PRESS RELEASE
Plantronics Reports Second Quarter Fiscal Year 2008 Results
Revenues & Profits Increase on Office & Call Center Demand and Increase in International Sales;
Earnings per Share Exceed Guidance
FOR INFORMATION, CONTACT: Greg Klaben Vice President of Investor Relations (831) 458-7533 | FOR IMMEDIATE RELEASE October 23, 2007 |
SANTA CRUZ, CA – October 23, 2007 - Plantronics, Inc., (NYSE: PLT) today announced second quarter fiscal 2008 net revenues of $208.2 million compared with $194.9 million in the second quarter of fiscal 2007. Revenues were within the guidance range of $206 to $212 million. Plantronics' GAAP diluted earnings per share were $0.34 in the second quarter of fiscal 2008 compared with $0.26 in same quarter of the prior year. Non-GAAP diluted earnings per share for the current quarter were $0.39 compared with $0.32 in the second quarter of fiscal 2007. Earnings per share were greater than the previously provided GAAP guidance of $0.25 to $0.29 and non-GAAP guidance of $0.30 to $0.35. The primary difference between GAAP and non-GAAP earnings per share for the current period is the cost of equity-based compensation.
“Our most important long term objective has been to grow our office business and we were pleased with the increase in our office wireless revenues. International demand for office wireless accelerated and our new CS70N office system is being well received in the market. Our gross margin also improved as our focus on reducing product cost and increasing manufacturing effectiveness resulted in nearly three points of gross margin improvement in the ACG segment. Finally, we introduced and started shipping some important new Bluetooth, consumer entertainment and home office products in the second quarter. These new products have received an excellent reception from the market,” stated Ken Kannappan, President & CEO of Plantronics.
Audio Communications Group (ACG) Non-GAAP Results
(Office & Contact Center, Mobile, Computer, Clarity)
Second quarter net revenues of $181.0 million were up 11% compared with $163.0 million in the year-ago quarter. Revenue growth compared to the year-ago quarter was driven by demand for wireless products, with office wireless up by 28% from a year ago and mobile Bluetooth up 17% from the same period. The CS70N, introduced in May, contributed significantly to the growth in office wireless this quarter.
Gross margin in Q2 FY08 was 47.2% compared with 44.3% in the year-ago quarter. Among the factors contributing to the higher gross margin was cost reduction on our office wireless and Bluetooth mobile products. We also continue to achieve greater productivity and improved effectiveness in our manufacturing processes. Operating margin in Q2 FY08 was 18.3% compared with 15% in the year-ago quarter primarily on the strength of the higher gross margin.
Audio Entertainment Group (AEG) Non-GAAP Results
(Altec Lansing)
Second quarter net revenues of $27.2 million were down 14.8% from $31.9 million in the year-ago quarter. While the turn-around of this division remains heavily dependent on a refreshed product portfolio, other steps are being taken to return the unit to profitability, including new management. The Company continues to target profitability for the division by the December quarter of next fiscal year.
The division’s gross margin was 0.4% compared with 16.9% in the year-ago quarter. Operating loss was $9.6 million in the quarter compared with an operating loss of $4.5 million in the same quarter of the prior year.
While results were lower than the year-ago quarter, revenues grew sequentially mostly on the strength of the iM600, the loss was reduced and the division performed slightly better than we anticipated. During the quarter, AEG also began shipping a number of new products; including the PT 7031 wireless home theatre sound system and PT 8050 wireless surround sound home theatre system.
PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098
Business Outlook
The following statements are based on current expectations. Many of these statements are forward-looking, and actual results may differ materially.
We have a “book and ship” business model whereby we ship most orders to our customers within 48 hours of our receipt of those orders, and we thus cannot rely on the level of backlog to provide visibility into potential future revenues. Our business is inherently difficult to forecast, and there can be no assurance that the incoming orders we expect to receive over the balance of the quarter will materialize.
We are currently expecting revenues for ACG and AEG to increase sequentially in the third quarter and for the non-GAAP AEG operating loss to be lower than the second quarter. The consumer related portions of our business are expected to grow strongly in the third quarter and it is thus likely that gross margin will be lower in Q3 than it was in Q2 due to product and segment mix. We are also planning a number of sales and marketing programs in the third quarter, some of which were deferred from the second quarter, and are thus expecting to increase our operating expenses sequentially and in comparison to the year ago quarter. Subject to the foregoing, we are currently expecting the following financial results for the third quarter of fiscal 2008:
| · | Net revenues for the third quarter of fiscal 2008 to be in the range of $230 - $235 million; |
| · | Non-GAAP consolidated tax rate to be approximately 24%; |
| · | The EPS cost of equity compensation pursuant to FAS 123(R) to be approximately $0.05 - $0.06; |
| · | Non-GAAP earnings per share for the third quarter of fiscal 2008 to be in the range of $0.37 - $0.42; and |
| · | GAAP earnings per share of approximately $0.32 to $0.37. |
Plantronics does not intend to update these targets during the quarter or to report on its progress toward these targets. Plantronics will not comment on these targets to analysts or investors except by its next press release announcing its third quarter fiscal year 2008 results or by other public disclosure. Any statements by persons outside Plantronics speculating on the progress of the third quarter fiscal year 2008 will not be based on internal Company information and should be assessed accordingly by investors.
