount represents stock-based compensation expense recorded in
accordance with SFAS 123R, "Share-Based Payment," during the period.

(c) Excluded amount represents loss recognized during the period on
preferred securities considered to be other than temporarily impaired.




                              POLYCOM, INC.
                      GAAP to Non-GAAP Reconciliation
                 (In thousands, except per share amounts)
                                (Unaudited)


                                               Three Months Ended
                                       -----------------------------------
                                                 March 31, 2009
                                       -----------------------------------
                                         GAAP     Excluded       Non-GAAP
                                       ---------  ---------      ---------

 Revenues:
         Product revenues              $ 183,294  $       -      $ 183,294
         Service revenues                 42,116          -         42,116
                                       ---------  ---------      ---------
                 Total revenues          225,410          -        225,410
                                       ---------  ---------      ---------

 Cost of revenues:
         Cost of product revenues         78,007      5,036  (a)    72,971
         Cost of service revenues         20,469        753  (b)    19,716
                                       ---------  ---------      ---------
                 Total cost of
                  revenues                98,476      5,789         92,687
                                       ---------  ---------      ---------

 Gross profit                            126,934     (5,789)       132,723
                                       ---------  ---------      ---------

 Operating expenses:
         Sales and marketing              66,233      1,900  (b)    64,333
         Research and development         28,453      1,873  (b)    26,580
         General and administrative       13,589      1,875  (b)    11,714
         Amortization of purchased
          intangibles                      1,464      1,464              -
         Restructuring costs               6,417      6,417              -
                                       ---------  ---------      ---------
                 Total operating
                  expenses               116,156     13,529        102,627
                                       ---------  ---------      ---------

 Operating income                         10,778    (19,318)        30,096

 Interest and other income (expense),
  net                                       (281)         -           (281)
                                       ---------  ---------      ---------

Income before provision for income
 taxes                                    10,497    (19,318)        29,815
 Provision for income taxes                2,472     (4,833)         7,305
                                       ---------  ---------      ---------
 Net income                            $   8,025  $ (14,485)     $  22,510
                                       =========  =========      =========

                                       ---------  ---------      ---------
 Basic net income per share            $    0.10  $   (0.17)     $    0.27
                                       =========  =========      =========

                                       ---------  ---------      ---------
 Diluted net income per share          $    0.10  $   (0.17)     $    0.27
                                       =========  =========      =========

 Weighted average shares outstanding
  for basic net income per share          83,625                    83,625
                                       =========                 =========

 Weighted average shares outstanding
  for diluted net income per share        84,250                    84,250
                                       =========                 =========

(a) Excluded amount includes $3,326 related to the amortization of
purchased intangibles for core and existing technologies, $1,050 related to
past license fee claims, $548 for stock-based compensation expense recorded
in accordance with SFAS 123R, "Share-Based Payment," during the period and
$112 related to the effect of stock-based compensation on warranty expense
rates.

(b) Excluded amount represents stock-based compensation expense recorded in
accordance with SFAS 123R, "Share-Based Payment," during the period.




                              POLYCOM, INC.
                  Condensed Consolidated Balance Sheets                    
                              (In thousands)
                                (Unaudited)


                                                   March 31,   December 31,
                                                      2010         2009
                                                  ------------ ------------

 ASSETS
 Current assets
         Cash and cash equivalents                $    293,154 $    331,098
         Short-term investments                        169,446      123,686
         Trade receivables, net                        135,165      132,813
         Inventories                                    82,930       76,863
         Deferred taxes                                 23,807       23,824
         Prepaid expenses and other current
          assets                                        29,418       24,299
                                                  ------------ ------------
            Total current assets                       733,920      712,583

 Property and equipment, net                            89,046       81,252
 Long-term investments                                   7,347       12,687
 Goodwill                                              493,207      495,299
 Purchased intangibles, net                             41,078       46,255
 Deferred taxes                                         23,975       23,943
 Other assets                                           16,027       13,882
                                                  ------------ ------------
            Total assets                          $  1,404,600 $  1,385,901
                                                  ============ ============


 LIABILITIES AND STOCKHOLDERS' EQUITY
 Current liabilities
         Accounts payable                         $     90,270 $     87,233
         Accrued payroll and related liabilities        21,893       23,707
         Taxes payable                                       -          617
         Deferred revenue                               87,287       79,504
         Other accrued liabilities                      41,183       52,360
                                                  ------------ ------------
            Total current liabilities                  240,633      243,421

 Non-current liabilities
 Long-term deferred revenue                             47,992       46,787
 Taxes payable                                          22,640       27,111
 Deferred taxes                                          2,550        2,702
 Other long-term liabilities                            12,478       12,027
                                                  ------------ ------------
            Total liabilities                          326,293      332,048

