PLT - Earnings call transcript Q2 2019

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Operator

Good afternoon, my name is Jerome and I will be your conference operator today. At this time, I would like to welcome everyone to the Plantronics Q2 FY 19 Earnings 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. [Operator Instructions] Thank you. Mr. begin may you Iburg, your conference. Mike

Mike Iburg

of and Jerome. for the Safe you, name President Securities Mike and statements, Investor and Welcome uncertainties such Burton, Pam which are year Vice to call conference is and under President recent Relations Act the forward-looking Litigation and discussed Private are of Head XX-Q, release. the Plantronics' includes results Harbor The today presented CEO; fiscal of related Iburg, me second information Plantronics' statements My today Joe The on Plantronics XXXX. Thank provisions joining risks are Strayer, XX-K XXXX. Reform quarter our press Executive made to today's and fiscal detailed of CFO. and most

the GAAP the We revenue of adjustments revenue. with along guidance impacts to providing accounting purchase are

on is results. past basis However, provided a other to a all comparable that period manner non-GAAP is guidance in

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

impact GAAP. diluted the were acquisition under per include share Polycom margin have section at GAAP margin $X.XX. quarter the purchase our was GAAP year call results the press XXXX GAAP Relations time gross XX.X% net made $XXX at our results and earnings earnings of corporate our available US which second the Plantronics' a on these with was is We was million. XX.X%, accounting in release, today's along revenues Investor GAAP investor.plantronics.com. with US GAAP measures Plantronics' website negative of of operating These adjustments reconciled recording GAAP negative fiscal of

which purchase in today the table outlining were non-GAAP revenue release results. impact accounting of earnings a included includes our Our adjustments,

believes of have results management the adjusted year regarding for period comparative set at impact combined period for and that meaningful our arrive performance. provides supplemental prior We current to a information revenue this

press I restructuring, adjustments. intangibles, accounting Combined period, year the purchase compared comparative release per of operating results to discrete was guidance turn provided accounting. the With these earnings margins that margins a prior issued for Actual be respectively. in tables we XX.X% unknown accounting this Please charges the time and XX.X% million August of providing at comparative with tax past time, adjustments, in impact fiscal acquisition our on for the Polycom will reconciliation adjustments associated in refer results. will Joe. specific that to from year and and The we second quarter results the different and combined revenue for acquisition-related revenues The $XXX impact consists XXXX, the difference to fees, is comparable be with between in are guidance of details. net quarter but earnings $X.XX compensation were here quarter. last all second combined at non-GAAP of this comparative manner of stock now our diluted noted is X, in call under period. for the tax GAAP compared the made will from our adjustments our company During GAAP due to we today XX.X% share million Combined of XX.X% September additional and quarter provided the results when this period call combined results. The primarily comparative over comparative gross for that $XXX XXXX any was and earnings prior net amortization, of net recorded combined the

Joe Burton

consolidated we opportunity the to report Plantronics the remarks milestone provide Polycom of Q&A. Good to and for before financial today. afternoon, combined everyone, wanted us open few we another quarter Today and results. thanks I for to as this call joining marks our a first take

and XX.X%, to are combined million, comparative of and net which margins accounting, revenues of our of purchase combined impact even results with $XXX a margin we gross achieved. to that demonstration that solid our of model delivered we per quarter of for yet have, in Looking cost the share revenue very the $X.XX, available be the operating adjusted of the leverage our is for results, first majority XX.X% earnings synergy

results to and as of will this fluctuation on be there through combination. we the deliver organizations, targets, the inherent overtime deliver some the expect process go our Although our two see in improvement as integrating of synergy potential we we

a through Now that that take it we we a core makes and be walk few market operating our are and sense and will successful. think in why market, believe reporting our combined to so I minutes we company, as strategy

past, the broad but billion we the flexible now video with of by of in a a past, participate addition we annual targeting in $X were the behind market, and of force providing the driving collaboration unified collaboration endpoints address voice, of have $XX In overall intelligent headset the Polycom and communications discussed we've market annual endpoints opportunity combined transition to to enterprise set As we market over portion range broad in business of the headset this the The and the professional and market, customer. limited approximately workspaces. billion and over growing $X of that XXXX billion X%. opportunity, unified to is rate open communications growth

