Form 8-K PLANTRONICS INC /CA/ For: Oct 29
Poly Announces Second Quarter Fiscal Year 2021 Financial Results
Hybrid Work Drives Record Enterprise Headset Revenue;
Remote Education Contributes to Record Video Shipments
SANTA CRUZ, Calif., - October 29, 2020 - Poly (NYSE: PLT) today announced second quarter results for the period ending September 26, 2020.
Highlights for the second quarter include the following:
•Poly posted record Enterprise Headset revenue and unit shipments, and shipped a record number of Video endpoints resulting in the highest Video revenue since the Polycom acquisition.
•The Company announced Poly Sync, a new family of smart, USB and Bluetooth speakerphones with advanced voice tracking, noise block technology, and virtual assistant integration.
•Poly continues to offer the broadest range of Microsoft Teams and Zoom certified endpoints for hybrid work, whether at home or in the office. This quarter, Zoom certified the Poly Sync 20 personal speakerphone.
•The Company retired $37M of debt and ended the quarter with $228M in cash and short-term investments.
"Poly's products are ideally suited for the hybrid work-from-home and work-from-anywhere trends, and we are pivoting aggressively toward this opportunity,” said Dave Shull, Poly President and Chief Executive Officer. “It's all about execution and delivering for our customers and partners. We are hyper-focused on turning around the company.”
“The underlying strength in the business gave us confidence to resume retiring debt,” said Chuck Boynton, Executive Vice President and Chief Financial Officer. “We plan to capitalize on the market growth in headsets and video to drive higher revenue, improve our profitability, and accelerate de-levering.”
($ Millions, except percent and per-share data)1 | Q2 FY21 | Q2 FY20 | YTD FY21 | YTD FY20 | |||||||||||||
GAAP Revenue | $411 | $462 | $767 | $909 | |||||||||||||
GAAP Gross Margin | 44.0 | % | 44.6 | % | 44.0 | % | 46.0 | % | |||||||||
GAAP Operating Income / (Loss) | $7 | ($6) | ($50) | ($34) | |||||||||||||
GAAP Diluted EPS | ($0.33) | ($0.65) | ($2.17) | ($1.80) | |||||||||||||
Cash Flow from Operations | ($1) | $25 | $40 | $34 | |||||||||||||
Non-GAAP Revenue | $415 | $470 | $776 | $930 | |||||||||||||
Non-GAAP Gross Margin | 48.9 | % | 52.4 | % | 49.4 | % | 54.1 | % | |||||||||
Non-GAAP Operating Income | $59 | $81 | $96 | $167 | |||||||||||||
Non-GAAP Diluted EPS | $0.93 | $1.24 | $1.27 | $2.55 | |||||||||||||
Adjusted EBITDA | $69 | $93 | $117 | $191 |
1 For further information on supplemental non-GAAP metrics refer to the Use of Non-GAAP Financial Information and Unaudited Reconciliations of GAAP Measures to Non-GAAP Measures sections below.
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Results Compared to July 28, 2020 Guidance
Q2 FY21 Results | Q2 FY21 Guidance Range2 | |||||||
GAAP Net Revenue | $411M | $346M - $386M | ||||||
Non-GAAP Net Revenue | $415M | $350M - $390M | ||||||
Adjusted EBITDA | $69M | $45M - $65M | ||||||
Non-GAAP Diluted EPS | $0.93 | $0.25 - $0.65 |
2The non-GAAP revenue guidance range shown here excludes the $4.2 million impact of purchase accounting related to recording deferred revenue at fair value at the time of the acquisition.
Business Outlook
The following statements are based on the Company's current expectations, and many of these statements are forward-looking. Actual results are subject to a variety of risks and uncertainties and may differ materially from the Company's expectations. Please refer to the Forward Looking Statements Safe Harbor section of this press release below.
The following represents the expected range of financial results for the fiscal third quarter of 2021 (all amounts assume currency rates remain stable):
Q3 FY21 Guidance | |||||
GAAP Net Revenue | $417M - $447M | ||||
Non-GAAP Revenue | $420M - $450M | ||||
Adjusted EBITDA1 | $70M - $80M | ||||
Non-GAAP Diluted EPS1,2 | $0.85 - $1.05 |
1 Q3 Adjusted EBITDA and non-GAAP diluted EPS guidance excludes estimated intangibles amortization expense of $30.7 million. With respect to adjusted EBITDA and diluted EPS guidance, the Company has determined that it is unable to provide quantitative reconciliations of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures with a reasonable degree of confidence in their accuracy without unreasonable effort, as items including stock based compensation, litigation gains and losses, and impacts from discrete tax adjustments and tax laws are inherently uncertain and depend on various factors, many of which are beyond the Company's control.
2 EPS guidance assumes approximately 42 million diluted average weighted shares and a non-GAAP effective tax rate of 11% to 13%.
Conference Call and Earnings Presentation
Poly is providing an earnings presentation in combination with this press release. The presentation is offered to provide shareholders and analysts with additional detail for analyzing results. The presentation will be available in the Investor Relations section of our corporate website at investor.poly.com along with this press release. A reconciliation of our GAAP to non-GAAP results is provided at the end of this press release.
We have scheduled a webcast to discuss second quarter fiscal year 2021 financial results. The webcast will take place today, October 29, 2020, at 2:00 PM (Pacific Time). All interested investors and potential investors in Poly stock are invited to join. To listen to the webcast, please access the webcast link from our Investor Relations website at investor.poly.com.
A replay of the webcast will be available shortly after its conclusion and can be accessed from our Investor Relations website at investor.poly.com.
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Use of Non-GAAP Financial Information
To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, and non-GAAP diluted EPS. These non-GAAP measures are adjusted from the most directly comparable GAAP measures to exclude, or include where applicable, the effect of purchase accounting on deferred revenue, charges associated with the optimization of our Consumer product line, stock-based compensation, acquisition related expenses, purchase accounting amortization and adjustments, restructuring and other related charges and credits, impairment charges, rebranding costs, other unusual and/or non-cash charges and credits, and the impact of participating securities, all net of any associated tax impact. We also exclude tax benefits from the release of tax reserves, discrete tax adjustments including transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We adjust these amounts from our non-GAAP measures primarily because management does not believe they are consistent with the development of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our historical and long-term target operating model goals as well as our performance as a combined company. We believe presenting non-GAAP net revenue provides meaningful supplemental information regarding how management views the performance of the business and underlying performance of our individual product categories. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation of, or as a substitute for, or superior to, net revenues, gross margin, operating expenses, operating income, operating margin, net income or EPS prepared in accordance with GAAP.
