PLT - Earnings call transcript Q1 2019

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Operator

Good afternoon, ladies and gentlemen. My name is Liddy and I will be your conference operator today. At this time, I would like to welcome everyone to the Plantronics Quarter One FY 2019 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. you. Thank Instructions] [Operator my welcome now Mr. host pleasure is our to today, It Iburg. Mike

You may begin.

Mike Iburg

Securities Good to are Strayer, Iburg, and Litigation on fiscal you, and are The today today’s recent afternoon Thank Liddy. Act information to of Plantronics' Burton, welcome call made Vice Relations which joining conference President President I are CFO. under press Joe today's Investor discussed statements, provisions related the XX-K and XX-Q, and XXXX The presented the call. detailed Plantronics' XXXX. forward-looking Private Reform Executive am of uncertainties of Mike Pam most Head risks CEO; and me Harbor Safe Plantronics' earnings quarter includes first and and release. on and our statements such

Polycom As for standalone Plantronics’ on the focus XXXX, June XXXX. July results will release this XX, of closed acquisition earnings on the ending quarter Xnd

quarter for a guidance on the September will be provided While basis. combined

combined manner accounting of adjustments non-GAAP U.S. the Actual from under to guidance due We past accounting. comparable of the this time results will in GAAP results. that companies for made are period to Polycom is differ providing the acquisition a at

reduced of these these acquired will increase in adjustments unknown results over expected example, expected recorded assets. publicly they quarter released. is future our revenue which sheet life as specific to amortized adjustments the when revenue balance impacts be this the will September then as time, are For of add deferred recognized at well the to our accounting be but are The acquired inventory, temporarily from of acquisition-related balances value intangible assets

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

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

Joe Burton

few joining provide we for to I thanks us to Good take and Mike. Thanks, today. this remarks call everyone the opportunity a Q&A. afternoon, wanted for open before

of are here periods most Plantronics’ one we As the history. I today, sit in exciting entering

creating Unified communications and acquisition game-changing Polycom the completion solutions on intelligent Collaboration endpoint of comprehensive With transform to and we markets' the needs. Communications the a of the to a analytics address by Xnd, began journey set evolving July industry

look a has forward benefits acquisition, executives As to of together Partners the endpoints. the track. to world Polycom I vendor onto logic and the of staff the a stages building bringing company are been feedback integration about communications the intelligent customers for talk the their welcome to customers am and single that great around early of several report pleased and on I my together. portfolios I the the direct having excellent. see partners two recognize

expect we addition, to fiscal $XX of of of target the XXXX. In synergies million year reach by annualized QX cost

outlook are by stable portfolio. second a UC&C forecasting combined quarter for Looking Polycom growth the Gaming along at driven year-over-year we basis, company modest the portfolio and growth on revenues our with Plantronics within

Our demand industry-wide outlook headset gaming higher to supply stabilizes. room compared business MLCC today our as for improvement gross the with headset and includes margins, historical standalone further constraints the

and immediately EPS margins fiscal expansion. cost is of previously XXXX, move in improvement and EPS outlook we non-GAAP As for operating this shown noted, non-GAAP year as today, deeper further non-GAAP and our synergies accretive into further acquisition to allow will

company long-term the when for announced. was deal Our the combined view outlook aligns our with

to the the expect portfolio continued the integration expected our gross while synergies our lead of growth bottom-line. enable to of and top-line, growth long-term on We of improved will margin acceleration the providers and UC&C

competitive portfolio in and coupled refreshes be more strong position Our core remains our in will going marketplace more to the integration markets forward. even with allow us even product

another just continued companies reported, solid the to results. greater quarter year-over-year by to Turning see X%, Plantronics of quarter quarter XX% both than of UC&C. growth strong in enterprise underpinned solid to the had compared growth

had consumer the quarter, where fueled by Gaming the Fortnite as a Battle is to collaboration games such vital blockbuster playing On Royale side, style competitively.

demand return This expect made holiday in year-over on voice relationships our Polycom’s impact a decision of ahead continued season. the we both materialize, forward. strengthen which our June improve demand had this to saw with to partners further growth negative quarter short-term to growth video. with market in going the and and we retail margins, upcoming the As meet we

time combined afternoon. And the call financials we publish again expect with visibility trailing results for for taking open provide us this questions. more We to with that, Thank to historical this into be the you let’s our the for quarter. company later when XX-months

Operator

of Greg, Instructions] from first [Operator comes question Your the line Sidoti. Mr.

You may your ask question.