the massive We environment. and and work innings collaboration are in flexibility more technology a productivity enterprise improve transition. Businesses want employees while their of early want in utilization, to

occur not of need desktop, at offices mobility only necessary converted also video this needs the the stokes traditional the as collaboration work workstation common The to rooms the in from is the flexible to fixed and deployments this utilizing the always-connected same at voice cloud-based be done transition, any work conference infrastructure this be by telecommuting whether tools, and worker work or had headsets have solutions. With voice hoteling, the any and As to across and is and the for environment. rooms past. location employees transition anywhere the and cost, tools while the is transition huddle today's the and transitioning untethered being being to denominator becoming have are from design able the a PBX job connected or reliability traditional for superior desk are for but a rapid hot past technology with connectivity replaced the their the traditional be critical. IP and can they or a spaces This get or common. reduces mobile into small pace yet flexibility setups, they hoteling need result, toward where cube/office is always-connected phones provides on in open on more road, need The software-based

thirdly, management We two, believe all on the based top analytics they have seamlessly industry market tied Number provisioning collaboratively number audio, positioned endpoints, be And tools insights that had with to and our provider We services. with meet communications world-class to tech content the ourselves provide needs. source and solutions, enhanced in headsets, and their software virtually conferencing, analytics the is going success of audio of infrastructure. a together any providing interoperating collaboration have never leading of and across working of integrated desk interoperate any as ability portfolio integrated before. infrastructure. and spanning the that through phones, partners management and all on, and single our virtually We endpoints video back-end unparalleled one, the offering intelligent all offer platform with video

with We leveraging the these the high-growth Over better combined let's quarters the for in that several from the solutions whole for than and opportunities bring and and questions. the Polycom sum floor believe will Thank market old for you specific really call, to thesis market. both us the today UC&C next again we combined will is world-class Plantronics the adage open parts. of our validate solutions greater confirm technology joining targeting this that together

Operator

Mr. a Company. [Operator the coming Instructions] have of We Burns Sidoti Greg from & question of line

Your open. line now is

Greg Burns

afternoon. good Hi,

back So then you the just variances and look us to all there between midpoint? Can with the where posted guidance numbers? wanted in you reiterated forward $X.XX, that to September through and third driven walk of us so those gave kind at looks was or the bridge projected to $X.XX it's we that, to between like EPS, to Thanks. guidance just early you the can the you down when of just the it bridge start the for quarter step $X.XX $X.XX quarter like around

Pam Strayer

Yes, hi this is Greg, Pam.

So to on we line EPS, bridge line, the of I on the would first top point top did on guidance. our midpoint the to overachieve relative

line. that bit our in in OpEx think little forecasted in in I impact forecast, below was overachieve on EPS really year helped operating that us expenses the decline on came but being on EPS quarter. guidance, the in or a really helped the was the what So biggest

Greg Burns

the quarter, little at in that looking is up quarter, stepping back then And Okay. to the third third going case? the OpEx is a be bit

Pam Strayer

Yes.

OpEx, So like said, bit was I than lower think we expected. I quarter, in the current a

As you our have more into size, see integration as plans. to are, imagine integration coming going it and of the pullback X can what quarter December together the to starting people finalizing bringing a like companies spend, you're plans plans, what's specific on as we're of similar of now out going

strategic we come area. sales in changes offset of overall do partners going to R&D business. lower. expect for an of NRE will little a December to increase that the expenses. some spend slightly fourth Number back that that be receipts have have to in and quarter we of in of a that that some are quarter higher help one, get that of quarter expense of it is from area going some saw do December is impacting We the We the spend. bit Polycom Some because as couple commissions, there expect operating R&D We're

going were be to on then on so And plans our would put just bit. going continue hiring that connections a And hold. up we're

that but that's a as So synergies little back. we why quarter is we'll be and to but on there that do you in realized coming some gives have coming headcount of flavor added, [indiscernible] the will color bit will be that be well OpEx. December seeing a OpEx of

Greg Burns

realization Okay. year in What 'XX? the the I do for full quarter guess, you third of, project in synergy be terms and may

Pam Strayer

Yes.

