Plantronics, Inc. (PLT)

F1Q11 (Qtr End 06/30/10) Earnings Call

July 26, 2010 5:00 pm ET


Greg Klaben – VP, IR

Ken Kannappan – President and CEO

Barbara Scherer – SVP, Finance & Administration and CFO


Reik Read – Robert Baird & Co.

John Bright – Avondale Partners

Greg Burns – Sidoti & Company

Rohit Chopra – Wedbush Securities

Bill Dezellem – Tieton Capital Management

Marie [ph] – JPMorgan

Tavis McCourt – Morgan Keegan



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Good afternoon. My name is Lamont and I will be your conference operator today. At this time I will like to welcome everyone to the first quarter 2011 financial results conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be question-and-answer session. (Operator instructions) Thank you.

Mr. Klaben, you may begin your conference.

Greg Klaben

Thanks Lamont. Joining me today to discuss our first quarter fiscal 2011 financial results are Ken Kannappan, Plantronics’ President and CEO, and Barbara Scherer, Senior Vice President of Finance and Administration, and CFO.

I’d like to remind you that during the course of today’s conference call, we may make certain forward-looking statements that are subject to risks and uncertainties, as outlined in today’s press release.

As we have highlighted before, the risk factors in our press release and SEC filings are not standard boilerplate. We update these risk factors every quarter, adding and dropping language and changing the order, depending upon the timing and potential impact of the concerns that we foresee.

We believe forecasting our results of operations is difficult, and we ask you to focus particular attention on these risk factors that could cause actual results to differ materially from those anticipated by any such statements. For further information, please refer to the Company’s Forms 10-K, 10-Q, today’s press release, and other SEC filings.

Please note that all financials, metrics and comparisons are stated in terms of continuing operations, which exclude Altec Lansing or the AEG division. The sale of Altec Lansing was effective as of December 1, 2009.

Plantronics first quarter fiscal 2011 net revenues were $170.7 million compared to guidance of $160 million to $165 million.

Plantronics GAAP diluted earnings per share were $0.52 in the first quarter of fiscal 2011 compared with $0.27 in the same quarter of the prior year.

Non-GAAP diluted earnings per share for the first quarter were $0.58 compared with $0.40 in the prior year and guidance of $0.46 to $0.50.

The difference between GAAP and non-GAAP earnings per share from continuing operations for the first quarter of fiscal 2011 includes stock based compensation charges and purchase accounting amortization, both net of associated tax benefits.

I’d like to remind you that on Investor Relations section of our Web site we have an updated PowerPoint presentation, as well as analyst metric sheet with all of the financials and metrics released today.

With that I’ll turn the call over to Ken.

Ken Kannappan

Thank you, Greg, and thanks all of you for taking the time to listen to our call. There are four key points I would like to highlight on the first quarter.

First, revenue was above guidance due to stronger than expected office and contact center revenues. In particular, we saw strength in Asia-Pacific and stronger conditions in the Americas.

Second, operating margin was exceptionally strong, although very likely unsustainable over the long term at this level.

Third, our cash and equivalents position remain very strong at over $360 million despite nearly $44 million of share repurchases during the quarter. Finally, our Unified Communications opportunity continues to grow.

On this last point, we did introduce a new metrics today to help you track our progress in the UC market. We announced that revenue from our UC products was $9.8 million and we believe this represents over 10% of our office headset sales.

We wanted to share a quantitative means for you to track our progress in this market, but this revenue metric is not perfect and I wanted to explain some of the challenges with our UC revenue measurements.

Customers are able to use our non-UC products with many UC deployments, and our UC products can always be used before UC has actually been rolled out. We have taken an approach which we can measure consistently and which we believe is conservative with respect to what our potential UC revenues are and recognize that it is impossible for us to know accurately how much revenue actually goes to UC installations each quarter.

We expect that as UC becomes a larger portion of our total revenues, we will ultimately drop this measurement as our total revenues will provide sufficient information.

The UC market is growing primarily as a result of the compelling system ROI and the marketing effort behind it by the major UC platform vendors. We are being told that we are an important element in the overall ROI of our customers.

In many cases, legacy systems are being left in place as new UC capabilities are added. The degree to which the new offerings are actually embraced and utilized determines the actual ROI. The quality and ease of use of our headsets can make a major difference in usage, and IT organizations and our UC partners are beginning to realize this.

We are within our target operating expense model and believe that we have an extremely compelling portfolio of new products underway for launch during the balance of the fiscal year.

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