SOURCE: Polycom, Inc.

Polycom, Inc.

April 21, 2011 16:05 ET

Polycom Reports First Quarter 2011 Earnings

Q1 Revenue Growth of 25 Percent Year-Over-Year to a Record $344 Million; Record Q1 Operating Cash Flow of $46 Million

PLEASANTON, CA--(Marketwire - Apr 21, 2011) - Polycom, Inc. (NASDAQ: PLCM), a global leader in unified communications (UC), today reported its earnings for the first quarter ended March 31, 2011.

First quarter 2011 consolidated net revenues were a record $344 million, compared to $276 million for the first quarter of 2010. GAAP net income for the first quarter of 2011 was $34 million, or 38 cents per diluted share, compared to $5 million, or 6 cents per diluted share, for the same period last year. Non-GAAP net income for the first quarter of 2011 was $43 million, or 48 cents per diluted share, compared to non-GAAP net income of $25 million, or 29 cents per diluted share, for the first quarter of 2010.

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

On a geographic basis, consolidated net revenues for the first quarter of 2011 were comprised of:

--  51 percent Americas, or $176 million;
--  25 percent Europe, Middle East, and Africa, or $86 million; and
--  24 percent Asia Pacific, or $82 million.

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

--  54 percent Americas, or $150 million;
--  25 percent Europe, Middle East, and Africa, or $67 million; and
--  21 percent Asia Pacific, or $59 million.

"Record results for the first quarter were driven by broad-based customer demand for Polycom's leading UC solutions across all major geographies," said Andrew Miller, Polycom president and CEO. "We are particularly pleased with the traction Polycom's UC strategy is gaining within our partner and customer communities, as well as the outstanding results we continue to achieve in emerging markets such as China and India."

"Importantly, our 2011 strategic imperatives are already beginning to yield results as evidenced by new strategic partnerships and the delivery of new solutions. For instance, through our recently acquired Accordent video content management solution, we announced our new cloud-based media service hosted on Microsoft's Windows Azure platform. IBM awarded Polycom the IBM Lotus Award for our innovative Polycom UC for Lotus Sametime solution, and we announced our new strategic partnership with Ericsson to capture business and consumer demand for mass-market visual communication. In addition, we extended our mobile presence to the Motorola XOOM platform, signifying another step toward Polycom's UC presence on all major mobility platforms and validating our open architecture strategy by providing support for Telepresence Interoperability Protocol (TIP) through Polycom's UC Intelligent Core™ platform."

"In summary, we believe the UC industry is at an inflection point and we are uniquely positioned to benefit directly from the fundamental shift in the way people communicate. The rapid adoption of video, the pervasive use of mobile devices, and the emerging use of the cloud to deliver UC solutions are driving our strategy as principal catalysts for our business. As the only independent provider of scale, we believe Polycom is in an excellent position to capture this momentum and deliver strong revenue growth and expanding operating margins in the future," concluded Miller.

"Driven by record revenues, strong gross margins, and operating cost management, Polycom's operating income grew both sequentially and year-over-year in the first quarter," said Michael Kourey, Polycom executive vice president, finance and administration, and CFO. "This is especially noteworthy given typical first quarter seasonality, as these results illustrate the demand for Polycom's UC solution and the margin growth opportunity for our business. As a result of our strong operating results and effective working capital management, we generated positive operating cash flow of $46 million -- a record for a Q1, and we exited the first quarter with $539 million in cash and investments and no debt."

About Polycom

Polycom, Inc. (NASDAQ: PLCM) is a global leader in unified communications solutions with industry-leading telepresence, video, voice and infrastructure solutions built on open standards. Polycom powers smarter conversations, transforming lives and businesses worldwide. Please visit www.polycom.com for more information or connect with Polycom on Twitter, Facebook, and LinkedIn.

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 Polycom's future UC presence on all major mobility platforms, Polycom as being uniquely positioned to benefit from the inflection point in the UC industry and shifts in the way people communicate, drivers such as video adoption, the pervasiveness of mobile devices and cloud-based delivery of UC solutions as catalysts for our business, and the future delivery of strong revenue growth and expanding operating margins by Polycom. 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 continuing 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 and external market factors; the market acceptance of Polycom's products and changing market demands, including demands for differing technologies or product and services offerings; our ability to successfully integrate Accordent into our business; possible delays in the development, availability and shipment of new products, increasing costs and differing uses of capital; changes in key personnel that may cause disruption to the business; any disruptive impact to the Company that may result from the new executive hires; the impact of restructuring actions; and the impact of global conflicts 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 December 31, 2010, 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.