Forward Looking Statements Safe Harbor
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our intentions, beliefs, projections, outlook, analyses or current expectations that are subject to many risks and uncertainties. Such forward-looking statements and the associated risks and uncertainties include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 (coronavirus) outbreak, and its impact across our businesses, our operations and global supply chain, including (a) our expectations the virus has caused and will continue to cause an increase in customer and partner demand for our product lines, including increased demand in collaboration endpoints, and our ability to design new product offerings to meet the change in demand due to a global hybrid work environment; (b) our inability to source component parts from key suppliers in sufficient quantities necessary to meet the high demand for certain product lines, including our Enterprise Headsets; and continued uncertainty and potential impact on future quarters if these sourcing constraints continue and/or price volatility occurs, which could continue to negatively affect our profitability and/or market share; (c) expectations related to our voice product lines, as well as our services attachment rate for such products, which have been, and may continue to be, negatively impacted as companies have delayed returning their workforces to offices in many countries due to the continued impact of COVID-19; (d) expectations related to our ability to fulfill the backlog generated by supply constraints, to timely supply the number of products to fulfill current and future customer demand, including expectations that our manufacturing facility in Tijuana, Mexico will continue production at the capacity necessary to meet such demand; (e) the impact of the virus on our distribution partners, resellers, end-user customers and our production facilities, including our ability to obtain alternative sources of supply if our production facility or other suppliers are impacted by future shut downs; (f) the impact if global or regional economic conditions deteriorate further, on our customers and/or partners, including increased demand for pricing accommodations, delayed payments, delayed deployment plans, insolvency or other issues which may increase credit losses; (g) risks related to restrictions or delays in global return to worksites as a result of COVID-19, which continues to impact our employees worldwide and our customers, which has negatively impacted our voice product lines for the quarter, and restricted customer engagement; and (h) the complexity of the forecast analysis and the design and operation of internal controls; and (ii) our belief that we can manufacture or supply products in a timely manner to satisfy perishable demand; (iii) expectations related to our customers’ purchasing decisions and our ability to pivot quickly enough and/or match product production to demand, particularly given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges; (iv) risks associated with significant and abrupt changes in product demand which increases the complexity of management’s evaluation of potential excess or obsolete inventory; (v) risks associated with the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; (vi) risks associated with the potential interruption in the supply of sole-sourced critical components, our ability to move to a dual-source model, and the continuity of component supply at costs consistent with our plans, which has negatively impacted in the quarter and may continue to impact our ability to timely supply product to meet our customer demand; (vii) expectations related to our services segment revenues, particularly as we introduce new generation, less complex, product solutions, or as companies shift from on
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premises to work from home options for their workforce, which may result in decreased demand for our professional, installation and/or managed service offerings; (viii) expectations that our current cash on hand, additional cash generated from operations, together with sources of cash through our credit facility, either alone or in combination with our election to suspend our dividend payments, will meet our liquidity needs during and following the unknown duration and impact of the COVID-19 pandemic; (ix) expectations relating to our ability to generate sufficient cash flow from operations to meet our debt covenants and timely repay all principal and interest amounts drawn under our credit facility as they become due; (x) risks associated with our channel partners’ sales reporting, product inventories and product sell through since we sell a significant amount of products to channel partners who maintain their own inventory of our products; (xi) our efforts to execute to drive sales and sustainable profitable revenue growth, to improve our profitability and cash flow, and accelerate debt reduction and de-levering; (xii) our expectations for new products launches, the timing of their releases and their expected impact on future growth and on our existing products; (xiii) our belief that our Partner Program will drive growth and profitability for both us and our partners through the sale of our product, services and solutions; (xiv) risks associated with forecasting sales and procurement demands, which are inherently difficult, particularly with continuing uncertainty in regional and global economic conditions; (xv) uncertainties attributable to currency fluctuations, including fluctuations in foreign exchange rates and/or new or greater tariffs on our products; (xvi) our expectations regarding our ability to control costs, streamline operations and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; (xvii) expectations relating to our quarterly and annual earnings guidance, particularly as economic uncertainty, including, without limitation, uncertainty related to the continued impact of COVID-19, the macro-economic and political climate and other external factors, puts further pressure on management judgments used to develop forward looking financial guidance and other prospective financial information; (xviii) expectations related to GAAP and non-GAAP financial results for the second quarter and full Fiscal Year 2021, including net revenues, adjusted EBITDA, tax rates, intangibles amortization, diluted weighted average shares outstanding and diluted EPS; (xix) our expectations of the impact of the acquisition of Polycom as it relates to our strategic vision and additional market and strategic partnership opportunities for our combined hardware, software and services offerings; (xx) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our position in the market, including risks associated with the potential failure of our UC&C solutions to be adopted with the breadth and speed we anticipate; (xxi) our belief that the increased adoption of certain technologies and our open architecture approach has and will continue to increase demand for our solutions; (xxii) expectations related to the micro and macro-economic conditions in our domestic and international markets and their impact on our future business; (xxiii) our forecast and estimates with respect to tax matters, including expectations with respect to utilizing our deferred tax assets; (xxiv) our expectations related to building strategic alliances and key partnerships with providers of collaboration tools and platforms to drive revenue growth and market share; and (xxv) our expectations regarding pending and potential future litigation, in addition to other matters discussed in this press release that are not purely historical data. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements.
We do not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise.
For more information concerning these and other possible risks, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 8, 2020 and other filings with the Securities and Exchange Commission, as well as recent press releases.
About Poly
Poly is a global communications company that powers meaningful human connection and collaboration. Poly combines legendary audio expertise and powerful video and conferencing capabilities to overcome the distractions, complexity and distance that make communication in and out of the workplace challenging. Poly believes in solutions that make life easier when they work together and with our partner’s services. Our headsets, software, desk phones, audio and video conferencing, analytics and services are used worldwide and are a leading choice for every kind of workspace. For more information, please visit: www.poly.com.
