SOURCE: Plantronics, Inc.

Plantronics Logo

February 01, 2016 16:00 ET

Plantronics Announces Third Quarter Fiscal Year 2016 Financial Results

Revenue Meets and Non-GAAP EPS Exceeds Guidance, Expense and Headcount Reduction Expected to Improve Operating Margins, New 1,000,000 Share Repurchase Authorization Approved

SANTA CRUZ, CA--(Marketwired - February 01, 2016) -  February 1, 2016 - Plantronics, Inc. (NYSE: PLT) today announced third quarter fiscal year 2016 financial results. Highlights of the third quarter include the following (comparisons are against the third quarter of fiscal year 2015):

  • Net revenues were $225.7 million compared with $231.8 million, and within our guidance of $225 million to $235 million
    • Constant currency revenue grew by 1%, from $231.8 to $232.9 
  • GAAP gross margin was 48.5% compared with 51.7%
    • Non-GAAP gross margin was 48.9% compared with 52.0%
  • GAAP operating income was $26.6 million compared with $40.6 million
    • Non-GAAP operating income was $42.9 million compared with $48.1 million
    • Constant currency Non-GAAP operating income was $45.7 million compared with $48.1 million
  • GAAP diluted earnings per share ("EPS") was $0.49 compared with $0.71, and below our guidance of $0.52 to $0.62
    • Non-GAAP diluted EPS was $0.83 compared with $0.79, and above our guidance of $0.71 to $0.81
    • Constant currency Non-GAAP EPS was $0.90 compared with $0.79
 
Q3 Fiscal Year 2016 GAAP Results
 
    Q3 2015   Q3 2016   Change (%)  
Net revenues   $ 231.8   million   $ 225.7   million   (2.6 )%
Operating income   $ 40.6   million   $ 26.6   million   (34.4 )%
  Operating margin     17.5 %       11.8 %        
Diluted EPS   $ 0.71       $ 0.49       (31.0 )%
                           
 
Q3 Fiscal Year 2016 Non-GAAP Results
 
    Q3 2015   Q3 2016   Change (%)  
Operating income   $ 48.1   million   $ 42.9   million   (10.9 )%
  Operating margin     20.8 %       19.0 %        
Diluted EPS   $ 0.79       $ 0.83       5.1 %
                           

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

"We believe our opportunities for growth, our execution on our strategic initiatives and our competitive position remain excellent," stated Ken Kannappan, President & CEO. "Our operating margins continue to be significantly impacted by foreign exchange movements and a sharp decline in the mono Bluetooth® headset category; we believe a series of restructuring actions announced today will offset a portion of the currency impact, streamline global operations and improve profitability in fiscal 2017."

"As part of our commitment to appropriately manage the profitability of the company, today's announced headcount reduction and expense reduction will better align our investments and cost structure with the current economic environment and put us in a better position to achieve our long term targets," stated Pam Strayer, Senior Vice President and Chief Financial Officer. 

Enterprise net revenues were down slightly to $158.3 million in the third quarter of fiscal year 2016 compared with $161.6 million in the third quarter of fiscal year 2015. On a constant currency basis, Enterprise net revenues grew by 1% from $161.6 million to $163.0 million year over year.

Consumer net revenues were $67.5 million in the third quarter of fiscal year 2016, down from $70.2 million in the third quarter of fiscal year 2015, due primarily to a decline in mono Bluetooth headset demand. On a constant currency basis, consumer revenues declined slightly from $70.2 million to $69.9 million year over year.

Restructuring Charges

During the third quarter of fiscal year 2016 we initiated a restructuring plan to better align expenses to our revenue and gross margin profile and position us for improved operating performance. Under that plan, we reduced costs through voluntary and involuntary elimination of certain positions throughout the organization in the U.S., Mexico, China and Europe. 

The restructuring actions will result in pre-tax charges of approximately $12.6 million, consisting of approximately $8.4 million for severance and related benefits recorded during the third quarter of fiscal year 2016, and approximately $5.8 million to be recognized in the fourth quarter related to a one-time incentive under our existing retirement program. These charges are expected to be offset by a reduction in our fiscal year 2016 stock-based compensation expense of approximately $1.6 million attributable to stock award forfeitures resulting from the restructuring action. Projected net annual savings from the restructuring activities are expected to be approximately $15 million to $16 million in fiscal year 2017.