Greg Burns

headset view how for the landscape the on changes your discuss just all getting Cisco you competitive at Could into you? market

Joe Burton

headsets couple or three Cisco Cisco jump of out that I and focused are cord less and out and can a started really are to Yes, market. are hi, Greg. couple Cisco’s I’ll coming in. two that there announced get headsets that anything Pam are IP currently the that ago. quarters a headsets Phone on is has she if corded think add, of

integrate with not we they closely very, have So, so frankly, them far, seen competitive Cisco very situation. in and

in deals have. So show seen near it's the and clearly, we haven’t the them big up that nowhere we breadth of portfolio

So, only business on low itself. even in see over Cisco the moderate business really in time, short-term no impact impact and we the and to the

Greg Burns

there? been any Cisco a in own relationship little BroadSoft combined Okay. business, how and the does – on BroadSoft side the that of dynamic impact And the what's longer maybe term? the your there they has Cisco bit, now is the Polycom change Polycom with And competitive

Joe Burton

answer, same Yes, things. A Greg. very similar

a BroadSoft, course, Cisco service of a So, acquiring provider. the is unified communications BroadSoft as is which

acquired So to small the gets or Cisco provider small service and companies. typically business sold they Polycom before turnaround BroadSoft as we AT&T British a a that announced system like transaction. and a to BroadSoft Telecom, offer

we we So, at in SIP of sell were well aware market. phones phones, rest Polycom a the entire purchased Communications-as-a-Service it against IP Polycom. few the open time of quite BroadSoft, Unified the does RingCentral XxX

from other sell in this against well. real can and and where phones can a BroadSoft. our revenues to open to that well from integrate BroadSoft mentioned vendors phones continue clearly we’ve change Cisco as time. And Polycom Cisco remaining at have but seen We against form, commitment so no

Greg Burns

of how sense revenue voice partner a us give BroadSoft generates on how Polycom much big revenue? through you of or a the Could

Joe Burton

and you couple break deeply but while third broadly, put out revenues, published do are back enough acquisition. don’t a in We that a voice, a the little out let kind acquisition BroadSoft I different look mean when minus partners. but go materials a down of deep business we me many if are they a back across were have a voice that a and or specifically, to third plus it. third, we of in third announced Polycom’s video But at the is fraction into bit. of Broadly, these but the break all services, things the materials and broad

third. and that of would So be some the it not BroadSoft of majority outside sliver that not of particular third,

zeroing on drying not those that the impact way you based we in hopefully, begin see any on way. frankly, helps So, do potential the up in that works, market abrupt and revenues

Greg Burns

back jump queue. I’ll the great. Okay, Thanks. in

Pam Strayer

Greg. Okay,

Joe Burton

next question. Greg. Operator Thanks,

Operator

next Mr. from Latimore Mike from Northland. comes question of your the line And

may your ask question. You

Mike Latimore

and in a UC concentration you it seeing On few? deals, the are diverse enterprise a a is Or set deals? of

Joe Burton

the particular, a make great – one Communications of Unified It’s the Part has is – we market frankly not over, of in seeing the lumpy a years deals part the of couple seeing been last question. or seeing business become or indeed. break We're the two quarters, growth several around where last quarter. with not are the the broad we've

demand solid point. seeing for at across a all consistent, are all really geographies, the three sizes, company business this UC We

lumpy no particular So deals.

Mike Latimore

Okay.

year, you over the growth stable bit the decline a or the given slight Polycom maybe You there? could any see you next months or you or Do about haven't a see full factor for twelve the months? of six the enough talk but guidance there being see a how next for you little and challenges

Joe Burton

Well, I’ll updated announced guidance we But, have as year said, and full again, it’s not you can start - any or so models. once Pam in. jump

We cautious are also being Polycom. on appropriately

did we diligence. course of that great Given

have days, it way about the We all under literally XX the today then, owned and technically, of as for covers.

see in go coming probably. bit. through a think, grower here we the But side, to flat Plantronics' little So, Pam Polycom the be probably stronger on a will bit I guidance modest to for with expect little quarter

Mike Latimore

Okay.

Pam Strayer

see just as during I the saw offset Polycom to expect legacy business maybe growth business. that voice guess, we jump to decline endpoints a that’s their side, They to are video that, business. their on But I we continue continuing trend from expected. going is getting being and growth Yes, their we which infrastructure in add diligence. in They had video by there

Joe Burton

the was reason Polycom so That’s matched market we came position frankly which part the portfolio of thesis how they well. Yes, and made choice that together. a our and

– deal. are what so really, were expecting we the are announced we far when we So very expecting we much

Mike Latimore

Okay.

couple does that there the further Polycom any mean be would quarters? be So, that would over decommissioned products it next of

Joe Burton

cancellations neither on Well, like announce we new call announce a products this. clearly, nor

purchased going together. in no However, product target on of part there certainly and a thought refreshes, part substantial old It’s why have are the of is they’ll versions we came change big a We product strategy. nothing why that’s big Polycom untied Obviously, it that was them. portfolio. great but of away, we Polycom products – has a planned.