Poly and the propeller design are trademarks of Plantronics, Inc. All other trademarks are the property of their respective owners.
INVESTOR CONTACT: Mike Iburg Vice President, Investor Relations (831) 458-7533 | MEDIA CONTACT: Edie Kissko Vice President, Corporate Communications (213) 369-3719 |
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PLANTRONICS, INC. | |||||||||||||||||||||||||||||
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |||||||||||||||||||||||||||||
($ in thousands, except per share data) | |||||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
September 26, | September 28, | September 26, | September 28, | ||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Net revenues: | |||||||||||||||||||||||||||||
Net product revenues | $ | 347,677 | $ | 395,137 | $ | 639,135 | $ | 777,882 | |||||||||||||||||||||
Net services revenues | 63,292 | 66,572 | 127,554 | 131,594 | |||||||||||||||||||||||||
Total net revenues | 410,969 | 461,709 | 766,689 | 909,476 | |||||||||||||||||||||||||
Cost of revenues: | |||||||||||||||||||||||||||||
Cost of product revenues | 209,261 | 229,323 | 385,876 | 437,939 | |||||||||||||||||||||||||
Cost of service revenues | 20,962 | 26,315 | 43,735 | 52,820 | |||||||||||||||||||||||||
Total cost of revenues | 230,223 | 255,638 | 429,611 | 490,759 | |||||||||||||||||||||||||
Gross profit | 180,746 | 206,071 | 337,078 | 418,717 | |||||||||||||||||||||||||
Gross profit % | 44.0 | % | 44.6 | % | 44.0 | % | 46.0 | % | |||||||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||
Research, development, and engineering | 52,148 | 57,415 | 102,177 | 116,939 | |||||||||||||||||||||||||
Selling, general, and administrative | 115,605 | 148,419 | 232,250 | 312,027 | |||||||||||||||||||||||||
(Gain) loss, net from litigation settlements | — | — | 17,561 | (1,162) | |||||||||||||||||||||||||
Restructuring and other related charges | 6,170 | 5,847 | 35,500 | 25,372 | |||||||||||||||||||||||||
Total operating expenses | 173,923 | 211,681 | 387,488 | 453,176 | |||||||||||||||||||||||||
Operating income (loss) | 6,823 | (5,610) | (50,410) | (34,459) | |||||||||||||||||||||||||
Operating income (loss) % | 1.7 | % | (1.2) | % | (6.6) | % | (3.8) | % | |||||||||||||||||||||
Interest expense | (18,581) | (23,797) | (39,765) | (47,729) | |||||||||||||||||||||||||
Other non-operating income (loss), net | 1,366 | (625) | 1,592 | (292) | |||||||||||||||||||||||||
Loss before income taxes | (10,392) | (30,032) | (88,583) | (82,480) | |||||||||||||||||||||||||
Income tax expense (benefit) | 3,013 | (4,122) | (163) | (11,699) | |||||||||||||||||||||||||
Net loss | $ | (13,405) | $ | (25,910) | $ | (88,420) | $ | (70,781) | |||||||||||||||||||||
% of net revenues | (3.3) | % | (5.6) | % | (11.5) | % | (7.8) | % | |||||||||||||||||||||
Loss per common share: | |||||||||||||||||||||||||||||
Basic | $ | (0.33) | $ | (0.65) | $ | (2.17) | $ | (1.80) | |||||||||||||||||||||
Diluted | $ | (0.33) | $ | (0.65) | $ | (2.17) | $ | (1.80) | |||||||||||||||||||||
Shares used in computing earnings per common share: | |||||||||||||||||||||||||||||
Basic | 40,970 | 39,584 | 40,715 | 39,411 | |||||||||||||||||||||||||
Diluted | 40,970 | 39,584 | 40,715 | 39,411 | |||||||||||||||||||||||||
Effective tax rate | (29.0) | % | 13.7 | % | 0.2 | % | 14.2 | % |
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PLANTRONICS, INC. | |||||||||||||||||
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |||||||||||||||||
($ in thousands) | |||||||||||||||||
UNAUDITED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||
September 26, | March 28, | ||||||||||||||||
2020 | 2020 | ||||||||||||||||
ASSETS | |||||||||||||||||
Cash and cash equivalents | $ | 213,901 | $ | 213,879 | |||||||||||||
Short-term investments | 13,975 | 11,841 | |||||||||||||||
Total cash, cash equivalents, and short-term investments | 227,876 | 225,720 | |||||||||||||||
Accounts receivable, net | 239,479 | 246,835 | |||||||||||||||
Inventory, net | 183,636 | 164,527 | |||||||||||||||
Other current assets | 51,987 | 47,946 | |||||||||||||||
Total current assets | 702,978 | 685,028 | |||||||||||||||
Property, plant, and equipment, net | 150,348 | 165,858 | |||||||||||||||
Purchased intangibles, net | 403,110 | 466,915 | |||||||||||||||
Goodwill | 796,216 | 796,216 | |||||||||||||||
Deferred tax and other assets | 148,891 | 143,157 | |||||||||||||||
Total assets | $ | 2,201,543 | $ | 2,257,174 | |||||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||||||||
Accounts payable | $ | 136,463 | $ | 102,159 | |||||||||||||
Accrued liabilities | 373,458 | 373,666 | |||||||||||||||
Total current liabilities | 509,921 | 475,825 | |||||||||||||||
Long-term debt, net of issuance costs | 1,587,556 | 1,621,694 | |||||||||||||||
Long-term income taxes payable | 91,235 | 98,319 | |||||||||||||||
Other long-term liabilities | 157,836 | 144,152 | |||||||||||||||
Total liabilities | 2,346,548 | 2,339,990 | |||||||||||||||
Stockholders' deficit | (145,005) | (82,816) | |||||||||||||||
Total liabilities and stockholders' equity | $ | 2,201,543 | $ | 2,257,174 | |||||||||||||
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PLANTRONICS, INC. | |||||||||||||||||||||||||||||
SUMMARY CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | |||||||||||||||||||||||||||||
($ in thousands, except per share data) | |||||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
September 26, | September 28, | September 26, | September 28, | ||||||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||||||
Cash flows from operating activities | |||||||||||||||||||||||||||||
Net Loss | $ | (13,405) | $ | (25,910) | $ | (88,420) | $ | (70,781) | |||||||||||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||||||||||||||
Depreciation and amortization | 40,971 | 57,376 | 84,371 | 115,074 | |||||||||||||||||||||||||
Amortization of debt issuance cost | 1,320 | 1,361 | 2,660 | 2,722 | |||||||||||||||||||||||||
Stock-based compensation | 10,263 | 14,693 | 19,618 | 27,597 | |||||||||||||||||||||||||
Deferred income taxes | 3,113 | (15,657) | (4,056) | (45,067) | |||||||||||||||||||||||||
Provision for excess and obsolete inventories | 3,076 | 2,913 | 9,158 | 5,682 | |||||||||||||||||||||||||
Restructuring charges | 6,170 | 5,847 | 35,500 | 25,372 | |||||||||||||||||||||||||
Cash payments for restructuring charges | (11,374) | (5,291) | (24,459) | (22,949) | |||||||||||||||||||||||||
Other operating activities | (1,311) | 6,929 | (3,162) | 8,894 | |||||||||||||||||||||||||
Changes in assets and liabilities: | |||||||||||||||||||||||||||||
Accounts receivable, net | (30,287) | (17,667) | 7,627 | 3,778 | |||||||||||||||||||||||||
Inventory, net | (11,542) | (13,275) | (27,550) | (55,584) | |||||||||||||||||||||||||
Current and other assets | (9,428) | (6,146) | (5,945) | 9,352 | |||||||||||||||||||||||||
Accounts payable | 20,571 | (1,482) | 32,892 | 34,910 | |||||||||||||||||||||||||
Accrued liabilities | 11,789 | 13,099 | 23,025 | (31,694) | |||||||||||||||||||||||||
Income taxes | (21,391) | 8,427 | (21,002) | 26,260 | |||||||||||||||||||||||||
Cash provided by operating activities | $ | (1,465) | $ | 25,217 | $ | 40,257 | $ | 33,566 | |||||||||||||||||||||
Cash flows from investing activities | |||||||||||||||||||||||||||||
Proceeds from sale of investments | — | — | — | 170 | |||||||||||||||||||||||||
Purchase of investments | (130) | (155) | (238) | (806) | |||||||||||||||||||||||||
Capital expenditures | (5,444) | (4,753) | (10,881) | (9,260) | |||||||||||||||||||||||||
Proceeds from sale of property, plant, and equipment and assets held for sale | — | 2,142 | 1,900 | 2,142 | |||||||||||||||||||||||||
Cash used for investing activities | $ | (5,574) | $ | (2,766) | $ | (9,219) | $ | (7,754) | |||||||||||||||||||||
Cash flows from financing activities | |||||||||||||||||||||||||||||
Employees' tax withheld and paid for restricted stock and restricted stock units | (310) | (660) | (3,049) | (9,281) | |||||||||||||||||||||||||
Proceeds from issuances under stock-based compensation plans | 5,726 | 6,027 | 5,731 | 6,616 | |||||||||||||||||||||||||
Proceeds from revolving line of credit | — | — | 50,000 | — | |||||||||||||||||||||||||
Repayments of revolving line of credit | — | — | (50,000) | — | |||||||||||||||||||||||||
Repayments of long-term debt | (35,563) | (25,000) | (35,563) | (25,000) | |||||||||||||||||||||||||
Payment of cash dividends | — | (5,982) | — | (11,922) | |||||||||||||||||||||||||