can't of I comment on quarter. tell couple things full the about you So will a I know the I year,

quarter of September of million $XX in We the in execute So the about $X the synergies synergies tune actual September to realize rate run in to were million. able we quarter on synergies. did

in run just to due in December the December that and that we'd right on quarter, execution. synergy quarter in execute in the I had will the track million back our much still million benefit to December, for been very December on we get we So plan. are $XX very of synergies target timing September actions. Actual quarter, synergies from low, with In the December the realized against are and expect rate projecting plan, $X we're that however, that

from but So benefits not actions actions. that until in be about March that million, should would see going the $X we're next December to $X see quarter December the from then we to quarter million

synergies. So on seeing of $XX we're the to following benefits in million target would as get our the still our right rate we're first we We're the of from very run to confident with and year expect plan the end acquisition. them by

Greg Burns

touch business? in the posted and you plans perfect. kind And could are Okay, could first you what then competitive I you decline the video, it then declines stabilize grow on think Do to that guess, stabilize And in the you look business? that video your of video? like maybe market? in What's maybe, landscape the XX%

Joe Burton

on in this Greg, jump Yes. I'll that. Joe, is

the about It So that endpoints from really, extraordinarily video really decline North platform and in going things. One video Asia-Pac. came business the on in decline in the temporary, in in one video decline The came X still business. quarter X America business. good feel a from we and in things but this planned

which and talk about the the the course important for some in us continue before the customers, have acquired first existing business strategic combined important markets, Company. no time. infrastructure MCU, as that a to company platform. focus in and is closet longer them, that Platform a Polycom, to both terribly is So let's going the we It's sits then down of decline to wiring of we over our expected a but it's decline couple of

endpoints platform So, of Asia in there's video in a really decline as couple part big in there. was North expected a of items America, in it. Declines

well on and share bit with temporarily this CAGR from frankly Nobody what we still to Microsoft a expect First of This is Teams. growing is is, stealing evaluate they on many what's we're that a the seen a We've story impacted much on to from believe customers five-year and blip to absolutely Skype capitalize that able great slowing selling for headsets this low-single-digits Customers before. as going very be the we a a all, portfolio products we video, are Teams and us. but partners in in is we're in little of as market. being the opportunity. that got market little deployment respects, Business transition from on little well, hearing bit their bit have our are and a

so major technology to a others to puts number with, up go major and see little that part little we Avaya softness number or be quarter excellent was in and little one headset little see we a Microsoft, there tend were in of expecting the slightly it We release where flat Cisco, it's there's that a softness the decline. it bit a we you As in another, on to in market goes exacerbated. that happens of although for see reevaluation growth partners, the the it or two just begin a video bit to from bit only

audio included clip. in plug-and-play selling where number our the it Another Trio where frankly, in currently room is important this high really driven by conference and is a the demand. expansion plug-and-play we used conferencing frequently in and a product is the of This market solutions product, growing and over fantastic. But is dynamic just I'll well rates really being being then the the some rooms XXX these room in both in revenue which market actually and solution smaller and by the XX% video rooms. evidenced is, smaller video going on done above conferencing solution really the where piece is our Trio it's are for all-in-one and are emerging an of audio as nice it's Fortune of small video other there into solutions that's on be It's

video to small, endpoints, digits kind mid-single video very our if reclass decline to So Trio would growth, much of you better. part be it look would were low in the into video that's be and of

transitions. very we just some and So in it in good phenomenon see still to this a industry video, long-term related good feel very we about temporary growth participating about the

Greg Burns

Okay. thanks. Great, back in I'll the queue.

Operator

question next of Mr. is the from Eller [Operator line Instructions] Your coming Fargo. Wells of David

Your line is open. now

David Eller

for guidance afternoon. Hi, good for organic pro low-single-digit taking the companies. looks combined revenue Thanks implies the forma It question growth like

of a Plantronics what's decline kind growth was of QX from a of little on Is For mostly bit Plantronics kind Polycom? this for the of the quarter Polycom. of guidance, kind it is driven the products on side with flattish that of kind embedded in

Pam Strayer

Polycom go deeper the little about categories in big movement be what by the the can this quarter. in bit and to in some I Yes, more talk of down to say, to growth going all, a similar voice a offset level first the business individual video seen we've is declines

we see suggested. you is that December dynamic September the again, So did as continuing into in

VXX really in December, received be little growth to Although well is and be launched be we've to we so going phones the that better we got we've voice market, a up expect expecting bit to there. voice that are in the new

year-over-year. side, then, expecting Plantronics the the we'll we of growth expect around UC the saw we're low-double-digit headset September continue the there, the in quarter consumer we growth on growth side consumer, kind roughly to and in year-over-year see what course of then On

that all growth yes, X% comparable So, roughly nets on out year-over-year a to basis.