Mike Latimore

yes. Owned quarter. lot. a Thanks it, Nice

Joe Burton

Operator, question. thanks, next Yes, Mike.

Operator

Thank you.

line Fargo. of question the next Eller from from Wells Your Mr. comes David

You may ask your question.

David Eller

Yes, for questions. my taking thank you

saw I think quarter EBITDA be it voice or of the video Did you in maybe any the June the And, script, correctly? income profitability, I hear operating June and whether well? in quarter. kind Polycom that you on mentioned growth thoughts as for

Joe Burton

that – of broken growth did least So, at like quarters. the have going see But, a Polycom we profitability, last continued Pam, we on that out couple did mention we saw in backwards? we anything

Pam Strayer

would still little I we growth we you say, about releasing of quarter, was talked In no, terms quarter. data in company. trends would I a I just in June and a those profitability, private the Yes, the June a say Polycom haven’t. here. were lot are because of not the guess, bit similar

with profitability, ability for terms In and say, costs confident and is no company. know, the our still to line expectations in what our were. you overall of just there surprises we I’d combined are There integrate it’s reduce in

David Eller

Okay.

you can of as Polycom cash debt of of question. kind June balance Any us and change the XX? housekeeping Another give

Pam Strayer

information. that No, releasing no, going we not be are to

David Eller

could about much give us you in Okay. And thoughts is after on combined other kind How talk just in much can deal, the any And you basis, have a how idea then, manufactured China? tariffs, to products a potential an turning little tariffs? Mexico? of for on your you bit

Joe Burton

we One would really products say I globally. our quite thing is, source

some have Plantronics but of course in on world overall do as around well. a many of Mexico. We exposure the sourced some other products to in the thoughts countries have We amount to tariffs Any substantial the being China, Pam?

Pam Strayer

is all looking is list point. the implementation to of timing, rates on I the Yes, going we final open depend products, at at specific this. this impact the think which Obviously, are and

we alternatives at our looking We prepare and chain. supply are watching for it are it, carefully to in

I us facility that think impact we position we a reduce because utilizing of are manufacturing potentially the manufacturing more good allow facility us have some by in It to does there. in to of a Mexico.

guidance there now. no So, right

are We it. watch to continue going to

David Eller

input could cost, you if pressures it foreign affects then, And exchange, those other factors going of be whether inflationary talk that the tariffs, of logistics, might about model of other kind outside just transportation, forward? any

Pam Strayer

just so, let jolt Sure, couple a a minute. just of me down notes for

quarter. the is to of increasing, June in little cost, going bit costs impacting MLCC going also Polycom couple market. that going the that’s is be in Plantronics dynamics there this a on So, forward. there There impacted It’s are are a capacitor

something past combined on was that’s bit expected for forward. to bit a that’s going a quarter, a that’s as weigh So company stabilize think FX Plantronics I gross favorable, going but our to margins a going In this bit more. forward

am and so on They are the not we the time place expecting head of of significant a program. from in ourselves FX. to are our forward. impacts a in little top do Polycom little So, not my I we get need currently that of going bit get trends to Those off terms big across. are need time things protect hedged to hedge We like normal FX

Joe Burton

the in just think consumer that’s well-known FX shortage industry. electronics everybody virtually that, and the I MLCC hitting

David Eller

of the of insight you us should on the and that side, next items any questions prior the we any recently, the of think consumer could from that was through kind on about forward those model Polycom into question or last of talked one prior be be about and you strength from thinking quarter. December of kind then, there do anomalies as pull of we Could kind other the gaming you business, QX, me, any kind September one-time are then, QX kind And of from give year quarters? two out quarters

Joe Burton

the including minimum. said question, same curve this seems in a continues us pull and that watch gaming for with Starting believe is industry the a time. Certainly, is the for you this couple strong, gaming quarters that gaming the likely as the forward. imagine at not everyone in to certainly might That shape everyone of to next business gaming phenomenon. others the demand of the the recently remain Clearly, announced have around to

our this quarter, So I additional this actual don’t had is think expect we Christmas I that quarter, demand.

to good tea quarters we out are the else, look a couple should really road. that’s next peer of couple of gaming So season. figure holiday leaves and post the the happens trying over everybody Like quarters. into what But down

Polycom next have couple have others. nor anomalies. particular last They are pretty words, stay than quarter negative anticipated the They there particularly any strong wildly In neither particular no over not On there linear. And unusual other a they do don’t any quarter quarters. ones seasonality. effects that’s positive side, or were the stronger over the of

David Eller

Thanks right. the All questions. taking for

Joe Burton

you David. bet, Yes,

Mike Iburg

next Operator, question.