Cash used for financing activities | $ | (30,147) | $ | (25,615) | $ | (32,881) | $ | (39,587) | |||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 1,321 | (2,298) | 1,865 | (2,292) | |||||||||||||||||||||||||
Net increase (decrease) in cash and cash equivalents | (35,865) | (5,462) | 22 | (16,067) | |||||||||||||||||||||||||
Cash and cash equivalents at beginning of period | 249,766 | 191,904 | 213,879 | 202,509 | |||||||||||||||||||||||||
Cash and cash equivalents at end of period | $ | 213,901 | $ | 186,442 | $ | 213,901 | $ | 186,442 | |||||||||||||||||||||
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PLANTRONICS, INC. | ||||||||||||||||||||||||||
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||||||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
September 26, | September 28, | September 26, | September 28, | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
GAAP Net revenues | $ | 410,969 | $ | 461,709 | $ | 766,689 | $ | 909,476 | ||||||||||||||||||
Deferred revenue purchase accounting1 | 4,237 | 8,524 | 9,319 | 20,683 | ||||||||||||||||||||||
Non-GAAP Net revenues | $ | 415,206 | $ | 470,233 | $ | 776,008 | $ | 930,159 | ||||||||||||||||||
GAAP Gross profit | $ | 180,746 | $ | 206,071 | $ | 337,078 | $ | 418,717 | ||||||||||||||||||
Purchase accounting amortization2 | 17,176 | 30,716 | 35,414 | 60,716 | ||||||||||||||||||||||
Deferred revenue purchase accounting1 | 4,237 | 8,524 | 9,319 | 20,683 | ||||||||||||||||||||||
Stock-based compensation | 742 | 997 | 1,575 | 1,975 | ||||||||||||||||||||||
Integration and Rebranding costs | — | 111 | — | 1,069 | ||||||||||||||||||||||
Non-GAAP Gross profit | $ | 202,901 | $ | 246,419 | $ | 383,386 | $ | 503,160 | ||||||||||||||||||
Non-GAAP Gross profit % | 48.9 | % | 52.4 | % | 49.4 | % | 54.1 | % | ||||||||||||||||||
GAAP Research, development, and engineering | $ | 52,148 | $ | 57,415 | $ | 102,177 | $ | 116,939 | ||||||||||||||||||
Other adjustments | 194 | (542) | — | (542) | ||||||||||||||||||||||
Integration and Rebranding costs | — | (560) | — | (1,901) | ||||||||||||||||||||||
Stock-based compensation | (4,068) | (4,213) | (7,299) | (7,932) | ||||||||||||||||||||||
Non-GAAP Research, development, and engineering | $ | 48,274 | $ | 52,100 | $ | 94,878 | $ | 106,564 | ||||||||||||||||||
GAAP Selling, general, and administrative | $ | 115,605 | $ | 148,419 | $ | 232,250 | $ | 312,027 | ||||||||||||||||||
Purchase accounting amortization2 | (14,195) | (15,278) | (28,390) | (30,556) | ||||||||||||||||||||||
Stock-based compensation | (5,453) | (9,483) | (10,749) | (17,690) | ||||||||||||||||||||||
Other adjustments | (723) | — | (718) | — | ||||||||||||||||||||||
Integration and Rebranding costs | — | (10,658) | — | (34,249) | ||||||||||||||||||||||
Non-GAAP Selling, general, and administrative | $ | 95,234 | $ | 113,000 | $ | 192,393 | $ | 229,532 | ||||||||||||||||||
1 | Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. | ||||
2 | Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018. |
8
PLANTRONICS, INC. | ||||||||||||||||||||||||||
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||||||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONTINUED) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
September 26, | September 28, | September 26, | September 28, | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
GAAP Operating expenses | $ | 173,923 | $ | 211,681 | $ | 387,488 | $ | 453,176 | ||||||||||||||||||
Purchase accounting amortization2 | (14,195) | (15,278) | (28,390) | (30,556) | ||||||||||||||||||||||
Stock-based compensation | (9,521) | (13,696) | (18,048) | (25,622) | ||||||||||||||||||||||
Restructuring and other related charges | (6,170) | (5,847) | (35,500) | (25,372) | ||||||||||||||||||||||
Integration and Rebranding costs | — | (11,218) | — | (36,150) | ||||||||||||||||||||||
Gain (loss), net from litigation settlements | — | — | (17,564) | — | ||||||||||||||||||||||
Other adjustments | (529) | (542) | (715) | 620 | ||||||||||||||||||||||
Non-GAAP Operating expenses | $ | 143,508 | $ | 165,100 | $ | 287,271 | $ | 336,096 | ||||||||||||||||||
GAAP Operating loss | $ | 6,823 | $ | (5,610) | $ | (50,410) | $ | (34,459) | ||||||||||||||||||
Purchase accounting amortization2 | 31,371 | 45,994 | 63,804 | 91,272 | ||||||||||||||||||||||
Stock-based compensation | 10,263 | 14,693 | 19,623 | 27,597 | ||||||||||||||||||||||
Restructuring and other related charges | 6,170 | 5,847 | 35,500 | 25,372 | ||||||||||||||||||||||
Deferred revenue purchase accounting1 | 4,237 | 8,524 | 9,319 | 20,683 | ||||||||||||||||||||||
Gain (loss), net from litigation settlements | — | — | 17,564 | — | ||||||||||||||||||||||
Integration and Rebranding costs | — | 11,329 | — | 37,219 | ||||||||||||||||||||||
Other adjustments | 529 | 542 | 715 | (620) | ||||||||||||||||||||||
Non-GAAP Operating income | $ | 59,393 | $ | 81,319 | $ | 96,115 | $ | 167,064 | ||||||||||||||||||
1 | Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. | ||||
2 | Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018. | ||||
9
PLANTRONICS, INC. | ||||||||||||||||||||||||||
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES | ||||||||||||||||||||||||||
($ in thousands, except per share data) | ||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA (CONTINUED) | ||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
September 26, | September 28, | September 26, | September 28, | |||||||||||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||||||||||||
GAAP Net loss | $ | (13,405) | $ | (25,910) | $ | (88,420) | $ | (70,781) | ||||||||||||||||||
Purchase accounting amortization2 | 31,371 | 45,994 | 63,804 | 91,272 | ||||||||||||||||||||||
Stock-based compensation | 10,263 | 14,693 | 19,623 | 27,597 | ||||||||||||||||||||||
Restructuring and other related charges | 6,170 | 5,847 | 35,500 | 25,372 | ||||||||||||||||||||||
Deferred revenue purchase accounting1 | 4,237 | 8,524 | 9,319 | 20,683 | ||||||||||||||||||||||
(Gain) loss, net from litigation settlements | — | — | 17,564 | — | ||||||||||||||||||||||
Integration and Rebranding costs | — | 11,329 | — | 37,219 | ||||||||||||||||||||||
Other adjustments | (150) | 542 | 44 | (620) | ||||||||||||||||||||||
Income tax effect of above items | — | (12,511) | — | (27,994) | ||||||||||||||||||||||
Income tax effect of unusual tax items | (86) | 498 | (5,707) | 3 | (1,519) | |||||||||||||||||||||
Non-GAAP Net income | $ | 38,400 | $ | 49,006 | $ | 51,727 | $ | 101,229 | ||||||||||||||||||
GAAP Diluted earnings per common share | $ | (0.33) | $ | (0.65) | $ | (2.17) | $ | (1.80) | ||||||||||||||||||
Purchase accounting amortization2 | 0.76 | 1.16 | 1.56 | 2.30 | ||||||||||||||||||||||
Stock-based compensation | 0.25 | 0.37 | 0.48 | 0.70 | ||||||||||||||||||||||
Restructuring and other related charges | 0.15 | 0.15 | 0.87 | 0.64 | ||||||||||||||||||||||
Deferred revenue purchase accounting1 | 0.10 | 0.21 | 0.23 | 0.52 | ||||||||||||||||||||||
(Gain) loss, net from litigation settlements | — | — | 0.43 | — | ||||||||||||||||||||||
Integration and Rebranding costs | — | 0.29 | — | 0.93 | ||||||||||||||||||||||
Other adjustments3 | — | 0.01 | 0.02 | (0.02) | ||||||||||||||||||||||
Income tax effect | — | (0.32) | (0.15) | (0.75) | ||||||||||||||||||||||
Effect of anti-dilutive securities | — | 0.02 | — | 0.03 | ||||||||||||||||||||||
Non-GAAP Diluted earnings per common share | $ | 0.93 | $ | 1.24 | $ | 1.27 | $ | 2.55 | ||||||||||||||||||
Shares used in diluted earnings per common share calculation: | ||||||||||||||||||||||||||
GAAP | 40,970 | 39,584 | 40,715 | 39,411 | ||||||||||||||||||||||
Non-GAAP | 41,312 | 39,664 | 40,890 | 39,653 | ||||||||||||||||||||||
1 | Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. | ||||
2 | Purchase accounting amortization: Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018. | ||||
3 | Excluded amounts represent amortization of intellectual property, impact of valuation allowance, and the release of tax reserves. |
10
PLANTRONICS, INC. | |||||||||||||||||||||||||||||||||||||||||
UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES | |||||||||||||||||||||||||||||||||||||||||
($ in thousands) | |||||||||||||||||||||||||||||||||||||||||
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA | |||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||||||||||||||||||
September 28 | December 28, | March 28, | June 27, | September 26, | September 26, | ||||||||||||||||||||||||||||||||||||
2019 | 2019 | 2020 | 2020 | 2020 | 2020 | ||||||||||||||||||||||||||||||||||||
GAAP Net loss | $ | (25,910) | $ | (78,483) | $ | (662,820) | $ | (75,015) | $ | (13,405) | $ | (829,723) | |||||||||||||||||||||||||||||