David Eller

drove headsets, you remind maybe core in the called decline. that going that what you a quarter and been trend's was and legacy low-single-digit few the if quarters then the expect forward? And Great. last improvement it Can that us out only you what

Joe Burton

numbers, to I'll of then and start if things. of strategic wants the great. add with Pam couple a that's kind Yes,

phones, and both So lot with that some we what headsets and the with are Pam, seeing how legacy of A demand some a market, hook type driving we've along has UC big in desk other for office was Frankly, growth. typically? to headsets the whatnot UC the contact there the the which again core once pre in proprietary and of stronger in good been legacy phones, stronger headsets in much this reemergence centers been quarter a the out deals saw both Avaya actually what bit a other decline centers. contact nice

Pam Strayer

It's couple high mid decline last roughly our like been decline to single-digit -- it's of X% over around years.

Joe Burton

thought, That's is X% X% what kind decline what to been of I seeing. we've

be So of do that slight seeing a surprise, flat a course back growth even trend to up down. around still pleasant we was the expect but bit

David Eller

foreign currencies about helpful. we headwinds, maybe of look very might kind year, full That's thinking us large out percentage can your then you And if what of headwind the for just breakdown that and Okay. exchange the be? remind

Pam Strayer

Yeah.

So, the We're September quarter significant expecting a it impact have December a impact in as significant on didn't currency not have in revenues. well. to

quarter a say business, our course, which but currency some do probably hedge dollars. Canadian fourth protect is memory, Just major in to so are of going British majority dollar, currencies euro our I'd dollar U.S. revenues The on quite think us euro, the the does and largest pound, bit. you remind but program, we next Australian I from hedging of do is around volatility of from is layered XX%. we that XX%, I'm in dollar U.S.

gives that you some So topic.

David Eller

question tariff you absorb? able the pass and customers of would basis could is to or tariff on a front, much impact effectively full price talk if go have to year increases XX% kind how me, about then to might of on how kind to you you for maybe if be the able into have to And estimate Right. effect, on last that any are

Pam Strayer

Street, the numbers XX%. the was shortage. target At Wireless taken due when that's we potential timeframe, of the capacitor mid-September were impact that some as gross off impact we on Shortly so MLCC tariffs for that positive a kind time over devices we communicate for after an share list went for well operating about talking that we announcement out CapEx as potential XX, ranges us. to that, Bluetooth the were with margin Yes, did to including long-term communication and tariff XX% there that very of nice the September

some tariffs million result, activities, year. dropped a as it estimating potentially So to $XX couple year to to we started but we with it's a back an impact things, pleased and a now any plans Even if we're of and us our does some now impact to prior a that mitigation on were come change. not is it's where dollars million there and had us, low, mitigation just that's right

Joe Burton

that, perfect answer, supply very is On as manufacturers, place chain outside with Mexico, of both strategic top of gives this another our Pam, well contract a at our just both but manufacturing flexible asset and Asian us flexibility. in level really China where and as Plantronics China,

move Now, in daily us imagine you are you products do basis, a and assembly, and final can't the can market think it a those advantage us on real well way. that it but of some move plans under level to of that, that gives just better around flexibility frankly we mitigate for a is

David Eller

for you questions. the taking thank Great,

Operator

There are no further questions at this time. Please continue, sir.

Joe Burton

Thank concludes our for QX forward like with results that look us early So year. you. to I'd you fiscal discussing everyone today thank and earnings joining conference call. today's next to we

Operator

This concludes call. today's conference

disconnect. You you. Thank may now

Plantronics (POLY) 10 Nov 182019 Q2 Earnings call transcript