PLT - Earnings call transcript Q4 2018

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Operator

Good afternoon. My name is Vincent and I will be your conference operator today. At this time, I would like to welcome everyone to the Plantronics Q4 FY'18 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Instructions]. [Operator you. Thank turn Mr. now over your to I the today, speaker will call Will Zelver. begin. you Sir, may

Will Zelver

Welcome Vincent. conference quarter XXXX. the results welcome call fourth year fiscal Thanks, and and for everyone to Plantronics' financial

today’s Joe me fiscal details detailed the Polycom acquisition Senior safe call for full discussed under Plantronics' and today Burton, year results XXXX, Joining standalone forward-looking all President at this are not Plantronics' and which specified, and to intended Pam Vice presented CEO; information of company The the the statements, President to time. the of not to CFO. otherwise to will release. includes further Strayer, XXXX. and and guidance and discuss of provisions are Unless made to we interpreted Plantronics’ our discussing performance, The and today be information are such the as company. Private fourth related and and uncertainties quarter references forward will The a are Reform looking be be XX-Q, of harbor recent for Securities Act risks Plantronics press combined statements XX-K standalone should on most as today's refer Litigation financial and guidance purpose

we today’s expenses, to gross operating primarily During margin, call, will share. non-GAAP conference operating earnings and income, providing be metrics per related net income

of year. website our the per results the year. and with of diluted net our call, in the earnings $X.XX with at fiscal corporate fiscal share $XXX.X quarter with with GAAP the the Plantronics’ XXXX fiscal in fees, compensation, for difference GAAP with revenues per GAAP the investor.plantronics.com. for quarter of from today’s $X.XX earnings related charges quarterly million US between restructuring, were to $XXX.X per fourth available, year in measures tax all presentation, Relations investor sheet release earnings And prior the of quarter on reconciliation impacts in million, $X.XX our were these XXXX of Plantronics’ compared analyst to were and in of over Non-GAAP the for prior section will tax any for call and fourth release, for net the refer diluted compared with prior Please year reconciled metric in fourth year. GAAP have non-GAAP additional which our We recording regulation. non-GAAP Investor along press are now consists compared press based $X.XX full all I associated quarter share to that, turn the share fourth impacts stock acquisition earnings The Joe. the details. changes

Joe Burton

everyone and afternoon, few are communicated spaces. continue to In thanks meetings take to and conversations looking evolving maneuvering guidance I Good themes. open reoccurring a ever around minutes revolve you customers UC them, and today. us we spend and with some this for to Q&A. before for in for through opportunity support our to our the partners as wanted previously, joining UCaaS

UC, UCaaS, continues And be by these spaces mobility, clients quality quarters innovation strategies several Unified couple the customer opportunity mapping communications deployments, team First, forms. ago, communications efficient and ring My strategies those in industry The team true unified areas. cost to of takes as rise is deployments still confuse of for importance constant a on collaboration of and chosen a are on today. and observations from changes and reliable, communications key. communications part is and the and headline. while can collaboration disrupt provided out the

points. desk Some and Others are are software only. software oriented, still end mix others and phone are a of predominantly hybrids, hardware

the cloud an to systems, that systems cloud the gain the of still offer increasing While deployments number access embracing speed premises and these adoption are to rich often customers deploy brings. on capabilities

deployed being work open Plantronics. systems significant see noise into demands from nature concerns. and the environments also of solutions distraction many where This new office UC are changes and We

voice remains choice striving customer greatest the interactions. those customer of possible service ensure interactions for impact. that to Next, customer have the businesses to and medium service, And handle are most most valuable the complex

be experience. Lastly, Increasingly, rise video client, usage are for recognized. in voice to desk conversations in analytics these that on phone premises, remote UCaaS being fidelity insights of of and the assure soft part richness need business a all and to and continues the and on great to the of is meetings. and deployments, improve headsets equation video, video In

resonating this seeing is We’re reflected customers. data offering inside with in need our how strongly

be to strategy overarching continues Our and validated. vision

headset and on. Our in intelligent the investments in analytics, insights spot space, software, innovation soundscaping are

collaboration of Polycom. and and desire communications a strategy alliance their time for capabilities can to They analytics the the taking and end again communications than importantly ever customers, more. maximize our open conditions this questions. And for the through acquisition and our afternoon. better channel with us you even comprehensive the Thank enable with more insight even market that let's partners of drove our accelerate with us asking and UC However, of call before. help that, points, impact investments suite for These us are

Operator

[Operator instructions].

comes question line from the of Greg First Sidoti. from Burns

is line Your open.