Tax provision | (4,122) | (19,708) | (37,995) | (3,177) | 3,013 | (57,867) | |||||||||||||||||||||||||||||||||||
Interest Expense | 23,797 | 22,533 | 22,378 | 21,184 | 18,581 | 84,676 | |||||||||||||||||||||||||||||||||||
Other Income and Expense | 625 | (967) | 562 | (224) | (1,366) | (1,995) | |||||||||||||||||||||||||||||||||||
Deferred revenue purchase accounting1 | 8,524 | 7,131 | 6,138 | 5,082 | 4,237 | 22,588 | |||||||||||||||||||||||||||||||||||
Consumer optimization3 | — | 10,415 | — | — | — | 10,415 | |||||||||||||||||||||||||||||||||||
Integration and Rebranding costs | 11,329 | 8,677 | 2,321 | 197 | — | 11,195 | |||||||||||||||||||||||||||||||||||
Stock-based compensation | 14,693 | 13,902 | 15,596 | 9,360 | 10,263 | 49,121 | |||||||||||||||||||||||||||||||||||
Restructuring and other related charges | 5,847 | 21,724 | 7,080 | 29,330 | 6,170 | 64,304 | |||||||||||||||||||||||||||||||||||
Impairment charges | — | — | 648,231 | — | — | 648,231 | |||||||||||||||||||||||||||||||||||
(Gain) loss, net from litigation settlements | — | — | — | 17,561 | — | 17,561 | |||||||||||||||||||||||||||||||||||
Other adjustments2 | 542 | — | 419 | — | 529 | 948 | |||||||||||||||||||||||||||||||||||
Depreciation and amortization | 57,376 | 57,556 | 57,632 | 43,400 | 40,971 | 199,559 | |||||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 92,701 | $ | 42,780 | $ | 59,542 | $ | 47,698 | $ | 68,993 | $ | 219,013 | |||||||||||||||||||||||||||||
1 | Deferred revenue purchase accounting: Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. | ||||
2 | Other adjustments: Excluded amounts represent immaterial executive transition costs. | ||||
3 | Consumer Optimization: Excluded amounts represent inventory related reserves associated with optimizing the consumer product portfolio. |
11
POLY COMPANY OVERVIEW October 29, 2020 NYSE: PLT ©2020 Plantronics Inc. All rights reserved. 1
FORWARD LOOKING STATEMENTS This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including statements relating to our intentions, beliefs, projections, outlook, analyses or current expectations that are subject to many risks and uncertainties. Such forward-looking statements and the associated risks and uncertainties include, but are not limited to: (i) our beliefs with respect to the length and severity of the COVID-19 (coronavirus) outbreak, and its impact across our businesses, our operations and global supply chain, including (a) our expectations the virus has caused and will continue to cause an increase in customer and partner demand for our product lines, including increased demand in collaboration endpoints, and our ability to design new product offerings to meet the change in demand due to a global hybrid work environment; (b) our inability to source component parts from key suppliers in sufficient quantities necessary to meet the high demand for certain product lines, including our Enterprise Headsets; and continued uncertainty and potential impact on future quarters if these sourcing constraints continue and/or price volatility occurs, which could continue to negatively affect our profitability and/or market share; (c) expectations related to our voice product lines, as well as our services attachment rate for such products, which have been, and may continue to be, negatively impacted as companies have delayed returning their workforces to offices in many countries due to the continued impact of COVID-19; (d) expectations related to our ability to fulfill the backlog generated by supply constraints, to timely supply the number of products to fulfill current and future customer demand, including expectations that our manufacturing facility in Tijuana, Mexico will continue production at the capacity necessary to meet such demand; (e) the impact of the virus on our distribution partners, resellers, end-user customers and our production facilities, including our ability to obtain alternative sources of supply if our production facility or other suppliers are impacted by future shut downs; (f) the impact if global or regional economic conditions deteriorate further, on our customers and/or partners, including increased demand for pricing accommodations, delayed payments, delayed deployment plans, insolvency or other issues which may increase credit losses; (g) risks related to restrictions or delays in global return to worksites as a result of COVID-19, which continues to impact our employees worldwide and our customers, which has negatively impacted our voice product lines for the quarter, and restricted customer engagement; and (h) the complexity of the forecast analysis and the design and operation of internal controls; and (ii) our belief that we can manufacture or supply products in a timely manner to satisfy perishable demand; (iii) expectations related to our customers’ purchasing decisions and our ability to pivot quickly enough and/or match product production to demand, particularly given long lead times and the difficulty of forecasting unit volumes and acquiring the component parts and materials to meet demand without having excess inventory or incurring cancellation charges; (iv) risks associated with significant and abrupt changes in product demand which increases the complexity of management’s evaluation of potential excess or obsolete inventory; (v) risks associated with the bankruptcy or financial weakness of distributors or key customers, or the bankruptcy of or reduction in capacity of our key suppliers; (vi) risks associated with the potential interruption in the supply of sole-sourced critical components, our ability to move to a dual-source model, and the continuity of component supply at costs consistent with our plans, which has negatively impacted in the quarter and may continue to impact our ability to timely supply product to meet our customer demand; (vii) expectations related to our services segment revenues, particularly as we introduce new generation, less complex, product solutions, or as companies shift from on premises to work from home options for their workforce, which may result in decreased demand for our professional, installation and/or managed service offerings; (viii) expectations that our current cash on hand, additional cash generated from operations, together with sources of cash through our credit facility, either alone or in combination with our election to suspend our dividend payments, will meet our liquidity needs during and following the unknown duration and impact of the COVID-19 pandemic; (ix) expectations relating to our ability to generate sufficient cash flow from operations to meet our debt covenants and timely repay all principal and interest amounts drawn under our credit facility as they become due; (x) risks associated with our channel partners’ sales reporting, product inventories and product sell through since we sell a significant amount of products to channel partners who maintain their own inventory of our products; (xi) our efforts to execute to drive sales and sustainable profitable revenue growth, to improve our profitability and cash flow, and accelerate debt reduction and de-levering; (xii) our expectations for new products launches, the timing of their releases and their expected impact on future growth and on our existing products; (xiii) our belief that our Partner Program will drive growth and profitability for both us and our partners through the sale of our product, services and solutions; (xiv) risks associated with forecasting sales and procurement demands, which are inherently difficult, particularly with continuing uncertainty in regional and global economic conditions; (xv) uncertainties attributable to currency fluctuations, including fluctuations in foreign exchange rates and/or new or greater tariffs on our products; (xvi) our expectations regarding our ability to control costs, streamline operations and successfully implement our various cost-reduction activities and realize anticipated cost savings under such cost-reduction initiatives; (xvii) expectations relating to our quarterly and annual earnings guidance, particularly as economic uncertainty, including, without limitation, uncertainty related to the continued impact of COVID-19, the macro-economic and political climate and other external factors, puts further pressure on management judgments used to develop forward looking financial guidance and other prospective financial information; (xviii) expectations related to GAAP and non-GAAP financial results for the second quarter and full Fiscal Year 2021, including net