Operator

from line the from Mr. Please And Sidoti. question. Burns of a coming follow-up your question Greg as

Greg Burns

your wanted for particularly, be the I is to just to get a is sense cash on what's what’s of view this year, your the on to be, this and where cost costs of cash synergy view CapEx going for going the flow the year?

Pam Strayer

first. answer Greg, your take to there. CapEx, questions Yes, me one On that try I’ll let

between be are million percent $XX I a expectation where expenditures. going think low for as situation year. company, be a a we still to million somewhere in My the than up combined CapEx will capital end $XX on going of in to similar revenue it’s and

about the flow. for forecast And, was that… question cash other Your

Greg Burns

The cash cost.

Pam Strayer

been significant cash take hard and cost, how those it’s plans working are to after size, the can to yes, an of cost on detailed the suggest while synergies, that are cash could Once some dollar-for-dollar – a combined we give going the working the integration I’ll now the just we will be to synergies into underpin that you company now. going end much costs know that forecast really be. by what don’t million runrate for starting benchmarks the on that synergies. to insight some plans. thanks. think a be But we’ve are right of sorry, we $XX cost of longer, looked able more get those you Oh, to for as a at on have detailed with The it’s pretty much our I I spend we’ve

Greg Burns

Okay. And, the gaming? is what of percent business consumer

Pam Strayer

- of XX% gaming. to It XX% consumer has right with it’s grown total to – revenues and be gotten now, certainly over time of about XX%

Greg Burns

Is on declining? market. growing, any what’s – that with competitive on there in going And, update on What’s at the improved Has all? Okay. positioning going there? your stereo

Joe Burton

I think the stereo our were of also margins. a to stated as a refreshing products ago, more both earnings have and calls we process of in competitive set attractive improve couple to we of portfolio

second here towards to As the of our the the completed holiday we begin tilt load half for year, in we’ve now. refresh

are We for have a set very yet back cautious. ready refreshed of fully products season and but beat we our go holiday the to optimistic,

next point. this the see to has for improved a think show at hand will us, we have what So, but quarter much we we

Greg Burns

to consumer lower view Okay. your XX%? roll the of much And changed the rest you when still are relative target is to Or looking your line, how to that the you gaming the margin model XX% they down operating margins, then, achievable? And that have at segment? on of

Pam Strayer

couple to our will a as what company don’t have - On expect increase model. gaming of But a combined some overall, royalties royalties change we I The of couple prepared to the are some on be. you a look gaming right airfreight headsets basis long-term the operate, operating I’d it added now. going airfreight target the is points over at so, down to also long-term quarters Yes, and that cost model of a the XXX way. before gaming as margins, take year-over-year. company, essential of for margins. to fresh it to that lock a a exclude But again, questions I well operating brought if some going I’d it there. combined the the attached did margins and model, to like in we

impact towards be to headsets gaming expedited additional which costs, in with gross total on consumer And but that be our to freight. product mix do tend you than royalties also basis the lower right margins. points gaming margin the the exclude estimating headsets But, enterprise. shift other when were line we XXX includes, and So, about

Joe Burton

it little margins that’s is bit actually our our model I this portfolio has nicely. gaming supports makes mixed fully Yes, a what tough that reasonable think very Pam. It quarter, quite

a bit down of to We our this sold when then them, headsets are which of the victim little we quarter a brought of anticipated than own profitability success airship bit. gaming and had had a we more really dramatically bunch

the maintain well that thought holiday we and be the our various crucial was to for season. relationship However, resellers with positioned

Greg Burns

in your that then, great. percent contact lastly, Okay, business, to centers? is And tied headset business of what

Joe Burton

I’d breakdown UC to to – hook like the of those it a it is – how or years. is USB. PC, newer business what to business between or telephones The always core our which We centers. to that of more tell tends a It’s a meaning core is in our which percent modern say the about to have what of parity, hook slow with number to a two percent smartphone things for What connection is has couple that. much know we contact been of of really detail some decline level impossible tied tablet and business really to tends over is approximate of Bluetooth hooks been

the those continues is percent you to businesses becoming to far it But tell, of the smaller what Impossible same as has really as to of precisely quarters take point UC a center? two off. but it proportionately where business about are for While contact number as the year-over-year XX% the is growing in see been now size.

Greg Burns

thank you. Okay,

Joe Burton

Yes.

Mike Iburg

Greg. Thanks,

Operator

again the Iburg hand will over Okay, Mike to thank for Mr. remarks. you. closing call I

Mike Iburg

We Plantronics’ Thank call. quarter second on Conference you Call. Fiscal next for Earnings forward XXXX Thank results to our our today Thank Quarter us you, for Liddy. joining reviewing you. look First

Operator

for conference today's concludes This participating. Thank you call.

disconnect. now may You

Plantronics (POLY) 10 Aug 182019 Q1 Earnings call transcript