Greg Burns

margin just operating operating in Good What’s in that the from the first look afternoon. the walk guidance decline you the driving trends us margin? the When for decline quarter, at through from you sequential quarter? strong the fourth can the

Pam Strayer

that Hey are profitability through year. to the for a - there. I is that first lower couple of There’s in quarter. Greg, of I tends our this is margin first I'd to go couple quarter impact that. generally our can the thing operating lower There's things expected of on say first to guess the relative that Pam. things you a the rest walk a be quarter quarter a

our bit. if at topline down revenue you First of quarter, all, is take look coming the a quarter over a

in And spend. so we that, squeezing seasonal addition some profitability. also our that’s typical to have But

year. that impact are training there don't in If you sales to tend expenses the our take rest guidance, the some we've of midpoint of that got the

reset we of some FY’XX quarter year. our first get our the In funding financial the of also goals. you missing variable below in if we were recall, We XX% were comp variable compensation because

As we pretty goals goal. we're start topline as about profitability confident new well fiscal revenue our year as ’XX, our the

that up starting go to funding expect the back we So to point. XXX% as

Greg Burns

Okay.

you to year, for full your come So still target within XX% do expect the XX% to range?

Pam Strayer

Yes, we do.

we full in expect you to QX We’ll at will we're be improve. If still see the to the and get will be in tend look little that Plantronics QX. increasing It expecting through the of year, a operating to year. numbers do And higher standalone. margin profitability to profitabilities able

Greg Burns

to Polycom deal, do finance the what on a And the looking you raise to debt you. have the thank like? rates Okay, then looking terms in of you're sense are

Pam Strayer

market debt Yes. Well, that the be right full in now underwritten a weeks. going of couple out and to we’ll is

probably expect We to land it's but market somewhere LIBOR around plus going XXX, shifts. constantly the

Greg Burns

Okay. Thank you.

Operator

of Capital. comes Mike from line Latimore question the from Northland Next

is line open. Your

Unidentified Analyst

Mike so Vijay Hi. you widening and A see quick is questions over here. challenges do how the especially the for there? here the to small, This of demand Latimore. large of mid regards do see or With is demand, of you sort companies, couple within UC kind

Joe Burton

good to Yes. Hey you. talk to Vijay,

or quarters, been row, this including in and above saw a it's demand UC. been strong several and in our one. we're for particularly in couple the you over strong broad quite As at actually seeing We’ve of quarters the results, model last

and UCaaS mid-size has for continuing stronger get even in been SMB while, in a on as deployments. the both it and strong larger to and So, company premises in

right So great UC really a in story now.

Unidentified Analyst

what mean Okay, great. you? I looking are potentially large could you about the how positive them are at of this for any clients talk acquisition? I'm your you from feedback sure can’t much but a Polycom opportunity terms be acquisition, in getting

Joe Burton

one the excite partners a the absolutely, possibilities. however, instantly acquisition and there'll been absolutely. at meets we clearly on very hardware the the collaboration and analyst that positive. The We the XXX% point we've has focused the is the ability every turned that in announcement, market were customer, provider Plantronics asking there. of excited gets for, to talked ability customers, it and And us feedback be in. partner, partners hearing we Yes, everywhere stay Vijay. primarily what had want anticipated comprehensive would And shop good them just be shifts for the very a every year stop our since end frankly, Every by person, and much. be piece virtually quarter to to a to looking channel

Unidentified Analyst

sounds Microsoft good. see can regards one I With If really Teams you in It to squeeze more. how do growth? Microsoft driving Teams,

Joe Burton

follow Well, for a demand is Teams on to product is team course drove Plantronics headsets. of for Business. already lot of of driving a course a essentially for Business is Skype Teams lot Microsoft for Skype collaboration Microsoft Plantronics a that demand headsets. fantastic of