revenues, adjusted EBITDA, tax rates, intangibles amortization, diluted weighted average shares outstanding and diluted EPS; (xix) our expectations of the impact of the acquisition of Polycom as it relates to our strategic vision and additional market and strategic partnership opportunities for our combined hardware, software and services offerings; (xx) our beliefs regarding the UC&C market, market dynamics and opportunities, and customer and partner behavior as well as our position in the market, including risks associated with the potential failure of our UC&C solutions to be adopted with the breadth and speed we anticipate; (xxi) our belief that the increased adoption of certain technologies and our open architecture approach has and will continue to increase demand for our solutions; (xxii) expectations related to the micro and macro-economic conditions in our domestic and international markets and their impact on our future business; (xxiii) our forecast and estimates with respect to tax matters, including expectations with respect to utilizing our deferred tax assets; (xxiv) our expectations related to building strategic alliances and key partnerships with providers of collaboration tools and platforms to drive revenue growth and market share; and (xxv) our expectations regarding pending and potential future litigation, in addition to other matters discussed in this press release that are not purely historical data. Such forward-looking statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially from the forward-looking statements. We do not assume any obligation to update or revise any such forward-looking statements, whether as the result of new developments or otherwise. For more information concerning these and other possible risks, please refer to our Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 8, 2020 and other filings with the Securities and Exchange Commission, as well as recent press releases. ©2020 Plantronics Inc. All rights reserved. 2
USE OF NON-GAAP INFORMATION To supplement our condensed consolidated financial statements presented on a GAAP basis, we use non-GAAP measures of operating results, including non-GAAP net revenues, non-GAAP gross profit, non-GAAP operating expenses, non-GAAP operating income, non-GAAP net income, adjusted EBITDA, and non-GAAP diluted EPS. These non-GAAP measures are adjusted from the most directly comparable GAAP measures to exclude, or include where applicable, the effect of purchase accounting on deferred revenue, charges associated with the optimization of our Consumer product line, stock-based compensation, acquisition related expenses, purchase accounting amortization and adjustments, restructuring and other related charges and credits, impairment charges, rebranding costs, other unusual and/or non-cash charges and credits, and the impact of participating securities, all net of any associated tax impact. We also exclude tax benefits from the release of tax reserves, discrete tax adjustments including transfer pricing, tax deduction and tax credit adjustments, and the impact of tax law changes. We adjust these amounts from our non-GAAP measures primarily because management does not believe they are consistent with the development of our target operating model. We believe that the use of non-GAAP financial measures provides meaningful supplemental information regarding our performance and liquidity and helps investors compare actual results with our historical and long-term target operating model goals as well as our performance as a combined company. We believe presenting non-GAAP net revenue provides meaningful supplemental information regarding how management views the performance of the business and underlying performance of our individual product categories. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods; however, non-GAAP financial measures are not meant to be considered in isolation of, or as a substitute for, or superior to, net revenues, gross margin, operating expenses, operating income, operating margin, net income or EPS prepared in accordance with GAAP. A reconciliation between GAAP and Non-GAAP measures for all periods presented in this document is included as an appendix to this document and in our press release regarding our results for Q2 FY21 filed with the SEC on Form 8-K on October 29, 2020. Other historical reconciliations are available at investor.poly.com. ©2020 Plantronics Inc. All rights reserved. 3
OVERVIEW & STRATEGY © 2020 Plantronics Inc. All rights reserved. 4
Q2 FY21 SUMMARY BUSINESS OVERVIEW FINANCIAL OVERVIEW • Continued elevated demand for headsets and • GAAP Revenue of $411M video endpoints Guidance range of $346M - $386M • Record Headset and Video unit shipments • Non-GAAP Revenue of $415M Guidance range of $350M - $390M • Expanded production capacity in quarter • GAAP EPS of $(0.33) • Supply chain issues persist but improving • Non-GAAP EPS of $0.93 • Headset and Video shipments, coupled with Guidance range of $0.25 - $0.65 expense management drove EBITDA and EPS above guidance ranges • Adjusted EBITDA of $69M Guidance range of $45M - $65M • Repurchased $37.4M of debt • Cash and ST Investments of $228M © 2020 Plantronics Inc. All rights reserved. 5
DAVE SHULL JOINS AS PRESIDENT AND CEO Right executive to build on Poly’s momentum • Extensive global experience in consumer hardware, operational transformation, complex business partnerships, corporate development and capital markets • Strong track record of value creation and capturing significant opportunities presented by emerging trends • Creative thinker with know-how to continue Poly’s transformation to become endpoint provider of choice • Deep appreciation for Poly’s talented team and industry- leading products ©2020 Plantronics Inc. All rights reserved. 6
THREE FUNDAMENTAL INDUSTRY DRIVERS ON-PREMISE TO CLOUD UCC WORK FROM HOME / WORK COLLABORATION FROM ANYWHERE ©2020 Plantronics Inc. All rights reserved. 7
A COMPELLING INVESTMENT OPPORTUNITY $41B UC&C1 Market UC&C Market Leader Strategic Innovator • We operate in a $41B UC&C market • Approximately $1.7B in annual • Reinventing the UC&C industry with strong growth drivers revenues and ~$220M TTM EBITDA through product integration, software and analytics • Rise in hybrid work trends creates the • Platform-agnostic, intelligent solutions need for multiple endpoints in multiple designed to seamlessly integrate with • Valuable business insights available locations a wide range of UCaaS, CPaaS, through unique software and analytics capabilities • Cloud deployments on rise with high CCaaS, and VaaS solutions demand for analytics and insights • We address an $8B Enterprise Endpoint market growing at ~8% 1 Frost & Sullivan, May 2019. © 2020 Plantronics Inc. All rights reserved. 8
OUR STRATEGY Deliver a comprehensive set of endpoints for the UC&C market and differentiate through software Management Analytics Interoperability Video Conference Desktop Headsets Software Services © 2020 Plantronics Inc. All rights reserved. 9
BROADER UC MARKET AND ECOSYSTEM Key Partners Our platform agnostic and best-in-class unified endpoint strategy differentiates us © 2020 Plantronics Inc. All rights reserved. 10
NEW PRODUCT & PARTNER ANNOUNCEMENTS © 2020 Plantronics Inc. All rights reserved. 11
POLY LAUNCHES SYNC FAMILY OF SPEAKERPHONES A flexible family of speakerphones for today’s hybrid work environment • Among the first to receive Zoom’s Personal USB Speakerphone certification (Sync 20) • Optional USB or Bluetooth connectivity • Smartphone charging ports • Advanced noise cancellation • Full speakerphone functionality plus music playback and voice assistant integration ©2020 Plantronics Inc. All rights reserved. 12
RINGCENTRAL ANNOUNCES RINGCENTRAL ROOM SOLUTIONS FEATURING POLY STUDIO X Poly Studio X family enhances the RingCentral Rooms meeting experience • Designed for a flexible and hybrid workforce • New rooms intelligence, analytics and manageability for IT • Cloud-based telepresence without costly endpoints and complicated configurations • Simple and seamless integration across RingCentral Video and Team Messaging ©2020 Plantronics Inc. All rights reserved. 13
STARLEAF ANNOUNCES POLY AS THEIR VIDEO PLATFORM VENDOR A complete StarLeaf experience with Poly room systems • Support for StarLeaf software out of the box, including Poly Studio X30, Studio X50 and G7500 • Enterprise video meeting solutions with rich and intelligent features • Industry-leading security, reliability and simplicity for all users ©2020 Plantronics Inc. All rights reserved. 14