Repurchase Authorization

We announced our board of directors has approved a new 1 million share repurchase authorization as it approaches the completion of its existing repurchase authorization announced in May 2015.

Plantronics Announces Quarterly Dividend of $0.15

We are also announcing that we have declared a quarterly dividend of $0.15 per common share, to be paid on March 10, 2016 to all shareholders of record as of the close of business on February 19, 2016.

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 currency fluctuations, 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 fourth quarter of fiscal year 2016:

  • Net revenues of $200 million to $210 million;
  • GAAP operating income of $16 million to $21 million;
  • Non-GAAP operating income of $30 million to $35 million, excluding the impact of $8 million from stock-based compensation and purchase accounting amortization and $6 million in restructuring costs from GAAP operating income;
  • Assuming approximately 33 million diluted average weighted shares outstanding:
    • GAAP diluted EPS of $0.21 to $0.31;
    • Non-GAAP diluted EPS of $0.50 to $0.60; and
  • Cost of stock-based compensation and purchase accounting amortization to be approximately $0.18 per diluted share;
  • Cost of restructuring program to be approximately $0.11 per diluted share

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

Conference Call and Prepared Remarks

Plantronics is providing a copy of prepared remarks in combination with its press release. These remarks are offered to provide shareholders and analysts with additional time and detail for analyzing results in advance of the company's quarterly conference call. The remarks will be available in the Investor Relations section of the Plantronics website in conjunction with the press release.

We have scheduled a conference call to discuss third quarter fiscal 2016 financial results. The conference call will take place today, February 1st, 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." The dial-in from North America is (888) 301-8736 and the international dial-in is (706) 634-7260.

A replay of the call with the conference ID # 4559879 will be available until March 1, 2016 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, including non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS which exclude certain non-cash expenses and charges that are included in the most directly comparable GAAP measure. These non-cash charges and expenses include 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. 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.

As a company with significant global operations and sales, fluctuations in foreign currency exchange rates may have a material effect on our reported results. Consequently, we also present supplemental metrics as identified in the reconciliation within this release "on a constant currency basis" which excludes the impact of currency exchange rate fluctuations. The constant currency presentation, which is a non-GAAP measure, is intended to supplement our reported operating results and, when considered in conjunction with the corresponding GAAP measures, facilitate a better understanding of changes in the metrics from period to period and the core operations of the Company. We calculate constant currency percentages by removing any hedge gains or losses from the particular metric in the current period and then converting our current period local currency financial results using the foreign currency exchange rates in effect during the prior year period and comparing these adjusted amounts to the corresponding current period metric.

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 opportunities for growth and execution on our strategic initiatives, our competitive position, (ii) the impact of our restructuring activities and the alignment of our investments and cost structure for the current economic environment and achievement of long term targets; (iii) resulting pre-tax restructuring charges of approximately $12.6 million, approximately $5.8 million of which are in connection with a one-time incentive under an existing early retirement program in the fourth fiscal quarter of 2016 and a reduction of stock based compensation of approximately $1.6 million in fiscal year 2016; (iv) projected annual savings from the restructuring activities of approximately $15 million to $16 million in fiscal year 2017; (v) estimates of GAAP and non-GAAP financial results for the fourth quarter of fiscal year 2016, 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 fourth quarter of fiscal year 2016; and (vii) our estimate of weighted average shares outstanding for the fourth quarter of fiscal year 2016, 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 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 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) our sales model and expertise must successfully evolve to support complex integration of hardware and software with UC infrastructure consistent with changing customer purchasing expectations; (vi) as UC 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; (vii) UC solutions generally, or our solutions in particular, may not be adopted with the breadth and speed in the marketplace that we currently anticipate; (viii) sales cycles for more complex UC deployments are longer as compared to our traditional Enterprise products; (ix) 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; and (x) our failure to expand our technical support capabilities to support the complex and proprietary platforms in which our UC products are and will be integrated;
  • 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, 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 15, 2015 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 is a registered trademark 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 95061-1802
831-426-6060 / Fax 831-426-6098