I address. They Enterprise was And for the capabilities that they collaboration, all web keynote they product was stage show bit mobile in communications person may of phone be part the the at Microsoft's by or And Teams. may very three every shot around frankly, hardware Enterprise Microsoft is Connect, Teams person I had keynote unified might would is pieces - kind voice, have or a some had large intelligence. by a Something showed on missed four video, you Plantronics of biased, say headset. party but chat, had sharing driven all a March artificial not And coming really long as the and industry a little compelling showed most collaboration, station that they Teams persistent for year. showed their interesting of group launch. has only that Connect to team out

the back with look very call Plantronics, almost mobile headset phone phone something a So go at much if we Connect actually you like and on top. site, - like Enterprise desk station. a a showed Looks

and a the your Android it kind mobile of headset Teams on very phone kind bring in. you magically desk very, right it iPhone plus phone your on drop your into phone turns or of cool You your Microsoft fly. it

of announced of tends of announced primary a the experience, it would is and actually we Microsoft's the great. collaboration, see most growth. to that one in-conference by room partners there, So Frankly, in be end shipping Polycom. said Partnership lot We the officially the year. Microsoft with group fall be around product

the together think really we Microsoft. be So with will nice two quite

Unidentified Analyst

for you product? Great. seen any this competition Have for the -

Joe Burton

born Frankly, out that mobile product a into do, is to to work. on the was place play. We delivering a customer station. them. the follow keenly This products will the Frankly, at done. was new how there be that trying that And customers to stay they of focused out with try persona we’ll we going deep understanding in we've category understanding and just We're particular will new Plantronics the comes user the what unique for and we're a think brand right thing to their the to copy really brand there on need out this right satisfy seems phone that. for want price, execute the product needs, research that industry, literally where be

Unidentified Analyst

the Thanks for Appreciate it. a lot All best. the color.

Operator

Your line next Baker question of the from GARP Research. Bill from comes

open. Your line is

Bill Baker

I little of year what was seems side contrary the a slightly the Yes. international we've year up. the love to trend. for hear consumer US, on seeing. think. little to would international And and strength and just consumer And the because kind the little drift QX, more little in a US time Enterprise it breaks was I Hi. These long a in more versus more a you've a the versus been enterprise the US on be to slightly the color had and are down over

Joe Burton

of some with on say numberless jump of kind macro if I'll A are Yes. and she'd couple start like. then specifics actually in about let trends to things that. Maybe the Pam that

in Unified first. and soft work, all little the first seems bit based really a executing business, UC. as in respects the communications on open strong just enterprise in stagnant this communications resonated business. we really growth very are unified In many market Europe seeing well bit the collaboration, So Europe modern Europe phone the side, with in and core, generation more that extraordinarily favors a to our have around of and Africa, little Africa enterprise next we're of for a

back go first. there over quarters, we the around if the UC really last be, few growth spurt to over seem we So hitting

telephone Now, our very, part business, core our time, the those in been is larger that the to is well, business. Americas, very strong have somewhat of around UC legacy a as a business but hooks systems that long

what see So in is is big Americas. the tend core great to we

the drag it as somewhat can't growing to smaller have rate. this flattened UC So that well, is overcome core business same growth has quite out, of the

Europe we're satisfied the business So in with Americas, Asia. very enterprise the and in in

we is particularly Frankly, the by rates Just This of had little you combined had gaming really Pam will. last comp, add really, side year portfolio consumer, numbers over our driven right a a particular really year to Number on one, we year. strength now. in to doing a year easy things. bit well a couple very the that And growth weak secondly, QX, are Anything different. an QX if that, or? on solid just

Pam Strayer

of little Americas the to consumer bit consumer the Americas, although of share between level, just well see biggest a enterprise impact is impact When context. the revenue. look Maybe you where any you biggest of we breakout geographic at any that as the really and changes, as don't core changes our at

about more half region. than is of If consumer in business, think the you our it Americas

benefited gaming that. some because - But strong a from quarter see that core down. QX, so had we in weak that And quarter a Americas you brought

dynamics. the of some that’s So

Bill Baker

Thank Okay. you.

Operator

from Sidoti. comes of Next line question Greg Burns from the

open. is line Your

Greg Burns

the of ’XX. on a Manager bookings over expect following multi-year million million in to, Is expect question those you $X think that? or we $X the to about $X Pro, - months? million that $X How contracts? revenue Is to the that fiscal million should a you are Just XX

Joe Burton

Yes.

say impact our very a also the think, though is contracts mix of a part high the three in couple one nice. bit we One on year thing business. probably really it's and hand, of that's two But software I and reoccurring, would contracts, revenue contracts. a it’s really, that it has year about a for few margin between. year overall Pam little not? I most maybe it like it a The in So three mix, to So is is on one million

So couple it’s things. a of

So we get that revenue.

they're to even and a Plantronics though, changes they're and management, headsets first ASP our usage help even the in-stock. over of more that Once the our drive fundamentals value ability substantially Also and then higher of higher of really that we even really at have where under to cases, them, understand asset In our different sell software it It analysis. back value the have some to We analytics. around business. creates go used the all price. contract, conversational throw that headset provide more a with higher think the can modules the we standardization customer analysis time, relationship really value off more customers we

relationship ongoing an revenue, a a So to series shift really this transactions is to of addition our customer of - in the to from relationship.