 Stockholders' equity                                1,078,307    1,053,853
                                                  ------------ ------------
            Total liabilities and stockholders'
             equity                               $  1,404,600 $  1,385,901
                                                  ============ ============




                              POLYCOM, INC.
              Condensed Consolidated Statements of Operations
                 (In thousands, except per share amounts)
                                (Unaudited)


                                                      Three Months Ended
                                                    ----------------------
                                                    March 31,   March 31,
                                                       2010        2009
                                                    ----------  ----------

 Revenues:
         Product revenues                           $  228,057  $  183,294
         Service revenues                               48,097      42,116
                                                    ----------  ----------
                 Total revenues                        276,154     225,410
                                                    ----------  ----------

 Cost of revenues:
         Cost of product revenues                       92,549      78,007
         Cost of service revenues                       24,286      20,469
                                                    ----------  ----------
                 Total cost of revenues                116,835      98,476
                                                    ----------  ----------

 Gross profit                                          159,319     126,934
                                                    ----------  ----------

 Operating expenses:
         Sales and marketing                            90,916      66,233
         Research and development                       33,905      28,453
         General and administrative                     15,982      13,589
         Amortization of purchased intangibles           1,440       1,464
         Restructuring costs                             1,749       6,417
                                                    ----------  ----------
                 Total operating expenses              143,992     116,156
                                                    ----------  ----------

 Operating income                                       15,327      10,778

 Interest and other income (expense), net               (8,581)       (281)
                                                    ----------  ----------

Income before provision for income taxes                 6,746      10,497
 Provision for income taxes                              1,335       2,472
                                                    ----------  ----------
 Net income                                         $    5,411  $    8,025
                                                    ==========  ==========

                                                    ----------  ----------
 Basic net income per share                         $     0.06  $     0.10
                                                    ==========  ==========

                                                    ----------  ----------
 Diluted net income per share                       $     0.06  $     0.10
                                                    ==========  ==========

 Weighted average shares outstanding for basic
  net income per share                                  84,665      83,625
                                                    ==========  ==========

 Weighted average shares outstanding for diluted
  net income per share                                  87,364      84,250
                                                    ==========  ==========




                              POLYCOM, INC.
              Condensed Consolidated Statements of Cash Flows
                              (In thousands)
                                (Unaudited)


                                                      Three Months Ended
                                                    ----------------------
                                                    March 31,   March 31,
                                                       2010        2009
                                                    ----------  ----------

   Cash flows from operating activities:
   Net income                                       $    5,411  $    8,025
   Adjustments to reconcile net income
    to net cash provided by operating activities:
      Depreciation and amortization                      9,243       7,863
      Amortization of purchased intangibles              4,804       4,797
      Provision for doubtful accounts                        -         247
      Provision for excess and obsolete inventories        716       1,517
      Non-cash stock based compensation                 13,819       6,949
      Excess tax benefits from stock-based
       compensation                                     (3,731)          -
      Write down of investments other than
       temporarily impaired                              6,530           -
      Loss on disposals of property and equipment           61          10

      Changes in assets and liabilities, net of the
       effect of acquisitions:
           Trade receivables                            (2,352)     13,089
           Inventories                                  (6,783)      1,096
           Deferred taxes                                 (528)      1,175
           Prepaid expenses and other assets            (8,228)      1,778
           Accounts payable                              3,037      (5,437)
           Taxes payable                                 1,359        (737)
           Other accrued liabilities and deferred
            revenue                                     (2,674)    (13,539)
                                                    ----------  ----------
   Net cash provided by operating activities            20,684      26,833
                                                    ----------  ----------

   Cash flows from investing activities:
       Purchases of property and equipment             (16,998)     (8,548)
       Purchases of investments                       (108,862)   (158,045)
       Proceeds from sale and maturity of
        investments                                     70,464     130,600
                                                    ----------  ----------
   Net cash used in investing activities               (55,396)    (35,993)
                                                    ----------  ----------

   Cash flows from financing activities:
       Proceeds from issuance of common stock
        under employee option and stock purchase
        plans                                           19,720       6,404
       Repurchase of common stock                      (26,683)     (7,828)
       Excess tax benefits from stock-based
        compensation                                     3,731           -
                                                    ----------  ----------
   Net cash used in financing activities                (3,232)     (1,424)
                                                    ----------  ----------

   Net decrease in cash and cash equivalents           (37,944)    (10,584)
   Cash and cash equivalents, beginning of period      331,098     165,669
                                                    ----------  ---------- 
   Cash and cash equivalents, end of period         $  293,154  $  155,085
                                                    ==========  ==========

Contact Information

  • Investor Contact:
    Michael R. Kourey, CFO
    Polycom, Inc.
    925-924-5742
    Email Contact

    Press Contact:
    Caroline Japic
    Polycom, Inc.
    408-474-2265
    Email Contact