                         
PLANTRONICS, INC.  
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
($ in thousands, except per share data)  
               
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS  
                         
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2014     2015     2014     2015  
Net revenues   $ 231,781     $ 225,735     $ 664,248     $ 647,110  
Cost of revenues     111,865       116,219       311,795       319,266  
Gross profit     119,916       109,516       352,453       327,844  
  Gross profit %     51.7 %     48.5 %     53.1 %     50.7 %
                                 
Research, development and engineering     22,991       20,811       69,280       66,614  
Selling, general and administrative     57,977       53,715       174,756       163,689  
Gain from litigation settlements     (1,666 )     (91 )     (7,816 )     (998 )
Restructuring and other related charges     -       8,433       -       8,433  
  Total operating expenses     79,302       82,868       236,220       237,738  
    Operating income     40,614       26,648       116,233       90,106  
    Operating income %     17.5 %     11.8 %     17.5 %     13.9 %
                                 
Interest expense     (59 )     (7,217 )     (209 )     (17,278 )
Other non-operating income and (expense), net     (1,959 )     398       (1,474 )     (2,025 )
Income before income taxes     38,596       19,829       114,550       70,803  
Income tax expense     8,212       3,541       28,073       15,391  
      Net income   $ 30,384     $ 16,288     $ 86,477     $ 55,412  
                                 
      % of net revenues     13.1 %     7.2 %     13.0 %     8.6 %
                                 
Earnings per common share:                                
  Basic   $ 0.73     $ 0.50     $ 2.07     $ 1.60  
  Diluted   $ 0.71     $ 0.49     $ 2.03     $ 1.56  
                                 
Shares used in computing earnings per common share:                                
  Basic     41,901       32,579       41,780       34,723  
  Diluted     42,700       33,259       42,674       35,588  
                                 
Effective tax rate     21.3 %     17.9 %     24.5 %     21.7 %
                                 
                                 
           
PLANTRONICS, INC.  
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
($ in thousands)  
   
UNAUDITED CONSOLIDATED BALANCE SHEETS  
    March 31,   December 31,  
    2015   2015  
ASSETS              
  Cash and cash equivalents   $ 276,850   $ 219,091  
  Short-term investments     97,859     166,257  
    Total cash, cash equivalents and short-term investments     374,709     385,348  
  Accounts receivable, net     136,581     136,402  
  Inventory, net     56,676     55,650  
  Deferred tax assets     6,564     6,548  
  Other current assets     28,124     28,403  
      Total current assets     602,654     612,351  
  Long-term investments     107,590     135,164  
  Property, plant and equipment, net     139,413     145,349  
  Goodwill and purchased intangibles, net     16,077     15,890  
  Other assets     10,308     8,767  
      Total assets   $ 876,042   $ 917,521  
LIABILITIES AND STOCKHOLDERS' EQUITY              
  Accounts payable   $ 32,781   $ 39,738  
  Accrued liabilities     62,041     63,161  
    Total current liabilities     94,822     102,899  
  Long-term debt, net of issuance costs     -     489,246  
  Long-term income taxes payable     12,984     12,219  
  Revolving line of credit     34,500     -  
  Other long-term liabilities     6,339     9,730  
      Total liabilities     148,645     614,094  
  Stockholders' equity     727,397     303,427  
      Total liabilities and stockholders' equity   $ 876,042   $ 917,521  
                     
                     
   
PLANTRONICS, INC.  
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  
($ in thousands, except per share data)  
               