Greg Burns

quarter, stereo I declined. mono Okay, and flat those two thanks. this did stable Bluetooth And then was last How perform guess or quarter?

Pam Strayer

Yes.

I quarter this in Yes. me give So - just one while look. minute

a a to US. quarter when year share So similar Mono mono said the We declines call long of had think at year before, this quarter couple flat, continue I predict ago. is got it And you some as look over in the to to the quarters we category. was expect in bit, category term, the a mono market before. a strong the shrinking We’ve there in And over compare we was was It's that hard aged the to products shrink. first quarters quarters, that but flat. was QX. mind a stable. a has has number in bit. down very It Stereo this it because a in it Stereo from quarter we over a But perspective, QX year market. the been easy keep we ago had was many had last had consumer been couple down stereo down the that of in with that some because

a year And ago. so had started we to decline

a was That stereo but gaming So not down bit, offset significantly. all was a just good quarter. by

the - continued that gaming holiday gaming the extremely headset continued that fourth into quarter. in well that the and and had released portfolio was for our our strength So - we marketplace, received season

Joe Burton

was even ago approach half paying a over though year stereo Mono we in and consumer, more thing, The and products, flat bad essentially from and down, frankly to the I placements some if Pam, away a flat disciplined market, had a think was really year a will, nevertheless improve and off. remember year, margins sure to I on bad you off that slightly if journey walk set that’s some make correctly, year other we and to substantially

profitability continued to I we make progress - quarter, think yes? Our on this

Pam Strayer

absolutely. Yes,

If year. points we you year at able by over improve standalone, to product consumer over QX look basis take were margins a XXX

So professional conscientious come to and business to while expect improved we focused continue. made line let we've that significantly down that business. profitable space and consumer We that a we on top niches the places and we most revenues we're decision margins of on prefer in nice where have areas focused commutation. where customers think some the And we can excellent succeed audio in

Joe Burton

things Pam, the I thing there's of always to a consumer remembered, Last story. because lot

bear to almost is for had quarter, decline I in is the we divested and year. that the comparables, the over this of accounts in we other summer, last thing clarity that consumer mind the last business The last these think XX% of

for So million $X from a quarters frankly, of these all up to a quarter were clarity. making hole $X million

had gain bit they’re be actually decent So more to in in wanted that we we fair a profitable. the ongoing a and operations little

Pam Strayer

right. that’s Yes,

Greg Burns

Okay. And then margin, the really gross just lastly quarter. on this strong

So out. year? range? gross about kind think like margins XX that helped Will next How XX get back of they into to we should FX your

Pam Strayer

Yes.

other experience that's that that expect long a range FX margins put might quarter, We dynamics above be this little which helpful term from to a for about. good business. in us We in up some gross did fourth the help range going that talk bit. still on There’s

out costs. those, just the are One it cost a about to we we able is that which of material squeeze of ongoing talk savings lot, our

does high of save looking and those at to ways for constantly job Our out a pennies fantastic volume looking operations headsets headsets. team of

of in time, over at a product offsetting our mix larger And of in savings points and negative material had changing. shift coming some down. gross you mix margin product products our becoming That is margin much UC we how higher look is core XXX when a much, take costs. enterprise, part basis So the from are about was

gross some lower can't as causing on Also from is complain gaining gaming, about a mono pressure of margin. nice. - margins although the a bit downward. bit to that’s but I So margin slightly we shift higher margin shift mono it a are those,

So material savings. cost of that some offset the

plus of get you currency And of those all where net the so is benefit.

Greg Burns

thank Okay, you.

Operator

instructions]. [Operator

no further continue. Please have questions. We

Will Zelver

are reach the you hesitate for us, investor.plantronics.com And today. Okay. Please if visit out for there of Thank investor to questions. please further set joining materials. everyone don’t full any

Operator

This concludes call. conference today's

disconnect. may You now

Plantronics (POLY) 1 May 182018 Q4 Earnings call transcript