EXTRON AND POLY PARTNER TO DELIVER ROOM AUTOMATION AND A/V CONTROLS FOR MICROSOFT TEAMS A simple, clutter-free experience that’s easy to deploy in any type of meeting room environment • Scalable integration options for Extron control systems, audio devices and signal switching • Unified AV experience through a single interface • Complete AV and conferencing control for the enterprise ©2020 Plantronics Inc. All rights reserved. 15
Q2 FY21 EARNINGS RESULTS © 2020 Plantronics Inc. All rights reserved. 16
Q2 FINANCIAL SUMMARY1 Non-GAAP Revenue of $415 million down 12% Y/Y: • Primarily driven by declines in Voice, Consumer, and Services • Continued strong demand for remote work solutions – primarily headsets • Next-gen video bars ramping above expectations Non-GAAP gross margins of 48.9%, down 350 bps Y/Y: • Primarily impacted by incremental freight, factory expansion, and product mix Non-GAAP operating expenses of $144 million, down $21 million Y/Y: • Primarily due to cost savings from restructuring and lower travel due to COVID-19 Non-GAAP operating margin of 14.3%, Adj. EBITDA of $69 million Non-GAAP diluted EPS of $0.93 1 Please refer to the appendix to this presentation and to our press release regarding our Q2 FY21 filed with the SEC on Form 8-K on October 29, 2020 for a reconciliation between GAAP and Non-GAAP measures. © 2020 Plantronics Inc. All rights reserved. 17
NON-GAAP REVENUE BY CATEGORY & REGION ($MM) $470 $470 75 $415 $415 Services APAC 91 $361 67 $361 74 Video 90 69 EMEA 67 96 131 Voice 131 99 66 95 49 Consumer 51 8 Headsets1 30 6 AMER 248 Enterprise 195 199 210 Headsets1 176 169 Q2 FY20 Q1 FY21 Q2 FY21 Q2 FY20 Q1 FY21 Q2 FY21 1 Restated to move mono premium product revenues from Consumer Headsets to Enterprise Headsets © 2020 Plantronics Inc. All rights reserved. 18
TRENDED SALES-OUT FOR NEW VIDEO PRODUCTS Based on Sales-Out1 and includes Studio USB, Studio X30, Studio X50, G75002 ($MM) 45 40 35 30 25 20 15 10 5 0 Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 1 Sales-Out (AKA Sell-Through) data is provided by channel parnters. As a result, Poly is unable to ensure the completeness or accuacy of such data. 2 Studio USB began shipping in Q1FY20, G7500 began shipping in Q2FY20, Studio X30 and X50 began shipping in Q3FY20. © 2020 Plantronics Inc. All rights reserved. 19
NON-GAAP OPERATING DETAILS ($MM) $246 $81 $203 $165 $144 $59 52.4% 48.9% 17.3% 35.1% 34.6% 14.3% Q2 FY20 Q2 FY21 Q2 FY20 Q2 FY21 Q2 FY20 Q2 FY21 Gross Profit Operating Expenses Operating Income • Y/Y decline of $43M or 350 • Y/Y decline of $21M or 13% • Operating income decline basis points primarily due to cost of $22M or 27% driven • Margins primarily impacted by savings from restructuring primarily by lower revenue freight, capacity expansion, and lower travel due to and gross margin and product mix COVID-19 © 2020 Plantronics Inc. All rights reserved. 20
CASH & INVESTMENTS BRIDGE Q1FY21 – Q2FY21 ($MM) $263 $228 © 2020 Plantronics Inc. All rights reserved. 21
TRAILING TWELVE MONTHS ADJUSTED EBITDA ($MM) TTM EBITDA: $219M $93 $69 $60 $48 $43 Q2 FY20 Q3 FY20 Q4 FY20 Q1 FY21 Q2 FY21 © 2020 Plantronics Inc. All rights reserved. 22
Q3 FY21 GUIDANCE © 2020 Plantronics Inc. All rights reserved. 23
Q3 GUIDANCE (AS OF OCTOBER 29, 2020) Q3 FY21 Guidance GAAP Net Revenue $417M - $447M Non-GAAP Net Revenue1 $420M - $450M Adjusted EBITDA2 $70M - $80M Non-GAAP Diluted EPS2,3 $0.85 – $1.05 1 The non-GAAP revenue guidance range shown here excludes the $3.3 million impact of purchase accounting related to recording deferred revenue at fair value at the time of the acquisition. 2 Q3 Adjusted EBITDA and non-GAAP diluted EPS excludes estimated intangibles amortization expense of $30.7 million. 3 EPS Guidance assumes approximately 42 million diluted average weighted shares and a non-GAAP effective tax rate of 11% to 13%. Poly does not intend to update these targets during the quarter or to report on its progress toward these targets. Poly will not comment on these targets to analysts or investors except by its press release announcing its third quarter fiscal year 2021 results or by other public disclosure. Any statements by persons outside Poly speculating on the progress of the third quarter or full fiscal year 2021 will not be based on internal company information and should be assessed accordingly by investors. Please refer to the appendix in this presentation and to our press release regarding our Q2 FY21 filed with the SEC on Form 8-K on October 29, 2020 for a reconciliation between GAAP and Non-GAAP measures. With respect to adjusted EBITDA and diluted EPS guidance, the Company has determined that it is unable to provide quantitative reconciliations of these forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measures with a reasonable degree of confidence in their accuracy without unreasonable effort, as items including stock based compensation, acquisition and integration costs, litigation gains and losses, and impacts from discrete tax adjustments and tax laws are inherently uncertain and depend on various factors, many of which are beyond the Company's control. Our business is inherently difficult to forecast, particularly with continuing uncertainty in regional economic conditions, currency fluctuations, customer cancellations and rescheduling, and there can be no assurance that expectations of incoming orders over the balance of the current quarter will materialize. © 2020 Plantronics Inc. All rights reserved. 24
4 Quarter Rolling Q3 Q4 Q1 Q2 Forecast ($MM) FY21 FY21 FY22 FY22 Revenue–Deferred GAAP PURCHASE Revenue Fair Value $3.3 $1.8 $1.3 $1.1 Adjustment ACCOUNTING COGS–Intangibles FORECAST $16.5 $16.2 $16.2 $16.2 Amortization SG&A–Intangibles $14.2 $14.2 $14.2 $11.6 Amortization © 2020 Plantronics Inc. All rights reserved. 25
SUPPLEMENTAL DATA & GAAP TO NON-GAAP RECONCILIATIONS © 2020 Plantronics Inc. All rights reserved. 26
TRENDED NON-GAAP INFORMATION ($MM, except earnings per share data) Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Non-GAAP Revenue $460 $470 $392 $409 $1,731 $361 $415 Gross Profit $257 $246 $193 $202 $899 $180 $203 Gross Margin 55.8% 52.4% 49.4% 49.4% 51.9% 50.0% 48.9% Op. Expense $171 $165 $162 $154 $652 $144 $144 Op. Income $86 $81 $31 $48 $247 $37 $59 Op. Margin 18.6% 17.3% 8.0% 11.8% 14.2% 10.2% 14.3% Diluted EPS $1.32 $1.24 $0.30 $0.30 $3.13 $0.33 $0.93 Adj. EBITDA $98 $93 $43 $60 $293 $48 $69 Op. Cash Flow $8 $25 -$17 $62 $78 $42 $-1 © 2020 Plantronics Inc. All rights reserved. 27
TRENDED NON-GAAP REVENUE DATA Non-GAAP Rev by Q1 FY20 Q2 FY20 Q3 FY20 Q4 FY20 FY20 Q1 FY21 Q2 FY21 Category ($MM) Voice $104 $99 $80 $95 $377 $51 $49 Video $61 $90 $70 $62 $284 $66 $96 Services $77 $75 $75 $70 $297 $69 $67 Ent Headsets1 $187 $176 $136 $169 $668 $169 $195 Cons Headsets1 $31 $30 $30 $13 $105 $6 $8 Total Revenue $460 $470 $392 $409 $1,731 $361 $415 Non-GAAP Revenue by Geography Americas $261 $248 $207 $232 $948 $199 $210 EMEA $119 $131 $108 $115 $473 $95 $131 APAC $80 $91 $77 $62 $310 $67 $74 Total Revenue $460 $470 $392 $409 $1,731 $361 $415 1 Restated to move mono premium product revenues from Consumer Headsets to Enterprise Headsets © 2020 Plantronics Inc. All rights reserved. 28
THANK YOU ©2020 Plantronics, Inc. Poly and the propeller design are trademarks of Plantronics, Inc. 29
Unaudited Reconciliations of GAAP net revenue to non-GAAP net revenue ($ in thousands) Three Months Ended September 28, December 28, March 28, June 27, September 26, 2019 2019 2020 2020 2020 Net revenues from unaffiliated customers: Enterprise Headsets1 $ 176,031 $ 136,807 $ 168,002 $ 169,234 $ 195,128 Consumer Headsets1 30,261 30,473 12,962 5,516 7,712 Voice 98,453 79,494 95,265 50,681 49,069 Video 90,392 69,859 61,992 66,027 95,768 Services 66,572 67,838 64,822 64,262 63,292 Total GAAP net revenues $ 461,709 $ 384,471 $ 403,043 $ 355,720 $ 410,969 Deferred revenue purchase accounting2 8,524 7,131 6,138 5,082 4,237 Total non-GAAP net revenues $ 470,233 $ 391,602 $ 409,181 $ 360,802 $ 415,206 Net revenues by geographic area from unaffiliated customers: Americas $ 245,283 $ 204,910 $ 229,900 $ 197,350 $ 209,001 EMEA 128,973 105,931 113,738 94,105 130,399 APAC 87,453 73,630 59,405 64,265 71,569 Total GAAP net revenues $ 461,709 $ 384,471 $ 403,043 $ 355,720 $ 410,969 Deferred revenue purchase accounting2 8,524 7,131 6,138 5,082 4,237 Total non-GAAP net revenues $ 470,233 $ 391,602 $ 409,181 $ 360,802 $ 415,206 1 Restated to move mono premium product revenues from Consumer Headsets to Enterprise Headsets. Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated 2 with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines.