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS  
                         
    Three Months Ended     Nine Months Ended  
    December 31,     December 31,  
    2014     2015     2014     2015  
Cash flows from operating activities                                
  Net Income   $ 30,384     $ 16,288     $ 86,477     $ 55,412  
  Adjustments to reconcile net income to net cash provided by operating activities:                                
    Depreciation and amortization     4,887       5,019       13,975       14,838  
    Amortization of debt issuance cost     -       362       -       845  
    Stock-based compensation     7,430       7,717       21,122       24,599  
    Excess tax benefit from stock-based compensation     (1,304 )     (150 )     (2,988 )     (3,300 )
    Deferred income taxes     (115 )     (622 )     1,654       2,185  
    Provision for excess and obsolete inventories     427       235       992       1,319  
    Non-cash restructuring charges     -       8,433       -       8,433  
    Other operating activities     1,588       2,859       484       5,896  
  Changes in assets and liabilities:                                
    Accounts receivable, net     (16,847 )     4,104       (18,479 )     1,279  
    Inventory, net     4,199       1,814       (920 )     (352 )
    Current and other assets     (1,749 )     1,926       (4,680 )     (264 )
    Accounts payable     (5,763 )     (3,272 )     2,395       5,744  
    Accrued liabilities     11,235       (4,512 )     3,464       (3,841 )
    Income taxes     (6,027 )     (2,626 )     (3,120 )     (8,770 )
        Cash provided by operating activities     28,345       37,575       100,376       104,023  
                                 
Cash flows from investing activities                                
  Proceeds from sale of investments     51,613       32,061       72,564       56,890  
  Proceeds from maturities of investments     20,900       11,490       102,175       51,895  
  Purchase of investments     (73,532 )     (144,519 )     (172,757 )     (206,110 )
  Acquisitions, net of cash acquired     -       -       (150 )     -  
  Capital expenditures     (5,795 )     (7,885 )     (19,214 )     (20,977 )
      Cash used for investing activities     (6,814 )     (108,853 )     (17,382 )     (118,302 )
                                 
Cash flows from financing activities                                
  Repurchase of common stock     (8,526 )     (9,556 )     (27,443 )     (482,776 )
  Employees' tax withheld and paid for restricted stock and restricted stock units     (1,071 )     (305 )     (7,306 )     (10,804 )
  Proceeds from issuances under stock-based compensation plans     6,397       783       17,821       9,854  
  Proceeds from revolving line of credit     -       -       -       155,749  
  Repayments of revolving line of credit     -       -       -       (190,249 )
  Proceeds from bonds issuance, net     -       -       -       488,401  
  Payment of cash dividends     (6,460 )     (5,048 )     (19,296 )     (16,034 )
  Excess tax benefit from stock-based compensation     1,304       150       2,988       3,300  
                                 
      Cash used for financing activities     (8,356 )     (13,976 )     (33,236 )     (42,559 )
Effect of exchange rate changes on cash and cash equivalents     (1,054 )     (491 )     (2,112 )     (921 )
      Net increase (decrease) in cash and cash equivalents     12,121       (85,745 )     47,646       (57,759 )
Cash and cash equivalents at beginning of period     268,229       304,836       232,704       276,850  
Cash and cash equivalents at end of period   $ 280,350     $ 219,091     $ 280,350     $ 219,091  
                                 
                                 
   
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     Nine Months Ended  
    December 31,     December 31,  
    2014     2015     2014     2015  
GAAP Gross profit   $ 119,916     $ 109,516     $ 352,453     $ 327,844  
  Stock-based compensation     685       811       1,888       2,469  
Non-GAAP Gross profit   $ 120,601     $ 110,327     $ 354,341     $ 330,313  
Non-GAAP Gross profit %     52.0 %     48.9 %     53.3 %     51.0 %
                                 
GAAP Research, development and engineering   $ 22,991     $ 20,811     $ 69,280     $ 66,614  
  Stock-based compensation     (2,068 )     (2,286 )     (5,934 )     (7,264 )
  Purchase accounting amortization     (64 )     (62 )     (175 )     (187 )
Non-GAAP Research, development and engineering   $ 20,859     $ 18,463     $ 63,171     $ 59,163  
                                 
GAAP Selling, general and administrative   $ 57,977     $ 53,715     $ 174,756     $ 163,689  
  Stock-based compensation     (4,677 )     (4,620 )     (13,300 )     (14,866 )
Non-GAAP Selling, general and administrative   $ 53,300     $ 49,095     $ 161,456     $ 148,823  
                                 
