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ShoreTel, Inc. (SHOR)

Q2 2011 Earnings Call

January 26, 2011 5:00 PM ET


Tonya Chin – Director, Investor Relations

Peter Blackmore – President and CEO

Mike Healy – Senior Vice President and CFO

Don Girskis – Senior Vice President, Worldwide Sales

Kevin Gavin – Chief Marketing Officer


Troy Jensen – Piper Jaffray

Steve O’Brien – JPMorgan

Edward Parker – Lazard Capital Markets

Sanjiv Wadhwani – Stifel Nicolaus

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Douglas Ireland – JMP Securities

Ian – Northland Capital Markets

Rohit Chopra – Wedbush Securities

Gregory Burns – Sidoti & Company

Lynn Um – Barclays Capital




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Good afternoon. My name is [Kristin] and I’ll be your conference operator today. At this time, I would like to welcome everyone to the ShoreTel Q2 Fiscal Year 2011 Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. (Operator Instructions)

Thank you. At this time, I would like to turn the call over to our host, Ms. Tonya Chin, Director of Investor Relations. Please go ahead.

Tonya Chin

Hello and thanks for joining us today as we report our second quarter fiscal year 2011 financial results. Joining me on the call today for the first time is Peter Blackmore ShoreTel’s new President and CEO; Mike Healy, Senior Vice President and Chief Financial Officer. Additionally, we have Don Girskis, Senior Vice President of Worldwide Sales and our Chief Marketing Officer, Kevin Gavin, who’ll be participating in the Q&A session.

Before we begin, I will remind you that during today’s call, management will make forward-looking statements within the meaning of the Safe Harbor provision of federal securities laws regarding the company’s anticipated future revenues, gross margins, operating expenses and other financial and business-related information. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

Additional information concerning the risk factors that could cause actual results to differ materially from those in our forward-looking statements can be found in the company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2010, our most recent 10-Q for the quarter-ended September 30, 2010 and the current report on Form 8-K furnished today.

The information in this conference call related to projections or other forward-looking statements is based on management’s current expectations. The company does not intend to update its forward-looking statements should circumstances change. As a matter of policy, ShoreTel does not comment on financial guidance during the quarter unless it’s done in a public forum.

We will be discussing both GAAP and non-GAAP results throughout this call and I ask that you refer to our press release issued today for the reconciliation between these amounts. Our non-GAAP numbers exclude stock-based compensation charges, amortization of acquisition-related intangibles, other adjustments and the related tax impact.

And finally, let me take a moment to say that we will be at several investor conferences this quarter. On March 9, we’ll be in Boston at the [CFFD] Communication Equipment, Semiconductor and Networking Conference. On March 10, we’ll be in New York City at the Wedbush Technology, Media & Telecom Conference. On March 15, we’ll be in Boston at the Lazard Capital Technology & Media Conference. And on March 22, we’ll be back in New York for the Sidoti Conference. We love to see many of you there.

Now, I’m very pleased to turn the call over to Peter Blackmore. Peter?

Peter Blackmore

Thank you, Tonya and hello to everybody on the call. Before I get into the highlights of the quarter, let me start by taking a moment to thank Don Girskis for doing a fantastic job as Interim CEO. Under Don’s watch, the company executed on its objectives without missing a beat and ramped our revenue to its highest level in our history. And it’s great to see Don return to his role leading worldwide sales to make sure we sustained the momentum that he and the team have helped to build.

I would also like to share just a little bit about my background and what drew me to ShoreTel. I have spent my entire carrier in technology, holding senior positions at Compaq and later Hewlett-Packard and most recently, a CEO of UTStarcom.

When I learned about this opportunity at ShoreTel, what drew my interest and ultimately caused me to take the job is ShoreTel’s tremendous potential for growth. With a clearly differentiated product that is the simplest in the industry to install, to use and to manage, coupled with an extremely high customer satisfaction and loyalty, plus the benefit of a solid balance sheet, the talented leadership team and proven growing momentum, ShoreTel has all of the necessary ingredients for sustained growth. I saw the opportunity to grow this great small-company into a world-class business. I’m excited to be here.

Turning to the quarter, it is my pleasure to report the financial highlights for quarter two, which was a very strong quarter for ShoreTel. We were pleased to see the business continue to build momentum with record revenues of 47.7 million in the quarter, up 8% sequentially over the previous quarter and up 35% over the second quarter of fiscal 2010.

Non-GAAP gross margins were consistent with last quarter at 67.2%. We had a non-GAAP net loss of $1 million in the quarter or the loss of $0.02 on a per share basis. Changing gears, I’ve been at ShoreTel nearly seven weeks now and so I’d like to share some of my early observations.

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