Conference Call Scheduled to Discuss Financial Results
Plantronics has scheduled a conference call to discuss the contents of this release. The conference call will take place today, Tuesday, October 23 at 2:00 PM (PDT). All interested investors and potential investors in Plantronics stock are invited to participate. To listen to the call, please dial in five to ten minutes prior to the scheduled starting time and refer to the "Plantronics Conference Call." Participants from North America should call (888) 301-8736 and other participants should call (706) 634-7260.
A replay of the call with the conference ID #2596307 will be available for 72 hours at (800) 642-1687 for callers from North America and at (706) 645-9291 for all other callers. The conference call will also be simultaneously web cast at www.plantronics.com under Investor Relations.
Use of Non-GAAP Financial Information
Plantronics excludes non-recurring transactions and non-cash expenses such as stock-based compensation related to stock options, awards and employee stock purchases from: non-GAAP net income, non-GAAP earnings per diluted share, non-GAAP operating income, non-GAAP operating margin and non-GAAP effective tax rate. Plantronics excludes these expenses from its non-GAAP measures primarily because Plantronics does not believe they are reflective of ongoing operating results and are not part of its target operating model. Plantronics believes that the use of non-GAAP financial measures provides meaningful supplemental information regarding its performance and liquidity, and help investors compare actual results to its long-term target operating model goals. Plantronics believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning, forecasting and analyzing future periods.
PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098
SAFE HARBOR
This release contains forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Specific forward-looking statements include our profitability target of December 2008 for our AEG business, and that this can be achieved primarily via a refreshed product offering, and meeting our estimates of net revenues, margins, operating expenses, tax rate and earnings for the third quarter of fiscal 2008. These forward-looking statements involve a number of risks and uncertainties, and are based on current information and management judgment.
Among the factors that could cause actual results to differ materially from those projected are:
| · | Our operating results are difficult to predict; |
| · | The ability to achieve the turnaround of AEG is uncertain because: |
| · | it is dependent upon our ability to more effectively research and implement features in our AEG products that consumers want and are willing to purchase; |
| · | we must be able to meet the market windows for these products; |
| · | we must be able to retain or obtain the shelf space for these products in our sales channel; |
| · | we must retain or improve the brand recognition associated with the Altec Lansing brand during the turnaround; |
| · | Failure to achieve any of these objectives may adversely affect our financial results; |
| · | We have significant intangible assets and goodwill recorded on our balance sheet. If the carrying value of our intangible assets and goodwill is not recoverable, an impairment loss must be recognized which would adversely affect our financial results; |
| · | The market for our products is characterized by rapidly changing technology, short product life cycles, and frequent new product introductions, and we may not be able to develop, manufacture or market new products in response to changing customer requirements and new technologies; |
| · | The actions of existing and/or new competitors, especially with regard to pricing and promotional programs; |
| · | Product mix is difficult to estimate and standard margin varies considerably by product; |
| · | Failure to match production to demand given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts to meet demand without having excess inventory or incurring cancellation charges; |
| · | The inability to successfully develop, manufacture and market new products and achieve volume shipment schedules to meet demand; |
| · | A softening of the level of market demand for our products; |
| · | Variations in sales and profits in higher tax, as compared to lower tax, jurisdictions; |
| · | Fluctuations in foreign exchange rates; |
| · | Class action lawsuits are being brought against us and other Bluetooth headset manufacturers claiming “noise induced hearing loss”. While we believe these suits are without merit, the costs to defend against them could be high and the results of litigation are not predictable in any event; |
| · | Changes in the regulatory environment either as to headsets directly or as to the products, such as mobile phones, with which our products are used; and |
| · | Additional risk factors include: changes in the timing and size of orders from our customers, price erosion, increased requirements from retail customers for marketing and advertising funding, interruption in the supply of sole-sourced critical components, continuity of component supply at costs consistent with our plans, failure of our distribution channels to operate as we expect, failure to develop products that keep pace with technological changes, the inherent risks of our substantial foreign operations, problems which might affect our manufacturing facilities in Mexico or in China, and the loss of the services of key executives and employees. |
For more information concerning these and other possible risks, please refer to the Company's Annual Report on Form 10-K filed May 29, 2007, quarterly reports filed on Form 10-Q and other filings with the Securities and Exchange Commission as well as recent press releases. These filings can be accessed over the Internet at http://www.sec.gov/edgar/searchedgar/companysearch.html
PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098
Financial Summaries
The following related charts are provided:
In 1969, a Plantronics headset carried the historic first words from the moon: “That’s one small step for man, one giant leap for mankind.” Since then, Plantronics has become the headset of choice for mission-critical applications such as air traffic control, 911 dispatch, and the New York Stock Exchange. Today, this history of Sound Innovation® is the basis for every product we build for the office, contact center, personal mobile, entertainment and residential markets. The Plantronics family of brands includes Plantronics, Altec Lansing, Clarity, and Volume Logic. For more information, go to www.plantronics.com or call (800) 544-4660.
Altec Lansing, Clarity, Plantronics, Sound Innovation, Volume Logic and AudioIQ are trademarks or registered trademarks of Plantronics, Inc. All other trademarks are the property of their respective owners.
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PLANTRONICS, INC. / 345 Encinal Street / P.O. Box 1802 / Santa Cruz, California 95061-1802
831-426-6060 / Fax 831-426-6098