GAAP Operating expenses   $ 79,302     $ 82,868     $ 236,220     $ 237,738  
  Stock-based compensation     (6,745 )     (6,906 )     (19,234 )     (22,130 )
  Purchase accounting amortization     (64 )     (62 )     (175 )     (187 )
  Restructuring and other related charges     -       (8,433 )     -       (8,433 )
Non-GAAP Operating expenses   $ 72,493     $ 67,467     $ 216,811     $ 206,988  
                                 
                                 
                                 
PLANTRONICS, INC.
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES
($ in thousands, except per share data)
                                 
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONTINUED)
                                 
    Three Months Ended       Nine Months Ended    
    December 31,       December 31,    
    2014       2015       2014       2015    
GAAP Operating income   $ 40,614       $ 26,648       $ 116,233       $ 90,106    
  Stock-based compensation     7,430         7,717         21,122         24,599    
  Purchase accounting amortization     64         62         175         187    
  Restructuring and other related charges     -         8,433         -         8,433    
Non-GAAP Operating income   $ 48,108       $ 42,860       $ 137,530       $ 123,325    
                                         
GAAP Net income   $ 30,384       $ 16,288       $ 86,477       $ 55,412    
  Stock-based compensation     7,430         7,717         21,122         24,599    
  Purchase accounting amortization     64         62         175         187    
  Restructuring and other related charges     -         8,433         -         8,433    
  Income tax effect of above items     (2,204 )       (3,549 )       (6,254 )       (8,543 )  
  Income tax effect of unusual tax items     (2,028 ) (1)     (1,419 ) (1)     (2,375 ) (1)     (2,590 ) (1)
Non-GAAP Net income   $ 33,646       $ 27,532       $ 99,145       $ 77,498    
                                         
GAAP Diluted earnings per common share   $ 0.71       $ 0.49       $ 2.03       $ 1.56    
  Stock-based compensation     0.18         0.24         0.49         0.69    
  Restructuring and other related charges     -         0.25         -         0.24    
  Income tax effect     (0.10 )       (0.15 )       (0.20 )       (0.31 )  
Non-GAAP Diluted earnings per common share   $ 0.79       $ 0.83       $ 2.32       $ 2.18    
                                         
Shares used in diluted earnings per common share calculation     42,700         33,259         42,674         35,588    
                         
                                         
(1) Excluded amount represents tax benefits from the release of tax reserves and the impact of tax law changes.
                                         

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, including non-GAAP operating income, non-GAAP net income and non-GAAP diluted EPS which exclude certain non-cash expenses and charges that are included in the most directly comparable GAAP measure. These non-cash charges and expenses include 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. 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.

As a company with significant global operations and sales, fluctuations in foreign currency exchange rates may have a material effect on our reported results. Consequently, we also present supplemental metrics as identified in the reconciliation within this release "on a constant currency basis" which excludes the impact of currency exchange rate fluctuations. The constant currency presentation, which is a non-GAAP measure, is intended to supplement our reported operating results and, when considered in conjunction with the corresponding GAAP measures, facilitate a better understanding of changes in the metrics from period to period and the core operations of the Company. We calculate constant currency percentages by removing any hedge gains or losses from the particular metric in the current period and then converting our current period local currency financial results using the foreign currency exchange rates in effect during the prior year period and comparing these adjusted amounts to the corresponding current period metric. 

   
Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and other Unaudited GAAP Data  
($ in thousands, except per share data)                              
    Q115   Q215   Q315   Q415   Q116   Q216   Q316  
GAAP Gross profit   $ 114,710   $ 117,827   $ 119,916   $ 109,166   $ 107,358   $ 110,970   $ 109,516  
  Stock-based compensation     535     668     685     695     779     879     811  
Non-GAAP Gross profit   $ 115,245   $ 118,495   $ 120,601   $ 109,861   $ 108,137   $ 111,849   $ 110,327  
Non-GAAP Gross profit %     53.2 %   54.9 %   52.0 %   54.7 %   52.4 %   52.0 %   48.9 %
                                             