Earnings Call Details

As has been noted on the Company's web site since April 4, 2011, Polycom will hold a conference call today, April 21, 2011, at 5 p.m. EDT/2 p.m. PDT to discuss its first quarter earnings. Andrew Miller, president and CEO, and Michael Kourey, chief financial officer, will host the conference call. You may participate by viewing the webcast at www.polycom.com/investors or, for callers in the US and Canada, by calling 800.891.3472; and for callers outside of the US and Canada, by calling 212.231.2900. The pass code for the call is "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 21517838. A replay of the call will be available on www.polycom.com for approximately 12 months.

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.

© 2011 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, 2011
                                     -------------------------------------
                                        GAAP      Excluded       Non-GAAP
                                     ----------  ----------     ----------

Revenues:
  Product revenues                   $  285,469  $        -     $  285,469
  Service revenues                       58,696           -         58,696
                                     ----------  ----------     ----------
    Total revenues                      344,165           -        344,165
                                     ----------  ----------     ----------

Cost of revenues:
  Cost of product revenues              111,987       4,039 (a)    107,948
  Cost of service revenues               26,424         582 (b)     25,842
                                     ----------  ----------     ----------
    Total cost of revenues              138,411       4,621        133,790
                                     ----------  ----------     ----------

Gross profit                            205,754      (4,621)       210,375
                                     ----------  ----------     ----------

Operating expenses:
  Sales and marketing                   100,621       4,824 (b)     95,797
  Research and development               44,231       2,400 (b)     41,831
  General and administrative             18,429       2,975 (c)     15,454
  Amortization of purchased
   intangibles                            1,382       1,382              -
  Restructuring costs                     2,578       2,578              -
  Acquisition-related costs               2,349       2,349              -
                                     ----------  ----------     ----------
    Total operating expenses            169,590      16,508        153,082
                                     ----------  ----------     ----------

Operating income                         36,164     (21,129)        57,293

Other expense, net                       (1,279)       (500)(d)       (779)
                                     ----------  ----------     ----------

Income before provision for income
 taxes                                   34,885     (21,629)        56,514
Provision for income taxes                  907     (12,374)(e)     13,281
                                     ----------  ----------     ----------
Net income                           $   33,978  $   (9,255)    $   43,233
                                     ==========  ==========     ==========

Basic net income per share           $     0.39  $    (0.10)    $     0.49
                                     ==========  ==========     ==========

Diluted net income per share         $     0.38  $    (0.10)    $     0.48
                                     ==========  ==========     ==========

Weighted average shares outstanding
 for basic net income per share          87,528                     87,528
                                     ==========                 ==========

Weighted average shares outstanding
 for diluted net income per share        90,300                     90,300
                                     ==========                 ==========


(a) Excluded amount includes $3,286 related to the amortization of
    purchased intangibles for core and existing technologies, $642 for
    stock-based compensation expense recorded during the period and $111
    related to the effect of stock-based compensation on warranty expense
    rates.

(b) Excluded amount represents stock-based compensation expense recorded
    during the period.

(c) Excluded amount includes $1,807 for stock-based compensation expense
    recorded during the period and $1,168 for the legal costs related to
    the indemnification of a former officer of the Company.

(d) Excluded amount represents the impairment of an investment in a private
    company.

(e) Excluded amount represents the tax impact on expenses which are
    excluded in items (a)-(d) above, as well as a $7,487 benefit related to
    the resolution of a multi-year tax audit.







                              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              -
  Acquisition-related costs                   -           -              -
                                     ----------  ----------     ----------
     Total operating expenses           143,992      15,059        128,933
                                     ----------  ----------     ----------

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

Other 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 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
    during the period.

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







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




                                                  March 31,   December 31,
                                                    2011          2010
                                                ------------- -------------

ASSETS
Current assets
  Cash and cash equivalents                     $     362,557 $     324,188
  Investments                                         140,473       170,154
  Trade receivables, net                              174,526       154,507
  Inventories                                         116,546       113,994
  Deferred taxes                                       34,004        32,357
  Prepaid expenses and other current assets            47,586        41,884
                                                ------------- -------------
    Total current assets                              875,692       837,084

Property and equipment, net                           112,649       110,321
Long-term investments                                  35,674        41,316
Goodwill and purchased intangibles                    574,173       519,685
Deferred taxes                                         11,494        18,388
Other assets                                           20,871        20,611
                                                ------------- -------------
    Total assets                                $   1,630,553 $   1,547,405
                                                ============= =============



LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
  Accounts payable                              $      96,231 $      90,890
  Accrued payroll and related liabilities              33,203        35,222
  Deferred revenue                                    119,751       104,919
  Other accrued liabilities                            56,359        54,651
                                                ------------- -------------
    Total current liabilities                         305,544       285,682