PLANTRONICS, INC. UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES ($ in thousands, except per share data) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA - AS REPORTED Three Months Ended, September 28, December 28, March 28, June 27. September 26, 2019 2019 2020 2020 2020 GAAP Net revenues $ 461,709 $ 384,471 $ 403,043 $ 355,720 $ 410,969 Deferred revenue purchase accounting1 8,524 7,131 6,138 5,082 4,237 Non-GAAP Net revenues $ 470,233 $ 391,602 $ 409,181 $ 360,802 $ 415,206 GAAP Gross profit $ 206,071 $ 143,846 $ (10,328) $ 156,332 $ 180,746 Purchase accounting amortization2 30,716 30,819 31,018 18,238 17,176 Deferred revenue purchase accounting1 8,547 7,185 6,138 5,082 4,237 Consumer optimization — 10,415 — — — Acquisition, integration, and rebranding fees 88 46 42 — — Stock-based compensation 997 1,019 998 833 742 Impairment charges — — 174,235 — — Non-GAAP Gross profit $ 246,419 $ 193,330 $ 202,103 $ 180,485 $ 202,901 Non-GAAP Gross profit % 52.4 % 49.4 % 49.4 % 50.0 % 48.9 % GAAP Operating expenses $ 211,681 $ 220,471 $ 667,546 $ 213,564 $ 173,923 Acquisition, integration, and rebranding fees (11,218) (8,577) (2,279) (188) — Purchase accounting amortization2 (15,278) (15,278) (15,278) (14,195) (14,195) Stock-based compensation (13,696) (12,883) (14,598) (8,527) (9,521) Restructuring and other related charges (5,847) (21,724) (7,080) (29,330) (6,170) Impairment charges — — (473,996) — 0 (Gain) loss, net from litigation settlements — — (419) 17,561 — Other adjustments (542) — — — (529) Non-GAAP Operating expenses $ 165,100 $ 162,009 $ 153,896 $ 143,763 $ 143,508 Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated 1 with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. 2 Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018.
PLANTRONICS, INC. UNAUDITED RECONCILIATIONS OF GAAP MEASURES TO NON-GAAP MEASURES ($ in thousands, except per share data) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA - AS REPORTED (CONTINUED) Three Months Ended September 28, December 28, March 28, June 27, September 26, 2019 2019 2020 2020 2020 GAAP Operating income (loss) $ (5,610) $ (76,625) $ (677,874) $ (57,232) $ 6,823 Purchase accounting amortization2 45,994 46,097 46,296 32,433 31,371 Deferred revenue purchase accounting1 9,196 7,509 6,138 5,082 4,237 Consumer optimization — 10,415 — — — Acquisition, integration, and rebranding fees 10,657 8,299 2,321 188 — Stock-based compensation 14,693 13,902 15,596 9,360 10,263 Restructuring and other related charges 5,847 21,724 7,080 29,330 6,170 Impairment charges — — 648,231 — — (Gain) loss, net from litigation settlements — — 419 17,561 — Other adjustments 542 — — — 529 Non-GAAP Operating income $ 81,319 $ 31,321 $ 48,207 $ 36,722 $ 59,393 GAAP Diluted earnings per common share $ (0.65) $ (1.97) $ (16.56) (1.85) (0.33) Purchase accounting amortization2 1.16 1.16 1.15 0.80 0.76 Deferred revenue purchase accounting1 0.21 0.18 0.15 0.13 0.10 Consumer optimization — 0.26 — — — Stock-based compensation 0.37 0.35 0.39 0.23 0.25 Acquisition, integration, and rebranding fees 0.29 0.22 0.06 — — Restructuring and other related charges 0.15 0.54 0.18 0.72 0.15 Impairment charges — — 16.11 — — (Gain) loss, net from litigation settlements — — — 0.43 — Other adjustments 0.01 — — — — Income tax effect (0.32) (0.44) (1.18) (0.13) — Effect of anti-dilutive securities 0.02 — — — — Non-GAAP Diluted earnings per common share $ 1.24 $ 0.30 $ 0.30 $ 0.33 $ 0.93 Shares used in diluted earnings per common share calculation: GAAP 39,584 39,784 40,025 40,460 40,970 non-GAAP 39,664 39,870 40,235 40,620 41,312 Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated 1 with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines. 2 Represents the amortization of purchased intangible assets recorded in connection with the acquisition of Polycom on July 2, 2018.
PLANTRONICS, INC. UNAUDITED RECONCILIATIONS OF GAAP MEASURES OPERATING INCOME TO ADJUSTED EBITDA ($ in thousands) UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS DATA Twelve Months Three Months Ended Ended September December September September 28, 28, March 28, June 27, 26, 26, 2019 2019 2020 2020 2020 2020 GAAP Net Income $ (25,910) $ (78,483) $ (662,820) $ (75,015) $ (13,405) $ (829,723) Tax provision (4,122) (19,708) (37,995) (3,177) 3,013 (57,867) Interest Expense 23,797 22,533 22,378 21,184 18,581 84,676 Other Income and Expense 625 (967) 562 (224) (1,366) (1,995) Deferred revenue purchase accounting1 8,524 7,131 6,138 5,082 4,237 22,588 Acquisition, integration, and rebranding fees 11,329 8,677 2,321 — — 10,998 Consumer optimization — 10,415 — 197 — 10,612 Stock-based compensation 14,693 13,902 15,596 9,360 10,263 49,121 Restructuring and other related charges 5,847 21,724 7,080 29,330 6,170 64,304 Impairment charges — — 648,231 — — 648,231 (Gain) loss, net from litigation settlements — — 419 17,561 — 17,980 Other adjustments 542 — — — 529 529 Depreciation and amortization 57,376 57,556 57,632 43,400 40,971 199,559 Adjusted EBITDA $ 92,701 $ 42,780 $ 59,542 $ 47,698 $ 68,993 $ 219,013 1 Represents the impact of fair value purchase accounting adjustments related to deferred revenue recorded in connection with the acquisition of Polycom on July 2, 2018. The Company’s deferred revenue primarily relates to Service revenue associated with non-cancelable maintenance support on hardware devices which are typically billed in advance and recognized ratably over the contract term as those services are delivered. This adjustment represents the amount of additional revenue that would have been recognized during the period absent the write-down to fair value required under purchase accounting guidelines.