GAAP Operating expenses   $ 76,949   $ 79,969   $ 79,302   $ 76,314   $ 77,996   $ 76,874   $ 82,868  
  Stock-based compensation     (5,770 )   (6,719 )   (6,745 )   (6,774 )   (7,271 )   (7,953 )   (6,906 )
  Purchase accounting amortization     (50 )   (61 )   (64 )   (63 )   (62 )   (63 )   (62 )
  Restructuring and other related charges     -     -     -     -     -     -     (8,433 )
Non-GAAP Operating expenses   $ 71,129   $ 73,189   $ 72,493   $ 69,477   $ 70,663   $ 68,858   $ 67,467  
                                             
GAAP Operating income   $ 37,761   $ 37,858   $ 40,614   $ 32,852   $ 29,362   $ 34,096   $ 26,648  
  Stock-based compensation     6,305     7,387     7,430     7,469     8,050     8,832     7,717  
  Purchase accounting amortization     50     61     64     63     62     63     62  
  Restructuring and other related charges     -     -     -     -     -     -     8,433  
Non-GAAP Operating income   $ 44,116   $ 45,306   $ 48,108   $ 40,384   $ 37,474   $ 42,991   $ 42,860  
Non-GAAP Operating income %     20.4 %   21.0 %   20.8 %   20.1 %   18.2 %   20.0 %   19.0 %
                                             
GAAP Income before income taxes   $ 38,781   $ 37,173   $ 38,596   $ 30,701   $ 26,336   $ 24,638   $ 19,829  
  Stock-based compensation     6,305     7,387     7,430     7,469     8,050     8,832     7,717  
  Purchase accounting amortization     50     61     64     63     62     63     62  
  Restructuring and other related charges     -     -     -     -     -     -     8,433  
Non-GAAP Income before income taxes   $ 45,136   $ 44,621   $ 46,090   $ 38,233   $ 34,448   $ 33,533   $ 36,041  
                                             
GAAP Income tax expense   $ 10,109   $ 9,752   $ 8,212   $ 4,877   $ 5,108   $ 6,742   $ 3,541  
  Income tax effect of above items     1,800     2,250     2,204     2,252     2,338     2,656     3,549  
  Income tax effect of unusual tax items     273     74     2,028     489     994     177     1,419  
Non-GAAP Income tax expense   $ 12,182   $ 12,076   $ 12,444   $ 7,618   $ 8,440   $ 9,575   $ 8,509  
Non-GAAP Income tax expense as a % of Non-GAAP Income before income taxes     27.0 %   27.1 %   27.0 %   19.9 %   24.5 %   28.6 %   23.6 %
                                             
   
Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures and other Unaudited GAAP Data (Continued)  
($ in thousands, except per share data)                              
    Q115   Q215   Q315   Q415   Q116   Q216   Q316  
GAAP Net income   $ 28,672   $ 27,421   $ 30,384   $ 25,824   $ 21,228   $ 17,896   $ 16,288  
  Stock-based compensation     6,305     7,387     7,430     7,469     8,050     8,832     7,717  
  Purchase accounting amortization     50     61     64     63     62     63     62  
  Restructuring and other related charges     -     -     -     -     -     -     8,433  
  Income tax effect of above items     (1,800 )   (2,250 )   (2,204 )   (2,252 )   (2,338 )   (2,656 )   (3,549 )
  Income tax effect of unusual tax items     (273 )   (74 )   (2,028 )   (489 )   (994 )   (177 )   (1,419 )
Non-GAAP Net income   $ 32,954   $ 32,545   $ 33,646   $ 30,615   $ 26,008   $ 23,958   $ 27,532  
                                             
GAAP Diluted earnings per common share   $ 0.68   $ 0.65   $ 0.71   $ 0.61   $ 0.55   $ 0.52   $ 0.49  
  Stock-based compensation     0.15     0.17     0.18     0.17     0.21     0.26     0.24  
  Restructuring and other related charges     -     -     -     -     -     -     0.25  
  Income tax effect     (0.05 )   (0.05 )   (0.10 )   (0.06 )   (0.09 )   (0.08 )   (0.15 )
Non-GAAP Diluted earnings per common share   $ 0.78   $ 0.77   $ 0.79   $ 0.72   $ 0.67   $ 0.70   $ 0.83  
                                             