Non-current liabilities
Deferred revenue                                       59,553        55,292
Taxes payable                                           9,877        16,690
Deferred taxes                                          2,000         2,057
Other long-term liabilities                            13,153        12,714
                                                ------------- -------------
    Total liabilities                                 390,127       372,435

Stockholders' equity                                1,240,426     1,174,970
                                                ------------- -------------
    Total liabilities and stockholders' equity  $   1,630,553 $   1,547,405
                                                ============= =============








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





                                                    Three Months Ended
                                                --------------------------
                                                  March 31,     March 31,
                                                    2011          2010
                                                ------------  ------------


Revenues:
  Product revenues                              $    285,469  $    228,057
  Service revenues                                    58,696        48,097
                                                ------------  ------------
    Total revenues                                   344,165       276,154
                                                ------------  ------------

Cost of revenues:
  Cost of product revenues                           111,987        92,549
  Cost of service revenues                            26,424        24,286
                                                ------------  ------------
    Total cost of revenues                           138,411       116,835
                                                ------------  ------------

Gross profit                                         205,754       159,319
                                                ------------  ------------

Operating expenses:
  Sales and marketing                                100,621        90,916
  Research and development                            44,231        33,905
  General and administrative                          18,429        15,982
  Amortization of purchased intangibles                1,382         1,440
  Restructuring costs                                  2,578         1,749
  Acquisition-related costs                            2,349             -
                                                ------------  ------------
    Total operating expenses                         169,590       143,992
                                                ------------  ------------

Operating income                                      36,164        15,327

Other expense, net                                    (1,279)       (8,581)
                                                ------------  ------------

Income before provision for income taxes              34,885         6,746
Provision for income taxes                               907         1,335
                                                ------------  ------------
Net income                                      $     33,978  $      5,411
                                                ============  ============

                                                ------------  ------------
Basic net income per share                      $       0.39  $       0.06
                                                ============  ============

                                                ------------  ------------
Diluted net income per share                    $       0.38  $       0.06
                                                ============  ============

Weighted average shares outstanding for basic
 net income per share                                 87,528        84,665
                                                ============  ============

Weighted average shares outstanding for
 diluted net income per share                         90,300        87,364
                                                ============  ============








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






                                                    Three Months Ended
                                                --------------------------
                                                  March 31,     March 31,
                                                    2011          2010
                                                ------------  ------------


Cash flows from operating activities:
Net income                                      $     33,978  $      5,411
Adjustments to reconcile net income to net cash
 provided by operating activities:
  Depreciation and amortization                       12,512         9,243
  Amortization of purchased intangibles                4,668         4,804
  Provision for excess and obsolete inventories        2,490           716
  Non-cash stock-based compensation                   10,255        13,819
  Excess tax benefits from stock-based
   compensation                                      (10,087)       (3,731)
  Impairment of private company investments              500             -
  Write down of investments other than
   temporarily impaired                                    -         6,530
  Loss on disposals of property and equipment            581            61

  Changes in assets and liabilities, net of
   effects of acquisitions:
    Trade receivables                                (17,840)       (2,352)
    Inventories                                       (4,904)       (6,783)
    Deferred taxes                                       397          (528)
    Prepaid expenses and other assets                (10,013)       (8,228)
    Accounts payable                                   5,204         3,037
    Taxes payable                                      2,986         1,359
    Other accrued liabilities                         14,867        (2,674)
                                                ------------  ------------
Net cash provided by operating activities             45,594        20,684
                                                ------------  ------------

Cash flows from investing activities:
  Purchases of property and equipment                (14,848)      (16,998)
  Purchases of investments                           (62,491)     (108,862)
  Proceeds from sale of investments                   22,956        59,724
  Proceeds from maturity of investments               74,855        10,740
  Cash paid in purchase acquisition, net of
   cash acquired                                     (50,041)            -
                                                ------------  ------------
Net cash used in investing activities                (29,569)      (55,396)
                                                ------------  ------------

Cash flows from financing activities:
  Proceeds from issuance of common stock
   under employee option and stock purchase
   plans                                              26,945        19,720
  Repurchase of common stock                         (14,688)      (26,683)
  Excess tax benefits from stock-based
   compensation                                       10,087         3,731
                                                ------------  ------------
Net cash provided by (used in) financing
 activities                                           22,344        (3,232)
                                                ------------  ------------

Net increase (decrease) in cash and cash
 equivalents                                          38,369       (37,944)
Cash and cash equivalents, beginning of period       324,188       331,098
                                                ------------  ------------
Cash and cash equivalents, end of period        $    362,557  $    293,154
                                                ============  ============


Contact Information

  • Investor Contact:
    Investor Relations
    Polycom, Inc.
    925-924-5907
    Email Contact

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