Shares used in diluted earnings per common share calculation     42,466     42,505     42,700     42,482     38,943     34,245     33,259  
                                             
SUMMARY OF UNAUDITED GAAP DATA                                            
($ in thousands)                                            
Net revenues from unaffiliated customers:                                            
  Enterprise   $ 152,354   $ 156,680   $ 161,591   $ 148,660   $ 151,757   $ 160,468   $ 158,251  
  Consumer     64,308     59,125     70,190     52,102     54,601     54,549     67,484  
    Total net revenues   $ 216,662   $ 215,805   $ 231,781   $ 200,762   $ 206,358   $ 215,017   $ 225,735  
Net revenues by geographic area from unaffiliated customers:                                            
  Domestic   $ 124,467   $ 123,697   $ 123,092   $ 116,351   $ 117,578   $ 123,803   $ 122,075  
  International     92,195     92,108     108,689     84,411     88,780     91,214     103,660  
    Total net revenues   $ 216,662   $ 215,805   $ 231,781   $ 200,762   $ 206,358   $ 215,017   $ 225,735  
   
   
Balance Sheet accounts and metrics:                                            
Accounts receivable, net   $ 150,765   $ 140,427   $ 157,322   $ 136,581   $ 127,160   $ 139,939   $ 136,402  
Days sales outstanding (DSO)     63     59     61     61     55     59     54  
Inventory, net   $ 60,968   $ 63,551   $ 57,724   $ 56,676   $ 55,918   $ 57,760   $ 55,650  
Inventory turns     6.7     6.2     7.8     6.5     7.1     7.2     8.3  
                                             
   
Summary of Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures  
($ in millions, except per share data)  
   
Net Revenues   Q3'15 ($)     Q3'16 ($)     Change ($)     Change (%)  
Net Revenues as reported (GAAP)   $ 231.8     $ 225.7     $ (6.1 )   -3 %
  Less Hedge Gains     -       (1.7 )              
  Impact of Year over Year Foreign Currency Exchange Rate Movements     -       8.9                
Constant Currency Revenues (Non-GAAP)   $ 231.8     $ 232.9                
                               
   
Operating Income   Q3'15 ($)     Q3'15 (%)     Q3'16 ($)     Q3'16 (%)  
Operating Income as reported (GAAP)   $ 40.6       17.5 %   $ 26.6     11.8 %
  Stock-based compensation & purchase accounting amortization     7.5               7.9        
  Restructuring and other related charges     -               8.4        
  Non-GAAP Operating Income     48.1       20.8 %     42.9     19.0 %
  Less Hedge Gains, net     -               (0.5 )      
  Impact of Year over Year Foreign Currency Exchange Rate Movements     -               3.2        
Constant Currency Operating Income (Non-GAAP)   $ 48.1       20.8 %   $ 45.6     19.6 %
                               
   
Diluted Earnings per Common Share ("EPS")   Q3'15 ($)     Q3'16 ($)     Change ($)     Change (%)  
Diluted EPS (GAAP)   $ 0.71     $ 0.49     $ (0.22 )   -31 %
  Stock-based compensation     0.18       0.24                
  Restructuring and other related charges     -       0.25                
  Income Tax Effect     (0.1 )     (0.15 )              
  Non-GAAP Diluted EPS     0.79       0.83       0.04     5 %
  Less Hedge Gains, net of tax     -       (0.03 )              
Impact of Year over Year Foreign Currency Exchange Rate Movements, net of tax     -       0.10                
Constant Currency Diluted EPS (Non-GAAP)   $ 0.79     $ 0.90       0.11     14 %
                               
                               

Contact Information

  • Investor Contact:
    Greg Klaben
    Vice President of Investor Relations
    (831) 458-7533

    Media Contact:
    George Guttierez
    Sr. Director Global Communications and Content Strategy
    (831) 458-7537